Sackville & Neave Australian property law [Tenth edition.] 9780409343786, 0409343781

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SACKVILLE & NEAVE

Australian Property Law Tenth Edition

Brendan Edgeworth LLB (Hons), MA (Sheff) Professor of Law, University of New South Wales

Christopher Rossiter BA, LLB (Syd), PhD (NSW) Formerly Professor of Law, University of New South Wales

Pamela O’Connor BA, LLB, MBA (Mon), LLM (Melb), PhD (Mon) Professor, USC Law School, University of the Sunshine Coast

Andrew Godwin BA (Hons), LLB (Hons), LLM (Melb)

Associate Professor, Melbourne Law School, The University of Melbourne

LexisNexis Butterworths Australia 2016

AUSTRALIA

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National Library of Australia Cataloguing-in-Publication entry Author: Title: Edition: ISBN: Notes: Subjects: Other Creators/Contributors: Dewey Number:

Edgeworth, Brendan. Sackville and Neave Australian Property Law. 10th ed. 9780409343786 (pbk). 9780409343793 (ebk). Includes index. Property — Australia. Rossiter, Christopher. O’Connor, Pamela. Godwin, Andrew. 346.9404.

© 2016 Reed International Books Australia Pty Limited trading as LexisNexis. First edition, 1971; second edition, 1975; third edition, 1981; fourth edition, 1988; fifth edition, 1994; sixth edition, 1999; seventh edition, 2004; eighth edition, 2008 (reprinted 2011 and 2012); ninth edition (2013). This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Adobe Caslon Pro and Trade Gothic. Printed in China. Visit LexisNexis Butterworths at www.lexisnexis.com.au

Preface

As in previous editions, this book is designed to serve two purposes. First, it provides a coherent set of materials and commentary for use in the teaching of property law in all Australian jurisdictions. Although its emphasis is on real property law, it also contains material on the creation, transfer and enforceability of interests in personal property. Second, it is designed as an up-to-date and comprehensive resource book on property law for legal practitioners. The book retains the structure adopted in the ninth edition and incorporates various innovations, including an increased focus on the transactional context within which the substantive law operates. Chapter 1 deals with conceptual issues that underpin and define the ambit of property law. Later chapters examine four broad issues with which the law of property is concerned: the fragmentation of proprietary interests, which enables several persons to hold interests in the same object of property at the same time (Chapters 2, 3 and 6); the acquisition and transfer of proprietary interests, primarily by means of equitable doctrines (Chapter 4); and the enforceability

of proprietary interests and related priority issues (Chapters 4 and 5). The book goes on to examine the rules regulating the creation and enforcement of particular interests in land, including leases, easements, restrictive covenants and mortgages. This edition is accompanied by a dedicated LexisNexis-run Campus website which contains a range of supplementary study materials such as well as model answers both to the questions posed in each chapter, and to problem questions on key topics. We hope that this will greatly assist students in grasping the basic concepts as well as exploring some of the more complex issues in Australian property law. The book brings the law up-to-date to 31 August 2016. In this edition, Brendan Edgeworth was responsible for Chapters 2, 3, 5 and 8; Chris Rossiter for Chapters 7, 9 and 10 and Chapter 6 jointly with Brendan Edgeworth; Pam O’Connor for Chapter 1, and Andrew Godwin for Chapters 4 and 11. We wish to thank Andrew Lynch, Thomas Monotti and Wee An Tan for their invaluable research assistance.

Brendan Edgeworth Christopher Rossiter Pamela O’Connor Andrew Godwin 20 October 2016

Preface to the First Edition

This book is designed to provide a coherent set of materials for the teaching of a course in the law of property in Australian law schools. However, since it contains many of the leading cases of property law, as well as an up-to-date treatment of Australian legislation, it is hoped that it will also provide a useful reference work for practitioners. The structure and contents of the book are based on four assumptions: (i)

Analysis of the nature of proprietary interests and the purposes served by the law of property facilitates a critical understanding of the rules and principles that comprise the modern law. Consequently, although the book deals with the traditional classifications and, from time to time, outlines historical material, its organisation follows the framework established in the first chapter.

(ii) The law of property should be as responsive as any other branch of the law to social change. Moreover, despite an appearance of rigidity caused by the existence of a traditional framework, the rules can often be flexibly applied. Because of the amorphous character of apparently stable

concepts, the courts often contrive to arrive at decisions which are desirable in terms of social policy. A study of property law must not only canvass legislative reform, but also the part played by the courts in effecting change, especially since they do not always openly acknowledge their role. (iii) While recognising that the aims and techniques of a legal education remain the subject of controversy, a basic course in property law can be taught through class discussion of source material at least as effectively as other subjects in a law course. (iv) Australian law students suffer from the lack of an Australia-wide textbook in property law, particularly when they are concerned with detailed legislative provisions. Consequently, the book endeavours to cover material already dealt with in standard texts but with a specifically Australian bias. In other words the book endeavours to be reasonably inclusive and in many cases is designed to be used as a textbook as well as a casebook. Of course, in areas where the substantive law is very detailed, want of space has made it necessary to refer students to other textbooks. It is to be acknowledged at once that many concessions have been made to the demands of practicality. These concessions have often produced omissions and inconsistencies that cannot be explained on theoretical grounds. Thus, although the distinction between real and personal property is rejected as a basis for organisation, the main focus of the book is on subjects within the realm of real property. The reason is simply that the curricula of

most Australian law schools devote detailed attention in later years of the course to transactions involving personal property. Any reader with a knowledge of property law will realise immediately the debt we owe to thinkers more original than ourselves. We have attempted to acknowledge our indebtedness at appropriate places in the text. However, we have been influenced especially (though not necessarily in ways of which they would approve) by Professor Lawson’s little book, Introduction to the Law of Property (1958) and by McDougal and Haber’s Property, Wealth and Land: Allocation, Planning and Development (1948). But while ideas have been borrowed, we have tried to keep in mind constantly that the book is primarily for Australian law students, whose capabilities, experience and expectations are rather different from their American counterparts. In this regard, of course, Australian students should be encouraged to evaluate critically the rules and concepts they study. By the same token, we accept the view, perhaps sometimes overlooked in the United States, that a complete restructuring of an area of law first requires a sound grasp of orthodox principle. This book began life as a collection of mimeographed materials used in the Principles of Property and Conveyancing course at the University of Melbourne in 1968. The task of developing the materials as a coherent whole has been shared jointly, and no definable portion of the book has been the sole responsibility of either author.

Ronald Sackville

Faculty of Law University of Melbourne

Marcia Neave Faculty of Law University of Melbourne March 1971

Acknowledgments

The authors and publishers are grateful to the holders of copyright in material from which extracts appear in this work, particularly to the following: The Legal Service Bulletin Co-operative Ltd for permission to publish Should Australian Bills of Rights Protect Property Rights? (2006) by Simon Evans; Kevin Gray and the Cambridge Law Journal for permission to reproduce material from Kevin Gray, ‘Property in Thin Air’ [1991] Cambridge Law Journal 252; New South Wales Law Reform Commission for permission to reproduce material from the Commission’s Report No 73 (1994): ‘Unilateral Severance of Joint Tenancy’; West Publishing Company for permission to reproduce material from Moore v Regents of the University of California (1990), West’s Pacific Reporter, Second Series; While every care has been taken to establish and acknowledge copyright, the publishers tender their apologies for any accidental infringement. The

publishers would be pleased to come to a suitable arrangement with the rightful owners in each case. The publisher, authors, contributors and endorsers of this publication each excludes liability for loss suffered by any person resulting in any way from the use of, or reliance on this publication.

Table of Cases References are to paragraphs Bold numbers indicate extracts

117 York Street Pty Ltd v Proprietors Strata Plan 16123 (1998) 43 NSWLR 504 …. 10.98, 10.102C 400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302 …. 4.29

A A Legudi and Sons (Vic) Pty Ltd v VL Finance Pty Ltd (unreported, Supreme Court of Victoria, Hansen J, 30 April 1997) …. 11.87C Abbatangelo v Whittlesea City Council [2007] VSC 529 …. 2.82 A’Beckett v Warburton (1888) 14 VLR 308 …. 10.46 Abela v Public Trustee [1983] 1 NSWLR 308 …. 6.64, 6.66, 6.68 Abidogun v Frolan Health Care Ltd [2001] EWCA Civ 1821 …. 8.197C Abigail v Lapin (1934) 51 CLR 58 [1934] AC 491; [1934] All ER Rep 720 …. 5.48C, 5.180C, 5.181, 5.184, 5.185C, 5.187, 5.188, 5.191, 5.201, 11.99C

Abjornsen v Urban Newspapers Pty Ltd (1986) 4 SR (WA) 225 …. 8.54 Abjornson v Urban Newspapers Pty Ltd [1989] WAR 191 …. 4.104C, 8.32 Aboody v Ryan (2012) 17 BPR 32,359 …. 5.104 Abrahams v Flynn (1996) ANZ Conv R 149 …. 10.76 — v Shaw (1969) 72 SR (NSW) 225 …. 8.101 Accordent Pty Ltd v Bresimark Nominees Pty Ltd (2008) 101 SASR 286 …. 8.148 ACES v Sogutlu Holdings Pty Ltd (in liq) v Commonwealth Bank of Australia (2014) 89 NSWLR 209; [2014] NSWCA 402 …. 11.94 Achatz v De Reuver [1971] SASR 240 …. 5.96 Achterberg, Ex parte [1984] 1 Qd R 160 …. 1.106 Acorn Computers v MCS Microcomputer Systems Pty Ltd (1984) 6 FCR 277; 57 ALR 389 …. 4.55 Adams v Bank of NSW [1984] 1 NSWLR 285 …. 11.107 Adamson v Hayes (1973) 130 CLR 276; [1972–73] ALR 1224; (1973) 47 ALJR 201 …. 4.98, 4.101, 4.104C, 4.105, 4.106, 9.52C Adderley v Dixon (1824) 1 Sim & St 607 …. 4.77 Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513; [1957] 3 All ER 563 …. 8.23, 8.28 Addison v Billion [1983] 1 NSWLR 586 …. 5.146 Adelaide Congregation Jehovah’s Witnesses Inc v Pegasus Leasing Ltd (SC(SA), Olsson J, 1996, No SCGRG of 1993, unreported) …. 5.74 Adler v Blackman [1953] 1 QB 146; [1952] 2 All ER 945 …. 8.46

Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng [2001] 1 MLJ 241; 2 CLJ 133 …. 5.46 AF Textile Printers Pty Ltd v Thalut Nominees Pty Ltd [2007] VSC 73 …. 8.60, 8.74 AG (CQ) Pty Ltd v A&T Promotions Ltd [2011] 1 Qd R 306; [2010] QCA 83 …. 4.198, 5.190 AG Securities v Vaughan [1990] 1 AC 417 …. 8.23 AGC (Advances) Ltd v Tweed Canal Estates Pty Ltd (1988) 4 BPR 9404 …. 11.65 Agripower Barraba Pty Ltd v Blomfield (2015) 317 ALR 202 …. 1.81 Ahluwalia v Robinson [2003] NSWCA 175 …. 8.85 Akiba obh of Torres Strait Regional Seas Claim Group v Commonwealth of Australia (2013) 250 CLR 209 …. 3.93, 3.101, 3.121C, 3.123, 3.126C Akiba obh of the Torres Strait Islanders of the Regional Seas Claim Group v Queensland (No 2) (2010) 270 ALR 564 …. 3.91, 3.93, 3.101, 3.108 Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477 …. 1.110C Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd (2007) NSW ConvR ¶56-167 …. 8.100 Albazero [1977] AC 774; [1976] 3 All ER 129 …. 2.23 Albion Insurance Co Ltd v Government Insurance Office of NSW (1969) 121 CLR 342; [1969] HCA 55 …. 6.36C Albon v Dremsall (1610) 1 Brownlow 216; 123 ER 763 …. 10.40

Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 …. 8.80 Aldin v Latimer, Clark, Muirhead [1894] 2 Ch 437 …. 8.64, 8.65, 10.51 Aldred’s Case (1610) Co Rep 57b; 77 ER 816 …. 10.49 Aldridge v Wright [1929] 2 KB 117 …. 10.63, 10.80, 10.137C Alierzai v ANZ [2004] Q ConvR 54-601; [2004] QCA 6 …. 5.111 Allen v Anthony (1816) 1 Mer 282; 35 ER 679 …. 4.188C — v Greenwood [1980] Ch 119; [1979] 1 All ER 819; [1979] 2 WLR 187 …. 10.84 — v Jackson (1875) 1 Ch D 399 …. 3.35 — v Lawson [1926] VLR 1 …. 9.69 — v Roughley (1955) 94 CLR 98 …. 2.108 — v Snyder [1977] 2 NSWLR 685 …. 4.118, 4.122, 4.123C, 4.128C, 4.133, 4.140 Allen (dec’d), Re [1953] Ch 810 …. 3.34 Allen Taylor and Co Pty Ltd t/as Boral Timber v Harrison (2010) 15 BPR 28,505; [2010] NSWSC 1021 …. 6.50 Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202 …. 5.169 Allfox Building Pty Ltd v Bank of Melbourne Ltd (1992) NSW ConvR ¶55-634 …. 10.110, 11.108, 11.109C Altarama v Camp (1983) 5 ACLR 511 …. 11.101 Alyawarr v Northern Territory (2004) 207 ALR 539 …. 3.119 Amad v Grant (1947) 74 CLR 327 …. 8.18 Amalgamated Property Co v Texas Bank [1982] QB 84 …. 4.151C, 4.158

Amatek Ltd v Googoorewan Pty Ltd (1993) 176 CLR 471; 112 ALR 1; 67 ALJR 339 …. 1.106 Amble Inn Pty Ltd v Ryan [2001] NSWSC 875 …. 7.11 AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 …. 8.189, 8.190C — v Canagon Engineering Pty Ltd (1987) 6 BPR 13,899 …. 11.135 Amory Pty Ltd, Application of (1984) NSW Conv R ¶55-180 …. 9.77, 9.117 Anderson v Bowles (1951) 84 CLR 310 …. 3.20 — v Mackellar County Council [1968] 2 NSWR 217; (1968) 14 LGRA 352 …. 10.97 Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22 …. 2.27, 2.30 Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (2004) 206 ALR 69; [2004] SASC 60 …. 11.112 Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 …. 11.58 — v Parker [1973] Qd R 93 …. 3.33, 3.35, 3.36 — v Partington (1791) 3 Bro CC 401; 29 ER 610 …. 7.55 — v Taylor (1869) 6 WW & A’B (L) 223 …. 5.12 — v Television NZ [2009] 1 NZLR 220 …. 1.53 Angelopoulos v Sabatino (1995) 65 SASR 1 …. 1.98 Angus & Co v Dalton (1877) 3 QBD 85 …. 10.92, 10.94

Ankerson v Connelly [1906] 2 Ch 544 …. 10.111 Annen v Rattee (1985) 273 EG 503; [1985] 1 EGLR 136 …. 6.51 Anning v Anning (1907) 4 CLR 1049 …. 4.83, 4.84, 4.85C Anstruther-Gough-Calthorpe v McOscar …. 8.104C Anthony v Commonwealth [1972–73] ALR 769; (1973) 47 ALJR 83 …. 1.84, 1.88, 10.84, 10.140C Apple Fields Ltd v Damesh Holdings Ltd [2004] 1 NZLR 721 …. 11.91 Appleby v Myers (1867) LR 2 CP 651 …. 1.80C Application by Franklin, Re [2009] VSC 496 …. 2.106, 2.107 Application by Haupiri Courts Ltd (No 2), Re [1969] NZLR 353 …. 5.171 Application of Sutherland and Arnautovic, Re [2014] NSWSC 821 …. 11.30 Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319; [2005] V ConvR 54-704 …. 8.195, 8.199 Arambasic v Veza (No 4) (2014) 17 BPR 33,101; [2014] NSWSC 1109 …. 4.46, 5.74 Arcade Hotel, Re [1962] VR 274 …. 9.61, 9.62C, 9.63 Ardrey v Bartlett [2004] WASCA 256 …. 5.110 Argyle Art Centre Pty Ltd v Bond & Freestores Co Pty Ltd [1976] 1 NSWLR 377 …. 8.182 Armory v Delamirie (1722) 1 Strange 506; 93 ER 664 …. 2.14, 2.18, 2.21C, 2.32C, 2.34C Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 ….

6.36C Arnold v Mann (1957) 99 CLR 462 …. 3.111C Arthur v The Public Trustee (1988) 90 FLR 203 …. 4.118 Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002) 10 BPR 19,565 …. 11.75, 11.93 Ashburn Anstalt v Arnold [1988] 2 WLR 706 …. 1.31 Ashe v Hogan [1920] 1 IR 159 …. 8.134 Asher v Whitlock (1865) LR 1 QB 1 …. 2.48C, 2.52C, 2.57, 2.73, 2.108 Ashgrove Pty Ltd v Deputy Commissioner of Taxation (1994) 53 FCR 452; 124 ALR 315 …. 4.37, 10.146 Ashmore Developments Pty Ltd v Eaton [1992] 2 Qd R 1 …. 8.142C, 8.143, 8.144 Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180 …. 8.112, 8.114C Aslan v Murphy [1990] 1 WLR 766 …. 8.23 Assets Co Ltd v Mere Roihi [1905] AC 176 …. 5.38, 5.39, 5.41C, 5.48C, 5.80, 5.86, 5.101C Atkins’s Will Trusts, Re [1974] 2 All ER 1 …. 7.45 Attenborough v London and St Katharine’s Dock Co (1873) 3 CPD 450 …. 2.15 Attorney-General v Brown (1847) 1 Legge 312 …. 3.77C, 3.80 — v Chambers (1854) 4 De GM & G 206 …. 1.107 — v Horner (No 2) [1913] 2 Ch 140 …. 10.33C

Attorney-General (Cth) v RT Co Pty Ltd (No 2) (1957) 97 CLR 146 …. 1.84 Attorney-General (NZ) v Codner [1973] 1 NZLR 545 …. 4.151C Attorney General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114 …. 4.151C, 4.166C Attorney-General of Southern Nigeria v John Holt & Co (Liverpool) Ltd [1915] AC 599 …. 1.104C, 10.25 Attwater v Attwater (1853) 18 Beav 330; 52 ER 131 …. 7.2C, 7.4 Atwood v Maude (1868) LR 3 Ch App 369 …. 4.123C Auerbach v Beck (1985) 6 NSWLR 424 …. 10.61C, 10.76, 10.121 Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 …. 8.69C, 8.70, 8.71, 8.72, 8.73 Austerberry v Corporation of Oldham (1885) 29 Ch D 750 …. 9.16C, 9.22, 9.23C, 9.41 Austin v Keele (1987) 10 NSWLR 283 …. 4.118 Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 …. 4.153C, 4.155 Australia & New Zealand Bank Ltd v Sinclair [1968] 2 NSWR 26 …. 11.135 Australia & New Zealand Banking Group Ltd v Barns (1994) 13 ACSR 592 …. 5.39 — v Widin (1990) 26 FCR 21; 102 ALR 289 …. 4.39, 4.44 Australian and New Zealand Banking Group Ltd v Bangadilly Pastoral Co

Pty Ltd (1978) 139 CLR 195; 19 ALR 519; 52 ALJR 529 …. 11.70, 11.71C, 11.72, 11.74C — v Scott (1993) 6 BPR 13,217 …. 6.81 Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; 185 ALR 1; [2001] HCA 63 …. 1.50C, 1.52, 1.53, 1.54, 11.45C — v O’Neill (2006) 227 CLR 57 …. 5.176 Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491; [2002] FCA 2 …. 11.45C Australian Convention & Exhibition Services Pty Ltd v Sydney City Council (1998) 9 BPR 16,753 …. 8.27 Australian Guarantee Corp Ltd v De Jager [1984] VR 483 …. 5.90, 5.91C, 5.93 Australian Guarantee Corporation (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 …. 4.198, 5.187 Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 …. 10.121, 10.122, 10.123, 10.124C, 10.125, 10.128, 10.137C, 10.140C Australian Mortgage & Properties Pty Ltd v Baclon Pty Ltd (2001) 10 BPR 19,227 …. 9.7C Australian Mutual Provident Society v 400 St Kilda Rd Pty Ltd [1990] VR 646 …. 8.175 Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 …. 1.80C, 1.85C, 1.86 — v Rogers (1943) 43 SR (NSW) 202 …. 8.47C

Australian Regional Credit v Mula [2009] NSWSC 325 …. 5.111 Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (1981) 148 CLR 121; 36 ALR 257 …. 1.16, 10.147C Avco Financial Services v White [1977] VR 561 …. 5.169, 5.183

B Baden Delvaux & Lecuit v Societe Generale pour Favoriser le Development du Commerce [1992] 4 All ER 161 …. 5.113 Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1 …. 5.72C, 5.77, 5.91C, 5.96, 5.99, 5.101C, 5.102, 5.104, 5.113, 5.118, 5.169, 7.2C, 10.135, 10.137C, 10.140C Bailey v Barnes [1894] 1 Ch 25 …. 4.192C, 11.29 — v J Paynter (Mayfield) Pty Ltd [1966] 1 NSWR 596 …. 8.103, 8.106, 8.137 Bain v Brand (1876) 1 App Cas 762 …. 1.90 Baker v Australia and New Zealand Banking Group (SC(NSW), Cohen J, 5 May 1995, unreported) …. 5.90 — v Biddle (1923) 33 CLR 188; [1923] HCA 26 …. 11.45C, 11.50C, 11.53C — v Merckel [1960] 1 QB 657; [1960] 1 All ER 668 …. 8.125 Bakewell Management Ltd v Brandwood [2004] 2 WLR 955 …. 10.83 Balanced Securities Ltd v Bianco [2010] VSC 201 …. 5.133 Balani Pty Ltd v Gunns Ltd [2011] FCAFC 153 …. 5.104 Ballard’s Conveyance, Re [1937] Ch 473; [1937] 2 All ER 691 …. 9.60,

9.61, 9.63, 9.65 Ball-Guymer v Livantes (1990) 102 FLR 327 …. 1.81, 1.85C Baloglow v Konstantinidis (2001) 11 BPR 20,721 …. 4.101, 4.104C, 4.105 Bamford v Turnley (1862) 3 B & S 66; 122 ER 27; [1861–73] All ER Rep 706 …. 1.46C Bank of Ireland Home Mortgages v South Lodge Developments [1996] 1 EGLR 91 …. 8.177 Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495 …. 11.37 Bank of South Australia v Ferguson (1998) 151 ALR 729 …. 5.81 Bank of Victoria v M’Hutchison (1881) 7 VLR (L) 452 …. 8.46 Bankes v Jarvis [1903] 1 KB 549 …. 8.201C Banks v Ferrari [2000] NSWSC 874 …. 2.43 Bankstown Community Child Care Inc, Re [2008] NSWSC 173 …. 5.59 Bannerman, Brydone, Foster & Co v Murray [1972] NZLR 411 …. 11.21 Bannister v Bannister [1948] 2 All ER 133 …. 4.117C, 4.118, 5.101C Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd (2002) V ConvR 54654; [2001] FCA 1672 …. 9.36, 9.52C, 9.57 Barba v Gas & Fuel Corp of Victoria (1976) 136 CLR 120; 12 ALR 649; 51 ALJR 219 …. 5.132C, 5.135, 10.4, 10.5, 10.56 Barbour, Re [1967] Qd R 10 …. 6.10 Barclays Bank plc v Boulter [1997] 2 All ER 1002; [1998] 1 WLR 1 …. 4.195, 5.132C, 5.194C

Barina Properties Pty Ltd v Bernard Hastie (Aust) Pty Ltd [1979] 1 NSWLR 480 …. 8.112, 8.118 Barlin Investments Pty Ltd v Westpac Banking Corp (2012) 16 BPR 30,671; [2012] NSWSC 699 …. 5.205, 11.30 Barnardiston v Chapman (1715) cited 4 East 121 …. 6.12 Barnes v Addy (1874) LR 9 Ch App 244 …. 5.74, 5.113 — v Barratt [1970] 2 QB 657; [1970] 2 All ER 483 …. 8.28 — v Queensland National Bank (1906) 3 CLR 924 …. 11.109C Barnhart v Greenshields (1853) 9 Moo PCC 18; 14 ER 204 …. 4.188C, 4.189, 4.190, 5.194C Baron Bernstein of Leigh v Skyviews & General Ltd [1978] QB 479; [1977] 2 All ER 902 …. 1.70 Barrett v Barrett (1918) 18 SR (NSW) 637 …. 3.64, 7.27, 7.54 — v Lounova (1982) Ltd [1990] 1 QB 348; [1989] 1 All ER 351 …. 8.80, 8.81 Barrington v Tristram (1801) 6 Ves 345; 31 ER 1085 …. 7.55 Barrows v Isaacs [1891] 1 QB 417 …. 8.111 Barry v Hasseldine [1952] Ch 835; [1952] 2 All ER 317 …. 10.73 — v Heider (1914) 19 CLR 197; 21 ALR 93 …. 4.53, 4.85C, 5.48C, 5.101C, 5.109, 5.134, 5.163C, 5.164, 5.165, 5.180C, 10.140C, 10.142C, 11.27 Barry and the Conveyancing Act, Re (1962) 79 WN (NSW) 759 …. 9.73 Bartlett v Ryan (2000) 10 BPR 18,007 …. 5.146

Barton v Morris [1985] 2 All ER 1032; [1985] 1 WLR 1257 …. 6.69 Barton v Upton [2000] TASSC 20 …. 5.54 Basham, Re [1986] 1 WLR 1498 …. 4.164C Batchelor v Marlow [2003] 1 WLR 764 …. 10.26, 10.29 Bates v Donaldson [1896] 2 QB 241 …. 8.114C Bathurst City Council v PWC Properties Pty Ltd (1998) 157 ALR 414; 72 ALJR 1470 …. 4.162C — v Saban (1985) 2 NSWLR 704 …. 1.52 Batiste v Lenin (2002) 10 BPR 19,441; [2002] NSWSC 233 …. 8.207 — v — (2002) 11 BPR 20,403; [2002] NSWCA 316 …. 8.197C, 8.199, 8.203, 8.207 Battenberg v Union Club (2005) 215 ALR 696; [2005] NSWSC 242 …. 5.110 Baulkham Hills Shire Council v Pascoe [1999] NSWCA 431 …. 8.85 Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29 …. 4.112, 4.122, 4.123C, 4.124, 4.125, 4.129, 4.130, 4.131, 4.132, 4.133, 4.136, 4.139, 4.140, 6.54 Bawofi Pty Ltd v Comrealty Ltd (1992) NSW ConvR ¶55-646 …. 8.79 Baxendale v Instow PC [1981] 2 All ER 620 …. 1.103 Baxter v Four Oaks Properties Ltd [1965] Ch 816; [1965] 1 All ER 906 …. 9.73, 9.74 Baypoint Pty Ltd v Baker (1994) 6 BPR 13,687 …. 11.120 Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; [2002] VSC

206 …. 2.92C, 2.94, 2.95 Bayside Developments Pty Ltd v Copperart Pty Ltd (1974) 11 SR (WA) 316 …. 4.47 BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2012] NSWCA 224 …. 8.52 Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 …. 8.175 Beardsley v Registrar of Titles [1993] 2 Qd R 117 …. 5.222 Beatty v ANZ Banking Group Ltd [1995] 2 VR 301;[1995] ANZ ConvR 478; (1995) V ConvR 54-517 …. 5.90 Beavis, Re; Beavis v Beavis (1906) 7 SR (NSW) 66 …. 3.63C, 3.64 Beca Developments Pty Ltd v Idameneo (1989) 4 BPR 9575 …. 8.168 — v — (No 92) Pty Ltd (1990) 21 NSWLR 459 …. 5.172 Beck v Auerbach (1986) 6 NSWLR 454 …. 10.49, 10.121, 10.130 Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 …. 5.177, 5.178 Beever v Spaceline Engineering Pty Ltd (1993) NSW ConvR ¶55-678 …. 2.60 Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 …. 1.80C, 1.81, 1.83, 1.88 Belgravia Ins Co Ltd v Beah [1964] 1 QB 436 …. 8.166C Bell v Bell (1995) 19 Fam LR 690 …. 4.118 Bellevue Crescent Pty Ltd v Marland Holdings Pty Ltd (1998) 43 NSWLR

364 …. 10.144 Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 …. 3.32 Bendal Pty Ltd v Mirvac Projects Pty Ltd (1991) 23 NSWLR 464; 74 LGRA 407 …. 1.71 Beneficial Finance Corporation Ltd v Collings (SC (NSW), Newman J, 15 September 1989, unreported) …. 11.128 Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510 …. 7.4 Benger v Quartermain [1934] NZLR s 13 …. 1.80C Bennell v Western Australia (2006) 153 FCR 120 …. 3.107, 3.108 Bentley v Chang Holdings Pty Ltd [2012] QSC 366 …. 8.100 Benwell Tower, The (1895) 72 LT 664 …. 11.31C Benzlaw & Associates Pty Ltd v Medi-Aid Centre Foundation Ltd [2007] QSC 233 …. 11.72, 11.91 Berdal v Burns [1990] WAR 140 …. 6.67 Berger Bros Trading Co Pty Ltd v Bursill Enterprises Pty Ltd [1970] 1 NSWR 137 …. 10.121 — v — (1971) 124 CLR 73; 45 ALJR 20 …. 10.121 Bergougnan v British Motors Ltd (1929) 30 SR (NSW) 61 …. 1.110C Bernard v Josephs [1982] Ch 391 …. 6.36C Berrisford v Mexfield Housing Co-operative Ltd [2012] 1 All ER 1393; [2012] 1 AC 955; [2011] 3 WLR 1091 …. 8.15C, 8.16, 8.17, 8.18

Beswick v Beswick [1966] Ch 538; [1966] 3 All ER 1 …. 9.6 — v — [1968] AC 58; [1967] 2 All ER 1197 …. 9.6, 9.7C, 9.10, 9.52C Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494; 42 ALR 353; [1982] HCA 45 …. 11.45C, 11.61 Bickel v Duke of Westminster [1977] QB 517 …. 8.112, 8.114C Biddle v Bond (1865) 6 B&S 225; 122 ER 1179 …. 2.25 Big Top Hereford Pty Ltd v Gavin Thomas as Trustee of the Bankrupt Estate of Douglas Keith Tyler [2006] NSWSC 1159 …. 2.10C Biggs v McEllister (1880) 14 SALR 86 …. 5.69 — v — (1883) 8 AC 314 …. 5.69 Billson v Residential Apartments Ltd [1992] 1 AC 494; [1992] 1 All ER 141 …. 8.156, 8.162, 8.163 Binions v Evans [1972] Ch 359; [1972] 2 All ER 70 …. 4.117C, 4.118, 4.119, 5.101C Bird v Trustees Executors and Agency Co Ltd [1957] VR 619 …. 9.7C, 9.10, 9.14 Birkett, Re [1950] 1 Ch 330 …. 7.54 Birmingham v Renfrew (1937) 57 CLR 661; [1937] HCA 52 …. 4.166C Birmingham and District Land Co v London and North Western Railway Co (1888) 40 Ch D 268 …. 4.147C Birmingham and District Land Co and Allday, Re [1893] 1 Ch 342 …. 9.72 Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883 …. 11.132

BIS Cleanaway t/a CHEP v Tatale [2007] NSWSC 378 …. 2.20 Bishop v Taylor (1968) 118 CLR 518 …. 8.14 Biviano v Natoli (1998) 43 NSWLR 695 …. 6.33C, 6.34, 6.36C Black v Black (1991) 15 Fam LR 109 …. 4.139 — v Garnock (2007) 230 CLR 438; 237 ALR 1; [2007] HCA 31 …. 5.50, 5.186, 5.201, 10.35C, 11.30 — v Poole (1895) 16 ALT 155 …. 5.132C Blackett v Olanoff 358 NE 2d 817 (1997) …. 8.69C Blacks Ltd v Rix [1962] SASR 161 …. 9.34C, 9.39, 9.52C, 9.112 Blacktown Municipal Council v Doneo (1971) 1 NSWLR 157 …. 7.2C Blades v Higgs (1861) 10 CBNS 713; 142 ER 634 …. 2.24 Blair v Blair [1956] Tas SR 146 …. 4.114 — v Curran (1939) 62 CLR 464 …. 7.74 Bland v Ingram Estates Ltd [2002] 1 All ER 244; [2002] 2 WLR 361 …. 8.178 — v Levi [2000] NSWSC 161; (2000) 9 BPR 17,517 …. 10.42C Blankstein, Fages and Fages v Walsh [1989] 1 WWR 277 …. 10.17C Blathwayt v Baron Cawley [1976] AC 397; [1975] 3 All ER 625 …. 3.35, 3.36, 7.12 Bligh v Martin [1968] 1 WLR 804 …. 2.92C, 2.100 Bloch v Bloch (1981) 180 CLR 390; 37 ALR 55; 55 ALJR 701 …. 4.108 Bluebird Investments Pty Ltd v Graf (1994) 13 ALJR 271 …. 4.86 Blundell v Associated Securities (1971) 19 FLR 17 …. 11.78

— v Catterall (1821) 5 B & Ald 268; 106 ER 1190 …. 1.11 Blunt v Blunt [1943] AC 517 …. 8.166C Bocardo SA v S & M Hotels Ltd [1979] 3 All ER 797; [1980] 1 WLR 17 …. 8.110 Bocchini v Gorn Management Co 515 A2d 1179 (1986) …. 8.69C Bodney v Bennell (2008) 249 ALR 300; [2008] FCAFC 63 …. 3.108 Bofinger v Kingsway Group Pty Ltd (2008) 73 NSWLR 437; [2008] NSWCA 332 …. 11.41 Bogdanovic v Koteff (1988) 12 NSWLR 472 …. 5.69, 5.70C, 5.71, 5.72C, 5.74 Bohn v Miller Brothers Pty Ltd [1953] VLR 355 …. 9.7C Bolton v Clutterbuck [1955] SASR 253 …. 10.73 — v Tomlin (1836) 5 Ad & E 856; 111 ER 391 …. 8.32 Bond v Rosling (1861) 1 B & S 371; 121 ER 753 …. 8.47C Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 16 BPR 30,111; [2011] NSWCA 396 …. 6.51, 7.2C, 7.4, 7.8, 7.9 Bonvale Enterprises Pty Ltd v Halfpenny Investments Pty Ltd (2005) 62 NSWLR 698 …. 10.25, 10.98 Booker v Palmer [1942] 2 All ER 674 …. 8.22C Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600; 43 ALR 68 …. 8.119 Borambil Pty Ltd v O’Carroll [1972] 2 NSWLR 302 …. 8.17 Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25; [1979] 3

All ER 961 …. 1.112 Borg v Howlett [1996] NSWSC 153; (1996) 8 BPR 15,535 …. 2.10C Borman v Griffith [1930] 1 Ch 493 …. 4.76, 8.37C, 10.20, 10.62 Boulter v Boulter (1898) 19 LR (NSW) Eq 135 …. 6.46, 6.47 Bourke (No 2), In the Marriage of (1994) 18 Fam LR 1; [1994] FLC 92-479 …. 6.67 Bourseguin v Stannard Bros Holdings Pty Ltd [1994] 1 Qd R 231 …. 5.102 Bouvia v Superior Court of California (1986) 179 Cal App 3d 1127; 225 Cal Rptr 297 …. 1.36C Bowser v Colby [1841] 1 Hare 109; 66 ER 969 …. 8.166C, 8.197C Box v Attfield (1886) 12 VLR (L) 574 …. 8.46 Boyce v Beckman (1890) 11 LR (NSW) (L) 139 …. 5.12 Boyd v Mayor of Wellington [1924] NZLR 1174 …. 5.39, 5.41C, 5.48C, 5.49, 5.54, 5.115 Boyer v Warbey [1953] 1 QB 234; [1952] 2 All ER 976 …. 8.135, 8.146C BP Properties Ltd v Buckler (1988) 55 P & CR 337 …. 2.110 Bracewell v Appleby [1975] Ch 408; [1975] 1 All ER 993 …. 10.38 Bradford Banking Co Ltd v Henry Briggs Son and Co Ltd (1886) 12 AC 29 …. 11.31C Bradford House Pty Ltd v Leroy Fashion Group Ltd (1983) 68 FLR 1 …. 8.79 Bradley v Carritt [1903] AC 253 …. 11.46 — v Heslin [2015] EWHC 3267 …. 10.31

Brambles v Commissioner of State Revenue [2004] VCAT 1755 …. 8.23 Branca v Cobarro [1947] KB 854; [1947] 2 All ER 101 …. 8.34 Branchett v Beaney [1992] 3 All ER 910 …. 8.63 Brand v Chris Building Society Pty Ltd [1957] VR 625 …. 1.96, 1.98, 1.102 Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149 …. 11.124 Bray v Bray (1926) 38 CLR 542 …. 3.31C Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd (2007) 20 VR 311 …. 1.74 Breams Property Investment Co Ltd v Strougler [1948] 2 KB 1; [1948] 1 All ER 758 …. 8.15C, 8.126 Breheney, In the Will of [1915] VLR 242 …. 7.54, 7.56 Breskvar v Wall (1971) 126 CLR 376; [1972] ALR 205; [1971] HCA 70 …. 5.48C, 5.49, 5.51, 5.62C, 5.70C, 5.71, 5.72C, 5.96, 5.101C, 5.107, 5.108C, 5.113, 5.154C, 5.155, 5.187, 9.92C, 10.35C, 11.99C Brickwood v Young (1905) 2 CLR 387; 11 ALR 154 …. 6.41, 6.43, 6.44, 6.45 Bride v Shire of Katanning [2013] WASCA 154 …. 2.18 Bridges v Bridges [2010] NSWSC 1287 …. 2.93 — v Hawkesworth (1851) 21 LJQB 75; 15 Jur 1079 …. 2.34C, 2.35 — v Mees [1957] Ch 475 …. 2.105 Bridgewater v Leahy (1998) 194 CLR 457 …. 11.45C Bridle v Ruby [1989] QB 169; [1988] 3 All ER 64; [1988] 3 WLR 191 ….

10.83 Bright v Walker (1834) 1 CM & R 211; 149 ER 1057 …. 10.91 Brighten Pty Ltd v Nine Network Australia Pty Ltd [2009] NSWSC 319 …. 1.49 Britain v Rossiter (1879) 11 QBD 123 …. 4.49 British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1979] 2 All ER 1063; [1979] 3 WLR 451 …. 8.200, 8.201C, 8.202, 8.205C British Equitable Assurance Co Ltd v Bailey [1906] AC 35 …. 11.74C British Telecommunications plc v Sun Life Assurance [1996] Ch 69; [1995] 4 All ER 44 …. 8.102 Broadlands International Finance v Sly (1987) 4 BPR 9420 …. 5.53 Brock v Hillsdale Bowling & Recreation Club Ltd [2007] NSWCA 46 …. 8.85 Brocklesby v Temperance Permanent Building Society [1895] AC 173 …. 4.180 Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179 …. 5.174 Brooks’ Caveat, Re [2014] QSC 76 …. 5.178 Broomfield v Williams [1897] 1 Ch 602 …. 10.71 Bropho v Western Australia [2007] FCA 519 …. 1.31 Brown v Heffer (1996) 116 CLR 344 …. 4.104C — v Superior Court (1988) 44 Cal 3d 1049; 245 Cal Rptr 412; 751 P 2d 470

…. 1.36C Brown (on behalf of the Ngarla People) v State of Western Australia (No 2) (2010) 268 ALR 149; [2010] FCA 498 …. 3.116 Brown, Re; District Bank Ltd v Brown [1954] Ch 39 …. 7.2C, 7.4 Browne v Dawson (1840) 12 Ad & El 624; 113 ER 950 …. 2.61C — v Flower [1911] 1 Ch 219 …. 8.59, 8.69C, 10.49 Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555; [1937] ALR 349 …. 4.85C, 4.86, 5.167 Brunner v Greenslade [1971] Ch 993; [1970] 3 All ER 833 …. 9.76, 9.92C, 9.94 Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 39 ACTR 47; 58 FLR 289 …. 11.77, 11.113 Bruton v London and Quadrant Housing Trust [2000] 1 AC 406 …. 8.51 Brydall Pty Ltd v Owners of Strata Plan 66794 [2009] NSWSC 819 …. 10.27C Brynowen Estates Ltd v Bourne (1981) 131 NLJ 1212 …. 4.146 Bryson v Bryant (1992) 29 NSWLR 188 …. 4.129, 4.131, 4.136 Buchan v Nash [1983] 2 NSWLR 575 …. 6.16, 6.20 Buchanan v Byrnes (1906) 3 CLR 704 …. 8.183C Buchholz v Kempsey Shire Council [2005] NSWSC 235 …. 10.26 Buckley v Buckley, Administratrix of the Estate of Henry A Buckley (dec’d) 12 Nev 423; 1877 WL 4371 …. 2.10C Buckley v Timbury (2013) 17 BPR 32,187; [2013] NSWSC 1009 …. 10.41,

10.42C Bucknell v Mann (1862) 2 SCR (NSW) 1 …. 8.51 Buckworth v Simpson (1835) 1 C M & R 832; 149 ER 1317 …. 8.135 Buffrey v Buffrey (2007) 12 BPR 23,619 …. 4.110 Buildev Development Pty Ltd v Pic Sales Pty Ltd (2004) 11 BPR 21,445 …. 8.120 Bull v Bull [1955] 1 QB 234; [1955] 1 All ER 253 …. 6.16 Bulli Coal Mining Co v Osborne [1899] AC 351 …. 1.74 Bulun Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244 …. 3.94 Bunny Industries v FSW Enterprises Pty Ltd [1982] Qd R 712 …. 4.50, 4.51, 4.52C, 4.53, 4.54, 4.59, 4.135 Bunyip Buildings Pty Ltd v Gestetner Pty Ltd [1969] SASR 87 …. 8.99 — v — [1969] SASR 94 …. 8.99 Burgess v Rawnsley [1975] Ch 429 …. 4.85C, 6.53C Burke v Dawes (1938) 59 CLR 1; [1938] ALR 135 …. 5.131, 5.132C, 5.133, 5.135 — v Frasers Lorne Pty Ltd (2008) 14 BPR 26,111; NSWSC 988 …. 10.42C — v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 …. 6.36C — v Yurilla SA Pty Ltd (1991) 56 SASR 382 …. 9.39, 9.119C, 9.120 Burkinshaw v Nicholls (1878) 3 App Cas 1004 …. 10.142C Burnham v Carroll Musgrove Theatres Ltd (1927) 28 SR (NSW) 169 …. 8.37C — v — (1928) 41 CLR 540 …. 8.37C, 8.46

Burns v Burns [1984] Ch 317; [1984] 1 All ER 244 …. 4.116 — v Dennis (1948) 48 SR (NSW) 266 …. 8.119 Burnes v Trade Credits Ltd [1981] 2 All ER 122 …. 11.34 Burrowes v Lock [1805] EngR 89; (1805) 10 Ves Jr 470; 32 ER 927 …. 4.166C Burrows and Burrows v Sharp [1991] Fam Law 67 …. 4.148 Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73; [1971] ALR 551 …. 5.119C, 5.120, 5.121, 5.226, 9.34C, 9.52C, 9.119C, 9.120 Burton v Arcus [2006] WASCA 71 …. 5.153 — v Winters [1993] 1 WLR 1077 …. 10.104 Butler v Attorney General (Vic) (1961) 106 CLR 268 …. 5.154C, 5.155 — v Craine [1986] VR 274 …. 4.45, 4.118 — v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 …. 2.29 — v Fairclough (1917) 23 CLR 78; 23 ALR 62 …. 5.48C, 5.77, 5.101C, 5.180C, 5.181, 5.185C, 5.187, 5.188, 5.194C, 5.201 — v Muddle (1995) 6 BPR 13,984 …. 10.42C — v — (1995) 6 BPR 97-532 …. 10.39 Butts v O’Dwyer (1952) 87 CLR 267 …. 8.47C Byers v Dorotea (1986) 69 ALR 715 …. 4.18 Byrne v Hoare [1965] Qd R 135 …. 2.42

C C&P Syndicate Pty Ltd v Reddy (2013) 16 BPR 31,771 …. 8.120

Cable v Bryant [1908] 1 Ch 259; [1904–07] All ER Rep 937 …. 8.65, 10.49 Caboche & Bond v Ramsay (1993) 119 ALR 215 …. 3.32 Cachalot Nominees Pty Ltd v Prime Nominees Pty Ltd [1984] WAR 380 …. 11.74C, 11.77 Cadell v Palmer (1833) 1 Cl & F 372; 6 ER 956 …. 7.15 Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 …. 4.162C Calabar Properties Ltd v Seagull Autos Ltd [1969] 1 Ch 451; [1968] 1 All ER 1 …. 8.163 Calabrese v Miuccio (No 2) [1985] 1 Qd R 17 …. 6.65 Calabro v Bayside City Council [1999] 3 VR 688 …. 5.153 Calder v Attorney-General of British Columbia [1973] SCR 313; (1973) 34 DLR (3d) 145 …. 2.52C Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415 …. 5.40, 5.48C Caledonian Railway Co v Sprot (1856) 2 Macq 449; [1843–60] All ER Rep 109 …. 10.85C Callaghan v Merivale CBD Pty Ltd [2006] ANZ ConvR 114; (2006) NSW ConvR ¶56-155 …. 8.97, 8.119, 8.122 Callanan, Re [1970] 2 NSWR 127 …. 9.108 Callow v Rupchev (2009) 14 BPR 27,533; [2009] NSWCA 148 …. 6.34, 6.36C, 6.37, 6.38, 6.39, 6.41 Calverley v Green (1984) 155 CLR 242; 56 ALR 483; 59 ALJR 111 ….

4.108, 4.109C, 4.110, 4.112, 4.119, 4.128C, 5.109, 6.16, 6.26, 6.45 Campbell v Commercial Banking Co of Sydney (1881) 2 LR (NSW) 375 …. 11.63C — v Holyland (1877) 7 Ch D 166 …. 11.114C — v MGN Ltd [2004] 2 WLR 1232 …. 1.53 Campion, Re [1908] SALR 1 …. 3.73C Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433; [1970] 2 All ER 795 …. 8.165, 8.183C Capital Finance Australia Ltd v Bayblu Holdings Pty Ltd & JNW Investments Pty Ltd [2011] NSWSC 24 …. 5.171, 11.106 — v Struthers [2008] NSWSC 440 …. 11.30 Carberry v Gardiner (1936) 36 SR (NSW) 559 …. 8.47C Cardinaels-Hooper v Tierney (1995) 7 BPR 14,435; (1996) NSW ConvR ¶55,887 …. 6.32, 6.45 Cardwell v Walker [2004] 2 P & CR 9 …. 10.20 Cargill v Gotts [1981] 1 All ER 682; [1981] 1 WLR 441 …. 10.92 Carkeek v Tate-Jones [1971] VR 691 …. 3.33 Carmody v Delehunt (1988) 11 Syd I 611 …. 4.108 Carne’s Settled Estates, Re [1899] 1 Ch 324 …. 8.15C Caroline Chisholm Village Pty Ltd, Re (1980) 1 BPR 9507 …. 9.7C, 9.10 Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2003] NSWSC 460 …. 8.65 — v — (2005) NSW ConvR ¶56-116 …. 8.65, 8.71

Carrathool Hotel Pty Ltd v Scutti [2005] NSWSC 401 …. 8.81 Carretta Stud Nominees Pty Ltd v White and Finniss River Pty Ltd and the National Bank of Australasia Ltd (1982) 29 SASR 597 …. 11.61 Carroll v Azolia Pty Ltd [2000] WASC 95 …. 5.178 Carr-Saunders v Dick McNeil Associates Ltd [1986] 2 All ER 888; [1986] 1 WLR 922 …. 10.104 Cartwright, Re (1889) 41 Ch D 532 …. 3.38 Case of the Royal Fishery of the Banne (1610) Dav 55; 80 ER 540 …. 1.11 Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576 …. 5.183 Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 316 ALR 111 …. 5.88, 6.25 Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149; [2013] HCA 11 …. 10.131, 10.132C Catanzariti v Whitehouse (1981) 55 FLR 426 …. 6.49 Catlin v National Australia Bank Ltd [2004] WASC 135 …. 11.75 Caunce v Caunce [1969] 1 All ER 722; [1969] 1 WLR 286 …. 4.192, 5.194C Cavalier v Cavalier (1971) 19 FLR 199 …. 3.33 Cave v Cave (1880) 15 Ch D 639 …. 4.197, 4.203C Celermajer Holdings Pty Ltd v Kopas (2011) 16 BPR 30,735 …. 8.17 Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204 …. 10.40 Centaploy Ltd v Matlodge Ltd [1974] Ch 1; [1973] 2 All ER 720 …. 8.18

Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 3 All ER 610; [1972] 1 WLR 1048 …. 8.172 Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 …. 4.147C, 4.151C Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 …. 11.31C, 11.33 Central Trust and Safe Deposit Company v Snider [1916] 1 AC 266 …. 4.52C Centrovincial Estates PLC v Bulk Storage Ltd (1983) P & CR 394 …. 8.125 Cervi v Letcher [2011] VSC 156 …. 2.89 Chabbra Corporation Pty Ltd v Jag Shakti (Owners) [1986] AC 337 …. 2.22 Chairman, National Crime Authority v Flack (1998) 86 FCR 16; 156 ALR 501 …. 2.38 Chaka Holdings Pty Ltd v Sunsim Pty Ltd (1987) NSW ConvR ¶55-367 …. 8.24 Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd (2003) 59 NSWLR 452; [2003] NSWSC 1072 …. 5.57, 5.212 Chalmers v Pardoe [1963] 3 All ER 552; [1963] 1 WLR 677 …. 4.162C, 4.166C Chamberlain and the Conveyancing Act, Re (1969) 90 WN (NSW) (Pt 1) 585 …. 9.80 Chambers v Randall [1923] 1 Ch 149; [1922] All ER Rep 565 …. 9.67C Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014]

NSWSC 952 …. 5.183 Chan v Cresdon Pty Ltd (1989) 168 CLR 242; 89 ALR 522; 64 ALJR 111 …. 3.111C, 4.70, 4.85C, 8.136 Chandler v Thompson (1811) 3 Camp 80; 170 ER 1312 …. 1.46C Chandless-Chandless v Nicholson [1942] 2 KB 321 …. 8.174 Chandos Developments Pty Ltd v Mulkearns [2008] NSWCA 62 …. 8.96 Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675; ANZ ConvR 481; [2007] NSWSC 694 …. 5.57, 5.59, 5.64, 5.219 Chang v Registrar of Titles (1976) 137 CLR 177 …. 4.52C, 4.55, 4.57C, 4.61 Chaplin v Smith [1926] 1 KB 198 …. 8.109 Chapman v Chapman (2014) 17 BPR 33,093; [2014] NSWSC 1140 …. 6.67 — v Honig [1963] 2 QB 502; [1964] 2 All ER 513 …. 8.63 — v Strawbridge [1910] SALR 118 …. 3.38 Chapman’s Settlement Trusts, Re [1978] 1 All ER 1122; [1977] 1 WLR 1163 …. 7.55 Chardon, Re [1928] Ch 464 …. 7.64 Charles Rickards Ltd v Oppenhaim [1950] 1 KB 616 …. 4.147C Charmelyn Enterprises Pty Ltd v Klonis (1981) 2 BPR 9,527 …. 11.45C, 11.48, 11.50C Chartered Trust Plc v Davies (1997) 76 P & CR 396 …. 8.71 Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co

Ltd (1994) 35 NSWLR 1 …. 11.37 Chasfild Pty Ltd v Taranto [1991] 1 VR 225 …. 5.52 Chateau Douglas Hunter Valley Vineyards Ltd v Chateau Douglas Hunter Valley Winery and Cellars Ltd (Receivers Appointed) [1978] ACLD 258 …. 1.96 Chatsworth Estates Company v Fewell [1931] Ch 224 …. 9.90 Chatsworth Properties Ltd v Effiom [1971] 1 All ER 604; [1971] 1 WLR 144 …. 8.51, 11.136 Chelfield Pty Ltd v Goldsea Pty Ltd [2003] 2 Qd R 243 …. 8.155 Chelsea Yacht and Boat Co Ltd v Pope [2000] 1 WLR 1941 …. 1.87 CHEP Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 …. 2.10C Chhokar v Chhokar [1984] FLR 313; 14 Fam Law 269 …. 6.32 Chick v Dockray (2011) 20 Tas R 167; [2011] TASFC 1 …. 10.36 Chieco v Evans (1990) 5 BPR 11,297 …. 6.32, 6.33C Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462 …. 8.53 Child v Douglas (1854) Kay 560; 69 ER 237 …. 9.49C China and South Sea Bank Ltd v Tan Soon Gin (alias George Tan) [1990] 1 AC 536 …. 11.81C, 11.109C Chiodo v Murphy (1995) V Conv R 54-531 …. 5.170 Choi v Kim [2013] NSWSC 1774 …. 5.174 Chomley v Firebrace (1879) 5 VLR (Eq) 57 …. 5.69 Christie v Dalco Holdings Pty Ltd [1964] Tas SR 34 …. 9.89, 9.110

Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481 …. 8.136 Chung Ping Kwan v Lam Island Development Co Ltd [1997] AC 38 …. 2.116 Cini v Pets Paradise Franchising (SA) Pty Ltd [2009] SASC 7 …. 5.176 Circuit Finance Australia Ltd v Panella (2012) 16 BPR 30,347 …. 4.59 Cirino v Registrar General (1993) 6 BPR 13,260 …. 5.212, 5.214 Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168 …. 8.208 Citicorp Australia Ltd v McLoughney and Registrar-General of Deeds (1984) 35 SASR 375 …. 11.77 Citicorp Investment Bank (Singapore) Ltd v Wee Ah Kee [1997] 2 SLR 759 …. 11.45C City Developments v Registrar General of the Northern Territory (2000) 135 NTR 1 …. 10.17C City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477; [1962] ALR 184 …. 2.28 City Mutual Life Assurance Society Ltd v Lance Creek Meat Works Pty Ltd [1976] VR 1 …. 11.130 City of Canada Bay City Council v Bonaccorso (2007) 156 LGERA 294; [2007] NSWCA 351 …. 5.156, 5.157 City of Subiaco v Heytesbury Properties Pty Ltd (2001) 24 WAR 146 …. 8.79, 8.187 Cityland and Property (Holdings) Ltd v Dabrah [1968] 1 Ch 167 …. 11.48 Civil Service Co-operative Society Ltd v McGrigor’s Trustee [1923] 2 QB 79

…. 8.156 Clairview Developments Pty Ltd v Law Mortgages Gold Coast Pty Ltd [2007] QCA 141 …. 5.57 Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 4) [2008] WASC 293 …. 2.27, 2.30 Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425 …. 1.99 Clapman v Edwards [1938] 2 All ER 507 …. 10.14C Clare Morris Ltd v Hunter BNZ Finance Ltd (1988) 4 BPR 9609 …. 11.65 Claremont 24-7 Pty Ltd v Invox Pty Ltd (No 2) [2015] WASC 220 …. 4.198 Claridge v South Staffordsmith Tramway Co [1892] 1 QB 422 …. 2.21C Clark v Raymor [1982] Qd R 790 …. 4.198 Clarke v Japan Machines (Australia) Pty Ltd (No 2) (1984) 1 Qd R 421 …. 11.113 — v Palmer (1882) 21 Ch D 124 …. 4.181 — v Ramuz [1891] 2 QB 456; [1891–94] All ER Rep 502 …. 4.65 Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V Conv R 54-506 …. 5.170 Claude Neon Ltd v Melbourne and Metropolitan Board of Works (1969) 43 ALJR 69 …. 1.25, 8.28, 8.29, 10.12 Clayton v Corby (1843) 5 QB 415 …. 10.147C — v Ramsden [1943] AC 321; [1943] 1 All ER 16 …. 3.34, 3.36 Clem Smith Nominees Pty Ltd v Farrelly & Farrelly (1978) 20 SASR 227

…. 9.34C, 9.39, 9.52C, 9.56, 9.69, 9.109, 9.111, 9.112, 9.119C Clements v Ellis (1934) 51 CLR 217; 23 ALR 62 …. 5.40, 5.42, 5.48C, 5.49, 5.71, 5.108C Cleret v Rago [2014] QCA 158 …. 2.89 Cleveland v Roberts [1993] 2 NZLR 17 …. 10.63, 10.80 Clifford v Dove [2003] NSWSC 938 …. 9.17 — v — (2004) 11 BPR 21,149 …. 10.52, 10.104 Clifford’s Settlement Trusts, Re [1981] Ch 63 …. 7.55 Clifton Securities Ltd v Huntley [1948] 2 All ER 283 …. 8.165 Clos Farming Estates Pty Ltd v Easton (2001) 10 BPR 18,845; [2001] NSWSC 525 …. 10.27C — v — (2002) 11 BPR 20,605; [2002] NSWCA 389 …. 10.14C, 10.15, 10.25, 10.26, 10.30, 10.147C Clowes v Bentley [1970] WAR 24 …. 8.100, 8.105 Clyne v Lowe (1968) 69 SR (NSW) 433; [1968] 2 NSWR 292 …. 5.140 CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2011] TASSC 71 …. 8.192, 8.198 Coatsworth v Johnson (1886) 54 LT 520 …. 8.37C Cobb v Lane [1952] 1 All ER 1199 …. 8.26, 8.27, 8.28 Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752 …. 4.154, 4.155, 4.160, 4.161, 4.164C, 4.165, 4.166C Cockerill, Re; Mackaness v Percival [1929] 2 Ch 131 …. 7.2C, 7.4 Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1987) 149

CLR 337 …. 8.80, 10.33C, 10.35C, 10.137C Cohen v Cohen (1929) 42 CLR 91 …. 2.105 — v Popular Restaurants Ltd [1917] 1 KB 480 …. 8.127 Cole v Kelly [1920] 2 KB 106 …. 8.37C Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 9 BPR 16,939 …. 9.60 Colledge v H C Curlett Construction Co Ltd [1932] NZLR 1060 …. 1.80C Colin D Young Pty Ltd v Commercial and General Acceptance Ltd (Court of Appeal, 24 August 1982, unreported) …. 11.81C, 11.113 Collins v Castle (1887) 36 Ch D 243 …. 9.77 Combe v Combe [1951] 2 KB 215 …. 4.151C Commercial & General Acceptance Corporation Ltd v Nixon (1981) 152 CLR 491; 38 ALR 225 …. 11.77, 11.90, 11.93 Commercial Bank of Australasia Ltd v Schierholter [1981] VR 292 …. 5.174 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 …. 5.112 Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10; 3 ALR 97 …. 5.132C Commissioner for Main Roads v BP Australia Ltd (1964) 82 WN (NSW) (Pt 2) …. 9.37 — v North Shore Gas Co Ltd (1967) 120 CLR 118; [1968] ALR 111 …. 10.3C Commissioner of Fair Trading v Voulon [2005] WASC 229 …. 8.213 Commissioner of Taxation v R & D Holdings Pty Ltd (2007) 240 ALR 653

…. 11.127 Commonwealth v Clark [1994] 2 VR 333 …. 4.159 — v Orr (1981) 58 FLR 219 …. 11.135 — v Registrar of Titles (Vic) (1918) 24 CLR 348; 24 ALR 106; [1918] HCA 17 …. 10.27C, 10.44 — v Verwayen (1990) 170 CLR 394; 95 ALR 321; 64 ALJR 540; [1990] HCA 39 …. 4.45, 4.156, 4.159, 4.162C, 4.166C, 4.171C, 4.206, 11.45C — v Yarmirr (2001) 208 CLR 1; 184 ALR 113 …. 1.11, 3.89, 3.91, 3.114C, 3.121C Commonwealth Bank of Australia, Re (2009) 14 BPR 26,819; [2009] NSWSC 81 …. 6.62 Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 …. 5.177, 8.52 — v Hadfield (2001) 53 NSWLR 614 …. 11.73 — v Lee (1996) 22 ACSR 574 …. 11.82 — v MacDonald (2000) 10 BPR 18,111 …. 6.81, 6.85 — v Muirhead [1997] 1 Qd R 567 …. 11.90 — v Platzer [1997] 1 Qd R 266 …. 4.193, 5.193 — v Psevdos [2015] SASC 66 …. 5.193 — v Shannon [2013] NSWSC 1076 …. 11.87C — v Thompson [2013] NSWSC 149 …. 11.96 Commonwealth Development Bank of Australia v Eagle Hotels (1990) NSW ConvR ¶55-506 …. 8.178

Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 …. 3.18, 8.11, 8.109, 8.119 Commonwealth of Australia v Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group (2012) 289 ALR 400; [2012] FCAFC 25 …. 3.100 Compagnia Sud Americana de Vapores v Shipmair (The Teno) [1977] 2 Lloyd’s Rep 289 …. 8.201C Competitive Funerals Pty Limited v Gurmit Singh Rai trading as Blacktown City Funerals [2005] NSWSC 1171 …. 8.34 Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 …. 5.170 Comptroller of Stamps v Howard-Smith (1936) 54 CLR 614 …. 4.80, 4.97 Concepts Property Ltd v McKay [1984] 1 NZLR 560 …. 1.91 Congleton Corp v Pattison (1808) 10 East 130; 103 ER 725 …. 9.23C Conlan v Registrar of Titles (2001) 24 WAR 299; [2001] WASC 201 …. 5.50, 5.57, 5.74, 5.106 Conn v Martusevicus (1991) 14 Fam LR 751 …. 4.139 Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] ANZ ConvR 463; [1994] 4 All ER 834; [1994] 1 WLR 501 …. 8.206, 8.207 Connors v United Kingdom [2004] EHRR 189 …. 1.63 Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607 …. 7.67 Conquest v Ebbetts [1896] AC 490; [1895] All ER Rep 622 …. 8.107 Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607 …. 5.53, 8.162

Cook, Re [1964] VR 808 …. 9.92C Cook v Saroukos (1989) 97 FLR 33 …. 2.8, 2.43 Cooke v Cooke [1987] VR 625 …. 4.118, 4.133 — v Head [1972] 2 All ER 38; [1972] 1 WLR 518 …. 4.116, 4.117C Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd (2013) 46 VR 447; [2013] V ConvR 54-834; [2013] VSCA 106 …. 8.135, 8.146C, 8.148 Cooney v Burns (1922) 30 CLR 216 …. 4.44, 4.45 Cooper, Re (1881) 20 Ch D 611 …. 5.11 Cooper v Corporation of Sydney (1853) Legge 765 …. 10.84 Co-operative Property Developments of Australia Limited (in liq) v Commonwealth Bank of Australia [1992] 1 Tas R 308 …. 5.53 Copeland v Greenhalf [1952] Ch 488; [1952] 1 All ER 809 …. 10.5, 10.24, 10.27C, 10.29 Coras v Webb [1942] QSR 66 …. 5.40 Cordingley, Re (1948) 48 SR (NSW) 248 …. 6.83 Corin v Patton (1990) 169 CLR 540; 92 ALR 1; 64 ALJR 256 …. 4.83, 4.84, 4.85C, 4.86, 4.87, 4.89, 4.109C, 6.53C, 6.54, 6.55, 6.57 Cornillie v Saha (1996) 28 HLR 561 …. 8.159 Cornish v Brook Green Laundry Ltd [1959] 1 QB 394; [1959] 1 All ER 373 …. 4.71, 4.76 Coroneo v Australia Provincial Assurance Association Ltd (1935) 35 SR 391 …. 11.113

Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 18 NSWLR 577 …. 4.36, 5.140, 10.145, 10.146, 10.150 — v Australian Softwood Forest Pty Ltd [1978] 1 NSWLR 150 …. 10.147C Cory v Davies [1923] 2 Ch 95 …. 10.77 Coshott v Ludwig (1997) NSW ConvR ¶55-810 …. 9.82 Costello v Chief Constable of Derbyshire Constabulary [2001] 3 All ER 150; [2001] 1 WLR 1437 …. 2.18 Costin v Costin (1997) 7 BPR 15,167 …. 6.55, 6.57 — v — (1997) NSW ConvR ¶55-811 …. 4.87 Council for the Municipality of Lane Cove v Hand and Hurdis Pty Ltd (1955) 72 WN (NSW) 284 …. 9.60 Council of the Municipality of Randwick v Rutledge (1959) 102 CLR 54 …. 3.5 Cousin v Grant (1991) 103 FLR 236 …. 9.15, 9.77, 9.121 Coventry v Smith (2004) 31 Fam LR 608; [2004] FamCA 249 …. 3.45 Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605; [1937] ALR 273 …. 1.18C, 1.19, 1.20 Cox v Bath (1893) 14 LR (NSW) 263 …. 2.24 Crabb v Arun District Council [1976] Ch 179; [1975] 3 All ER 865 …. 4.140, 4.147C, 4.148, 4.151C, 4.157, 4.164C, 4.166C, 10.56, 10.143 Cracknell v Cracknell [1971] P 356 (EWCA Civ) …. 6.36C Cram v Bellambi Coal Co Ltd [1964–65] NSWR 897 …. 8.43 Cram Foundation v Corbett-Jones [2006] NSWSC 495 …. 3.32, 7.64, 7.65,

7.76 Crampton v French (1995) V ConvR 54-529 …. 5.170 Crane v Crane (1949) 80 CLR 327 …. 7.55, 7.56 Crawley Borough Council v Ure [1996] QB 13; [1996] 1 All ER 724; [1995] 3 WLR 95 …. 6.51 Credit Connect Pty Ltd v Carney; Credit Connect Pty Ltd v Smit [2010] NSWSC 910 …. 5.67, 5.95 Credit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803 …. 8.101 Creelman v Hudson’s Bay Insurance Co Ltd [1920] AC 194 …. 5.39 Creer v P & O Lines of Australia (1971) 125 CLR 84; [1972] ALR 226 …. 8.110 Crest Nicholson Residential (South) Ltd v McAllister [2004] EWCA Civ 410 …. 9.54, 9.56 Cricklewood Property and Investment Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221 …. 8.183C Crocombe v Pine Forests of Australia Pty Ltd (2005) 219 ALR 692 …. 3.38 Croft v Lumley (1858) 6 HLC 672; 10 ER 1459 …. 8.158 Crofts v Beamish (1905) 2 IR 349 …. 7.2C Cross & National Australia Bank Ltd, Re [1992] ANZ ConvR 28; (1992) Q ConvR 54-433 …. 5.171, 11.106 Crow v Campbell (1884) 10 VLR (Eq) 86 …. 5.69 — v Wood [1971] 1 QB 77; [1970] 3 All ER 425 …. 10.48, 1.70 Cruse v Mount [1933] Ch 278; [1932] All ER Rep 781 …. 8.76

Cuckmere Brick Co Ltd v Mutual Finance Co Ltd [1971] Ch 949; [1971] 2 All ER 633 …. 11.76, 11.77, 11.78, 11.79, 11.80, 11.81C, 11.83, 11.87C, 11.109C Cudgegong v Transport for NSW (No 3) [2015] NSWLEC 185 …. 11.93 Cugg Pty Ltd v Gibo Pty Ltd (2001) 10 BPR 18,641 …. 8.105 Cuming, Re; Nicholls v Public Trustee (SA) (1945) 72 CLR 86; [1945] ALR 456 …. 7.12 Cummins v Cummins (2006) 227 CLR 278 …. 6.75 Currey v Federal Building Society (1929) 42 CLR 421; [1929] ALR 320 …. 5.180C Currie v Hamilton [1984] 1 NSWLR 687 …. 6.16 Currumbin Investments Pty Ltd v Body Corporate Mitchell Park Parkwood CTS [2012] 2 Qd R 511; [2012] QCA 9 …. 10.36 Cussons, Re (1904) 73 LJ Ch 296 …. 2.105 Cuthbert v Hardie (1989) 17 NSWLR 321 …. 1.106 Cuthbertson v Swan (1877) 11 SALR 102 …. 5.163C, 5.167 Cuvet v Davis (1883) 9 VLR (L) 390 …. 9.92C Cuzeno Pty Ltd v Owners — Strata Plan 65870 [2013] NSWSC 1385 …. 10.64

D D R Fullerton and Co Pty Ltd v Minjar Holdings Pty Ltd (SC (NSW), Lusher AJ, 27 February 1990, unreported) …. 11.128 Dabbs v Seaman (1925) 36 CLR 538 …. 10.78, 10.117, 10.123, 10.142C,

10.143, 10.144 Dale v Haggerty [1979] Qd R 83 …. 4.118 — v Moses [2007] FCAFC 82 …. 3.98 Dalegrove Pty Ltd v Isles Parking Station Pty Ltd (1988) 12 NSWLR 546 …. 8.143, 8.144 Dalla Costa v Beydoun (1990) 5 BPR 11,379; (1991) NSW ConvR ¶55-559 …. 8.169, 8.197C Dalton v Angus & Co (1881) 6 App Cas 740; (1881–5) All ER Rep 1 …. 10.46, 10.85C, 10.87, 10.93, 10.97 — v Christofis [1978] WAR 42 …. 2.104, 4.119 — v Ellis; Estate of Bristow (2005) 65 NSWLR 134; [2005] NSWSC 1252 …. 9.7C Daniel v Gracie (1844) 6 QB 145; 115 ER 56 …. 8.119 — v Western Australia [2003] FCA 666 …. 3.104 Daniels v Davison (1809) 16 Ves 249; 33 ER 978 …. 4.188C Daniher v Fitzgerald (1919) 12 SR (NSW) 260 …. 11.135 Darbyshire v Darbyshire (1905) 2 CLR 787; 11 ALR 417 …. 5.9 D’Arcy v Burelli Investments Pty Ltd (1989) 8 NSWLR 317 …. 1.90, 1.91 Darrington v Caldbeck (1990) 20 NSWLR 212 …. 6.81 David Jones Ltd v Leventhal (1927) 40 CLR 357 …. 8.59 Davidson v Elkington [2011] WASC 29 …. 2.111 Davies v Johnston [2014] VCAT 512 …. 6.39 — v Otty (1865) 35 Beav 208; 55 ER 875 …. 4.101

— v Ryan [1951] VLR 283 …. 5.40, 5.48C — v Sear (1869) LR 7 Eq 427 …. 10.79C — v Williams (1851) 16 QB 546 …. 10.104 Davis v Commonwealth (1988) 166 CLR 79; 82 ALR 633 …. 1.59C, 1.61 — v Johnson [1979] AC 264 …. 6.33C, 6.34 — v Johnson [1979] AC 317 …. 6.33C — v Town Properties Investment Corp Ltd [1903] 1 Ch 797; [1900–3] All ER Rep 558 …. 8.140 — v Whitby [1974] Ch 186; [1974] 1 All ER 806 …. 10.91 — v Williams (2003) 11 BPR 21,313; [2003] NSWCA 371 …. 5.94, 5.95 Davjoyda Estates Pty Ltd v National Insurance Co of New Zealand Ltd [1965] NSWR 1257; (1965) 69 SR (NSW) 381 …. 4.53 Dawson v Stevenson [1920] VLR 564 …. 1.93 Dayeian v Davidson [2010] NSWCA 42 …. 8.17 De Mattos v Gibson (1858) 4 De G & J 276; 45 ER 108 …. 9.34C De Rose v South Australia (2003) 133 FCR 325 …. 3.87, 3.99, 3.106C — v — (No 2) (2005) 145 FCR 290 …. 3.89, 3.99, 3.100, 3.106C, 3.116, 3.124C, 3.125 Deanshaw and Deanshaw v Marshall (1978) 20 SASR 146 …. 5.169, 10.38, 10.56 Dee Trading Co Pty Ltd v Baldwin [1938] VLR 173 …. 2.31 Deeks v Deeks [1988] 1 NZLR 664 …. 6.44 Deeley v Lloyds Bank Ltd [1912] AC 756 …. 11.31C, 11.33

Delaforce v Simpson-Cook (2010) 78 NSWLR 483 …. 4.166C, 4.167, 4.168 Delehunt v Carmody (1986) 161 CLR 464; 68 ALR 253; 61 ALJR 54 …. 4.108, 6.13, 6.18, 6.23 Delohery v Permanent Trustee Co of New South Wales (1904) 1 CLR 283 …. 10.83, 10.93, 10.96 Demertjis v Chauhan (Rld) [2008] NSWADTAP 43 …. 8.72 Denham Bros Ltd v Freestone Leasing Pty Ltd [2003] QCA 376 …. 8.127 Denison v Denison [2000] NSWSC 1205 …. 7.56 Dennerstein, Re [1963] VR 688 …. 9.34C, 9.78, 9.109, 9.110, 9.112, 9.113C, 9.114, 9.119C Dennis v Dennis (1971) 124 CLR 317; [1972] ALR 599; (1971) 45 ALJR 605 …. 6.11 — v McDonald [1982] 1 All ER 590; [1982] 2 WLR 275; [1982] Fam 63 …. 6.33C, 6.36C, 6.34 Densham, Re [1975] 3 All ER 726; [1975] 1 WLR 1519 …. 4.118 Denton v Phillpot (1990) NSW ConvR 55-543 …. 10.42C Department of the Environment v James [1972] 3 All ER 629; [1972] 1 WLR 1279 …. 2.61C Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 97,352; NSW ConvR ¶55-523 …. 1.75 Deutsch v Rodkin [2012] VSC 450 …. 5.178 Dewar v Goodman [1908] 1 KB 94; [1908–10] All ER Rep 188 …. 8.141C

Dewhirst v Edwards [1983] 1 NSWLR 34 …. 10.123, 10.139 D’Eyncourt v Gregory (1866) Law Rep 3 Eq 382 …. 1.80C DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 …. 8.52 DHK Retailers Pty Ltd v Leda Commercial Properties Pty Ltd [1993] ANZ ConvR 635 …. 8.189 Di Palma v Victoria Square Property Co Ltd (1983) 48 P & CR 140 …. 8.174 Diamond v Chakrabarty 447 US 303 (1980); 100 S Ct 2204; 65 L Ed 2d 144 …. 1.36C Dickinson v Burrell (1866) LR 1 Eq 337 …. 4.203C Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572; 10 BPR 18,769 …. 5.207, 5.211, 5.212, 5.225C Dikstein v Kanevsky [1947] VLR 216 …. 8.94 Dillon v Nash [1950] VLR 293 …. 8.94, 10.77 Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1285; [1861–73] All ER Rep 384 …. 4.141C, 4.143, 4.144, 4.145, 4.162C Diment v N H Foot Ltd [1974] 2 All ER 785; [1974] 1 WLR 1427 …. 10.90 Dimmick v Pearce Investments Pty Ltd (1980) 43 FLR 235 …. 11.83 Direct Factory Outlets Pty Ltd v Westfield Management Ltd (No 2) (2005) 144 FCR 23 …. 8.118 Direct Food Supplies (Victoria) Pty Ltd v DLV Pty Ltd [1975] VR 358 ….

8.167 Director of Public Prosecution v Ali (No 2) [2010] VSC 503 …. 4.118 Diwell v Farnes [1959] 2 All ER 379; [1959] 1 WLR 624 …. 6.16 Dobbie v Davidson (1991) 23 NSWLR 625; 73 LGRA 402 …. 10.117, 10.123, 10.124C, 10.125, 10.126, 10.130, 10.131, 10.132C Dobson v North Tyneside Health Authority [1996] 4 All ER 474 …. 1.40 Dockrill v Cavanagh (1944) 45 SR (NSW) 78 …. 8.37C, 8.39, 8.40, 8.43 Doe v Bird (1809) 11 East 49; 103 ER 922 …. 6.33C — v Browne (1807) 8 East 165 …. 8.15C Doe d Carter v Barnard (1849) 13 QB 945; 116 ER 1524 …. 2.48C Doe d Clarke v Clarke (1794) 2 H Black 399; 126 ER 617 …. 9.7C Doe d Hughes v Dyeball (1829) Mood & M 346; 173 ER 1184 …. 2.48C Doe d Lloyd v Passingham (1827) 6 B & C 305; 108 ER 465 …. 3.58, 3.61C, 3.62 Doe d Pitt v Hogg (1824) 4 Dow & Ry 226; 171 ER 1144 …. 8.109 Doe dem Davenish v Moffatt (1850) 15 QB 257; 117 ER 455 …. 8.37C Doe dem Rigge v Bell (1793) 5 TR 471; 101 ER 265 …. 8.37C Doe dem Shore v Porter (1789) 3 TR 13; 100 ER 428 …. 8.37C Doe dem Thompson v Amey (1840) 12 A & E 476; 113 ER 892 …. 8.37C Doe dem Tilt v Stratton (1828) 4 Bing 446; 130 ER 839 …. 8.37C Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380 …. 8.65, 8.94 Doherty v Allman (1878) 3 App Cas 709 …. 3.38 Dollars & Sense Finance Ltd v Nathan [2007] NZCA 177 …. 5.57, 5.109

— v — [2008] NZSC 20 …. 5.87 Dolphin’s Conveyance, Re [1970] Ch 654; [1970] 2 All ER 664 …. 9.74 Dolroy Pty Ltd v Civilco Constructions Pty Ltd [2007] NSWSC 1263 …. 5.169 Donaldson v Donaldson (1854) Kay 711; 69 ER 303 …. 4.85C Donis v Donis (2007) 19 VR 577 …. 4.171C Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 590 …. 1.50C Donoghue v Stevenson [1932] AC 562; [1932] All ER Rep 1 …. 1.46C, 8.83C, 11.79 Doodeward v Spence (1908) 6 CLR 406; 15 ALR 105 …. 1.40, 1.41, 1.42, 4.6 Doohan v Nelson [1973] 2 NSWLR 320 …. 4.117C, 4.118, 4.136 Dorman v Rogers (1982) 148 CLR 365 …. 1.56C Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409 …. 4.205, 5.196 Dougan v Ley (1946) 71 CLR 142; 20 ALJ 37 …. 1.21, 4.77 Douglas v Cicirello [2006] WASCA 226 …. 8.196 — v Hello! Ltd [2001] QB 967 …. 1.52 Downie v Lockwood [1965] VR 257 …. 4.209, 5.131, 5.133, 5.135, 5.194C Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295; [1993] 3 All ER 626 …. 11.80 Dowse v Wynyard Holdings Ltd [1962] NSWR 252 …. 8.60, 8.81

Dowsett v Reid (1912) 15 CLR 695 …. 1.21 Dowty Bolton Paul Ltd v Wolverhampton Corporation (No 2) [1976] Ch 13 …. 10.49 Doyle v Phillips (No 1) (1997) 8 BPR 15,523 …. 9.7C, 9.10, 9.58, 9.65, 9.83 Dr Bronte Douglass v Lawton Pty Ltd [2007] NSWCA 89 …. 1.89 Drake v Gray [1936] 1 Ch 451 …. 9.62C, 9.92C Drane v Evangelou [1978] 2 All ER 437; [1978] 1 WLR 455 …. 8.63 Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53; [2006] FCAFC 157 …. 6.36C Driscoll v Church Commissioners for England [1957] 1 QB 330 …. 9.92C Drive Yourself Hire Co (London) Ltd v Strutt [1954] 1 QB 250; [1953] 2 All ER 1475 …. 9.6 Drummond’s Settlement, Re [1986] 3 All ER 45 …. 7.54 DS Queen Street Mall Pty Ltd v Texrose Pty Ltd [2006] QCA 429 …. 8.143 D’Silva v Lister House Development Ltd [1971] 1 Ch 17; [1970] 1 All ER 858 …. 8.34, 8.45 Dudley and District Benefit Building Society Ltd v Emerson [1949] 1 Ch 707; 1 All ER 691 …. 11.136 Duggan v Kelly (1847) 10 Ir Eq R 295 …. 3.35 — v Thomas [2002] FCA 830 …. 11.92, 11.107 Dukart v District of Surrey et al (1978) 86 DLR 609 …. 10.17C, 10.23 Duke of Norfolk’s Case (1682) 3 Ch Cas 1; 22 ER 931 …. 7.15

Duke of Norfolk’s Case (1685) 3 Ch Cas 54; 22 ER 963 …. 7.15 Duke of Sutherland v Heathcote [1892] 1 Ch 475 …. 10.145 Dullow v Dullow (1985) 3 NSWLR 531 …. 4.108 Dumpor’s case (1603) 4 Co Rep 119(b); 76 ER 1110 …. 8.109 Duncan v Big Country Developments Pty Ltd [2016] NSWCA 163 …. 8.188, 8.196 — v Louch (1845) 6 QB 904; 115 ER 341 …. 10.17C, 10.22, 10.23 — v McDonald (1997) 3 NZLR 669 …. 5.56, 5.57 Dunlop Olympic Ltd v Ellis [1986] WAR 8 …. 4.75 Duran (Holdings) Pty Ltd v Cavacourt Pty Ltd (2000) 10 BPR 18,099 …. 10.108 Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839 …. 4.151C Dutton v Taylor (1700) Lutw 1487; 125 ER 819 …. 10.79C Dwyer v Kaljo (1992) 15 Fam LR 645 …. 4.139 Dyce v Lady James Hay (1852) 1 Macq 305 …. 10.14C, 10.27C Dykstra v Dykstra (1991) 22 NSWLR 556 …. 5.178

E Eade v Vagiozopoulos [1993] V ConvR 54-458 …. 5.52 Eagling v Gardner [1970] 2 All ER 838 …. 9.76 Earl of Egmont v Smith (1877) 6 Ch D 469 …. 4.65 Eastdoro Pty Ltd (No 2), Re [1990] 1 Qd R 424 …. 5.56 Ecclesiastical Commrs for England’s Conveyance, Re [1936] Ch 430; [1934]

All ER Rep 118 …. 9.9 Economy Shipping Pty Ltd v ADC Buildings Pty Ltd [1969] 2 NSWR 97 …. 10.97 Eddowes, Re [1991] 2 Qd R 381 …. 10.116 Edmund Barton Chambers (Level 44) Co-operative Ltd v Mutual Life and Citizens Assurance Co Ltd (1985) 6 NSWLR 312 …. 8.119 Edwards; Re the Estate of Edwards [2011] NSWSC 478 …. 1.42 Effeney v Millar Investments Pty Ltd and Others (2011) 16 BPR 30,275 …. 10.108 Efstratiou v Glantschnig [1972] NZLR 594 …. 5.98 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 …. 5.190 Eliezer v Residential Tribunal (2001) 53 NSWLR 657 …. 8.218 Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd (2011) 80 NSWLR 686 …. 8.208 Elitestone Ltd v Morris [1997] 1 WLR 687 …. 1.85C Ellaway v Lawson [2006] QSC 170 …. 3.34 Ellco Farm Supplies Pty Ltd v Healy (1986) 3 BPR 9596 …. 10.38 Ellenborough Park, Re [1956] Ch 131; [1955] 3 All ER 667; [1955] 3 WLR 892 …. 10.2, 10.13C, 10.14C, 10.15, 10.17C, 10.21C, 10.22, 10.23, 10.24, 10.25, 10.27C, 10.31, 10.55 Eller v Grovecrest Investments Ltd [1994] 4 All ER 845 …. 8.208 Elliot, Re [1896] 2 Ch 353 …. 7.2C Elliott v Boynton [1924] 1 Ch 236; [1923] All ER Rep 174 …. 8.165

Ellison v O’Neill (1968) 88 WN (NSW) (Pt 1) 213; [1968] 2 NSWR 246 …. 9.61 — v Vukicevic (1986) 7 NSWLR 104 …. 10.145, 10.149 Elliston v Reacher [1908] 2 Ch 374 …. 9.73, 9.74, 9.76, 9.92C, 9.118 — v — [1908] 2 Ch 665 …. 9.34C Elton v Cavill (No 2) (1994) 34 NSWLR 289 …. 6.51, 7.2C, 7.9, 7.10 Elwes v Brigg Gas Co (1886) 33 Ch D 562 …. 2.34C, 2.38 — v Maw (1802) 3 East 38; 102 ER 510 …. 1.94 Emcorp Pty Ltd v ABC [1988] 2 Qd R 169 …. 1.49 Emerald Securities Pty Ltd v Tee Zed Enterprises Pty Ltd (1981) 28 SASR 214 …. 11.100 Emerald Quarry Industry Pty Ltd v Commissioner of Highways (1976) 14 SASR 486 …. 10.146 Emerson, Ex parte (1898) 15 WN (NSW) 101 …. 4.5 Emerson v Custom Credit Corporation Ltd [1994] 1 Qd R 516 …. 11.90 Emile Elias & Co Ltd v Pine Groves Ltd [1993] 1 WLR 305 …. 9.77 Eng Mee Yong v Letchumanan [1980] AC 331 …. 5.175, 5.176 English, Scottish and Australian Bank v Phillips (1937) 57 CLR 302 …. 11.25 ENT Pty Ltd v McVeigh (1996) 6 Tas R 202 …. 11.82 Eon Metals NL v Commissioner for State Taxation (WA) (1991) 22 ATR 601 …. 1.85C, 1.87 Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd (1998) 71 SASR 161

…. 11.45C Epworth Group v Permanent Custodians [2011] SASCFC 32 …. 5.157 Equitiloan Securities Pty Ltd v Registrar of Titles [1997] 2 Qd R 597 …. 5.122 Equititrust Ltd v Franks (2009) 258 ALR 388 …. 6.25 Equity One Mortgage Fund Ltd v Thompson [2009] VSC 408 …. 11.110 Equity Trustees Executors and Agency Co Ltd v Epstein [1984] VR 577 …. 7.74 ER Ives Investment Ltd v High [1967] 2 QB 379; [1967] 1 All ER 504 …. 4.142, 9.19, 9.20, 10.56 Errington v Errington and Woods [1952] 1 All ER 149; [1952] 1 KB 290 …. 1.31, 4.141C, 8.22C, 8.26, 8.27 Esanda Finance Corporation Ltd v Gibbons [1999] NSWSC 1094 …. 2.26 Estate of Virgona v Lautour (2007) Aust Torts Reports 81-918; [2007] NSWCA 282 …. 8.85 Estates Gazette Ltd v Benjamin Restaurants Ltd [1995] 1 All ER 129 …. 8.125 Esther Investments Pty Ltd v Cherrywood Park Pty Ltd [1986] WAR 279 …. 8.127, 8.198 Evanel Pty Ltd v Nelson (1995) 39 NSWLR 209; 7 BPR 14,388 …. 10.27C Evans v Balog [1976] 1 NSWLR 36 …. 10.97 — v Braddock [2015] NSWSC 249 …. 4.172 — v Marmont (1997) 21 Fam LR 760 …. 4.139

Eves v Eves [1975] 3 All ER 768; [1975] 1 WLR 1338 …. 4.116, 4.117C Executive Seminars Pty Ltd v Peck [2001] WASC 229 …. 2.99, 5.104 Expert Clothing Service v Hillgate House [1986] 1 Ch 340; [1985] 2 All ER 998 …. 8.155 Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 …. 11.74C, 11.77

F F & F Holdings Pty Ltd v Ridge Lane Pty Ltd [1998] VSCA 72 …. 5.91C Facchini v Bryson [1952] 1 TLR 1386 …. 8.22C FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 …. 4.200 Fairclough v Swan Brewery Co Ltd [1912] AC 565 …. 11.45C, 11.53C Fairless v Registrar of Title [1997] 1 VR 404 …. 5.216, 5.220 Fairweather v St Marylebone Property Co Ltd [1963] AC 510; [1962] 2 All ER 288 …. 2.116, 2.117 Famous Army Stores v Meehan [1993] 1 EGLR 73 …. 8.206 Famous Makers Confectionery Pty Ltd v Sengos (1993) 6 BPR 13,222 …. 1.82 — v — (1993) NSW ConvR ¶55-672 …. 8.62 Fanigun Pty Ltd v Woolworths Ltd [2006] QSC 28 …. 8.72 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 236 ALR 209; 81 ALJR 1107; [2007] HCA 22 …. 5.74, 5.98, 5.113, 10.35C, 11.45C

Farquharson Brothers & Co v King & Co [1902] AC 325; [1900-3] All ER Rep 120 …. 10.142C Farrand v Yorkshire Banking Co (1888) 40 Ch D 182 …. 4.200 Farrar v Farrars Ltd (1888) 40 Ch D 395 …. 11.68, 11.70, 11.73 Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 …. 1.23, 8.24, 8.181 Federal Commerce and Navigation Co Ltd v Molena Alpha Ltd [1978] QB 427; [1978] 3 All ER 1066 …. 8.201C Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371; [1980] 1 WLR 594 …. 9.26E, 9.52C, 9.53, 9.54, 9.56, 9.57, 9.62C, 9.92C — v — (1995) 133 ALR 465 …. 9.52C Fejo v Northern Territory (1998) 195 CLR 96 …. 3.88C, 3.110, 3.114C, 3.121C, 3.124C, 3.126C Fels v Knowles (1906) 26 NZLR 604 …. 5.56 Fenn v Smart (1810) 12 East 444; 104 ER 173 …. 8.161C Fennings v Lord Grenville (1808) 1 Taunt 241; 127 ER 825 …. 2.4 Fensom v Cootamundra Racecourse Reserve Trust [2000] NSWSC 1072 …. 1.99 Fenwick v Wambo Coal Pty Ltd (No 3) (2011) 15 BPR 29,559 …. 10.6 Ferguson v Miller [1978] 1 NZLR 819 …. 6.32, 6.33C, 6.48 Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281 …. 10.36 Ferrari v Beccaris [1979] 2 NSWLR 181 …. 6.86

Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245 …. 11.24 Fink v Robertson (1907) 4 CLR 864 …. 11.23C Finlay v R & I Bank of Western Australia Ltd (1993) 6 BPR 13,232 …. 5.190, 5.201 First National Securities Ltd v Jones [1978] Ch 109; [1978] 2 All ER 221 …. 4.29 Fischer v Easthaven Ltd (1963) 80 WN (NSW) 1155 …. 5.229 Fisher v Westpac Banking Corporation (1993) 43 FCR 385 …. 4.29 Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81 …. 2.18 Fitt v Luxury Developments [2000] VSC 258 …. 9.65, 9.113C, 9.114 Fitzgerald v Firbank [1877] 2 Ch 96; [1895–99] All ER Rep 445 …. 1.28C, 4.5 Flavelle, Re; Moore v Flavelle [1969] 1 NSWR 361 …. 2.104 Flexman v Corbett [1930] 1 Ch 672; All ER Rep 420 …. 8.34 Flight v Bentley (1835) 7 Lim 149; 58 ER 793 …. 8.142C Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712 …. 4.166C Foley v Interactive Data Corp (1988) 47 Cal 3d 654; 254 Cal Rptr 211; 765 P 2d 373 …. 1.36C Foley (Deceased), Re; Public Trustee v Foley [1955] NZLR 702 …. 6.26 Forbes v New South Wales Trotting Club (1979) 25 ALR 1 …. 1.57 Ford v Heathwood [1949] QWN 11 …. 10.51

— v Perpetual Trustees Victoria Ltd [2009] NSWCA 186 …. 5.67 Forder v Cemcorp Pty Ltd (2001) 10 BPR 18,615 …. 5.169 Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154; 152 ALR 149 …. 9.51, 9.52C, 9.60 Forgeard v Shanahan (1994) 35 NSWLR 206; 18 Fam LR 281 …. 6.35, 6.36C, 6.38, 6.41, 6.46 Formby v Barker [1903] 2 Ch 539; [1900–3] All ER Rep 445 …. 9.34C, 9.48, 9.67C Forrest Trust, Re; Trustees, Executors and Agency Co Ltd v Anson [1953] VLR 246 …. 11.23C, 11.123 Forsyth v Blundell (1973) 129 CLR 477; 1 ALR 68 …. 4.208, 5.171, 11.77, 11.78, 11.81C, 11.87C, 11.91, 11.99C, 11.100, 11.101, 11.102 — v Blackstone (1883) 1 My & K 298; 39 ER 694 …. 4.196C — v Mountford (1976) 14 ALR 71 …. 3.96 — v Reeves [1892] 2 QB 255 …. 4.71, 8.37C — v Wright (1878) 4 CPD 438 …. 1.105 Four Maids Ltd v Dudley Marshall (Properties) Ltd [1957] 1 Ch 317 …. 11.132 Four Oaks Enterprises Pty Ltd v Clark [2002] TASSC 39 …. 5.173 Fox v Jolly [1916] 1 AC 1 …. 8.154 Frame v Dawson (1807) 14 Ves Jun 386; 33 ER 569 …. 4.42C Francis Longmore & Co Ltd v Stedman [1948] VLR 322 …. 8.119 Francis, Re; Ex Parte Official Trustee in Bankruptcy (1988) 82 ALR 335 ….

6.75 Frater v Finlay (1968) 91 WN (NSW) 730 …. 10.14C, 10.52 Frazer v Walker [1967] 1 AC 569; [1967] 1 All ER 649 …. 5.25, 5.37, 5.40, 5.41C, 5.42, 5.43, 5.44, 5.45, 5.48C, 5.49, 5.55C, 5.59, 5.70C, 5.72C, 5.75, 5.77, 5.100, 5.101C, 5.108C, 5.110, 5.113, 5.122, 5.123, 5.154C, 5.214 Frederick Betts Ltd v Pickfords Ltd [1906] 2 Ch 87 …. 8.65 Freed v Taffel (1984) 2 NSWLR 322 …. 4.85C, 6.54, 6.58 Freemasons Hospital v Attorney-General for the State of Victoria [2010] VSC 373 …. 7.64, 7.65 Fremantle Trades Hall Industrial Association v Victor Motor Co Ltd [1963] WAR 201 …. 8.162 French v Queensland Premier Mines Pty Ltd [2006] VSCA 287 …. 5.57, 11.118 Friedman v Barrett; Ex parte Friedman [1962] Qd R 498 …. 5.96, 5.101C, 5.103 Frieze v Unger [1960] VR 230 …. 6.49, 6.63 Fuentes v Bondi Beachside Pty Ltd [2016] NSWSC 531 …. 4.60 Fulham Partners LLC v National Australia Bank Ltd (2013) 17 BPR 32,709; [2013] NSWCA 296 …. 7.10 Fulton v 523 Nominees Pty Ltd [1984] VR 200 …. 6.50, 6.80 Funds in Court; Application of Mango Credit Pty Ltd, Re [2016] NSWSC 199 …. 11.57, 11.58

Fyfe v Smith [1975] 2 NSWLR 408 …. 11.127 Fysh v Page (1956) 96 CLR 233 …. 11.73 Fyvie v Anand (1994) 6 BPR 13,743 …. 10.97

G G & A Lanteri Nominees Pty Ltd v Fishers Stores Consolidated Pty Ltd (2005) V ConvR 54-708 …. 8.144 G & C Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25 …. 11.44, 11.45C, 11.46, 11.48, 11.49, 11.50C, 11.53C, 11.55 Gallagher v Rainbow (1994) 179 CLR 624; 121 ALR 129; 68 ALJR 512 …. 9.20, 10.18, 10.32, 10.33C, 10.35C, 10.37 Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176 …. 5.168 Ganga Dhar v Shankar Lal (1958) 45 AIR 770 …. 11.45C Gangemi v Watson (1994) 11 WAR 505 …. 10.88 Gapes v Fish [1927] VLR 88; [1927] ALR 111 …. 10.3C, 10.5, 10.12 Garafano v Reliance Finance Corp Pty Ltd (1992) NSW ConvR ¶55-640 …. 5.106 Garcia v National Australia Bank Ltd [1998] HCA 48 …. 5.111, 5.112, 5.118 Gardner v Hodgson’s Kingston Brewery Co Ltd [1903] AC 229 …. 10.89 — v Moore [1984] AC 584 …. 6.72 Garofano v Reliance Finance Corp Pty Ltd (1992) 5 BPR 11,941; NSW ConvR ¶55-640 …. 5.39

Gas & Fuel Corporation of Victoria v Barba [1976] VR 755 …. 10.3C Gateway Developments Pty Ltd v Grech (1970) 71 SR (NSW) 161 …. 5.8 Geftakis v Maritime Services Board of New South Wales (Court of Appeal, 20 November 1987, unreported) …. 4.153C George v Biztole Corp Pty Ltd (1995) V ConvR 54-519 …. 5.172 — v Commercial Union Assurance Company of Australia Ltd (1977) 1 BPR 9649 …. 11.109C George Wimpey & Co Ltd v Sohn [1967] Ch 487 …. 2.92C, 2.93 Georgeski v Owners Corporation Strata Plan 49833 (2004) 62 NSWLR 534; 12 BPR 22,573 …. 1.28C, 1.31, 1.32, 8.23 Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 …. 5.88 — v — (2013) 305 ALR 612 …. 5.88, 6.25 Gerraty v McGavin (1914) 18 CLR 152 …. 8.154 Gesmando v Anastasiou (1975) 1 BPR 9297 …. 1.106 Ghey and Galton’s Application, Re [1957] 2 QB 650 …. 9.92C Giacomi v Nashvying Pty Ltd (2008) Q ConvR ¶54-684; [2007] QCA 454 …. 8.156 Gibbons v Wright (1954) 91 CLR 423 …. 6.59 Gibbs v Messer [1891] AC 248 …. 5.37, 5.38, 5.39, 5.41C, 5.48C, 5.71, 5.72C, 5.101C Gibbs & Houlder Brothers & Co Ltd’s Lease, Re; Houdler Brothers & Co Ltd v Gibbs [1925] Ch 575; [1925] All ER Rep 128 …. 8.112, 8.114C

Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630 …. 5.169 — v Dickie (1815) 3 M&S 463; 105 ER 684 …. 3.31C — v Gibson (1698) 2 Freeman 223; 22 ER 1173 …. 9.7C — v Kirk (1841) 1 QB 850; 113 ER 1357 …. 8.119 Gifford v Lord Yarborough (1828) 5 Bing 163; 130 ER 1023 …. 1.103 Gigi Entertainment Pty Ltd v Schmidt (2013) 17 BPR 32,611; [2013] NSWCA 287 …. 8.185 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689; [1973] 3 All ER 195 …. 8.207 Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122 …. 8.120 Giles and McConachy’s Lease, Re [1953] VLR 273 …. 8.110 Gill v Bucholtz (2009) 90 BCLR (4th) 276; [2009] BCCA 137 …. 5.46 — v Lewis [1956] 2 QB 1; [1956] 1 All ER 844 …. 8.166C, 8.173, 8.177, 8.197C Gillett v Holt [2001] Ch 210 …. 4.164C, 4.166C Ginelle Finance Pty Ltd v Diakakis [2002] NSWSC 1032 …. 5.105 Gissing v Gissing [1971] AC 886; [1970] 2 All ER 780 …. 4.111, 4.114, 4.116, 4.118, 4.128C Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473; [1999] HCA 10 …. 4.134, 4.161, 4.162C, 4.163, 4.166C, 4.167, 4.171C Glandore Pty Ltd v Elders Finance and Investment Co Ltd (1984) 4 FCR

130 …. 11.111 Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 456 …. 8.68, 8.81 Gledhill v Hunter (1880) 14 Ch D 492 …. 2.61C Glenwood Lumber Co v Phillips [1904] AC 405; [1904–07] All ER Rep 203 …. 8.23 Global Minerals Australia Pty Ltd v Valerica Pty Ltd (2000) 10 BPR 18,463 …. 5.169, 5.170 Glouftsis v Glouftsis (1987) 44 SASR 298 …. 4.133 Gnych v Polish Club Limited [2015] HCA 23 …. 8.39 Gobblers Inc Pty Ltd v Stevens (1993) 6 BPR 13,591 …. 4.70 Godecke v Kirwan (1973) 129 CLR 628; 1 ALR 457 …. 8.34 Goff v Albury Sailors, Soldiers and Airmen’s Club Ltd (1996) ANZ Conv R 166 …. 10.135 Gohl v Hender [1930] SAStRp 36; [1930] SASR 158 …. 10.42C Goldberg v Edwards [1950] Ch 247 …. 10.70 Goldcel Nominees Pty Ltd v Network Finance Ltd [1983] 2 VR 257 …. 11.87C Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd [2015] NSWCA 100 …. 4.61 Golding v Tanner (1991) 56 SASR 482 …. 5.117, 10.84, 10.128, 10.129, 10.139, 10.140C, 10.141 Goldsworthy Mining Ltd v Commissioner of Taxation (Cth) (1973) 128

CLR 199; 47 ALJR 175 …. 8.23 Goodchild, Re [1996] 1 WLR 694 …. 4.166C Goodman v Gallant [1986] 1 All ER 311 …. 6.16 Gordon v Lidcombe Investments …. 8.69C Gorman (A Bankrupt), Re [1990] 1 WLR 616 …. 6.36C Government Insurance Office (NSW) v KA Reed Services Pty Ltd [1988] VR 829 …. 9.20 Government of the Islamic Republic of Iran v The Barakat Galleries Ltd [2009] QB 22; [2007] EWCA Civ 1374 …. 2.1 Goyal v Chandra (2006) 12 BPR 23,553; [2006] NSWSC 239 …. 7.5 Grafton v Griffin (1830) 1 Russ & M 336; 29 ER 130 …. 2.61C Graham v Aluma-Lite Products Pty Ltd (2006) NSW ConvR 56-156; [2006] NSWSC 476 …. 11.65 — v Commonwealth Bank of Australia (1988) ATPR ¶40-908 …. 11.111 — v Markets Hotel Pty Ltd (1943) 67 CLR 567 …. 8.104C, 8.107 — v Philcox [1984] QB 747; [1984] 2 All ER 621 …. 10.70, 10.111 Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93 …. 1.22 Grainger v Williams [2005] WASC 286 …. 8.89 Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] Ch 592; [1959] 2 All ER 176 …. 8.137 Grant v Edwards [1986] Ch 638; [1986] 2 All ER 426; [1986] 3 WLR 114 …. 4.118, 4.140

— v Macdonald [1992] 5 WWR 577 …. 10.17C — v NZMC Ltd [1989] 1 NZLR 8 …. 8.206 —v YYH Holdings Pty Ltd [2012] NSWCA 360 …. 2.10C Gration v C Gillan Investments Pty Ltd [2005] 2 Qd R 267 …. 8.102 Great West Permanent Loan Co v Friesen [1925] AC 208 …. 5.48C, 5.165 Greco v Swinburne Ltd [1991] 1 VR 304 …. 5.132C Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Ltd [2007] NSWSC 92 …. 8.168 Green v Ashco Horticulturist Ltd [1966] 2 All ER 232; [1966] 1 WLR 889 …. 10.70 — v Green (1989) 17 NSWLR 343; 13 Fam LR 336 …. 4.118, 4.133 — v Robinson (1995) 36 NSWLR 96 …. 4.139 — v Russell; McCarthy (Third Party) [1959] 2 QB 226 …. 5.101C — v Smith (1738) 1 Atk 573; 26 ER 360 …. 4.52C Greenfield v Greenfield (1979) 38 P & C R 570 …. 6.69 Greenwood v Bennett [1973] QB 195; [1972] 3 All ER 586 …. 2.24 Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49 …. 8.167 Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33 …. 8.80 Greig v Watson (1881) 7 VLR (Eq) 79 …. 11.23C Gregor v M’Gregor (1859) 1 De G F & J 63; 45 ER 282 …. 6.2E Gresley v Mousley (1859) 4 De G & J 78; 45 ER 31 …. 4.203C

Greville v Parker [1910] AC 335 …. 8.197C Grey v Inland Revenue Commissioners [1958] Ch 375 …. 4.101 — v — [1958] Ch 690 …. 4.101 — v — [1960] AC 1; [1959] 3 All ER 603 …. 4.100, 4.101, 4.102 Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 …. 5.57, 5.62C, 5.82, 5.90, 5.100, 5.106, 5.107, 5.109 Griffith v Pelton [1958] Ch 205; [1957] 3 All ER 75 …. 8.127, 10.3C Griffiths v Northern Territory (2006) 165 FCR 300; [2006] FCA 903 …. 3.118 Grigsby v Melville [1972] 1 WLR 1355 …. 10.27C Grill v Hockey (1991) 5 BPR 11,421 …. 10.116 Groongal Pastoral Co Ltd (in liq) v Falkiner (1924) 35 CLR 157 …. 5.58, 11.118 Gross and the Conveyancing Act, Re [1965] NSWR 887 …. 9.108 Grose v St George Commercial Credit Corporation Ltd ((1991) NSW ConvR ¶55-586 …. 11.109C, 11.110 Grosse v Purvis [2003] QDC 151 …. 1.52, 1.54 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641; [1937] HCA 58 …. 4.151C, 4.166C Grundy v Ley [1984] 2 NSWLR 467 …. 5.58, 11.118 GS Fashions Ltd v B & Q plc [1995] 4 All ER 899 …. 8.162, 8.163 Guardian Mortgages Pty Ltd v Miller (2004) 12 BPR 22,833; [2004] NSWSC 1236 …. 11.97

Gumana v Northern Territory of Australia (2007) 158 FCR 349 …. 3.12, 3.91, 3.92, 3.100 Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; 244 ALR 1 …. 5.57, 8.148, 8.189, 8.190C, 8.191 Gunnion v Ardex Acceptance Corp Pty Ltd [1968] VR 547 …. 11.130 Guss v Geelong Building Society (in liq) [2001] VSC 37 …. 11.87C Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 …. 6.61, 6.50, 6.62, 6.74 Gyarfas v Bray (1989) 4 BPR 9736 …. 9.61, 9.62C, 9.92C

H H, AE (No 2), Re [2012] SASC 177 …. 1.42 H H Halls Ltd v Lepouris (1964) 82 WN (NSW) (Pt 2) 87 …. 5.229 HA Warner Pty Ltd v Williams (1945) 73 CLR 421 …. 8.27 Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326 …. 8.157, 8.174 Haddersley v Adams (1856) 22 Beav 266; 52 ER 1110 …. 6.6E Hadley v London Bank of Scotland (1865) 3 De GJ & S 63; 46 ER 562 …. 4.52C Haig v Chesney [1925] SASR 82 …. 8.69C Hagan v Waterhouse (1991) 34 NSWLR 308 …. 4.104C Hale v Dobbie (1996) ANZ Conv R 152 …. 10.107 Hall v Busst (1960) 104 CLR 206; [1961] ALR 508; [1960] HCA 84 ….

7.2C, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10, 7.11, 7.12 Halsall v Brizell [1957] Ch 169; [1957] 1 All ER 371 …. 9.19, 9.20, 9.21 Hamble Parish Council v Haggard [1992] 4 All ER 147; [1992] 1 WLR 122 …. 10.5 Hamilton v Geraghty (1901) 1 SR (NSW) Eq 81 …. 4.158 — v Joyce [1984] 3 NSWLR 279 …. 10.82, 10.87, 10.91 — v Porta [1958] VR 247; [1958] 65 ALR 620 …. 1.10 Hamilton Ice Arena Ltd v Perry Developments Ltd [2002] 1 NZLR 309 …. 205C Hamilton Island Enterprises v Boss [2010] 2 Qd R 115; [2009] QCA 229 …. 8.114C Hamilton-Snowball’s Conveyance, Re [1959] Ch 308; [1958] 2 All ER 319 …. 4.65 Hammond, Re [2015] VSC 608 …. 9.88, 9.89 Hamps v Derby [1948] 2 KB 311; [1948] 2 All ER 474 …. 4.5 Hampshire v Wickens (1878) 7 Ch D 555 …. 8.34 Hamwood v Murdoch [2010] NTSC 62 …. 11.64 Hanak v Green [1958] 2 QB 9 …. 8.201C Hanbury v Jenkins [1901] 2 Ch 401 …. 10.5 Handberg v MIG Property Services Pty Ltd [2010] VSC 388 …. 5.188 Hannah v Peel [1945] KB 509 …. 2.34C Hansford v Jago [1921] Ch 322; [1920] All ER Rep 580 …. 10.63 Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240 ….

5.174 Haque v Haque (No 2) (1965) 114 CLR 98 …. 4.52C Harada v Registrar of Titles [1981] VR 743 …. 10.5, 10.27C Hardebol v Perpetual Trustee Co Ltd [1975] 1 NSWLR 221 …. 7.30 Harding v National Insurance Co (1871) 2 AJR 67 …. 1.89 Hargrave v Goldman (1963) 110 CLR 40 …. 8.69C Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200 …. 8.64, 8.69C — v Pearson [1993] ACL Rep 430 Qld 1 …. 4.133 Harrigan v Brown [1967] 1 NSWR 342 …. 1.21 Harrington-Smith on behalf of the Wongatha People v Western Australia (No 9) [2007] FCA 31 …. 3.101, 3.108 Harris v Commissioner for Social Housing (2013) 8 ACTLR 98 …. 8.71 — v De Pinna (1886) 33 Ch D 238 …. 10.44 — v Goddard [1983] 3 All ER 242; [1983] 1 WLR 1203 …. 6.67 — v King (1936) 56 CLR 177 …. 7.35, 7.39 — v Smith [2008] NSWSC 545 …. 5.110, 5.114 — v Walker (1969) 14 FLR 167 …. 6.74 — v Western Australian Exim Corporation (1995) 129 ALR 387 …. 11.111 Harrison, Ainslie & Co v Muncaster [1891] 2 QB 680 …. 8.69C, 8.72 Harrow London Borough Council v Johnstone [1997] 1 All ER 929; [1997] 1 WLR 459 …. 6.51 Hart, Re [1954] SASR 1 …. 3.38 Hart v Windsor (1843) 12 M & W 68; 152 ER 1114; [1843–60] All ER Rep

68 …. 8.76 Harvey v McWatters (1948) 49 SR (NSW) 173 …. 11.109C, 11.113 Haselhurst v Elliott [1945] VLR 153 …. 8.32 Haskell v Marlow [1928] 2 KB 45 …. 8.99, 8.100 Haslam v Money for Living (Aust) Pty Ltd (2008) 172 FCR 301 …. 8.17 Hassell, Re Will of (1940) 43 WALR 36 …. 7.56 Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 …. 8.68 Hawkesbury Valley Developments Pty Limited v Custom Credit Corporation Ltd (Supreme Court of New South Wales, 7 February 1990 unreported) …. 11.109C, 11.113 Hayes v Adamson [1972] WAR 116 …. 4.98 — v Gunbola Pty Ltd (1986) 4 BPR 97,263 …. 8.168, 8.169, 8.176, 8.197C — v O’Sullivan (2001) 24 WAR 40; [2001] WASC 55 …. 5.169 — v Seymour-Johns (1981) 2 BPR 9366 …. 5.140, 8.119 Haynes Case (1614) 12 Co Rep 113 …. 1.40 Hayward v Challoner [1968] 1 QB 107; [1967] 3 All ER 122 …. 2.119 — v Skinner [1981] 1 NSWLR 590 …. 6.82, 6.83, 6.84 Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403 …. 9.16C, 9.40 Headland Developments Pty Ltd v Bullen [1975] 2 NSWLR 309 …. 7.66 — v — [1976] ACLD 805 …. 7.66 Healey v Hawkins [1968] 3 All ER 836; [1968] 1 WLR 1967 …. 10.89 Heath, Re [1936] Ch 259 …. 7.27

Hedley v Roberts [1977] VR 282 …. 6.50, 10.27C, 10.49 Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628 …. 5.225C — v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326; 49 ALR 229 …. 4.198, 4.200, 5.184, 5.187, 5.188, 5.192C, 5.193, 5.194C, 5.201 Heidke v Sydney City Council (1952) 52 SR (NSW) 143 …. 1.20, 1.22 Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343 …. 10.123 Hemmings v Stoke Poges Golf Club Ltd [1920] 1 KB 720; [1918–19] All ER Rep 798 …. 2.61C, 2.64, 2.65 Hender v Gohl [1928] SAStRp 63; [1928] SASR 325 …. 10.42C Henderson v Eason (1851) 17 QB 701; 117 ER 1451 …. 6.42, 6.44 Henry v Henry [2010] 1 All ER 988 …. 4.165, 4.166C, 4.167 Henry, Ex parte; Commissioner of Stamp Duties, Re [1963] NSWR 1079; (1963) 63 SR (NSW) 298 …. 10.146 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 …. 11.87C, 11.101, 11.113 Hepworth v Hepworth (1963) 110 CLR 309 …. 4.118, 4.123C Heseltine v Heseltine [1971] All ER 752; [1971] 1 WLR 342 …. 4.116 Heslop v Burns [1974] 3 All ER 406; [1974] 1 WLR 1241 …. 8.27, 8.28 Heyman v Darwins Ltd [1942] AC 356 …. 8.47C Hibbert v McKiernan [1948] 2 KB 142 …. 2.34C Highwater Nominees Pty Ltd v Mead [2006] WASC 17 …. 8.206 Higgins v Wingfield [1987] VR 689 …. 4.120

Higgs v Nassauvian Ltd [1975] AC 464 …. 2.102 Highmist Pty Ltd v Tricare Australia Ltd [2005] QCA 357 …. 10.144 Highway Properties Ltd v Kelly (1971) 17 DLR (3d) 710 …. 8.183C Higton Enterprises Pty Ltd v BFC Finance Ltd [1997] 1 Qd R 168 …. 11.91 Hilderbrandt v Stephen [1964] NSWR 740 …. 9.89 Hill v C A Parsons & Co Ltd [1972] Ch 305; [1971] 3 All ER 1345 …. 1.22 — v Harris [1965] 2 QB 601; [1965] 2 All ER 358 …. 8.78, 8.79 — v Lyne (1893) 14 LR (NSW) 449 …. 1.103, 1.107 Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004) 220 CLR 472; 211 ALR 588; [2004] HCA 59 …. 5.157 Hilton v Gray [2007] QSC 401 …. 5.57, 5.82, 5.83 Hinds v Uellendahl (No 2) (1992) 112 FLR 222 …. 5.102 Hine v Hine [1962] 3 All ER 345 …. 4.113 Hinton v Fawcett [1957] SASR 213 …. 8.158 Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501 …. 6.25 Hirst v New Zealand Insurance Co Ltd [1981] VR 571 …. 4.64 Hobson v Gorringe [1897] 1 Ch 182; [1895–9] All ER Rep 1231 …. 1.80C, 1.83, 1.84, 11.2 Hocking v Western Australia Bank (1909) 9 CLR 738 …. 8.212 Hockley v Rendell (1909) 11 WALR 170 …. 3.38 Hodgson v Marks [1971] Ch 892; [1971] 2 All ER 684 …. 4.191

Hogarth v Jackson (1827) 2 C & P 595; Mood & M 58; 173 ER 1080 …. 2.4, 4.5 Hohol v Hohol [1981] VR 221; [1980] FLC 90-824 …. 4.118 Holden v Blaiklock [1974] 2 NSWLR 262 …. 8.157 Holding & Management Ltd v Property Holding & Investment Trust plc [1990] 1 All ER 938; [1990] 1 EGLR 65 …. 8.96 Holland v Hodgson (1872) LR 7 CP 328; [1861–73] All ER Rep 237 …. 1.80C, 1.88 Hollins v Verney (1884) 13 QBD 304 …. 10.90 Holt v Heatherfield Trust Ltd [1942] 2 KB 1 …. 8.142C Holus Bolus Pty Ltd v Wicko Pty Ltd [2012] NSWSC 497 …. 8.101 Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605 …. 8.80 Honeybone v National Bank of New Zealand (1890) 9 NZLR 102 …. 5.180C Hong Kong and Shanghai Banking Corp v Kloeckner & Co AG [1990] 2 QB 514; [1989] All ER 513 …. 8.206 Honner v Ashton (1979) 1 BPR 9478 …. 8.183C Honywood v Honywood (1874) LR 18 Eq 306 …. 3.38 Hooke v Holland [1984] WAR 16 …. 5.177, 5.178, 5.179 Hooper v Australia & New Zealand Banking Group Ltd (1996) 5 Tas R 398 …. 5.173 Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829 …. 11.31C, 11.32,

11.34, 11.36, 11.37 Hopper v Corp of Liverpool (1944) 88 Sol J 213 …. 7.64 Horn v Cole 51 NH 287; 12 Am Rep 111 (1868) …. 4.166C Hornsby Council v Roads and Traffic Authority (1997) 41 NSWLR 151 …. 10.147C Horrocks v Forray [1976] 1 All ER 737; [1976] 1 WLR 230 …. 4.117C Horsey Estate Ltd v Steiger [1899] 2 QB 79; [1895–99] All ER Rep 515 …. 8.154 Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR 14,360 …. 2.8 Horton v Public Trustee [1977] 1 NSWLR 182 …. 4.119 Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 …. 5.53, 5.154C, 5.155 Hosking v Haas (No 2) [2009] NSWSC 1328 …. 9.117, 9.118 — v Runting [2005] NZLR 1 …. 1.53, 1.54 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 …. 6.47 Houison v Metropolitan Mutual Permanent Building and Investment Association Ltd (1899) 20 LR (NSW) 316 …. 8.32 Houlder Bros & Co v Gibbs [1925] Ch 198 …. 8.112 House v Caffyn [1922] VLR 711 …. 4.111 Household Realty Corp Ltd v Liu (2005) 261 DLR (4th) 679 …. 5.46 Howard v Fanshawe [1895] 2 Ch 581; [1895–99] All ER Rep 855 …. 8.167 — v Miller [1915] AC 318 …. 4.52C

— v Pickford Tool Co Ltd [1951] 1 KB 417 …. 8.188 Howard E Perry and Co v British Railway Board [1980] 1 WLR 1375 …. 2.9 Howell v Bradford 570 So 2d 643 (1990) …. 6.33C Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 …. 8.47C Hudson v Cripps [1896] 1 Ch 265 …. 8.59 — v Viney [1921] 1 Ch 98 …. 4.181 Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 …. 4.147C, 4.151C — v NLS Pty Ltd [1966] WAR 100 …. 8.183C Humphries v Southern Cross Ski Club [2012] VSC 232 …. 1.22 Hunt v Luck [1902] 1 Ch 428; [1900–3] All ER Rep 275 …. 4.70, 4.142, 4.188C, 4.190, 5.194C — v Luengo [1991] ACL Rep 395 Vic 7 …. 4.118 Hunter v Canary Wharf Ltd [1997] AC 655 …. 10.49 Hunter’s Lease, Re; Giles v Hutchings [1942] Ch 124; [1942] 1 All ER 27 …. 8.127, 8.141C Hurst v Picture Theatres Ltd [1915] 1 KB 1; [1914–15] All ER Rep 836 …. 1.18C Hutton v Watling [1948] Ch 26 …. 7.66 Hyde v Holland [2003] NSWSC 733 …. 3.32 — v Pearce [1982] 1 All ER 1029 …. 2.105 Hyman v Rose [1911] 2 KB 234; [1912] AC 623; [1911–13] All ER Rep

238 …. 8.172, 8.175, 8.176

I IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; [1964] ALR 971 …. 5.69, 5.138C, 5.139, 5.181, 5.200C, 5.201, 5.203 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 …. 11.112 IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 …. 5.193 Imray v Oakshette [1897] 2 QB 218 …. 8.179 In Roma Pty Ltd v Adams [2012] QCA 347 …. 4.29 India v Florlim Pty Ltd [2003] SASC 161 …. 8.184 Indigenous Business Australia v Kani [2012] NTSC 24 …. 11.64 Industrial Acceptance Corp Ltd v Tarulli [1974] WAR 125 …. 11.118 Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580; [1977] 2 All ER 293 …. 8.33, 8.51 Inglewood Investments Co Ltd v Baker [2003] 2 P & CR 319 …. 2.94 Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 121 …. 11.101, 11.109C, 11.113 Ingram v Ingram [1941] VLR 95 …. 4.112, 6.16 Inland Revenue Commissioners v Derby [1914] 3 KB 1186 …. 8.37C International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513; [1986] 1 All ER 321 …. 8.113, 8.114C International Factors Ltd v Rodriguez [1979] QB 351 …. 2.16

International News Services v Associated Press 248 US 215 (1918); 63 L Ed 211 …. 1.46C, 1.47 International Tea Stores Co v Hobbs [1903] 2 Ch 165; [1900–3] All ER Rep 303 …. 10.70 Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 256 ALR 104; [2009] VSCA 97 …. 11.93 Inwards v Baker [1965] 2 QB 29; [1965] 1 All ER 446 …. 4.140, 4.141C, 4.144, 4.145, 4.146, 4.151C, 4.157 Irani v St George Bank Ltd (No 2) [2005] VSC 403 …. 11.82 Isaac v Hotel de Paris Ltd [1960] 1 All ER 348 …. 8.26, 8.28

J J A McBeath Nominees Pty Ltd v Jenkins Development Corporation [1992] 2 Qd R 121 …. 8.112, 8.113, 8.114C J & C Reid Pty Ltd v Abau Holdings Pty Ltd [1988] NSW ConvR ¶55-416 …. 8.189 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1970) 92 WN (NSW) 803 …. 5.185C — v — (1971) 125 CLR 546; [1972] ALR 323 …. 4.198, 5.48C, 5.181, 5.185C, 5.186, 5.187, 5.188, 5.191, 5.194C, 5.201, 11.30 J Lyons & Sons v Wilkins [1899] 1 Ch 255 …. 1.46C J & S Chan Pty Ltd v McKenzie [1994] ANZ ConvR 610 …. 8.188 J Sainsbury plc v Enfield London B C [1989] 2 All ER 817 …. 9.54, 9.57 J Wright Enterprises Ltd (in liq) v Port Ballidu Pty Ltd [2010] QSC 213 ….

5.95 JA Pye (Oxford) Ltd v Graham [2003] AC 419 …. 2.76, 2.81, 2.92C, 2.93 — v United Kingdom [2005] ECHR 921 …. 1.63, 2.81 JA Pye (Oxford) Ltd and JA Pye (Oxford) Land Ltd v United Kingdom [2007] ECHR 700 …. 1.63 Jackson, Re (1887) 34 Ch D 732 …. 6.15 Jackson v Crosby (No 2) (1979) 21 SASR 280 …. 4.148 — v Horizon Holidays Ltd [1975] 3 All ER 92 …. 1.16 Jacobs v Greig [1956] VLR 597 …. 9.89 — v Platt Nominees Pty Ltd [1990] VR 146 …. 5.169, 5.188, 5.189 — v Seward (1872) LR 5 HL 464 …. 6.36C Jaffe v Premier Motors Ltd [1960] NZLR 146 …. 11.63C Jager v Jager 136 NJ Eq 379; 42 A 2d 201 (1945) …. 6.33C Jaggard v Sawyer [1995] 1 WLR 269 …. 1.73 James v Hutton and J Cook and Sons Ltd [1950] 1 KB 9 …. 8.108 — v Plant (1826) 4 Ad & E 749 …. 9.92C — v Registrar-General (1967) 69 SR (NSW) 361; [1968] 1 NSWR 310 …. 10.117, 10.121, 10.130 — v Stevenson [1893] AC 162 …. 10.107, 10.118 Jancso v Vuong (1988) 12 Fam LR 615 …. 4.131 Jango v Northern Territory (2006) 152 FCR 150 …. 3.107, 3.118 Janos v Chama Motors Pty Ltd [2011] NSWCA 238 …. 8.185 Jarvis v Duke (1681) 1 Vern 19; 23 ER 274 …. 3.35

— v Swan Tours [1973] QB 233 …. 1.16 — v Williams [1955] 1 All ER 108 …. 2.16 Jaswil Properties Pty Ltd (atf Jaswil Units Trust) v Barrak Corporation Pt Ltd [2015] NSWSC 391 …. 4.58 JC Berndt Pty Ltd v Walsh [1969] SASR 34 …. 8.60, 8.69C JC Williamson Pty Ltd v Lukey and Mulholland (1931) 45 CLR 282; [1931] ALR 157 …. 1.21, 1.22, 4.42C Jeans West Corporation Pty Ltd v JWD Pty Ltd (in liq) (1991) 4 ACSR 689 …. 11.110 Jee v Audley (1787) 1 Cox Eq Cas 324; 29 ER 1186 …. 7.40 Jeffries v Great Western Railway Co (1856) 5 El & Bl 802; 119 ER 680 …. 2.13C, 2.14, 2.15, 2.17, 2.18, 2.21C, 2.22 Jelbert v Davis [1968] 1 All ER 1182; [1968] 1 WLR 589 …. 10.38, 10.111 Jelley v Buckman [1974] QB 488; [1973] 3 All ER 853 …. 8.149 Jenkins v Levinson (1929) 29 SR (NSW) 151 …. 8.94 — v Wynen [1992] 1 Qd R 40 …. 4.131 Jenner v Turner (1880–81) 16 Ch D 188 …. 3.35 Jennings v Rice [2003] 1 P & CR 100 …. 4.166C — v Ward (1705) 2 Vern 520; 23 ER 935 …. 11.45C Jeogla Pty Ltd v ANZ Banking Group Ltd (1999) 150 FLR 359 …. 11.92 Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140 …. 5.169 Jigrose Pty Ltd, Re [1994] 1 Qd R 382 …. 2.43, 2.44

JNM Pty Ltd v Adelaide Banner Pty Ltd [2009] VSC 237 …. 2.102 Jobson v Nankervis (1943) 44 SR (NSW) 277 …. 10.121, 10.140C, 10.143, 10.144 John F Goulding Pty Ltd v Victorian Railways Commissioners (1932) 48 CLR 157; [1932] HCA 37 …. 2.10C John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334; [2004] SASC 128 …. 7.2C, 8.85 Johnson v Wyatt (1863) 2 De G J & S 18; 46 ER 281 …. 1.46C Johnson, Re [2000] 2 Qd R 502 …. 2.89 Johnston v O’Neill [1911] AC 552 …. 2.52C Johnston & Halliday v Halliday [1984] ANZ ConvR 652 …. 7.6 Johnstone v Holdway [1963] 1 QB 601; [1963] 1 All ER 432 …. 10.3C Johnstone’s Estate, Re [1973] Qd R 347; (1973) 22 FLR 291 …. 6.67, 6.74 Jones v Bartlett (2000) 205 CLR 166 …. 8.80, 8.82, 8.83C, 8.84, 8.85, 8.86C — v Carter (1846) 15 M & W 718; 153 ER 1040 …. 8.161C, 8.163, 8.164, 8.183C — v De Marchant (1916) 28 DLR 561 …. 2.10C — v Jones [1977] 1 WLR 438 …. 6.30 — v Lavington [1903] 1 KB 253 …. 8.75 — v Lock (1865) 1 Ch App 25 …. 4.79 — v Maynard [1951] Ch 572; [1951] 1 All ER 802 …. 4.113 — v Morgan [2001] EWCA Civ 995 …. 11.45C, 11.55

— v Price [1965] 2 QB 618; [1965] 2 All ER 625; [1965] 3 WLR 296 …. 10.48 — v Pritchard [1908] 1 Ch 630 …. 10.28, 10.49 — v Sherwood Hills Pty Ltd (SC Waddell J, 8 July 1975, unreported) …. 9.59, 9.95 Jonns v Tan (1999) 9 BPR 17,113 …. 7.4 Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (NSW) (Pt 1) 568; [1969] 1 NSWR 621 …. 5.181, 5.201, 5.202, 5.204, 5.206 Jonton Pty Ltd, Re [1992] 2 Qd R 105 …. 4.129, 4.205 Jordan v Holkham (1753) Amb 209; 27 ER 139 …. 3.35 Jorden v Money (1854) 5 HLC 185; 10 ER 868 …. 4.151C Joseph Abraham Pty Ltd v Emelin [1960] NSWR 362 …. 8.29 Josephson v Mason (1912) 12 SR (NSW) 249 …. 5.134, 5.138C Jourdain v Wilson [1821] 4 B & Ald 266 …. 8.127 Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 …. 11.92, 11.93 Joyner v Weeks [1891] 2 QB 31 …. 8.107, 8.108 JS and GP, Re (2006) 35 Fam LR 88 …. 4.103 Junghenn v Wood [1958] SR (NSW) 327 …. 5.56

K Kara v Kara and Holman [1948] P 287 …. 8.166C Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235; [2000] NSWCA 313 …. 5.54, 5.56, 8.129, 8.131, 8.135

Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381 …. 8.94 Kardynal v Dodek [1980] FLC 90-823 …. 4.119 Karpany v Dietman (2013) 252 CLR 507 …. 3.123 Katakouzinas v Roufir Pty Ltd (1999) 9 BPR 17,303 …. 10.98 Kater v Kater (No 3) [1964] NSWR 987 …. 8.214 Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049 …. 5.62C Kavanaugh v Cohoes Power & Light Corp 187 NYS 216 (1921) …. 3.111C Kay, Re [1969] SASR 1 …. 5.148 Kay v Lambeth London Borough Council [2004] 3 WLR 1396 …. 8.51 — v South Eastern Sydney Area Health Service [2003] NSWSC 292 …. 3.35 Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 …. 1.80C, 1.83, 4.197 Kearry v Pattinson [1939] 1 KB 471; [1939] 1 All ER 65 …. 4.5 Kebewar Pty Ltd v Harkin (1987) 9 NSWLR 738; 63 LGRA 412 …. 10.97 Keddell v Regarose Pty Ltd [1995] 1 Qd R 172 …. 5.223 Keene v Carter (1994) 12 WAR 20 …. 2.43 Keitley, Re [1992] 1 VR 583 …. 6.72 Kelly v Battershell [1949] 2 All ER 830 …. 8.69C Kemp v Lumeah Investments Pty Ltd (1983) 3 BPR 97,175; (1984) NSW ConvR ¶155-162 …. 8.39, 8.42, 8.157 Kennedy v De Trafford [1896] 1 Ch 762; [1897] AC 180 …. 11.76, 11.78,

11.89 — v — [1897] AC 180; [1895–9] All ER Rep 408 …. 4.203C — v General Credits Ltd (1982) 2 BPR 9456 …. 11.109C, 11.127, 11.131 Kenny v Preen [1963] 1 QB 499 …. 8.59 Keppell v Bailey (1834) 2 M & K 517; 39 ER 1042 …. 1.30E, 9.30C, 9.31 Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 …. 5.172, 5.174, 5.175, 11.35 Kerridge v Foley [1964–65] NSWR 1958; (1964) 82 WN (NSW) (Pt 293 …. 9.66, 9.91, 9.92C, 9.122 Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184 …. 4.46, 4.105 Kiao v West (1985) 159 CLR 550 …. 1.62 Kidner v Department of Social Security (1993) 18 AAR 545 …. 4.53 Kierford Ridge Pty Ltd v Ward [2005] VSC 215 …. 2.108, 2.111 King v David Allen & Sons, Billposting Ltd [1916] 2 AC 54; [1916–17] All ER Rep 268 …. 1.24C, 1.29, 1.31, 8.28, 10.29, 10.51 — v Northern Territory [2007] FCA 944 …. 3.116 — v Smail [1958] VR 273 …. 5.69, 5.70C, 5.71, 5.72C, 5.74 King dec’d, Re [1963] Ch 459 …. 8.142C, 8.144 King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; [2005] NSWSC 1076 …. 11.97 Kingsnorth Trust Ltd v Tizard [1986] 2 All ER 54 …. 4.192 Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169; [1962] 3 All ER

593 …. 4.43, 4.44, 4.71, 4.75 Kinjella Pty Ltd v Jay (1996) ATPR ¶42-433 …. 11.111 Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82 …. 4.145 Kirby v Cowderoy [1912] AC 599 …. 2.52C KLDE Pty Ltd v Commissioner of Stamp Duties (1984) 155 CLR 288; 56 ALR 337 …. 4.53 Knight v Gould (1833) 2 My & K 295; 39 ER 956 …. 6.21C Knightsbridge Estates Trust Ltd v Byrne [1939] 1 Ch 441; [1938] 2 All ER 444 …. 11.44 Knockholt Pty Ltd v Graff [1975] Qd R 88 …. 8.202 Kogarah Municipal Council v Golden Paradise Corporation (2005) 12 BPR 23,651 …. 1.10, 5.157 Kohua Pty Ltd v Tai Ping Trading Pty Ltd (1986) 3 BPR 9705 …. 8.61 Koompahtoo Local Aboriginal Land Council v KLALC Property & Investment Pty Ltd [2008] NSWCA 6 …. 5.156 Kort Pty Ltd v Shaw [1983] WAR 113 …. 9.104 Kostis v Devitt (1979) 1 BPR 9231 …. 1.106, 10.139, 10.140C Kranz v National Australia Bank Ltd (2003) 8 VR 310 …. 5.111 KT and T Developments Pty Ltd v Tay (1995) 13 WAR 363 …. 4.129, 4.131 Kuckucka v Kuckucka (1980) 48 FLR 282 …. 4.205 Kumar v Dunning [1989] QB 193; [1987] 2 All ER 801 …. 8.148

Kusel v Watson (1879) 11 Ch D 129 …. 8.15C Kushner v Law Society [1952] 1 KB 264; [1952] 1 All ER 404 …. 8.32 Kuwait Airways Corp v Iraqi Airways Co [2002] UKHL 19; [2002] 2 AC 883 …. 2.8 KY Enterprises Pty Ltd v Darby [2013] VSC 484 …. 2.95 Kyren Pty Ltd v Cinema Place Pty Ltd (2006) 244 LSJS 142; [2006] SASC 93 …. 10.40

L Lac Minerals Ltd v International Corona Resources (1989) 61 DLR (4th) 14 …. 4.134 Lace v Chantler [1944] KB 368; [1944] 1 All ER 305 …. 5.132C, 8.14, 8.15C Ladies’ Hosiery and Underwear Ltd v Parker [1930] 1 Ch 304 …. 8.37C Ladies Sanctuary v Parramatta (1997) 7 BPR 15,156 …. 8.176 Lake v Bayliss [1974] 1 WLR 1073 …. 4.52C — v Craddock (1732) 3 P Wms 158; 24 ER 1011 …. 6.14, 6.15 Lakhani and Weinstein, Re (1980) 118 DLR (3d) 61 …. 9.74 Lamshed v Lamshed (1963) 109 CLR 453 …. 1.21 — v Plakakis (1988) 47 SASR 316 …. 11.66, 11.128 Lancaster v Lloyd (1927) 27 SR (NSW) 379 …. 10.63 Land Tax Act, Re; Ex parte Finlay (1884) 10 VLR (E) 68 …. 5.69 Landale v Menzies (1909) 9 CLR 89 …. 3.19, 8.19 Lane Cove Municipal Council v Hurdis Pty Ltd (1955) 55 SR (NSW) 434

…. 9.37 Lang v Asemo Pty Ltd [1989] VR 747 …. 8.148 Lang Parade Pty Ltd v Peluso [2006] 1 Qd R 42 …. 1.71 Langdale Pty Ltd v Sollas [1959] VR 634 …. 9.61 Langley v Foster (1909) 10 SR (NSW) 54 …. 8.197C Lansen v The Honourable Justice Olney (acting as Aboriginal Land Commissioner) (1999) 169 ALR 49 …. 5.51 Lanyon Pty Ltd v Canberra Washed Sand Pty Ltd (1966) 115 CLR 342 …. 1.108 Lapin v Abigail (1930) 44 CLR 166; [1930] ALR 178 …. 4.198, 4.201, 5.48C, 5.180C, 5.181, 5.185C, 5.194C Lardil Peoples v Queensland [2004] FCA 298 …. 3.91, 3.100 Larke Hoskins & Co Ltd v Icher (1929) 29 SR (NSW) 142 …. 8.37C, 8.43 Last v Rosenfeld [1972] 2 NSWLR 923 …. 4.95C, 4.117C, 4.118 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR 775 …. 4.203C, 4.204, 4.205, 4.206, 4.208, 4.209, 4.210C, 4.211, 4.212, 4.213, 5.48C, 5.98, 5.101C, 5.171, 5.196, 11.2, 11.73, 11.99C, 11.101, 11.104, 11.105 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; 85 ALR 183; 63 ALJR 372 …. 8.196 Lavender v Betts [1942] 2 All ER 72 …. 8.59, 8.63 Lawrence v Maple Trust Co and Wright (2007) 51 RPR (4th) 1; 84 OR (3d) 94; 220 OAC 19 …. 5.46, 5.49

Lawton v SHEV Pty Ltd (1969) 89 WN (NSW) (Pt 1) 635 …. 9.89 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 …. 4.210C Layton v Martin [1986] 2 FLR 227 …. 4.164C Le Compte v Public Trustee [1983] 2 NSWLR 109 …. 4.122 Leake v Bruzzi [1974] 1 WLR 1528 …. 6.36C Leaver, Re [1997] 1 Qd R 55 …. 6.10 Leda Commercial Properties v DHK Retailers Pty Ltd (1992) 111 FLR 81 …. 8.189 Lee v Ferno Holdings Pty Ltd (1992) 33 NSWLR 404 …. 8.50 — v K Carter Ltd [1949] 1 KB 85; [1948] 2 All ER 690 …. 8.112 — v Ross (No 2) (2003) 11 BPR 20,991; [2003] NSWSC 507 …. 5.178 Lee-Parker v Izzet [1971] 3 All ER 1099; [1971] 1 WLR 1688 …. 8.201C, 8.203 Legione v Hateley (1983) 152 CLR 406; 46 ALR 1 …. 4.57C, 4.151C, 8.178, 8.198 Leicester, Earl of v Wells-Next-The-Sea Urban District Council [1973] Ch 110; [1972] 3 All ER 77 …. 9.89 Leichhardt Municipal Council v Montgomery (2007) 233 ALR 200 …. 8.85 Leigh v Dickeson (1884) 15 QBD 60 …. 6.31, 6.44 — v Taylor [1902] AC 157 …. 1.81, 1.82 Leitz Leeholme Stud Pty Ltd v Robinson (1977) 2 NSWLR 544 …. 8.39, 8.47C, 8.48, 8.49, 8.183C Lemon and Davies’ Contract, Re [1919] VLR 481 …. 5.8

Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 …. 8.58, 8.66 Lennard v Jessica Estates Pty Ltd (2008) 71 NSWLR 306; [2008] NSWCA 121 …. 9.81C, 9.82 Lep Air Services v Rolloswin Ltd [1973] AC 331 …. 8.183C Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 …. 5.96, 5.130 Leverhulme, Re [1943] 2 All ER 274 …. 7.30 Lewenberg and Pryles v Direct Acceptance Corp Ltd [1981] VR 344 …. 5.174 Lewis v Andrews and Rowley Pty Ltd (1956) 73 WN (NSW) 670 …. 1.110C — v Bell [1985] 1 NSWLR 731 …. 8.29 — v Frank Love Ltd [1961] 1 All ER 446 …. 11.47 Ley v Scarff (1981) 146 CLR 56; 33 ALR 653 …. 11.125 LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517; [2002] WASCA 291 …. 5.109, 5.113 Liddy v Kennedy (1871) LR 5 HL 134 …. 8.183C Lidsdale Nominees Pty Ltd v Elkharadly [1979] VR 84 …. 8.158 Lift Capital Partners Pty Ltd v Merrill Lynch International (2009) 73 NSWLR 400; [2009] NSWSC 7 …. 11.44, 11.45C, 11.46, 11.52 Lile v Reeve [1902] 1 Ch 53 …. 11.50C Lincoln Hunt Australia Pty Ltd v Willesee (1986) 4 NSWLR 457 …. 1.49, 1.50C

Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 …. 7.9, 7.10, 7.11 Linich v Garland (1992) 15 Fam LR 596 …. 4.139 Liristis Holdings Pty Ltd v Walville Pty Ltd (2001) 10 BPR 18,801 …. 8.198 Lister v Lane & Nesham [1893] 2 QB 212 …. 8.96, 8.104C Little v Dardier (1891) 12 NSWLR (Eq) 319 …. 10.142C — v Little (1988) 15 NSWLR 42 …. 4.108 Littledale v Scaith (1788) 1 Taunt 243; 127 ER 826 …. 2.4, 4.5 Litz v National Australia Bank [1986] Q ConvR 54-229 …. 1.87 Liubinas v Vicport Fisheries Pty Ltd [2016] VCAT 927 …. 1.93 Liverpool City Council v Irwin [1977] AC 239; [1976] 2 All ER 39 …. 8.77, 8.80, 8.81 LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490 …. 1.71, 1.74 Lloyd v Osborne (1899) 20 LR (NSW) 190 …. 2.10C Lloyds Bank Ltd v Dalton [1942] Ch 466 …. 10.88 Lloyds Bank plc v Carrick [1996] 4 All ER 630 …. 4.55 — v Rossett [1988] 3 WLR 1301 …. 4.192 Lockhart v Hardy (1846) 9 Beav 349; 50 ER 378 …. 11.119 Loclot Pty Ltd v Pullen (2003) 56 NSWLR 592 …. 10.40 Logue v Shoalhaven Shire Council [1978] 1 NSWLR 710 …. 5.102 — v — [1979] 1 NSWLR 537 …. 5.101C, 5.102, 5.115

Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 …. 5.78C, 5.96, 5.99, 5.101C London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1993] 4 All ER 157; [1994] 1 WLR 31 …. 10.19, 10.27C, 10.49 London & County Ltd v W. Sportsman Ltd [1971] 1 Ch 764 …. 8.142C London and South Western Railway Co v Gomm (1882) 20 Ch D 562 …. 9.16C, 9.34C, 9.49C London Borough of Southwark v Williams [1971] Ch 734; [1971] 2 All ER 175 …. 2.61C London County Council v Allen [1914] 3 KB 642; [1914–15] All ER Rep 1008 …. 9.34C, 9.37, 9.38, 9.52C Long v Blackall (1797) 7 TR 100; 101 ER 875 …. 9.7C — v Gowlett [1923] 2 Ch 177; [1923] All ER Rep 335 …. 10.68C, 10.71 — v Michie [2003] NSWSC 233 …. 10.108, 10.116 Lonsdale Pty Ltd v Carra [1974] VR 887 …. 8.10 Loose Fit Pty Ltd v Marshbaum [2011] NSWCA 372 …. 8.86C, 8.87 Lord v Commissioners for the City of Sydney (1859) 12 Moo PC 473; 14 ER 991 …. 1.108 Lord Abergavenny’s Case (1607) 6 Co Rep 78b; 77 ER 373 …. 6.74 Lord Advocate v Lord Blandyre (1879) 4 App Cas 770 …. 2.102 — v Lord Lovat (1880) 5 App Cas 273 …. 2.52C Lord Chesterfield v Harris [1908] 2 Ch 397 …. 10.147C Lord Fitzhardinge v Purcell [1908] 2 Ch 139 …. 3.91

Lord Strathcona Steamship Co, Ltd v Dominion Coal Co Ltd [1926] AC 108 …. 11.50C Louis and the Conveyancing Act, Re [1971] 1 NSWLR 164 …. 9.59, 9.72, 9.77, 9.79, 9.92C, 9.115C, 9.117, 9.119C, 9.120, 9.122 Love v Gemma Nominees Pty Ltd (1983) ANZ ConvR 68 …. 8.175 Lowe v Adams [1901] 2 Ch 598 …. 1.18C Lowe (Inspector of Taxes) v J W Ashmore Ltd [1971] 1 Ch 545 …. 10.147C Lucas v McNaughton (1990) 14 Fam LR 347 …. 6.80 Lukacs v Wood (1978) 19 SASR 520 …. 5.114 Lukass Investments Pty Ltd v Makaroff (1964) 82 WN (NSW) (Pt 1) 226 …. 11.102 Luke v Luke (1936) 36 SR (NSW) 310 …. 6.29, 6.33C, 6.36C Lukies v Ripley (1994) 6 BPR 13,471 …. 4.63 Lurcott v Wakely & Wheeler [1911] 1 KB 905 …. 8.96, 8.97, 8.101, 8.104C, 8.105 Lyme Valley Squash Club Ltd v Newcastle Under Lyme Borough Council [1985] 2 All ER 405 …. 10.70, 10.71, 10.104 Lynch v O’Keefe [1930] St R Qd 74 …. 5.201 Lyon v Tweddell (1881) 17 Ch D 529 …. 4.123C Lyons v Lyons [1967] VR 169 …. 4.85C, 5.62C, 6.61, 6.64 Lysaght v Edwards (1876) 2 Ch D 499 …. 4.52C, 4.53, 4.56, 4.57C, 4.62, 4.65, 4.101 Lyus v Prowsa Developments Ltd [1982] 2 All ER 953; [1982] 1 WLR 1044

…. 5.101C

M Mabo v Queensland (No 2) (1992) 175 CLR 1; 107 ALR 1 …. 1.3, 1.62, 2.51, 2.52C, 3.2, 3.3, 3.4, 3.6, 3.8, 3.76, 3.77C, 3.79, 3.82, 3.83, 3.85, 3.87, 3.88C, 3.89, 3.93, 3.98, 3.99, 3.101, 3.102, 3.109, 3.111C, 3.120, 3.121C, 3.126C Macedo v Stroud [1922] 2 AC 30 …. 4.80 Macedonian Society of Western Australia (Inc) (recs and mgrs apptd) v St George Bank Ltd; Cvetkoski v St George Bank Ltd [2003] WASC 17 …. 11.110 Machu, Re (1882) 21 Ch D 838 …. 3.34 Macintosh v Lobel (1993) 30 NSWLR 441 …. 2.65 Mack and the Conveyancing Act, Re [1975] 2 NSWLR 623 …. 9.75, 9.117, 9.122 Mackay v Wilson (1947) 47 SR (NSW) 315 …. 7.68 Mackreth v Symmons (1808) 15 Ves 329; 33 ER 778 …. 4.196C Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 …. 5.91C, 5.106, 5.109, 5.113 Macquarie Bank Limited v Clarke (Giles J, 22 March 1990 unreported) …. 11.81C, 11.113 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 …. 8.195, 8.198 Maddison v Alderson (1883) 8 App Cas 467 …. 4.41, 4.42C, 4.44, 4.45,

4.95C, 4.151C Magill v Magill (1993) NSW ConvR ¶55-663 …. 6.68 Magneta Time Co Ltd, Re Molden v The Company (1915) 84 LJ Ch 814 …. 11.125 Mahoney (who sues both personally and as executor of the estate of Mahoney (dec’d)) v Mahoney (who is sued both personally and as executor of the estate of Mahoney (dec’d)) [2015] VSC 600 …. 4.172 Maio v Sacco (2009) 14 BPR 27,591 …. 6.45 Maiorana and the Conveyancing Act, Re (1970) 92 WN (NSW) 365 …. 10.5 Maisons Pty Ltd, Re [1991] 2 Qd R 61 …. 5.56 Majala Pty Ltd v Ellas [1949] VLR 104 …. 8.158 Majestic Homes Pty Ltd v Wise [1978] Qd R 225 …. 5.114 Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549; [1986] 1 All ER 711; [1986] 1 WLR 590 …. 6.17C, 6.69 Malcomson v O’Dea (1863) 11 ER 1155 …. 3.91 Malin, In the Will of [1912] VLR 259 …. 3.64 Malsbury v Malsbury [1982] 1 NSWLR 226 …. 4.120 Malter v Procopets [2000] VSCA 11 …. 2.100 Malzy v Eichholz [1916] 2 KB 308 …. 8.58, 8.69C, 8.70, 8.71, 8.74 Manchester Airport plc v Dutton [2000] 1 QB 133 …. 1.28C, 1.31, 1.32 Manchester Brewery Co v Coombs [1901] 2 Ch 608 …. 8.135 Manchester City Council v Pinnock (No 1) [2010] UKSC 45; [2010] 3

WLR 1441 …. 1.63 Manchester Corp v Connolly [1970] Ch 420; [1970] 1 All ER 961 …. 2.61C Mangiola v Costanzo (1980) ANZ Conv R 331 …. 8.14 Manjang v Drammeh (1990) 61 P & CR 194 …. 10.74 Manly Properties Pty Ltd v Castrisos [1973] 2 NSWLR 420 …. 10.116 Manners, Re [1955] 1 WLR 1096 …. 7.56 Mantec Thoroughbreds Pty Ltd v Batur [2009] VSC 351 …. 10.42C Manton v Parabolic Pty Ltd [1985] 2 NSWLR 361 …. 4.29, 11.116 Maori Trustee v Prentice [1992] 3 NZLR 344 …. 1.84, 8.187 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 …. 10.137C Marek v Australasian Conference Association Pty Ltd [1993] 2 Qd R 521 …. 4.153C Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 1 NSWLR 1 …. 9.58, 9.92C, 10.7, 10.112, 10.130 Marist Bros Community Inc v Shire of Harvey (1995) 14 WAR 69 …. 4.103 Markham v Paget [1908] 1 Ch 697 …. 8.59, 8.75 Markin, Re [1966] VR 494 …. 9.108 Marquis Cholmondeley v Lord Clinton (1820) 2 Jac & W 1; 37 ER 527 …. 2.75 Marriott v Franklin (1993) 60 SASR 457 …. 6.32 Marshall v Allsop [1946] ALR 378 …. 11.45C — v Council of the Shire of Snowy River (1994) 7 BPR 14,447 …. 8.191,

8.193C, 8.194, 8.195, 8.199 — v Green (1875) 1 CPD 35 …. 4.37 — v Snowy River Council (1994) 6 BPR 13,548 …. 4.76 — v Snowy River Shire Council (1994) NSW ConvR ¶55-713 …. 8.33, 8.199 Marston v Charles H Griffith & Co Pty Ltd [1982] 3 NSWLR 294 …. 5.62C Marten v Flight Refuelling Ltd [1962] Ch 115; [1961] 2 All ER 696 …. 9.34C, 9.36, 9.47, 9.52C, 9.56, 9.69 Martin v Martin (1959) 110 CLR 297; 33 ALJR 362 …. 4.108 Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15 …. 8.61, 8.74 Martyn and the Conveyancing Act, Re (1965) 65 SR (NSW) 387; [1965] NSWR 80 …. 9.92C, 9.109, 9.112, 9.115C, 9.117 Mason v Clarke [1955] AC 778; [1955] 1 All ER 914 …. 4.39C, 10.149 Massart v Blight (1951) 82 CLR 423; [1951] ALR 401 …. 8.111, 8.164 Masters v Cameron (1954) 91 CLR 353 …. 8.34 Matsen v Matsen [2008] NSWSC 135 …. 6.84 Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 …. 11.31C, 11.36, 11.107 Maurice Toltz Pty Ltd v Macy’s Emporium Pty Ltd [1970] 1 NSWR 474; (1969) 91 WN (NSW) 598 …. 10.20, 10.40 Mavromates, Re [1964] VR 612 …. 7.2C, 7.4

May v Ceedive Pty Ltd (2006) 13 BPR 24,147 …. 1.81, 1.85C, 1.86 Mayer v Coe (1968) 88 WN (Pt 1) (NSW) 549; [1968] 2 NSWR 747 …. 5.70C, 5.214, 10.35C Mayer v Murray (1878) 8 Ch D 424 …. 11.73 Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428 …. 11.109C Mayhew v Suttle (1854) 119 ER 133 …. 8.27 Mayho v Buckhurst (1617) Cro Jac 438 …. 8.127 Maynegrain Pty Ltd v Compafina Bank [1984] 1 NSWLR 258 …. 2.8, 2.22 Mayo v Mayo [1966] NZLR 849 …. 6.32 MBF Investments Pty Ltd v Nolan (2011) 37 VR 116; [2011] VSCA 114 …. 11.88 MCA Camilleri Building and Constructions Pty Ltd v HR Walters Pty Ltd (1981) 2 BPR 9277 …. 10.123 McBride v Sandland (1918) 25 CLR 69 …. 4.41, 4.42C, 4.44, 4.45, 4.47 McCall v Abelesz [1976] QB 585; [1976] 1 All ER 727 …. 8.63 McCourt v National Australia Bank Ltd [2010] WASC 121 …. 5.172, 5.174 McCoy v Caelli (2010) 15 BPR 28,735 …. 6.54 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 …. 8.183C McEacharn v Colton [1902] AC 104 …. 8.111 McGellin & Fuchsbichler v Button [1973] WAR 22 …. 2.86 McGrath v Campbell (2006) 68 NSWLR 229; [2006] NSWCA 180 …. 5.109, 10.137C, 10.138, 10.141 McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd [1970] 1

NSWR 686 …. 9.36, 9.52C McIntyre v Potter [1983] 2 VR 439 …. 10.107 McKay v McKay [2008] NSWSC 177 …. 6.33C, 6.34 McKean v Maloney [1988] 1 Qd R 628 …. 11.90, 11.91 McKean’s Caveat, Re [1988] 1 Qd R 524 …. 4.208, 5.171, 11.106 McKenzie v McAllum [1956] VLR 208; [1956] ALR 576 …. 8.112 — v Storer [2007] ACTSC 88 …. 4.128C, 4.129 McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303; Aust Torts Reports ¶80-172 …. 1.112, 2.9 McKinlay v Dodds [1984] ANZ ConvR 617 …. 4.29 McKinnon v Portelli (1960) 60 SR (NSW) 343 …. 8.162 McMahon v A F Wade Pty Ltd [1983] WAR 152 …. 6.80 — v Ambrose [1987] VR 817 …. 4.45, 4.78 — v McMahon [1979] VR 239 …. 4.118 — v Public Curator (Qld) [1952] St R Qd 197 …. 6.44, 6.45 — v Swan [1924] VLR 397 …. 5.131 McManus v Cooke (1887) 35 Ch D 681 …. 10.56 McNab v Earle [1981] 2 NSWLR 673 …. 4.85C, 6.54 McNamara and the Conveyancing Act, Re (1961) 78 WN (NSW) 1068 …. 6.84 MCP Muswellbrook Pty Limited v Deutsche Bank (Asia) AG (1988) 12 NSWLR 16 …. 11.109C, 11.113 McPhail v Persons Unknown [1973] Ch 447; [1973] 3 All ER 393 ….

2.61C, 2.71, 2.96 McPherson v Minister for Natural Resources (1990) 22 NSWLR 671 …. 8.178 MDN Mortgages Pty Ltd v Caradonna (2010) 15 BPR 29,145 …. 5.82 M’Dowell v Ulster Bank (1899) 33 Ir L To 223 …. 2.41 Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd (No 2) [2008] FCA 471 …. 4.201 Mears v London and South Western Railway Co (1862) 11 CBNS 850; 142 ER 1029 …. 2.8 Measures v McFadyen (1910) 11 CLR 723 …. 8.131, 8.147 Medforth v Blake [2000] Ch 86 …. 11.78, 11.80 Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606 …. 5.114, 5.123, 5.125 Melksham v Archerfield Airport Corp [2004] QSC 164 …. 8.175 Mellor v Walmesley [1905] 2 Ch 164 …. 10.78 Melvin, Ex parte [1980] Qd R 391 …. 9.103 Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 …. 11.31C, 11.35, 11.36, 11.39 — v Shell Co of Australia Ltd (1976) 136 CLR 326; 9 ALR 39; [1976] HCA 9 …. 5.55C, 5.56, 5.57, 5.62C, 9.119C, 9.120, 11.31C Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 …. 5.105, 5.106C, 5.118 Mercer v Liverpool, St Helen’s & South Lancashire Railway Company

[1904] AC 461 …. 1.79 Meriton Apartments Pty Ltd v McLaurin & Tait Developments Pty Ltd (1976) 133 CLR 671 …. 5.201, 5.203 Merrell Associates Ltd v HL (Qld) Nominees Pty Ltd [2010] SASC 155 …. 5.114 Mestaer v Gillespie (1805) 11 Ves 231; 32 ER 1230 …. 5.62C Meux v Cobley [1892] 2 Ch 253 …. 3.38 Meye v Electric Transmission Ltd [1942] Ch 290 …. 8.37C Michael v Onisiforou (1977) 1 BPR 9356 …. 5.126 Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287; [2006] WASC 122 …. 5.169, 9.52C, 11.30, 11.35 Midland Railway Co’s Agreement, Re; Charles Clay & Sons Ltd v British Railways Board [1971] Ch 725; [1971] 1 All ER 1007 …. 5.132C, 8.15C, 8.18 Mijac Investments Pty Ltd (ACN 084 820 280) v Graham (No 2) (2009) 72 ACSR 684; [2009] FCA 773 …. 11.73 Milbourn v Lyons [1914] 1 Ch 34 …. 9.34C Milenkovic v Belleli [2015] VSC 349 …. 5.190 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141; [1971] ALR 65 …. 1.8, 3.77C, 3.81 Miller v Dell [1891] 1 QB 468 …. 2.10C — v Emcer Products [1956] Ch 304; [1956] 1 All ER 237 …. 8.81, 10.21C — v Jackson [1977] QB 966 …. 10.49

— v Minister of Mines and the Attorney General of New Zealand [1963] AC 484 …. 5.152, 5.170 — v Sutherland (1990) 14 Fam LR 416 …. 4.131 Millett v Regent [1975] 1 NSWLR 62 …. 4.44, 4.48, 4.117C Milling v Hardie [2014] NSWCA 163 …. 4.168, 4.172 Mills v Renwick (1901) 1 SR (NSW) Eq 173 …. 11.39 Mills v Silver [1991] Ch 271; [1991] 1 All ER 449; [1991] 2 WLR 324 …. 10.83 — v Stokman (1967) 116 CLR 61; 41 ALJR 16 …. 4.35, 5.98, 5.101C, 10.147C Milmo v Carreras [1946] KB 306; [1946] 1 All ER 288 …. 8.10 Milne v Jones (1910) 13 CLR 168 …. 10.88 Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 …. 4.81, 4.82, 4.83, 4.85C, 4.91 Mimi v Millennium Developments Pty Ltd [2003] VSC 260 …. 5.189 Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) 17 BPR 32,645; [2006] NSWSC 1203 …. 8.168, 8.169 Minister, Aboriginal Land Rights Act 1983 v Aboriginal Corporation of the National Aboriginal Conference [1992] ACL Rep 355; [1992] NSWSC 34 …. 4.87 Minister for Education and Training v Canham [2004] NSWSC 274 …. 5.114 Minister for Interiors v Brisbane Amateur Turf Club (1949) 80 CLR 123 ….

8.53 Mint v Good [1951] 1 KB 517; [1950] 2 All ER 1159 …. 8.80 Minter v Eacott (1952) 69 WN (NSW) 93 …. 10.46 — v Minter (2000) 10 BPR 18,133 …. 6.20 Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907 …. 5.174, 11.63C — v Lyons [1978] 2 NSWLR 505 …. 11.35 Miscamble’s Application, Re [1966] VR 596 …. 9.65 Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375 …. 6.66, 6.68 Missouri v Holland 252 US 416 (1920) …. 2.1 Mitcham City Council v Clothier (1994) 62 SASR 394; 83 LGERA 431 …. 9.76, 10.5 Mitchell v Arblaster [1964-65] NSWR 119 …. 6.21C — v Wieriks; Ex parte Wieriks [1975] Qd R 100 …. 8.11 Mitrovic v Koren [1971] VR 479 …. 6.74 M’Mahon v Burchell (1846) 2 Ph 127 …. 6.33C Moat v Martin [1950] 1 KB 175; [1949] 2 All ER 646 …. 8.115, 8.116 Modular Design Group Pty Ltd, Re (1994) 35 NSWLR 96 …. 11.45C, 11.51, 11.53C Moffatt v Kazana [1969] 2 QB 152; [1968] 3 All ER 271 …. 2.43 Moffett v Dillon (1999) 2 VR 480 …. 4.198, 4.201, 5.191, 5.192C, 5.193, 5.195, 5.201

Mohammadzadeh v Joseph [2006] EWHC 1040 …. 9.54, 9.56, 9.57 Mole v Ross (1950) 1 BPR 9101 …. 6.22 Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310 …. 4.29 Monash City Council v Melville (2000) V ConvR 54-621; [2000] VSC 55 …. 2.78, 2.92C, 2.93 Moncrieff v Jamieson [2007] UKHL 42; [2008] 4 All ER 752; [2007] 1 WLR 2620 …. 10.17C, 10.27C, 10.28, 10.29, 10.30 Mondel v Steel (1841) 8 M & W 858; 151 ER 1288 …. 8.201C Monte v Buongiorno [1978] WAR 49 …. 4.103 Moody v Steggles (1879) 12 Ch D 261 …. 10.14C Moorcock, The (1889) 14 PD 64 …. 10.61C Moore, Re [1901] 1 Ch 936 …. 7.30 Moore v Clench (1875) 1 Ch D 447 …. 10.3C — v Dimond (1929) 43 CLR 105; 3 ALJR 354 …. 4.71, 8.37C, 8.44, 8.45, 8.49 — v — [1929] SASR 274 …. 4.71 — v Regents of the University of California (1990) 793 P 2d 479 …. 1.2, 1.33, 1.36C, 1.37, 1.39, 1.41, 1.44 — v Ullcoats Mining Co Ltd [1908] 1 Ch 575 …. 8.161C, 8.162, 8.164, 8.165 Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445; 16 BPR 31,257 …. 10.102C

Moorhouse v Angus & Robinson (No 1) Pty Ltd [1981] 1 NSWLR 700 …. 2.43 Moraitis v Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327 …. 7.2C Moreland Timber Co Pty Ltd v Reid [1946] VLR 237 …. 1.28C, 4.40 Morley v Bird (1798) 3 Ves Jun 629; 30 ER 1192 …. 6.2E Morrells of Oxford Ltd v Oxford United Football Club Ltd [2001] Ch 459; [2001] 2 WLR 128 …. 9.45 Morris v Morris [1982] 1 NSWLR 61 …. 4.120, 4.162C Morrissey v Bright (3 August 1978, Powell J, unreported) …. 11.109C Morton v Black (1986) 4 BPR 9164 …. 5.53 Mostyn v Mostyn (1989) 16 NSWLR 635 …. 4.29 Moule v Garrett (1872) LR 7 Ex 101; (1861–73) All ER Rep 135 …. 8.132C, 8.133 Mounsey v Ismay (1865) 3 H & C 486 …. 10.17C Mount Carmel Investments v Peter Thurlow Ltd [1988] 3 All ER 129 …. 2.108, 2.109 Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 …. 2.57, 2.60, 2.93, 2.108 Multiservice Bookbinding Ltd v Marden [1979] 1 Ch 84 …. 11.48 Munro v Stuart (1924) 41 SR (NSW) 203 …. 5.96, 5.101C, 5.134, 5.138C Murnane v Findlay [1926] VLR 80 …. 2.93 Murray, Bull & Co Ltd v Murray [1953] 1 QB 211; [1952] 2 All ER 1079

…. 8.28 Muschinski v Dodds (1985) 160 CLR 583; 62 ALR 429; 60 ALJR 52; [1985] HCA 78 …. 4.122, 4.123C, 4.124, 4.129, 4.134, 4.205, 6.45, 11.45C Myers v Smith (1992) 5 BPR 11,494 …. 5.225C

N N H Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241 …. 1.85C NAB v Blacker (2000) 104 FCR 288 …. 1.85C Naish and the Conveyancing Act, Re [1960] 77 WN (NSW) 892 …. 9.77, 9.78, 9.92C, 9.108 Napper v Miller (2003) 11 BPR 21,175; [2003] NSWSC 376 …. 7.55 National Australia Bank v Blacker (2000) 179 ALR 97 …. 1.87 — v Clowes [2013] NSWCA 179 …. 11.18 — v Pasupati [2011] NSWSC 540 …. 6.76 — v State of New South Wales (2009) 260 ALR 115; [2009] FCA 1066 …. 11.25 — v Zollo (1992) 59 SASR 76 …. 11.66, 11.128 National Bank of Australasia v The United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 …. 11.131 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; [1981] 1 All ER 161 …. 8.183C, 8.187 National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477 …. 5.90

National Mutual Life Nominees Ltd v Travellers (NSW) Pty Ltd (1993) NSW ConvR ¶55-688 …. 8.119 National Outdoor Advertising Ltd v Wavon Pty Ltd (1988) 4 BPR 9732 …. 8.24 National Provincial Bank Ltd v Ainsworth [1965] AC 1175; [1965] 2 All ER 472 …. 1.10, 1.31, 3.77C, 4.192, 10.147C National Trustees, Executors and Agency Co v Hassett [1907] VLR 404 …. 5.28 — v Long [1939] VLR 33 …. 10.72, 10.118 Natwest Markets Australia Ltd v Mannix (1995) 7 BPR 14,668 …. 11.128 Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 295 ALR 9; [2012] FCAFC 163 …. 11.33 Naylor v Canterbury Park Racecourse Co Ltd (1935) 35 SR (NSW) 281 …. 1.18C Naziridis v Rimis (1985) 9 BPR 16,201 …. 6.86 Neale v Mackenzie (1836) 1 M & W 747; 150 ER 635 …. 8.53 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 …. 5.206 Neighbourhood Association DP No 285220 v Moffatt (2008) NSW ConvR ¶56-208; [2008] NSWSC 54 …. 10.36 Nelson v Hughes [1947] VLR 227 …. 10.118 — v Nelson (1995) 184 CLR 53 …. 4.108 — v Walker (1910) 10 CLR 560 …. 10.61C Nemesis Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152

…. 7.49 Nemeth v Reachcord Pty Ltd (1998) 9 BPR 16,557 …. 11.66 Neowarra v State of Western Australia [2003] FCA 1402 …. 3.100 Nepean District Tennis Association v Penrith City Council (1988) 4 BPR 9645 …. 1.98 Network Finance Ltd v Deposit and Investment Co Ltd [1972] QWN 19 …. 11.31C Neville v Wilson (1997) Ch 144 …. 4.104C New Beach Apartments Pty Ltd v Epic Hotels Pty Ltd (2007) 14 BPR 26,317; [2007] NSWSC 474 …. 11.97 New Hart Builders Ltd v Brindley [1975] Ch 342 …. 4.49 New South Wales Aged Pensioners’ Hostel and the Conveyancing Act, Re [1967] 1 NSWR 332 …. 9.77, 9.115C New South Wales Department of Housing v Hume (2007) Aust Torts Reports ¶81-879 …. 8.85 New South Wales Rifle Association Inc v Commonwealth (2012) 293 ALR 158 …. 1.22 New Zealand Factors Ltd v Farmers Trading Co Ltd [1992] 3 NZLR 703 …. 8.206 New Zealand Government Property Corp v H M & S Ltd [1982] QB 1145; [1982] 1 All ER 624 …. 1.90, 1.91 Newington v Windeyer (1985) 3 NSWLR 555 …. 2.57, 4.176 Newman v Real Estate Debenture Corporation Ltd [1940] 1 All ER 131 ….

8.69C Newton Abbot Co-operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286; [1952] 1 All ER 279 …. 9.34C, 9.36, 9.52C, 9.68, 9.69 Ngalakan People v Northern Territory (2001) 112 FCR 148 …. 3.99 Ngatoa v Ford (1990) 19 NSWLR 72 …. 6.84, 7.8 NGL Properties Pty Ltd v Harlington Pty Ltd [1979] VR 92 …. 8.111, 8.158 Nickerson v Barraclough [1981] 2 All ER 369; [1981] 2 WLR 773 …. 10.76 Nicholas v Andrew (1920) 20 SR (NSW) 178 …. 2.108 Nield v Whittem (1993) 67 ALJR 514 …. 5.51 Nilrem Nominees Pty Ltd v Karaley Pty Ltd [2000] WASC 82 …. 11.75 Nisbet and Potts’ Contract, Re [1905] 1 Ch 391 …. 5.69 Nisbet and Potts’ Contract, Re [1906] 1 Ch 386; [1904–7] All ER Rep 865 …. 4.186, 9.34C, 9.46 Nixon v Commercial and General Acceptance Corporation [1980] Qd R 153 …. 11.90 NLS Pty Ltd v Hughes (1966) 120 CLR 583 …. 8.183C, 8.209 Noakes & Co Ltd v Rice [1902] AC 24 …. 11.23C Noblett and Mansfield v Manley [1952] SASR 155 …. 8.213 Nolan v Nolan [2014] QSC 218 …. 4.172 — v — [2015] QCA 199 …. 4.125, 4.126 Noonan v Martin (1987) 10 NSWLR 402 …. 4.84 Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450 …. 8.71

Norman v FC of T (1963) 109 CLR 9; 37 ALJR 49 …. 4.84, 4.85C Norman; Re Forest Enterprises Ltd v FEA Plantation Ltd (2011) 280 ALR 470 …. 8.205C, 8.207 North Sydney Council v Plater [2002] NSWCA 225 …. 8.85 North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd [1971] 2 NSWLR 150 …. 10.75 Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 …. 4.179, 4.180, 4.181, 11.21 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313; 146 ALR 572 …. 8.80, 8.82, 8.83C, 8.84, 8.85, 8.221, 9.14 Northern Territory v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24 …. 3.100 Northern Territory of Australia v Alyawarr (2005) 145 FCR 442 …. 3.99, 3.100, 3.107, 3.116, 3.119 Northshore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1939– 1940) 63 CLR 52 …. 1.90 Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; 93 ALR 385 …. 5.214 Norton v Dashwood [1896] 2 Ch 497 …. 1.82 — v Kilduff [1974] Qd R 47 …. 9.110 Notaras v Sly and Weigall (2007) 12 BPR 23,765 …. 11.65 Noyes v Klein (1985) 3 BPR 9216 …. 8.51 NRMA Insurance Ltd v Individual Homes Pty Ltd (1988) 92 FLR 1 ….

11.67 Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; 116 ALR 26; 67 ALJR 739 …. 6.84

O Oakley v Boston [1976] QB 270; [1975] 3 All ER 405 …. 10.95 Obadia v Morris (1974) 232 EG 333 …. 10.108 Oboohoff v Melnicke [1990] ACLD 35 …. 4.86, 6.54 O’Brien v Robinson [1973] AC 912; [1973] 1 All ER 583 …. 8.102 Ocean Estates Ltd v Pinder [1969] 2 AC 19 …. 2.55, 2.92C, 2.95 Octapon Pty Ltd v Esanda Finance Corp Ltd (SC(NSW), 3 February 1989, Cole J, unreported) …. 5.89 O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359; 45 ALR 632 …. 11.58 Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37 …. 5.101C, 5.102 Official Receiver v Klau; Ex parte Stephenson Nominees Pty Ltd (1987) 74 ALR 67 …. 5.74 Ofulue v Bossert [2009] 1 AC 990; [2009] 2 WLR 749 …. 2.111 Ogilvie v Ryan [1976] 2 NSWLR 504 …. 4.44, 4.48, 4.116, 4.117C, 4.118, 4.119, 4.123C, 4.129, 4.133, 4.136, 4.140, 4.142 O’Keefe v Williams (1910) 11 CLR 171 …. 8.69C Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No 2) [1979] 2 All ER 504 …. 8.111, 8.155 Olivieri v Olivieri (1993) 38 NSWLR 665 …. 4.108

Olsson v Dyson (1969) 120 CLR 365; [1969] ALR 443; (1969) 43 ALJR 77 …. 4.85C, 4.145, 4.151C Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd (in liq) (2008) 36 WAR 342; [2008] WASCA 80 …. 11.29 Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd [2011] VSCA 116 …. 8.187 Organ v Sandwell [1921] VLR 622 …. 4.95C Orr Ewing v Colquhoun (1877) 2 AC 839 …. 1.108 Osborn, Re (1989) 91 ALR 135 …. 4.134 Osmanoski v Rose [1974] VR 523 …. 5.188 O’Sullivan v Williams [1992] 3 All ER 385 …. 2.8, 2.30 Oswal v Carson [2013] VSC 615 …. 11.104 Otter v Lord Vaux (1856) 6 De G M & G 638; 43 ER 1381 …. 11.40, 11.41 Outram v Maude (1881) 17 Ch D 391 …. 10.89, 35C Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) [2003] VSC 495 …. 11.32, 11.34, 11.39 Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6 …. 8.19 Owners of Corinne Court v Shean Pty Ltd (2000) 23 WAR 1 …. 10.33C, 10.40 Owners of East Fremantle Shopping Centre West Strata Plan 8618 v Action Supermarkets Pty Ltd [2008] WASCA 180 …. 10.27C Owners of Strata Plan 48754 v PD Anderson Holdings Pty Ltd [1999]

NSWSC 580 …. 10.42C Owners Strata Plan 30889 v Perrine [2002] NSWCA 324 …. 8.85 Oxford Meat Co Pty Ltd v McDonald [1963] SR (NSW) 423 …. 2.53 Oxley v James (1844) 13 M & W 209; 153 ER 87 …. 8.10

P P & A Swift Investments (a firm) v Combined English Stores Group plc [1988] 2 All ER 885 …. 8.148, 8.190C Pacer v Westpac Banking Corporation (SC(NSW), No 3615 of 1995, Santow J, unreported) …. 5.114 Paine & Co v St Neot’s Gas & Coke Co [1939] 3 All ER 812 …. 10.104 Palais Parking Station Pty Ltd v Shea (1980) 24 SASR 425 …. 5.116 Palermo Seafoods Pty Ltd v Lunapas Pty Ltd (2014) 17 BPR 33,047 …. 8.208 Palethorpe v Public Trustee of Queensland [2011] QSC 335 …. 6.79 Palk v Mortgage Services Funding plc [1993] Ch 330; [1993] 2 All ER 481 …. 11.95, 11.96, 11.97 Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd [2009] SASC 311 …. 5.169 Palmdale Insurance Limited v Sprenger [1988] 1 Qd R 414 …. 8.36 Palmer v Bank of New South Wales (1975) 7 ALR 671; 50 ALJR 320 …. 4.84 — v Hendrie (1859) 27 Beav 349; 54 ER 136 …. 11.119 — v Wiley (1906) 23 WN (NSW) 90 …. 5.172

Palumberi v Palumberi (1986) NSW ConvR ¶55-287 …. 1.81 Pampris v Thanos [1968] 1 NSWR 56 …. 8.76 Pan Australian Credits (SA) Pty Ltd v Kolim Pty Ltd (1981) 27 SASR 353 …. 1.83 Pannizutti v Trask (1987) 10 NSWR 531 …. 6.84 Papadopoulos v Goodwin [1982] 1 NSWLR 413 …. 9.58, 10.7 — v — [1983] 2 NSWLR 113 …. 10.7, 10.121, 10.130 Paradise Beach and Transportation Co Ltd v Price-Robinson [1968] AC 1072; [1968] 1 All ER 530 …. 2.106 Paradise Constructors & Co Pty Ltd v Poyser (2007) 20 VR 294 …. 5.54, 5.105 Parish v Kelly (1980) 1 BPR 9394 …. 10.74 Parker v British Airways Board [1982] QB 1004; [1982] 1 All ER 834 …. 2.34C, 2.37, 2.38 — v Glenninda Pty Ltd (1998) Q ConvR 54-499 …. 5.169 — v Housing Trust (1986) 41 SASR 493 …. 8.83C — v Mortgage Advance Securities [2003] QCA 275 …. 5.57 — v Registrar-General [1977] 1 NSWLR 22 …. 5.213, 5.216 — v Webb (1693) 3 Salk 5; 91 ER 656 …. 8.127 Parker-Tweedale v Dunbar Bank plc [1991] Ch 12; [1990] 2 All ER 577 …. 11.79, 11.80, 11.109C Parkin v Thorold (1851) 2 Sim NS 1; 61 ER 239 …. 8.47C Parkinson v Braham (1961) 62 SR (NSW) 663 …. 5.129, 5.138C

Parramore v Duggan (1994–95) 4 Tas SR 64 …. 10.119 Parsons and Parsons v McBain (2001) 109 FCR 120; 192 ALR 772 …. 4.135 Partnership Pacific Securities Ltd, Re [1994] 1 Qd R 410 …. 8.207 Pascoe v Turner [1978] EWCA Civ 2; [1979] 2 All ER 945; [1979] 1 WLR 431 …. 4.142, 4.166C Patmore v Upton (2004) 13 Tas R 95; [2004] TASSC 77 …. 4.208, 4.212, 5.171, 11.106 Patterson v Mortgage Finance Australia (18 September 1990, Court of Appeal, unreported) …. 11.109C Patzak v Lytton [1984] WAR 353 …. 4.85C, 6.54, 6.67 Paul v Paul (1882) 20 Ch D 742 …. 9.7C Pavey & Matthews v Paul (1986) 162 CLR 221 …. 1.98 Pavlou (A Bankrupt), Re [1993] 3 All ER 955; [1993] 1 WLR 1046 …. 6.32, 6.36C Pearce v Brain [1929] 2 KB 310 …. 5.154C — v Lord Mayor, Alderman and Citizens of the City of Hobart [1981] Tas R 334 …. 10.109, 10.119 — v Pearce [1977] 1 NSWLR 170 …. 4.119 Pearne v Lisle (1749) Amb 75; (1749) EngR 142; 27 ER 47 …. 2.10C Pearks v Moseley (1880) 5 App Cas 714 …. 7.54 Pearson v Aotea District Maori Land Board [1945] NZLR 542 …. 5.55C, 5.56

Pecar v National Australia Trustees Ltd [1996] NSWSC 2518 …. 1.41 Peck v Peck [2010] SASC 258 …. 5.74 Peden Pty Ltd v Bortolazzo [2006] QCA 350 …. 8.73 Pejovic v Malinic (1959) 60 SR (NSW) 184; 76 WN (NSW) 744 …. 4.49 Pekel v Humich (1999) 21 WAR 24 …. 10.96 Peldan v Anderson (2006) 229 ALR 432 …. 6.75 Pendlebury v Colonial Mutual Life Assurance Society (1912) 13 CLR 676 …. 11.74C, 11.77, 11.78, 11.81C, 11.87C, 11.109C Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 …. 2.8 Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284 …. 4.86, 6.54 — v — [1991] ACL Rep 355 NSW 1 …. 6.74 Penton v Barnett [1898] 1 QB 276 …. 8.156 — v Robart (1801) 2 East 88; 102 ER 302 …. 1.89 Percy v Youngman [1941] VLR 275 …. 5.40 Perera v Vandiyar [1953] 1 All ER 1109 …. 8.63 Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 …. 8.142C Permanent Custodians Ltd v Yazgi [2007] NSWSC 279 …. 5.67, 5.88, 5.89 Permanent Mortgages Pty Ltd v Vandenberg [2010] WASC 10 …. 5.111 Permanent Trustee Australia Ltd v Esanda Corporation Ltd (1991) 6 BPR 13,420 …. 1.81 — v Shand (1992) 27 NSWLR 426 …. 5.169, 10.146, 10.147C, 10.150

Permanent Trustee Co Ltd v Frazis [1999] NSWSC 319 …. 5.67 — v Freedom from Hunger Campaign (1991) 25 NSWLR 140 …. 6.72 — v Gillett (2004) 145 A Crim R 220; [2004] NSWSC 278 …. 6.73 — v O’Donnell [2009] NSWSC 902 …. 5.89 Permanent Trustee Co of New South Wales Ltd v D’Apice (1968) 118 CLR 105; [1968] ALR 437 …. 3.45 Permanent Trustee Nominees (Canberra) Ltd, Re [1989] 1 Qd R 314 …. 7.8 Perpetual Ltd v Barghachoun [2010] NSWSC 108 …. 5.50 Perpetual Nominees Ltd v Karamakis [2010] NSWSC 10 …. 5.169 Perpetual Trustee Co Ltd v English [2011] NSWSC 264 …. 5.174 — v Khoshaba [2006] NSWCA 41 …. 5.89 — v Smith (2010) 186 FCR 566; 273 ALR 469; [2010] V ConvR 54-779 …. 5.132C, 5.142, 5.194C — v Westfield Management Ltd (2007) 12 BPR 23,793 …. 10.33C Perpetual Trustees Victoria Ltd v Cipri [2008] NSWSC 1128 …. 5.67 — v English (2010) 14 BPR 27,339; [2010] NSWCA 32 …. 5.57, 5.61, 5.62C, 5.63 — v Ford [2008] NSWSC 29 …. 5.89 — v Tsai (2004) 12 BPR 22,281; [2004] NSWSC 745 …. 5.57, 5.59, 5.60, 5.64 — v Van Den Heuvel [2009] NSWSC 57 …. 5.67 Perrin v Lyon (1807) 9 East 170; 103 ER 538 …. 3.35 Perry v Clissold (1906) 4 CLR 374; [1907] AC 73 …. 2.50C, 2.52C, 2.53,

2.54, 2.57, 2.108 — v Rolfe [1948] VLR 297 …. 11.23C — v Woodfarm Homes Ltd [1975] IR 104 …. 2.116 Perry-Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895 …. 4.180, 5.180C Person-to-Person Financial Services v Sharari (1984) NSW ConvR ¶55-187 …. 5.190 Pertsoulis, In the marriage of (1979) 4 Fam LR 613; FLC 90-613 …. 4.85C, 6.67 Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163 …. 2.95 Petrie, Re [1962] Ch 355; [1961] 3 All ER 1067 …. 7.45 Pettey v Parsons [1914] 2 Ch 653 …. 10.42C Pettitt v Pettitt [1970] AC 777; [1969] 2 All ER 385 …. 4.109C, 4.114, 4.117C, 4.118 Peulen v Agius [2015] QSC 137 …. 10.99, 10.100C Philip v JPM Developments Pty Ltd (2015) 17 BPR 33,887; [2015] NSWSC 145 …. 10.43 Phillips v McCabe [2016] SASC 27 …. 7.16 — v Phillips (1861) 4 De GF & J 208; 45 ER 1164 …. 4.203C, 4.210C Philos Pty Ltd v National Bank of Australasia Ltd [1976] ACLD 800 …. 11.31C Philpott v Kelley (1835) 3 Ad & El 106; (1835) 111 ER 353 …. 2.10C Phipps v Ackers (1842) 9 Cl & Fin 583; 8 ER 539 …. 7.27

— v Pears [1965] 1 QB 76; [1964] 2 All ER 35 …. 10.45, 10.50, 10.51, 10.71 Photo Art and Sound (Cremorne) Pty Ltd v Cremorne Centre Pty Ltd (in liq) (1987) 4 BPR 9436 …. 8.52, 8.120 Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 214 ALR 392; (2005) 79 ALJR 825; [2005] HCA 13 …. 4.70, 11.18 Picton-Warlow v Allendale Holdings Pty Ltd [1988] WAR 107 …. 8.125 Pieper v Edwards [1982] 1 NSWLR 336 …. 9.92C, 10.116 Pierson v Post (1805) 3 Caines 175 …. 4.5 Piggott v Williams (1821) 6 Madd 95; 56 ER 1027 …. 8.201C Pigot’s Case (1614) 11 Co 26b; 77 ER 1177 …. 5.54, 5.56 Pilcher v Rawlins (1872) 7 Ch App 259 …. 4.183C, 4.173, 5.69 Pile’s Caveats, Re [1981] Qd R 81 …. 5.169 Pimms Ltd v Tallow Chandlers Co [1964] 2 QB 547; [1964] 2 All ER 145 …. 8.112, 8.114C Pinewood Estate, Farnborough, Re [1958] 1 Ch 280; [1957] 2 All ER 517 …. 9.74 Pinnington v Galland (1853) 9 Ex 1; 156 ER 1 …. 10.79C Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 97,145 …. 8.173, 8.197C Pirie v Registrar General (1962) 109 CLR 619 …. 9.52C Pirie and the Real Property Act, Re (1961) 79 WN (NSW) 701 …. 9.115C Pirie and the Real Property Act, Re [1962] NSWR 1004 …. 9.56, 9.115C

Piro v Foster (1943) 68 CLR 313 …. 9.62C Piromalli, In the Application of [1977] 1 NSWLR 39 …. 11.126 Piromalli v Di Masi [1980] WAR 173 …. 10.91 Piroshenko v Grojsman [2010] VSC 240 …. 5.176 Pitt v Baxter [2007] WASCA 104 …. 6.51 Platt v Ong [1972] VR 197 …. 8.166C, 8.167 Plimmer v Wellington Corp (1884) 9 App Cas 699 …. 4.141C, 4.147C, 4.166C, 4.166C Plumb v Breen [1991] ACL Rep 185 NSW 6 …. 4.129 Plymouth Corp v Harvey [1971] 1 All ER 623; [1971] 1 WLR 549 …. 8.157 Pola v Australian and New Zealand Banking Group Ltd (2015) 17 BPR 33,989; [2015] NSWCA 146 …. 11.94 Pollard v Pollard (1975) 25 FLR 125; 6 ALR 256 …. 6.74 Pollard v Registrar of Titles [2013] VSC 286 …. 9.57 Poltava Pty Ltd, Application of, Re [1982] 2 NSWLR 161 …. 9.77 Pomal Kanji Govindji v Vrajlal Karsandas Purohit (1989) 76 AIR 436 …. 11.45C Ponsford v HMS Aerosols Ltd [1978] 2 All ER 837 …. 8.121 Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642 …. 8.205C Port v Griffith [1938] 1 All ER 295 …. 8.69C Porter v Associated Securities Ltd unreported, 2 July 1976 …. 11.74C Post Investments Pty Ltd v Wilson (1990) 26 NSWLR 598 …. 9.91,

9.92C, 9.93 Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 …. 8.101, 8.105 Potter (decd), Re [1970] VR 352 …. 1.10 Pourzand v Telstra Corp Ltd [2012] WASC 210 …. 8.65 Powell v Langdon (1944) 45 SR (NSW) 136 …. 10.35C, 10.104 — v McFarlane (1977) 38 P & CR 452 …. 2.92C, 2.93, 2.102 — v Whyte [1968] Qd R 255 …. 10.56 Pozzi, Re [1982] Qd R 499 …. 6.65 Pratten v Warringah Shire Council (1969) 90 WN (NSW) (Pt 1) 134; [1969] 2 NSWR 161 …. 5.152, 5.153, 9.123 Premier Group Ltd v Lidgard [1970] NZLR 280; (1971) 4 NZULR 290 …. 5.165 Prentice v Cummins (No 6) (2003) 134 FCR 449 …. 4.109C Price v Murray [1970] VR 782 …. 8.127 Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242 …. 8.154 Pritchard v Briggs [1980] Ch 338; [1980] 1 All ER 294; [1979] 3 WLR 868 …. 7.4, 7.68 Proctor v Milton [1987] ANZ Conv R 14 …. 4.146 — v — (1989) NSW ConvR ¶55-450 …. 8.180 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; 57 ALR 609 …. 8.1, 8.48, 8.49, 8.183C, 8.184, 8.190C, 8.192, 8.193C, 8.196, 8.197C

Property Unit Nominees (No 2) Pty Ltd, Ex parte [1981] Qd R 178 …. 5.120 Proprietors of Averil Court Building Units Plan No 2001, Ex parte [1983] 1 Qd R 66 …. 10.116 Proprietors Strata Plan No 9,968 v Proprietors Strata Plan No 11,173 [1979] 2 NSWLR 605 …. 10.108 Prospect County Council v Cross (1990) 21 NSWLR 601 …. 10.10, 10.104 Proudfoot v Hart (1890) 25 QBD 42 …. 8.98C, 8.101, 8.103 Provident Capital Ltd v Printy (2007) 13 BPR 24,603; NSW ConvR ¶56810; [2008] NSWCA 131 …. 5.59 — v — (2008) 13 BPR 25,199; [2008] NSWCA 131 …. 5.57, 5.62C, 5.64 Prowse v Johnstone [2012] VSC 4 …. 9.88, 9.89, 9.107 — v — [2015] VSC 621 …. 9.45 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386; [1992] 3 All ER 504 …. 8.14, 8.15C, 8.16, 8.41 Pryce and Irving v McGuinness [1966] Qd R 591 …. 10.127 PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 …. 5.57, 5.62C PT Thiess Contractors Indonesia v PT Arutmin Indonesia [2015] QSC 123 …. 11.58 Public Trustee v Evans (1985) 2 NSWLR 188 …. 6.72 — v Fraser (1987) 9 NSWLR 433 …. 6.72 — v Gray-Masters [1977] VR 154 …. 4.84 — v Grivas [1974] 2 NSWLR 316 …. 6.67

— v Hermann [1968] 2 NSWR 94 …. 10.97 — v Paradiso (1995) 64 SASR 387 …. 5.51, 5.57 — v Pfeiffle [1991] 1 VR 19 …. 6.66 Public Trustee (NSW) v Fitter [2005] NSWSC 1188 …. 6.73 Public Trustee (Qld) (as Litigation Guardian for ADF) v Ban (No 2) [2012] QSC 97 …. 4.86 Pugh v Savage [1970] 2 QB 373; [1970] 2 All ER 353 …. 10.91 Pukuweka Sawmills Ltd v Winger [1917] NZLR 81 …. 1.80C Purcell, Ex parte [1982] Qd R 613; (1982) 47 LGRA433 …. 10.38, 10.104C Purefoy v Rogers (1671) 2 Wms Saund 380; 85 ER 1181 …. 7.13 Pwllbach Colliery Co Ltd v Woodman [1915] AC 634 …. 10.49, 10.77 Pyer v Carter (1857) 1 H & N 916; 156 ER 1472 …. 10.79C Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 …. 5.52, 5.57, 5.62C, 5.64, 5.82, 5.91C, 5.107, 5.109, 5.118

Q Quach v Marrickville Municipal Council (No 2) (1990) 22 NSWLR 55 …. 5.122, 5.152 Quadramain Pty Ltd v Sevastopol Investments Pty Ltd (1976) 8 ALR 555; 50 ALJR 475 …. 9.36 Quarm v Quarm [1892] 1 QB 184 …. 3.47 Quarmby v Keating [2008] TASSC 71 …. 5.145 Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [1996] NSWSC 86; (1996) 7 BPR 15,078 …. 10.27C

Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; [2007] HCA 53 …. 5.57, 5.65, 8.147 Queensland Trustee Ltd v Registrar of Titles (1893) 5 QLJ 46 …. 11.31C Quennell v Maltby [1979] 1 WLR 318 …. 11.132 Quick v Taff-Ely BC [1986] 1 QB 809; [1985] 3 All ER 321 …. 8.105

R R v Bathurst (1755) Say 225; 96 ER 860 …. 2.61C — v Child (1846) 2 Cox CC 102 …. 2.61C — v Dormy (1700) 1 Ld Raym 610; 91 ER 1308 …. 2.61C — v Gadd [1911] QWN 31 …. 4.5 — v Kelly [1998] 3 All ER 741 …. 1.40 — v Pierce (1852) 6 Cox CC 117 …. 2.41 — v Shorrock [1994] QB 279 …. 8.69C — v Sparrow [1990] 1 SCR 1075; (1990) 70 DLR (4th) 385 …. 3.77C — v Tang (2008) 237 CLR 1; [2008] HCA 39 …. 2.10C — v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 …. 1.2, 1.10 — v Yarborough (1824) 3 B and C 91 …. 1.104C R (Beresford) v Sunderland City Council [2003] 3 WLR 1306 …. 10.87 R J Finlayson Ltd v Elder, Smith & Co [1936] SASR 209 …. 10.77 R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100 …. 5.96, 5.97, 5.102, 5.103, 5.134 R (on the application of Best) v Chief Land Registrar and the Secretary of

State for Justice [2015] EWCA Civ 17 …. 2.96 Race v Ward (1855) 4 Ellis & Blackburn 702; 119 ER 259 …. 10.147C Radaich v Smith (1959) 101 CLR 209; ALR 1253 …. 1.28C, 8.22C, 8.23, 8.26, 8.27, 8.28, 8.29, 8.213 Raffaele v Raffaele [1962] WAR 29 …. 4.145 Rainbowforce Pty Ltd v Skyton Holdings Ltd (2010) 171 LGERA 286; [2010] NSWLEC 2; …. 10.102C Rains v Buxton (1880) 14 Ch D 537 …. 2.102 Rakus v Energy Australia (2004) 138 LGERA 373 …. 8.23 Ramnarace v Lutchman [2001] 1 WLR 1651 …. 2.89 Ramsay v Trustees Executors & Agency Co Ltd (1948) 77 CLR 321; [1949] ALR 105 …. 3.34, 7.12 Ramsden v Dyson (1866) LR 1 HL 129 …. 4.141C, 4.147C, 4.151C, 4.164C, 4.166C Rance v Elvin (1985) 50 P & CR 9 …. 10.52 Randazzo v Goulding [1968] Qd R 433 …. 8.119 Rasch Nominees Pty Ltd v Bartholomaeus (2013) 115 SASR 473 …. 5.88, 5.113 Rasmanis v Jurewitsch [1968] 2 NSWR 166 …. 6.70 — v — [1970] 1 NSWR 650; (1969) 70 SR (NSW) 407; 90 WN (NSW) Pt 2 154 …. 6.70 Rasmussen v Rasmussen [1995] 1 VR 613 …. 4.118, 4.121, 5.71, 5.72C, 5.74

Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497; [1969] 2 NSWR 146 …. 5.70C Rawcliffe v Custom Credit Corporation (1994) ATPR ¶41-292 …. 11.111 Rawlinson v Ames [1925] Ch 96 …. 4.49 Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451 …. 8.201C Ray v Fairway Motors (Barnstaple) Ltd (1968) 20 P & CR 261 …. 10.111 — v Hazeldine [1904] 2 Ch 17 …. 10.76 Rayburn v Wolf (1985) 50 P & CR 463 …. 8.113 RDN Developments Pty Ltd v Shtrambrandt [2011] VSC 130 …. 5.178 Rede v Farr (1817) 6 M & S 121; 105 ER 1188 …. 8.164 Redland Bricks Ltd v Morris [1970] AC 652; [1969] 2 All ER 576 …. 10.97 Rees v Rees [1931] SASR 78 …. 6.42 Reeve v Lisle [1902] AC 461 …. 11.47 Refina Pty Ltd v Binnie [2010] NSWCA 192 …. 5.149 Regal Castings Ltd v GM and GN Lightbody [2009] 2 NZLR 433 …. 5.74 Regency Villas Title Ltd v Diamond Resorts (Europe) Ltd [2015] EWHC 3564 …. 10.16, 10.17C, 10.21C, 10.24 Regent v Millett (1976) 133 CLR 679; 10 ALR 496 …. 4.44, 4.46, 4.49 Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402; [1965] 3 All ER 673 …. 8.51, 9.34C, 9.38, 11.134 Regis Property Co Ltd v Dudley [1959] AC 370; [1958] 3 All ER 491 …. 8.88, 8.99 Registrar-General v Behn [1980] 1 NSWLR 589 …. 5.223

— v Cleaver (1996) 41 NSWLR 713; 7 BPR 15,040 …. 5.214 — v Harris (1998) 45 NSWLR 404 …. 5.212 Registrar-General (NSW) v Cihan (2012) 16 BPR 30,845 …. 5.120 — v JEA Holdings (Aust) Pty Ltd (2015) 17 BPR 33,845; [2015] NSWCA 74 …. 10.30, 10.133 Registrar of Titles v Spencer (1909) 9 CLR 641 …. 5.223 Registrar of Titles (Q) v Crowle (1947) 75 CLR 191 …. 5.223 Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 …. 5.122, 5.214, 5.215 Reid v Bickerstaff [1909] 2 Ch 305; [1908–10] All ER Rep 298 …. 9.73, 9.77 — v Earle (1914) 18 CLR 493 …. 7.56 — v Shaw (1906) 3 CLR 656 …. 1.80C — v Smith (1905) 3 CLR 656 …. 1.84, 1.85C Reilly v Booth (1890) 44 Ch D 12 …. 10.27C — v Liangis (2000) 9 BPR 17,509 …. 8.88 Reitsema v Reitsema (1991) 15 Fam LR 706 …. 4.139 Renaghan v Breen [2000] NIJB 174 …. 2.108 Renals v Cowlishaw (1878) 9 Ch D 125; [1874–80] All ER Rep 359 …. 9.49C, 9.50, 9.52C, 9.62C, 9.67C, 9.73 Renals v Cowlishaw (1879) 11 Ch D 866 …. 9.50, 9.52C, 9.73 Rendell v Associated Finance Pty Ltd [1957] VR 604 …. 1.110C, 1.112 Reuthlinger v MacDonald [1976] 1 NSWLR 88 …. 7.2C, 7.4, 7.5, 7.11

Reynolds v Ashby & Son [1904] AC 466 …. 1.80C Rhone v Stephens [1994] 2 WLR 429 …. 9.20, 9.40 R&I Bank of Western Australia Ltd v Lavery (SC (WA), 25 October 1993, unreported) …. 11.106 Rice v Rice (1854) 2 Drew 73; 61 ER 646 …. 4.196C, 4.198, 4.199, 4.200, 4.201, 5.48C, 5.180C, 5.184, 5.185C, 5.191, 5.194C Richards v Rose (1853) 9 Ex 218; 156 ER 93; [1843–60] All ER Rep 827 …. 10.47, 10.79C, 10.80 Richardson v Graham [1908] 1 KB 39 …. 9.92C, 10.20 — v Landecker (1950) 50 SR (NSW) 250 …. 8.53 — v Somas [1967] WAR 109 …. 8.116 Riches v Hogben [1985] 2 Qd R 292 …. 4.162C, 4.166C — v — [1986] 1 Qd R 315 …. 4.142, 4.148 Ricketts v Enfield Churchwardens [1909] 1 Ch 544 …. 8.127 Ridgeway and Smith’s Contract, Re [1930] VLR 111 …. 10.7 Ridis v Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449 …. 8.81 Ridley, Re; Buckton v Hay (1879) 11 Ch D 645 …. 7.2C Riley v Nelson (1965) 119 CLR 131; [1966] ALR 663 …. 5.18 — v Osborne [1986] VR 193 …. 4.44 — v Pentilla [1974] VR 547; (1974) 30 LGRA 79 …. 2.94, 5.142, 9.92C, 10.17C, 10.23, 10.35C, 10.107, 10.108 Rimmer v Pearson (2000) 79 P & CR D21 …. 2.101 — v Rimmer [1953] 1 QB 63; [1952] 1 All ER 863 …. 4.113

— v Webster [1902] 2 Ch 163 …. 5.180C Rising Developments Pty Ltd v Hoskins (1996) 39 NSWLR 157 …. 5.169 Risk v Northern Territory of Australia [2006] FCA 404 …. 3.107 — v — [2007] FCAFC 46 …. 3.107 RJ Finlayson Ltd v Elder Smith & Co Ltd [1936] SASR 209 …. 9.52C Roake v Chadha [1983] 3 All ER 503; [1984] 1 WLR 40 …. 9.54 Roberts v District Land Registrar of Gisborne (1909) 28 NZLR 616 …. 5.55C — v Karr (1809) 1 Taunt 495; 127 ER 926 …. 10.142C — v Rose (1865) LR 1 Ex 82 …. 10.104 — v Waverley Municipal Council (1988) 14 NSWLR 423 …. 8.213 Roberston v Fraser (1871) 6 Ch App 696 …. 6.8, 6.10 — v Keith (1870) 1 VLR (E) 11 …. 5.131 — v Preston (1858) 4 K & J 505; 70 ER 211 …. 6.16 — v Registrar-General [1983] NSW ConvR ¶55-128 …. 5.225C — v Western Australian Museum (1977) 138 CLR 283 …. 2.43 Robson, Re [1916] 1 Ch 116 …. 3.64 Roche v Douglas [2000] WASC 146 …. 1.41 Roche and Murdoch’s Contract, Re [1921] VLR 296 …. 10.63 Rochefoucauld v Boustead [1897] 1 Ch 196 …. 4.95C, 4.118 Rochester Investments Pty Ltd v Couchman (1969) 90 WN (NSW) (Pt 1) 371 …. 5.231 Rock v Todeschino [1983] 1 Qd R 356 …. 10.121

Rodrigues v Bethlehem Steel Corp (1974) 12 Cal 3d 382; 115 Cal Rptr 765; 525 P 2d 669 …. 1.36C Rodwell v G R Evans & Co Pty Ltd [1978] 1 NSWLR 448 …. 10.7, 10.51, 10.91 Rogers v Hosegood [1900] 2 Ch 388; [1900–3] All ER Rep 915 …. 8.190C, 9.23C, 9.49C, 9.52C, 9.57 — v Resi-Statewide Corp Ltd (1991) 101 ALR 377 …. 5.51 — v Rice [1892] 2 Ch 170 …. 8.172 — v Spence (1844) 13 M&W 571; 153 ER 239 …. 2.4 Ron Medich Properties Pty Ltd v Mcgurk (2010) 15 BPR 28,399 …. 5.174 Rosa Investments Pty Ltd v Spencer Shier Pty Ltd [1965] VR 97 …. 8.162, 8.183C Rose, Re [1952] Ch 499; [1952] 1 All ER 1217 …. 4.82, 4.83, 4.85C Rose v Commissioner of Stamps (1979) 22 SASR 84 …. 4.29 — v Rose (1986) 7 NSWLR 679 …. 4.29 — v Watson (1864) 10 HLC 672 …. 4.52C Rose Bay Bowling and Recreation Club Ltd, Re (1935) 52 WN (NSW) 77 …. 9.92C Rosher, Re (1884) 26 Ch D 801 …. 7.2C Ross v Bank of Commerce (Saint Kitts Nevis) Trust and Savings Assn Ltd [2012] UKPC 3 …. 11.18 Rowe v Wood (1822) 2 Jac & W 553; 37 ER 740 …. 11.127 Roy v Lagona [2010] VSC 250 …. 2.108

Royalene Pty Ltd v Registrar of Titles (2008) Q ConvR ¶54-689; [2008] QSC 64 …. 5.59, 5.82, 5.83 Rudd v Cinderella Rockerfellas Ltd [2003] 1 WLR 2423 …. 1.87 Rufa Pty Ltd v Cross [1981] Qd R 365 …. 10.52 Rugby School (Governors) v Tannahill [1934] 1 KB 695 …. 8.154 — v — [1935] 1 KB 87 …. 8.154 Rushton v Smith [1975] 2 All ER 906 …. 4.71 Russel v Russel (1783) 1 Bro CC 269 …. 4.49, 11.18 Russell v Scott (1936) 55 CLR 440; [1936] ALR 375; 10 ALJ 211 …. 4.84 — v Wilson (1923) 33 CLR 538 …. 2.8 Russo v Bendigo Bank Ltd (1993) 3 VR 376 …. 5.82, 5.91C, 5.95, 5.98 Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793; [2003] NSWCA 56 …. 4.210C, 4.213, 5.196 Ryan v Brain [1994] 1 Qd R 681 …. 9.112 — v Dries (2002) 10 BPR 19,497; [2003] ANZ ConvR 47; [2002] NSWCA 3 …. 6.36C, 6.41, 6.44, 6.45 — v Kalocsay [2009] NSWSC 1009 …. 5.169 — v King [1932] QWN 1 …. 6.86 — v Nothelfer (1983) NSW ConvR ¶55-119 …. 5.190 — v Sutherland (2011) 16 BPR 30,101 …. 10.27C Ryde Joinery Pty Ltd v Zisti (1997) 7 BPR 97 638 …. 8.148 Ryder v Taylor (1935) 36 SR (NSW) 31 …. 9.7C

S

S & D International Pty Ltd, Re (in liq) (recs and mgrs apptd) [2009] VSC 225 …. 11.25 S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637 …. 4.155 S & M Ceramics Pty Ltd v Kin [1996] 2 Qd R 540 …. 10.39 Saade v Registrar-General (1993) 118 ALR 219 …. 5.214 Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 …. 8.148, 9.7C Sahade v Owners Corporation SP 62022 [2013] NSWSC 1791 …. 5.123 Sakoua v Williams (2005) 64 NSWLR 588 …. 8.85 Saleeba v Wilke [2007] QSC 298 …. 6.64 Salter v Clarke (1904) 4 SR (NSW) 280; 21 WN (NSW) 71 …. 2.108 Salvin’s Indenture, Re [1938] 2 All ER 498 …. 10.3C, 10.5 Sampi v Western Australia [2005] FCA 777 …. 3.100 Samuel v Jarrah Timber and Wood Paving Corp Ltd [1904] AC 323 …. 11.45C, 11.47, 11.50C, 11.53C, 11.56 Samuel Allen & Sons Ltd, Re [1907] 1 Ch 575; [1904–7] All ER Rep 785 …. 4.197 Sandbank Holdings Pty Ltd v Durkan [2010] WASCA 122 …. 8.207 Sanders v Cooper [1974] WAR 129 …. 8.214 Sanderson v Berwick-upon-Tweed Corporation (1884) 13 QBD 547 …. 8.74 Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd (2000) 22 WAR

172 …. 11.96 Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329 …. 5.133 Sandhurst Trustees Ltd v Australian Country Cinemas Pty Ltd [2006] QSC 165 …. 8.128 Sanma Australia Leasing Ltd v National Westminster Finance Australia (1988) 4 BPR 97,294 …. 1.83 Santley v Wilde [1899] 2 Ch 474 …. 11.46 Saraswati v R (1991) 172 CLR 1 …. 5.154C Sarson v Roberts [1895] 2 QB 395 …. 8.76 Saunders v Vautier (1841) Cr & Ph 240; 49 ER 282; 4 Beav 115; 41 ER 482 …. 7.27, 7.74 Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 …. 5.178 Savva v Houssein [1996] NPC 64 …. 8.155 Say v Smith and Fuller (1530) 1 Plow 269; 75 ER 410 …. 8.14, 8.15C Scala House and District Ltd v Forbes [1974] QB 575; [1973] 3 All ER 308 …. 8.155 Scandinavian Pacific Ltd v Burke (1991) 5 BPR 97,413; NSW ConvR 55575 …. 11.81C, 11.113 Scapinello v Scapinello [1968] SASR 316 …. 6.41 Scarcella v Linknarf Management Services Pty Ltd (in liq) (2005) NSW ConvR 56-106; [2004] NSWSC 360 …. 8.116, 8.196 Schebsman, Re [1944] Ch 83 …. 9.7C

Schmeling v Stankovic (1984) 3 BPR 9325 …. 6.23 Schibaia v Elias [2013] NSWSC 1485 …. 5.174 Shrivdev Singh v Sucha Singh [2000] AIR (1st Supp) 1935 …. 11.45C Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 …. 5.170, 5.171 Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576; (1969) 90 WN (NSW) (Pt 1) 529 …. 5.86, 5.87, 5.89 Schwann v Cotton [1916] 2 Ch 120; [1916–17] All ER Rep 368 …. 10.63 — v — [1916] 2 Ch 459 …. 10.61C Scott v Davis (2000) 204 CLR 333 …. 10.140C — v Scott [2009] NSWSC 567 …. 6.67 — v Southern Pacific Mortgages Ltd [2015] AC 385; [2015] 1 All ER 277; [2014] UKSC 52 …. 4.60 Seaforth Land Sales Pty Ltd’s Land, Re (No 2) [1977] Qd R 317 …. 10.98, 10.100C Seawell v Webster (1859) 29 LJ Ch 71 …. 4.52C Seay v Bacon (1856) 4 Sneed (TN) 99; 36 Tenn 99; 1856 WL 2500 …. 2.10C Secretary, Department of Social Security v James (1990) 85 ALR 615 …. 4.103, 4.104C Seddon v Smith (1877) 36 LT 168 …. 2.92C, 2.93, 2.94 Sedleigh-Denfield v O’Callaghan [1940] AC 880 …. 8.69C Sefton v Tophams Ltd [1967] 1 AC 60; [1966] 1 All ER 1039 …. 9.52C, 9.89

Segal v Barel (2013) 16 BPR 31,457; [2013] NSWCA 92 …. 6.82, 6.83 Selby v Alston (1797) 3 Ves 339; 30 ER 1042 …. 6.27 Selous, Re [1901] 1 Ch 921 …. 6.27 Selous Street Properties v Oronel Fabrics (1984) 270 EG 643 …. 8.125 Selwyn Bibby v Suintra Partap [1991] 1 WLR 931 …. 2.62 Serjeant v Nash, Field & Co [1903] 2 KB 304; [1900–3] All ER Rep 252 …. 8.158 Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 …. 10.36, 10.42C Shanahan v Fitzgerald [1982] 2 NSWLR 513 …. 4.66 Shannon Ltd v Venner Ltd [1965] Ch 682; [1965] 1 All ER 590 …. 10.3C, 10.33C Shannon’s Transfer, Re [1967] Tas SR 245 …. 6.61, 6.63 Sharp v Anderson (1994) 6 BPR 13,801 …. 4.142 Sharpe, Re [1980] 1 All ER 198 …. 4.142 Shaw v Appleyard [1978] 1 All ER 123; [1977] 1 WLR 970 …. 9.47, 9.90 — v Garbutt (1996) 7 BPR 14,816; (1997) NSW ConvR ¶55-801 …. 2.108, 2.109 — v Foster (1872) LR 5 HL 321 …. 4.52C Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd (2000) 9 Tas R 444 …. 5.171 Shawyer v Amberday (2001) 10 BPR 18,869 …. 4.205 Shebsman, Re; Official Receiver v Cargo Superintendents (London) Ltd

[1944] Ch 83 …. 5.101C Sheehy v Hobbs [2012] QSC 333 …. 8.85, 8.87 Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 …. 1.72, 1.73, 1.74 Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315 …. 10.107, 10.108 Shell-Mex and BP Ltd v Manchester Garages Ltd [1971] 1 All ER 841; [1971] 1 WLR 612 …. 8.28 Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315 …. 2.108 Shephard v Cartwright [1955] AC 431 …. 4.110 — v Corindi Blueberry Growers Pty Ltd (1994) 6 BPR 13,672 …. 4.65 Shepherd v FC of T (1965) 113 CLR 385; 39 ALJR 351 …. 4.84 Shepherd Homes v Sandham (No 2) [1971] 2 All ER 1267; [1971] 1 WLR 1062 …. 9.40 Shevill v Builders Licensing Board (1982) 149 CLR 620; 42 ALR 305 …. 8.48, 8.183C, 8.189, 8.190C Shi v Abi-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293 …. 10.101, 10.102C Shiloh Spinners Ltd v Harding [1973] AC 691; [1973] 1 All ER 90; [1973] 2 WLR 28 …. 4.57C, 8.160, 8.166C, 8.175, 8.176, 8.197C, 9.21 Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 …. 7.10 Short v Patrial Holdings Pty Ltd (1994) 6 BPR 13,996 …. 10.18 Shrimpton v Shrimpton (1862) 31 Beav 425; 54 ER 1203 …. 7.27

Shropshire Union Railways & Canal Co v R (1875) LR 7 HL 496 …. 4.199, 4.200, 5.48C, 5.180C, 5.185C, 5.191 Sibbles v Highfern Pty Ltd (1987) 164 CLR 214; 76 ALR 13; 62 ALJR 55 …. 11.33 Sidhu v Van Dyke (2014) 308 ALR 232 …. 4.170, 4.171C, 4.172 Siemenowski v Sellers [2009] NSWCA 245 …. 4.112 Siemenski v Brooks Nominees [1990] Tas R 236 …. 9.111 Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd [2004] VSCA 242 …. 1.22 Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414 …. 11.128 Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 …. 4.208 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 …. 4.149, 8.180 Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997 …. 11.80 Simons v David Benge Motors Pty Ltd [1974] VR 585 …. 5.169 Simpson v Forrester (1973) 132 CLR 499; 47 ALR 149 …. 11.119 — v Weber (1925) 133 LT 46 …. 10.77 Sims v SPM Business Consultants Pty Ltd [2002] FCA 1588 …. 2.43 Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 …. 4.205, 4.208, 5.171, 11.106 Singh v Kaur Bal (No 2) [2014] WASCA 88 …. 6.62 Siple v Blow (1904) 8 OLR 547 …. 10.42C

Sistrom v Urh (1992) 40 FCR 550; 117 ALR 528 …. 4.86 Skelton (William) & Son Ltd v Harrison & Pinder Ltd [1975] QB 361; [1975] 1 All ER 182 …. 8.10 Skinner v Chapman (1827) Mood & M 59; 173 ER 1081 …. 2.4 Skiwing Pty Ltd v Trust Company of Australia [2006] NSWCA 276 …. 8.106 Slater v Slater (1987) 12 Fam LR 1 …. 6.66 Sleafer v Lambeth Borough Council [1960] 1 QB 43; [1959] 3 All ER 378 …. 8.94 Sledmore v Dalby [1996] EWCA Civ 1305; (1996) 72 P & CR 196 …. 4.166C Small v Gray [2004] NSWSC 97 …. 5.57 — v Jones [1954] 2 All ER 823; [1954] 1 WLR 1089 …. 4.188C, 4.209, 4.211 — v Lloyd (1854) 9 Exch 562; 156 ER 240 …. 2.89 — v Marrable (1843) 11 M & W 6; 152 ER 693 …. 8.76 — v Scott [1973] Ch 314; [1972] 3 All ER 645 …. 8.73 Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500; [1949] 2 All ER 179 …. 9.6, 9.23C, 9.29, 9.47, 9.52C Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 …. 5.102 Solak v Bank of Western Australia Ltd [2009] VSC 82 …. 5.64, 5.65 — v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279 …. 5.50, 5.68, 5.156, 5.212

Solling v Broughton [1893] AC 556; (1893) 14 LR (NSW) 412 …. 2.108 Solomon v Bray (1873) 8 SALR 128 …. 8.45 Somerset v Stewart (Somerset’s Case) (1772) Lofft 1; 20 State Tr 1; 98 ER 499 …. 1.34E, 2.10C Somma v Hazlehurst [1978] 2 All ER 1011; [1978] 1 WLR 1014 …. 8.23 South Australian Co v City of Port Adelaide [1914] SALR 16 …. 2.86 South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259 …. 7.27 South Maitland Railways Pty Ltd v Satellite Centres Aust Pty Ltd [2009] NSWSC 716 …. 2.93 South Staffordshire Water Co v Sharman [1896] 2 QB 44; [1895–9] All ER Rep 259 …. 2.34C, 2.36, 2.41 South Sydney Council v Royal Botanic Gardens [1999] NSWCA 478 …. 7.11 South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603; [1940] ALR 1 …. 5.150, 5.151, 5.158 Southern Centre of Theosophy Inc v South Australia [1982] AC 706; (1981) 38 ALR 587; [1981] 1 All ER 283 …. 1.104C, 1.108 Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138 …. 11.74C, 11.75, 11.78 Southern Depot Company v British Railways Board [1990] 2 EGLR 39 …. 8.176 Southwark London Borough Council v Tanner [2001] 1 AC 1 …. 8.71

Southwell v Roberts (1940) 63 CLR 581; [1940] HCA 23 …. 11.45C Sovmonts Ltd v Enviroment Secretary [1977] QB 411 …. 10.61C Sovmots Investments Ltd v Secretary of State for the Environment [1979] AC 144; [1977] 2 All ER 385; [1977] 2 WLR 951 …. 10.61C, 10.64, 10.71 Spark v Meers [1971] 2 NSWLR 1 …. 2.57, 5.149 — v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970) 92 WN (NSW) 1087 …. 2.57, 4.176, 5.149 Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54 …. 8.105 Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 305 ALR 569 …. 8.65 Spencer’s case (1583) 5 Co Rep 16a; 77 ER 72 …. 8.126, 8.138, 9.23C Spicer v Martin (1888) 14 App Cas 12; [1886–90] All ER Rep 461 …. 9.73, 9.119C Spina v Conran Associates Pty Ltd (2008) NSW ConvR ¶56-218; [2008] NSWSC 326 …. 5.53, 5.112 Sports and General Press Agency Ltd v ‘Our Dogs’ Publishing Co Ltd [1916] 2 KB 880 …. 1.46C Spyer v Phillipson [1931] 2 Ch 183 …. 1.80C, 1.89 Squarey v Harris-Smith (1981) 42 P & CR 118 …. 10.71 Squire v Rogers (1979) 27 ALR 330 …. 6.46, 6.79 St Edmundsbury and Ipswich Diocesan Board of Finance v Clark (No 2)

[1975] 1 All ER 772; [1975] 1 WLR 468 …. 10.38 St George Bank v Wright (2015) 17 BPR 34,055; [2015] NSWSC 255 …. 6.62 St George Bank Ltd v McTaggart [2007] WASC 150 …. 11.33 Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938; [1982] 1 WLR 1410 …. 11.79, 11.81C Standard Electronic Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447 …. 2.28, 2.29 Standing v Bowring (1885) 31 Ch D 282 …. 9.7C Stanford v Hurlstone (1873) LR 9 Ch App 116 …. 2.52C Stanwell Park Hotel Co Ltd v Leslie (1952) 85 CLR 189 …. 11.48 Stapleford Colliery Co, Re (1880) 14 Ch D 432 …. 4.185 Starceavich v Swart & Associates Pty Ltd [2006] NSWSC 960 …. 11.127 State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398; NSW ConvR ¶55-281 …. 5.114, 5.122 State Bank of New South Wales v Yee (1994) 33 NSWLR 618 …. 5.90 State Electricity Commission of Victoria and Joshua’s Contract, Re [1940] VLR 121 …. 10.49, 10.77 State of New South Wales v Banabelle (2002) 54 NSWLR 503 …. 8.119 — v Koumdjiev (2005) 63 NSWLR 353 …. 6.51 State of Queensland v Congoo (2015) 320 ALR 1 …. 3.126C State of Western Australia v Ward (2000) 99 FCR 316 …. 3.99 State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7

NSWLR 170 …. 4.153C State Transit Authority v Australian Jockey Club (2003) 11 BPR 21,107 …. 10.40 Steadman v Steadman [1976] AC 536 …. 4.44, 4.45 Stedman v Smith (1857) 8 E1 & B1 1; 120 ER 1 …. 6.28 Steel-Smith v Liberty Financial Pty Ltd [2005] NSWSC 398 …. 5.89 Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] NSWLR 514 …. 8.204 Steindlberger v Mistroni (1992) 29 NSWLR 351; 5 BPR 11,529 …. 11.124 Stephens v Debney (1960) 60 SR (NSW) 468 …. 6.84 Stern v McArthur (1988) 165 CLR 489; [1988] HCA 51 …. 4.57C, 11.45C Sterns Trading Pty Ltd v Steinman (1988) NSW ConvR 55–414 …. 7.68 Stevens v Allan (1955) 58 WALR 1 …. 10.118 Stevenson v Yasso [2006] QCA 40 …. 3.101 Stewart v Cooper [1986] TASSC 3; [1986] ANZ ConvR 631 …. 10.42C Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 …. 8.166C, 8.176 Stilwell v Blackman [1968] Ch 508; [1967] 3 All ER 514 …. 9.70 Stockl v Rigura Pty Ltd (2004) 12 BPR 23,151 …. 11.87C, 11.94 Stone, Re (1936) 36 SR (NSW) 308 …. 3.6 Stone, Re [1989] 1 Qd R 351 …. 6.72 Stone v Leonardis (2011) 110 SASR 503; [2011] SASC 153 …. 5.171, 5.176, 11.106 — v Registrar of Titles [2012] WASC 21 …. 6.55

— v Stone (2014) 17 BPR 33,443 …. 6.85 Story v Advance Australia Bank Ltd (1993) 31 NSWLR 722 …. 5.53, 5.109 Stow v Mineral Holdings (Australia) Pty Ltd (1977) 180 CLR 295; 14 ALR 397 …. 1.12C, 1.60 Stowe and Devereaux Holdings Pty Ltd v Stowe (1995) 19 Fam LR 409 …. 4.118 Strand and Savoy Properties Ltd, Re [1960] Ch 582; [1960] 2 All ER 327 …. 8.54 Strang v Gray (1952) 55 WALR 9 …. 8.107 Stratulatos v Stratulatos [1988] 1 NZLR 424 …. 4.162C Streatfield v Winchcombe Carson Trustee Co (Canberra) Ltd [1981] 1 NSWLR 519 …. 8.30 Street v Mountford [1985] AC 809; [1985] 2 All ER 289; [1985] 2 WLR 877 …. 1.28C, 8.27, 8.29 Strelly v Winson (1685) 1 Vern 297; 23 ER 480 …. 6.41 Stromdale and Ball Ltd v Burden [1952] Ch 223; [1952] 1 All ER 59 …. 9.10, 9.11 Strong v Bird (1874) LR 18 Eq 315; [1874–80] All ER Rep 230 …. 4.85C, 4.86 Stroyan v Knowles (1861) 6 H & N 454 …. 10.97 Stuart v Kingston (1923) 32 CLR 309 …. 5.101C Stump v Gaby (1852) 2 De GM & G 623; 42 ER 1015 …. 4.203C Stuy v BC Ronalds Pty Ltd [1984] 2 Qd R 578 …. 10.126

Suffield v Brown (1864) 4 De GJ & s 185; 46 ER 888 …. 10.79C Suhr v Michelmore [2013] VSC 284 …. 9.88, 9.89 Sullivan v McMahon [1999] WASC 84 …. 5.172 Sun North Investments Pty Ltd (as Trustee of the Sun Development Trust) v Dale [2014] 1 Qd R 369; [2013] QSC 44 …. 11.53C, 11.54, 11.58 Sunny Corporation Pty Ltd v Elkayess Nominees Pty Ltd [2006] VSC 314 …. 2.100 Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214 …. 1.99 Sussman v AGC (Advances) Ltd (1991) 5 BPR 11,822 …. 11.40 Suttill v Graham [1977] 1 WLR 819 …. 6.36C Sutton v Sutton (1882) 22 Ch D 511 …. 11.118 Suttons Motors (Temora) Pty Ltd v Hollywood Motors Pty Ltd [1971] VR 684 …. 2.24 Swain v Ayres (1888) 21 QBD 289 …. 4.76 — v Law Society [1983] 1 AC 598 …. 9.7C Swan v Secureland Mortgage Investment Nominees Ltd (1992) 2 NZLR 144 …. 5.187 — v Sinclair [1924] 1 Ch 254 …. 10.107 — v — [1925] AC 227; [1924] All ER Rep 277 …. 10.107 — v Uecker [2016] VSC 313 …. 8.25C, 8.28, 8.109 Swans, Re Case of [1592] EngR 403; (1592) 7 Co Rep 15b; 77 ER 435 …. 2.10C

Swansborough v Coventry (1832) 9 Bing 305; 131 ER 629 …. 10.63, 10.80 Swanson v Forton [1949] Ch 143; [1949] 1 All ER 135 …. 8.112 Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; [1994] ANZ ConvR 176 …. 4.202, 4.208, 4.212, 5.171, 11.105, 11.106 Swanville Investment Pty Ltd v Riana Pty Ltd [2003] WASCA 121 …. 8.44 Sweet v Sommer [2004] EWHC 1504 …. 10.76 Swerus v Central Mortgage Registry of Australia Pty Ltd [1989] ANZ ConvR 169 …. 11.87C Swift v Westpac Banking Corporation (1995) ATPR ¶40-426 …. 11.111 Symes v Pitt [1952] VLR 412 …. 2.109 Symson v Turner (1700) 1 Eq Cas Abr 383; 21 ER 1119 …. 3.58, 3.60 Szew To Chun Keung v Jung Kwok Wai David [1997] 1 WLR 1232 …. 2.109

T Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 …. 8.107 Taddeo v Catalano (1975) 11 SASR 492 …. 5.201 Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489; [2011] NSWSC 1562 …. 5.190, 5.201, 5.205 Talga Investments Pty Ltd v Tweed Canal Estates Pty Ltd [1974] 1 BPR 9675 …. 10.56 Tall-Bennett & Co Pty Ltd v Sadot Holdings Pty Ltd (1988) 4 BPR 9522

…. 8.188 Tallon v The Proprietors of Metropolitan Towers Building Units Plan No 5157 [1997] 1 Qd R 102 …. 1.106 Tamsco Ltd v Franklins Ltd [(2001) 10 BPR 19,077 …. 8.114C Tan Ying Hong v Tan Sian San [2010] 2 CLJ 269 …. 5.46 Tancred v Allgood (1859) 4 H & N 438; 157 ER 910 …. 2.31 Tanner v Stocks and Realty (Premises) Pty Ltd [1972] 2 NSWLR 722 …. 8.119 — v Tanner [1975] 3 All ER 776; [1975] 1 WLR 1346 …. 4.117C Tannous v Cipolla Bros Holdings Pty Ltd [2001] NSWSC 236 …. 8.167 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; 201 ALR 359; [2003] HCA 57 …. 4.23, 4.57C, 4.58, 4.59, 4.60, 4.61, 11.45C Tanzone Pty Ltd v Westpac (1999) 9 BPR 17,287; [1999] NSW ConvR ¶55-908; [1999] NSWSC 478 …. 5.114 Tapling v Jones (1865) 11 HLC 290; 11 ER 1344 …. 1.46C Tara Shire Council v Garner [2002] QCA 232 …. 5.113 Tarrant v Zandstra (1973) 1 BPR 9381 …. 10.63 Tasevska v Tasevski [2011] NSWSC 174 …. 4.134 Tataurangi Tairuakena v Mua Carr [1927] NZLR 688 …. 5.41C, 5.113 Tattersall’s Hotel Penrith Pty Ltd v Permanent Trustee Co of New South Wales (1942) 42 SR (NSW) 104 …. 8.162 Taylor v Beal (1591) Cro Eliz 222; 78 ER 478 …. 8.201C, 8.203 — v Browning (1885) 11 VLR 158 …. 10.63, 10.118

— v Stibbert (1794) 2 Ves 437; 30 ER 713 …. 4.188C Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 1 All ER 897; [1981] 2 WLR 576 …. 4.148, 8.52 Tecbild Ltd v Chamberlain (1969) 20 P & Cr 633 …. 2.92C Tehidy Minerals Ltd v Norman [1971] 2 QB 528; [1971] 2 All ER 475 …. 10.94, 10.149 Telex (Australasia) Pty Ltd v Thomas Cook & Son (Australasia) Pty Ltd [1970] 2 NSWR 257 …. 8.60, 8.67 Telstra Corporation Ltd v Capetan Pty Ltd (1996) 7 BPR 14,744 …. 8.94 Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; 28 ALR 95 …. 5.32, 5.181 Tendiris Pty Ltd v Ogle [2004] QSC 355 …. 11.101 Tenstat Pty Ltd v Permanent Trustee Aust (1992) 28 NSWLR 625 …. 5.56 Teparyl Pty Ltd v Willis (2010) 30 VR 485; [2010] VSCA 318 …. 8.133 Tepper’s Will Trusts, Re [1987] 1 Ch 358 …. 3.34 Texaco Antilles Ltd v Kernochan [1973] AC 609; [1973] 2 All ER 118 …. 9.77, 9.87, 9.92C, 9.94 Thamesmead Town Ltd v Allotey (2000) 79 P & CR 557 …. 9.21 The Winkfield [1902] P 42; [1900–3] All ER Rep 346 …. 2.15, 2.21C, 2.22, 2.23, 2.25, 2.29, 2.30 Thelluson v Woodford (1799) 4 Ves 227; 31 ER 117 …. 7.71 — v — (1805) 11 Ves 112; 32 ER 1030 …. 7.71 Theodore v Mistford (2005) 221 CLR 612; 219 ALR 296; [2005] HCA 45

…. 4.49, 11.18 Theodoropoulos v Theodosiou (1995) 19 Fam LR 632 …. 4.139 Thomas v Hayward (1869) LR 4 Ex 311; [1861–73] All ER Rep 290 …. 8.141C — v Sorrell (1673) Vaughn 330; 124 ER 1098 …. 1.16, 1.18C, 8.22C — v Thomas [1956] NZLR 785 …. 4.145 Thomas Cook Pty Ltd v Commonwealth Banking Corp (1986) NSW ConvR ¶155-286; 4 BPR 9185 …. 8.119 Thomopoulos v Faulks [2006] VSC 262 …. 10.90 Thompson v Palmer (1933) 49 CLR 507 …. 4.151C Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176 …. 5.178 Thorner v Major [2009] All ER (D) 257; [2009] 1 WLR 776 …. 4.161, 4.164C, 4.165, 4.166C Thorpe v Brumfitt (1873) LR 8 Ch 650 …. 10.3C Thrift v Thrift (1975) 10 ALR 332 …. 6.28 Thwaites v Brahe (1895) 21 VLR 192 …. 10.95, 10.96 — v Ryan [1984] VR 65 …. 4.44 Thynne v Petrie [1975] Qd R 260 …. 10.97 Tichborne v Weir (1892) 67 LT 735; [1891–94] All ER Rep 448 …. 2.117, 8.134 Tidex v Trustees Executors and Agency Co Ltd [1971] 2 NSWLR 453 …. 7.40, 7.56, 7.60

Tietyens v Cox (1916) 17 SR (NSW) 48 …. 9.92C Tillack v Tillack [1941] VLR 151 …. 6.86 Tiller v Hawes [2005] NSWSC 1232 …. 10.25, 10.26 Tiltwood, Sussex, Re [1978] 1 Ch 269; [1978] 2 All ER 1091 …. 9.91, 9.92C Timber Top Realty Pty Ltd v Mullens [1974] VR 312 …. 4.145 Tipler v Fraser [1976] Qd R 272 …. 10.98 Titchmarsh v Royston Water Co Ltd (1899) 81 LT 673 …. 10.74 Tito v Waddell (No 2) [1977] Ch 106; [1977] 3 All ER 129 …. 9.19, 9.20 Todovoric v McWatt [1972] Tas SR 9 …. 10.97 Todrick v Western National Omnibus Co Limited [1934] 1 Ch 561 …. 10.33C Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 …. 2.10C Tolman’s Estate, Re (1928) 23 Tas LR 29 …. 6.41 Tomara Holdings v Pongrass (2002) 10 BPR 19,531 …. 10.116 Tomlin v Luce (1889) 43 Ch D 191 …. 11.76 Toohey v Gunther (1928) 41 CLR 181; [1928] HCA 19 …. 11.45C, 11.50C, 11.53C Toomes v Conset (1745) 3 Atk 261; 26 ER 952 …. 11.45C Torrisi v Magame Pty Ltd [1984] 1 NSWLR 14 …. 10.74, 10.123 — v Oliver [1951] VLR 380 …. 8.213 Tory v Tory [2007] NSWSC 1078 …. 6.83

Total Oil v Thompson Garages [1972] 1 QB 318 …. 8.183C Town and Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540; ATPR ¶40-911 …. 11.110, 11.111, 11.112 Toyota Finance Australia Ltd v Dennis (2002) 58 NSWLR 101 …. 2.24 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; [1972–73] ALR 1153; [1973] HCA 14 …. 5.55C, 5.56, 5.62C Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845 …. 10.98 Treloar v Bigge (1874) LR 9 Exch 151 …. 8.117 Treweeke v 36 Wolseley Road Pty Ltd (1972) 128 CLR 274; 1 ALR 104 …. 9.92C, 10.42C, 10.106C, 10.107, 10.108, 10.116 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 …. 9.7C, 9.15 Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98 …. 5.212 Trifid Pty Ltd v Ratto [1985] WAR 19 …. 4.45 Troja v Troja (1994) 33 NSWLR 269 …. 6.72, 6.73 Trustees Executors and Agency Co Ltd v Short (1888) 13 App Cas 793 …. 2.108 Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; [1961] ALR 339 …. 3.34, 3.35, 3.36, 7.12 Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278 …. 4.109C Tse Kwong Lam v Wong Chit Sen [1983] 3 All ER 54; [1983] 1 WLR 1349 …. 11.70, 11.73, 11.73

Tsirikolias v Oakes (1993) 169 LSJS 249 …. 5.51 Tubantia, The [1924] P 78 …. 2.6 Tucker v Farm and General Investment Trust Ltd [1966] 2 QB 421; [1966] 2 All ER 508 …. 1.111 Tuckett v Brice [1917] VLR 36 …. 10.95 Tuck’s Settlement Trusts, Re [1978] Ch 49; [1978] 1 All ER 1047 …. 3.34, 7.12 Tujilo Pty Ltd v Watts [2005] NSWSC 209 …. 10.25 Tulk v Moxhay (1848) 1 H & Tw 105; 2 Ph 774; 41 ER 1143; 47 ER 1345; [1843-60] All ER Rep 9 …. 4.202, 9.16C, 9.22, 9.30C, 9.31, 9.32, 9.34C, 9.35, 9.40, 9.44, 9.51, 9.52C, 9.67C, 9.92C, 9.115C Turner v York Motors Pty Ltd (1951) 85 CLR 55; [1951] ALR 1055 …. 8.45 Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 97,311 …. 8.197C Tutt v Doyle (1997) 42 NSWLR 10 …. 5.114 Tweddle v Atkinson (1861) 1 B & S 393; 121 ER 762 …. 9.7C Twentieth Century Banking Corp Ltd v Wilkinson [1977] Ch 99; [1976] 3 All ER 361 …. 11.117 Tyrrel’s case (1557) 2 Dyer 155a; 73 ER 336 …. 3.58, 3.60

U Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646; [2004] NSWSC 114 …. 11.73, 11.77, 11.92 Ultra Marine Pty Ltd v Misson (1981) ANZ ConvR 229 …. 5.172

Union Bank of Scotland v National Bank of Scotland (1886) 12 AC 53 …. 11.31C Union Lighterage Co v London Graving Dock Co [1902] 2 Ch 557; [1900– 3] All ER Rep 234 …. 10.88 Union of London and Smith’s Bank’s Conveyance, Re; Miles v Easter [1933] Ch 611; [1933] All ER Rep 355 …. 9.62C, 9.67C, 9.68, 9.69 United Bank of Kuwait plc v Sahib [1995] 2 All ER 973; [1995] 2 WLR 94 …. 6.61 — v — [1997] Ch 107; [1996] 3 All ER 215 …. 11.18 United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904; [1977] 2 All ER 62 …. 8.121, 8.122 United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331; [1968] 1 NSWR 134 …. 5.137, 5.138C United States v Santa Fe Pacific Railroad Co 314 US 339 (1941) …. 3.77C Uniting Church in Australia Property Trust (NSW) v Immer (No 145) Pty Ltd (1991) 24 NSWLR 510; 74 LGRA 255 …. 1.75 Upton v Baron (2000) 9 Tas R 178 …. 11.66 — v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118; 242 ALR 422 …. 11.77, 11.89

V V and W Corry, In the Marriage of (1983) 9 Fam LR 201 …. 6.67 Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295 …. 5.104 Valerica v Global Minerals Australia Pty Ltd (2001) NSW ConvR ¶55-963;

[2000] NSWSC 1144 …. 5.169, 5.170 Valoutin v Furst (1998) 154 ALR 119 …. 5.74 Van Brugge v Hare (2011) 16 BPR 30,217 …. 10.36 Van den Bosch v Australian Provincial Assurance Assoc Ltd (1968) 88 WN (NSW) (Pt 1) 357; [1968] 2 NSWR 550 …. 5.149 Van Den Heuvel v Perpetual Trustees Victoria Ltd (2010) 15 BPR 28,647; [2010] NSWCA 171 …. 5.57, 5.62C, 5.63, 5.65, 5.66, 5.67 Van der Peet v R [1996] 2 SCR 507 …. 3.101 Van Reesema v Giameos (1978) 17 SASR 390 …. 5.168 Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 …. 9.7C Vandervell v Inland Revenue Commissioners [1967] 2 AC 291; [1967] 1 All ER 1 …. 4.100, 4.102 Vane v Lord Barnard (1716) 2 Vern 738; 23 ER 1082 …. 3.39 Vaneris v Kemeny (1977) 1 BPR 9655 …. 10.72 Vangale Pty Ltd (in liq) v Kumagai Gumi Co Ltd [2002] QSC 137 …. 7.10 Vanstone v Malura Pty Ltd (1988) 50 SASR 110 …. 10.146 Vasilikopoulos v New South Wales Land and Housing Corporation [2010] NSWCA 91 …. 8.85 Vasiliou v Westpac Banking Corporation (2007) 19 VR 229; [2007] VSCA 113 …. 4.212, 5.171, 11.87C, 11.105 Vassos v State Bank of South Australia [1993] 2 VR 316 …. 5.52, 5.108C, 5.109, 5.118, 5.216

Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74 …. 1.80C, 1.86 Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343; (2008) NSW ConvR ¶56-221; [2008] NSWSC 505 …. 5.60, 5.64, 5.82, 5.105 Verebes v Verebes (1995) 6 BPR 14,408 …. 5.169 Vernon v Bethell (1762) 2 Eden 110; 28 ER 838 …. 11.45C, 11.50C — v Smith (1821) 5 B & Ald 1; 106 ER 1094 …. 8.127 Verrall v Great Yarmouth Borough Council [1980] 1 All ER 839 …. 1.20 — v Nott (1939) 39 SR (NSW) 89 …. 1.105, 1.107 Vickers v Stichtenoth (1989) 52 SASR 90 …. 8.188 Vickery v Municipality of Strathfield (1911) 11 SR (NSW) 354 …. 5.161 Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479; 43 ALR 597 …. 1.45, 1.46C, 1.47, 1.49, 1.50C, 1.52, 1.54, 4.6 Villar, Re [1929] 1 Ch 243 …. 7.30 Vinden v Vinden [1982] 1 NSWLR 618 …. 4.140, 4.142 Viro v R (1978) 141 CLR 88; [1978] HCA 9 …. 11.45C Voli v Inglewood Shire Council (1963) 110 CLR 74 …. 8.83C Volley Investments Pty Ltd v Coles Myer Ltd [2005] WASCA 52 …. 8.72 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 …. 1.93 Voudouris v Registrar General (1993) NSWLR 195 …. 5.212 Vrakas v Mills (2007) V ConvR 54-733; [2006] VSC 463 …. 9.65, 9.113C, 9.114

— v Registrar of Titles [2008] VSC 281 …. 9.105, 9.106C Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13 …. 11.26 Vyvyan v Arthur (1823) 1 B & C 410; [1814–23] All ER Rep 349 …. 8.148

W W v D (2012) 115 SASR 61; [2012] SASCFC 142 …. 6.38 — v G (1996) 20 Fam LR 49 …. 4.133 WA Club Inc v Nullagine Investments Pty Ltd (1992) 6 WAR 441 …. 8.24, 8.119 Wade v New South Wales Rutile Mining Co Pty Ltd (1969) 121 CLR 177 …. 9.83 Wade Sawmill Pty Ltd v Colenden Pty Ltd [2007] QCA 455 …. 2.9 Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1923] NZLR 1137 …. 5.91C, 5.93, 5.98 — v — [1926] AC 101 …. 5.98, 5.101C Wakeham v MacKenzie [1968] 1 WAR 1175 …. 4.44 Walker v Linom [1907] 2 Ch 104 …. 4.181, 4.199 Walker Corporation Pty Ltd v W R Pateman Pty Ltd (1990) 20 NSWLR 624 …. 7.4, 7.68 Wall v Australian Real Estate Investment Co Ltd [1978] WAR 187 …. 9.108 — v Bright (1820) 1 Jac & W 494; 37 ER 456 …. 4.52C Wallis v Moreton (1932) 32 SR (NSW) 659 …. 4.33 Walsh v Elson [1955] VLR 276 …. 10.47

— v Lonsdale (1882) 21 Ch D 9 …. 3.111C, 4.43, 4.53, 4.67, 4.68C, 4.69, 4.70, 4.71, 4.75, 4.76, 4.77, 4.79, 4.115, 8.33, 8.34, 8.37C, 8.119, 8.136, 8.182, 8.193C, 10.55, 10.135, 10.149, 11.18 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513; 62 ALJR 110 …. 4.45, 4.150, 4.151C, 4.152, 4.153C, 4.155, 4.156, 4.158, 4.163, 4.166C, 4.171C, 4.206, 8.52 Wanner v Caruana [1974] 2 NSWLR 301 …. 11.58 Wantagong Farms Pty Ltd (as trustee for Bulle Family Trust) v Bulle [2015] NSWSC 1603 …. 4.168, 4.172 Ward v Kirkland [1967] Ch 194; [1966] 1 All ER 609 …. 10.49, 10.68C — v Trustees, Executors and Agency Co Ltd (1893) 14 ALT 274 …. 6.80 — v Van der Loeff [1924] AC 653 …. 7.40 — v Western Australia (1998) 159 ALR 483 …. 3.100, 3.105, 3.115 Ward, Re; Gillet v Ward [1968] WAR 33 …. 4.87 Ward Locke & Co (Ltd) v Operative Printers’ Assistants’ Society (1906) 22 TLR 327 …. 1.46C Warmington v Miller [1973] QB 877; [1973] 2 All ER 372 …. 4.76, 8.33 Warnborough Ltd v Garmite Ltd [2003] EWCA Civ 1544 …. 11.45C Warner v Sampson [1959] 1 QB 297 …. 6.36C Warnford Investments v Duckworth [1979] 1 Ch 127; [1978] 2 All ER 517 …. 8.125 Warren v Keen [1954] 1 QB 15; [1953] 2 All ER 1118 …. 8.88, 8.91 Washington Constructions Co Pty Ltd v Ashcroft [1982] Qd R 776 …. 5.73

Waterlow v Bacon (1866) LR 2 Eq 514 …. 10.109 Waterways Authority of New South Wales v Coal and Allied Operations Pty Ltd [2005] NSWSC 1285 …. 8.108 Watson v George [1953] SASR 219 …. 8.83C Waverley Borough Council v Fletcher [1996] QB 334 …. 2.37 Webb v Bird (1862) 13 CBNS 841; 143 ER 332 …. 10.50 — v Chief Constable of Merseyside Police [2000] QB 427 …. 2.18 — v Fox (1797) 7 TR 391; 101 ER 1037 …. 2.4 — v Russell (1789) 3 TR 393; 100 ER 639 …. 9.49C Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 …. 11.62, 11.63C, 11.64, 11.65 Webster v Bradac (1993) 5 BPR 12,032 …. 9.108 — v Strong [1926] VLR 509 …. 9.92C Weg Motors Ltd v Hales [1961] Ch 176 …. 8.127 — v — [1962] Ch 49; [1961] 3 All ER 181 …. 8.54 Weigall v Toman [2006] QSC 349; [2008] 1 Qd R 192 …. 10.27C — v Waters (1795) 6 Term 488; 101 ER 663 …. 8.201C Weller v Williams [2010] NSWSC 716 …. 5.201 Wellsmore v Ratford (1973) 23 FLR 295 …. 1.84 Wenham v General Credits Ltd(McClelland J, 16 December 1988 unreported) …. 11.113 West v Mead (2013) 13 BPR 24,431 …. 4.125 — v Williams [1899] 1 Ch 132 …. 11.31C, 11.34

West Bank Estates Ltd v Arthur [1967] 1 AC 665 …. 2.101 West Lakes v Makris (1993) ANZ ConvR 193-150 …. 9.40 West Layton Ltd v Ford [1979] QB 593; [1979] 2 All ER 657 …. 8.112 Westdeutsche Landesbank v Islington LBC [1996] AC 669 …. 4.51 Westfield Management Pty Ltd v Perpetual Trustee Pty Ltd (2007) 233 CLR 528 …. 10.34, 10.35C, 10.36, 10.37 Western v MacDermott (1866) LR 1 Eq 499; 2 Ch App 72; [1861–73] All ER Rep 671 …. 9.16C Western Australia v Brown (2014) 306 ALR 168 …. 3.124C — v Ward (2000) 99 FCR 316; 170 ALR 159 …. 3.7, 3.100 — v — (2002) 191 ALR 1; 76 ALJR 1098 …. 1.28C, 3.88C, 3.89, 3.94, 3.96, 3.97, 3.104, 3.114C, 3.116, 3.118, 3.121C, 3.124C, 3.125, 3.126C, 8.1 Western Bank Ltd v Schindler [1977] Ch 1 …. 11.133 Western Fish Products Ltd v Penwith District Council [1981] 2 All ER 204 …. 4.148 Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194; 5 BPR 97,386 …. 11.45C, 11.49, 11.50C, 11.52, 11.53C, 11.54 Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 …. 9.88 Westpac Banking Corp v Kingsland (1991) 26 NSWLR 700; 5 BPR 11,412 …. 11.77, 11.80, 11.81C, 11.82, 11.96 Westpac Banking Corporation v Adelaide Bank Ltd [2005] NSW ConvR

¶56-133 …. 11.33, 11.34, 11.36 — v Sansom (1995) NSW ConvR ¶55-733 …. 5.90 Westpac New Zealand Ltd v Clark [2009] NZSC 73 …. 5.62C, 5.65 Whaley, Re [1908] 2 Ch 497 …. 1.82 Wheaton v Maple & Co [1893] 3 Ch 48 …. 10.91 Wheeldon v Burrows (1879) 12 Ch D 31; [1874–80] All ER Rep 669 …. 10.59, 10.60, 10.61C, 10.62, 10.63, 10.64, 10.68C, 10.69, 10.70, 10.71, 10.79C, 10.80, 10.97, 10.117, 10.118, 10.122, 10.125, 10.126, 10.136, 10.137C, 10.138 Wheeler v Baldwin (1955) 94 CLR 98 …. 2.108 — v JJ Saunders Ltd [1996] Ch 19; [1995] 2 All ER 697; [1995] 3 WLR 466 …. 10.61C, 10.69 Whelan, Ex parte [1986] 1 Qd R 500 …. 8.162 Whild v GE Mortgage Solutions Ltd [2012] VSC 212 …. 11.64 Whitby v Mitchell (1889) 42 Ch D 494 …. 7.14 — v Von Luedecke [1906] 1 Ch 783 …. 3.47 White v Betalli [2007] NSWCA 243 …. 10.26 — v Bijou Mansions Ltd [1937] Ch 610 …. 9.7C, 9.8 — v — [1938] Ch 351; [1938] 1 All ER 546 …. 9.8, 9.77 — v McLean (1890) 24 SALR 97 …. 10.84 — v Tomasel [2004] 2 Qd R 438 …. 5.103, 5.110 Whitehead, Re; Whitehead v Whitehead [1948] NZLR 1066 …. 4.162C Whittem v Acardi (1992) 59 SASR 57 …. 5.51

Whittle v Parnell Mogas Pty Ltd (2006) 96 SASR 421; [2006] SASC 129 …. 8.52 Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188 …. 2.82, 2.92C, 2.93, 2.94, 2.95 Wickham v Hawker (1840) 7 M & W 68; 151 ER 679 …. 10.57 Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247 …. 5.51 Wicks v Bennett (1921) 30 CLR 80 …. 5.98 Wigan v Edwards (1973) 47 ALJR 586: 1 ALR 497 …. 8.183C Wik Peoples v Queensland (1996) 187 CLR 1 …. 1.3, 3.12, 3.87, 3.109, 3.111C, 3.112, 3.113, 3.117, 3.120, 3.121C, 3.124C, 8.1, 8.7 Wilbraham v Snow (1699) 2 Wms Saund 47; 85 ER 624 …. 2.13C, 2.21C Wilcox v Richardson (1997) 43 NSWLR 4 …. 10.49, 10.60, 10.61C, 10.77, 10.136 Wildshut v Borg Warner Acceptance Corp (Aust) Ltd (1987) 4 BPR 9453 …. 5.178 Wilkes v Spooner [1911] 2 KB 473 …. 4.185, 4.186, 5.69, 5.204 Wilkinson v Hall (1837) 3 Bing NC 508; 132 ER 506 …. 11.133 — v Joyceman [1985] 1 Qd R 567 …. 8.69C — v Kerdene Ltd [2013] EWCA Civ 44 …. 9.21 — v Rogers (1864) 2 De GJ & S 62; 46 ER 298 …. 8.127 — v S & S Gikas Pty Ltd (2006) 12 BPR 23,685 …. 8.167 — v Spooner [1957] Tas SR 121 …. 10.119 Willey v Synan (1937) 57 CLR 200 …. 2.40, 2.42

William Brandt’s Sons & Co v Dunlop Rubber Co [1905] AC 454 …. 4.85C Williams v Booth (1910) 10 CLR 341 …. 1.104C — v Earle (1868) LR 3 QB 739 …. 8.127 — v Frayne (1937) 58 CLR 710 …. 11.81C — v Hensman (1861) 1 J & H 546; 70 ER 862 …. 4.85C, 6.2E, 6.53C, 6.64, 6.68 — v Legg (1993) 29 NSWLR 687 …. 6.84 — v Sinclair Refining Co Inc 39 NM 388, 47 P 2d 910 (1935) …. 6.33C — v Staite [1979] 1 Ch 291; [1978] 2 All ER 928 …. 4.146 — v State Transit Authority of NSW (2004) 60 NSWLR 286 …. 5.117, 10.96, 10.140C, 10.141 — v Underwood (1981) 45 P & CR 235 …. 2.101 — v Williams [1979] 1 NSWLR 376 …. 6.76 Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; [1980] 2 All ER 408; [1980] 3 WLR 138 …. 4.192, 5.194C Willis v Earl Howe [1893] 2 Ch 545 …. 2.108 — v The State of Western Australia (No 3) [2010] WASCA 56 …. 4.132 Wills v Wills [2004] 1 P & CR 37 …. 2.107 Wilson v Anderson (2002) 190 ALR 313 …. 3.113 — v Holland [1915] VLR 46 …. 11.31C — v Meudon Pty Ltd [2005] NSWCA 448 …. 8.14 — v Tavener [1901] 1 Ch 578 …. 1.24C Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567

…. 4.169 Wiltshear v Cottrell (1853) 1 EL & BL 674; 118 ER 589 …. 1.80C Wily v Endeavour Health Care Services Pty Ltd (2003) 12 BPR 22,447; [2003] NSWCA 321 …. 11.45C, 11.55 — v — (No 5) (2003) 11 BPR 21,081; [2003] NSWSC 61 …. 11.45C — v St George Partnership Banking Ltd (1999) 84 FCR 423 …. 1.9 Wirth v Wirth (1956) 98 CLR 228 …. 4.108, 4.109C, 4.113, 4.114 Wolfe v Freijahs Holding Pty Ltd [1988] VR 1017 …. 10.107 Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 …. 7.2C, 7.5, 7.7, 7.8, 7.10 Wolverhampton & Walsall Railway Co v London and North & Western Railway Co (1873) LR 16 Eq 433 …. 1.21 Wong v Beaumont Trust Ltd [1965] 1 QB 173 …. 10.74 Wongala Holdings Pty Ltd v Mulingelbar Pty Ltd (1994) 6 BPR 13,527 …. 11.65 Wood, Re [1894] 3 Ch 381 …. 7.44, 7.45 Wood v Browne [1984] 2 Qd R 593 …. 4.142 — v Leadbitter [1843-60] All ER Rep 190; (1845) 13 M & W 838; 153 ER 351 …. 1.16, 1.18C — v Wood [1956] VLR 478 …. 4.114 Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 …. 8.48, 8.186, 8.194, 8.199 Woodall v Clifton [1905] 2 Ch 257 …. 5.55C, 7.66, 8.127, 8.128

— v — [1905] 2 Ch 259; [1904–7] All ER Rep 268 …. 8.141C Woodberry v Gilbert (1907) 3 Tas LR 7 …. 9.52C Woodhouse v Walker (1880) 5 QBD 404 …. 3.38 Woodland v Manly Municipal Council [2003] NSWSC 392 …. 10.98 Woodroffe v Box (1954) 92 CLR 245; [1954] HCA 22 …. 7.2C Woods v Commonwealth Bank of Australia (30 January 1990, Needham AJ, unreported) …. 11.109C Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 …. 6.83, 6.85 Woolf v Associated Finance Pty Ltd [1956] VLR 51 …. 5.154C Worimi (aka Gary Dates) v Worimi Local Aboriginal Land Council (2010) 181 FCR 320; [2010] FCAFC 3 …. 3.108 World Best Holdings Ltd v Sarker [2010] NSWCA 24 …. 8.195, 8.198 Worthing Corp v Heather [1906] 2 Ch 532 …. 7.66 Worthington v Morgan (1849) 16 Sim 547 …. 4.181 Wragg v Denham (1836) 2 Y&C Ex 117; 160 ER 335 …. 11.127 Wratten v Hunter [1978] 2 NSWLR 367 …. 4.95C, 4.119 Wrey, Re (1885) 30 Ch D 507 …. 7.27 Wright v Gibbons (1949) 78 CLR 313 …. 4.85C, 6.53C, 6.59, 6.74 — v Macadam [1949] 2 KB 744; [1949] 2 All ER 565 …. 10.27C, 10.68C, 10.70 — v Madden [1992] 1 Qd R 343 …. 4.34 Wrightson v McArthur and Hutchinsons (1919) Ltd [1921] 2 KB 807 ….

11.2 Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 2 All ER 32; [1974] 1 WLR 7981 …. 9.47 Wykeham Terrace, Brighton, Sussex, Re; Ex parte Territorial Auxiliary and Volunteer Reserve Association for the South East [1971] Ch 204 …. 2.61C Wynsix Hotels (Oxford St) Pty Ltd v Toomey (2004) 17 BPR 32,633; [2004] NSWSC 236 …. 8.168

X Xenos v Wickham (1867) LR 2 HL 296 …. 4.29

Y Yahl v Bridgport Customs Pty Ltd [1984] ACLD 630 …. 4.75 Yanner v Eaton (1999) 201 CLR 351; 166 ALR 258; [1999] HCA 53 …. 1.9, 1.27, 2.10C, 3.2, 3.92, 3.101, 3.114C, 3.120, 3.121C, 3.123, 3.126C Yared v Spier [1979] 2 NSWLR 291 …. 8.111, 8.117 Yarrangah Pty Ltd v National Australia Bank Ltd (1999) 9 BPR 17,061 …. 11.96, 11.97 Yaxley v Gotts [2000] Ch 162 …. 4.166C Yazgi v Permanent Custodians (2007) 13 BPR 24,567; ANZ ConvR 566; NSW ConvR ¶56-195; [2007] NSWCA 240 …. 5.57, 5.60, 5.62C, 5.64, 5.67, 5.159 Yearworth v North Bristol NHS Trust [2009] 3 WLR 118 …. 1.42 Yeo v Brassil [2010] VSC 344 …. 6.78

Yerkey v Jones (1940) 63 CLR 649 …. 5.111, 5.112 Yip v Frolich (2003) 86 SASR 162 …. 10.116 Yorkshire Bank plc v Hall [1999] 1 WLR 1713 …. 11.80 Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422; 194 ALR 538; 77 ALJR 356 …. 3.89, 3.98, 3.103C, 3.104, 3.106C, 3.108 Young v Hichens (1844) 6 QB 606; 115 ER 228 …. 2.6, 4.5 — v Hoger [2002] ANZ ConvR 237; [2001] QCA 453 …. 5.82 — v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463; [1964–65] NSWR 1001 …. 5.178, 5.179 — v Young [2011] VSC 188 …. 5.169 YYH Holdings Pty Ltd v Grant (District Court of New South Wales, Rolfe DCJ, unreported, 23 March 2012) …. 2.10C

Z Zafiropoulos v Recchi, Williamson & Arbormont Nominees (1978) 18 SASR 5 …. 11.25, 11.31C Zahel, Re; Nicoll v Queensland Trustees Ltd [1931] St R Qd 1 …. 7.56 Zanee Pty Ltd v CG Maloney [1995] 1 Qd R 105 …. 5.174 Zanzoul v Westpac Banking Corporation (1995) 6 BPR 14,142 …. 11.127, 11.128 Zapletal v Wright [1957] Tas SR 211 …. 3.3.1C, 3.33, 3.34, 3.36 Zegir v Woop [1955] VLR 394 …. 8.19 Zetland v Driver [1939] Ch 1; [1938] 29 All ER 158 …. 9.60 Ziel Nominees Pty Ltd v VACC Insurance Co Ltd (1975) 180 CLR 173; 7

ALR 667; 50 ALJR 106 …. 4.62, 4.64 Zimbler v Abrahams [1903] 1 KB 577 …. 8.15C, 8.17 Zis, Re; O’Donnell v Keogh [1961] WAR 120 …. 8.107, 8.108

Table of Statutes References are to paragraphs

COMMONWEALTH Aboriginal Land Rights (Northern Territory) Act 1976 …. 3.92, 3.100 Australian Bicentennial Authority Act 1980 …. 1.59C s 22 …. 1.59C s 22(1) …. 1.59C s 22(1)(a) …. 1.59C s 22(1)(b) …. 1.59C s 22(1)(c) …. 1.59C s 22(1)(d) …. 1.59C s 22(6)(d) …. 1.59C s 22(6)(d)(i) …. 1.59C s 22(6)(d)(ii) …. 1.59C s 23 …. 1.59C s 24 …. 1.59C Australian Consumer Law see Competition and Consumer Act 2010; Sch 2

Bankruptcy Act 1966 s 58(2) …. 6.75 s 121 …. 4.107C Commonwealth of Australia Constitution Act 1901 s 51(i) …. 1.59C s 51(xviii) …. 1.59C, 4.7 s 51(xx) …. 1.59C s 51(xxxi) …. 1.4, 1.9, 1.65E, 3.77C, 3.89 s 51(xxxix) …. 1.59C s 122 …. 1.59C Competition and Consumer Act 2010 …. 8.5, 8.210 Sch 2 …. 8.210 Sch 2, s 4 …. 8.210 Sch 2, s 18 …. 4.18, 8.210, 11.110 Sch 2, s 20 …. 8.210 Copyright Act 1968 …. 4.7 Corporations Act 2001 s 111A …. 11.94 s 420A …. 11.69, 11.92, 11.93, 11.94 s 601FA …. 8.205C Crimes Act 1914 …. 2.38 Criminal Code Act 1995 s 270.3(1)(a) …. 2.10C

Designs Act 1906 …. 4.7 Family Law Act 1975 …. 4.134, 4.137, 5.169, 6.36C, 6.66, 6.76 s 75(2) …. 4.134 s 78 …. 4.111 s 79 …. 1.4, 4.134, 6.67, 6.74 s 79(4)(a) …. 4.134 s 79(4)(b) …. 4.134 s 79(4)(c) …. 4.134 s 79(4)(d) …. 4.134 s 79(8) …. 4.134 s 86 …. 6.65 s 87 …. 6.65, 6.66 Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 …. 4.135 Fisheries Management Act 1991 …. 3.121C Income Tax Assessment Act 1936 s 26BC …. 11.45C Insurance Contracts Act 1984 s 50 …. 4.62 Judiciary Act 1903 s 23(2) …. 3.127 s 35 …. 1.56C s 35(3)(b) …. 1.56C

s 40 …. 3.111C Land Rights Act (Northern Territory) 1976 …. 3.76 Lands Acquisition Act 1906 …. 1.84 Lands Acquisition Act 1920 …. 10.44 Matrimonial Causes Act 1959 …. 6.67 National Consumer Credit Protection Act 2009 Sch 1 …. 11.4, 11.19 Sch 1, Pt 3, Div 1 …. 11.7 Sch 1, Pt 4, Div 3 …. 11.8 Sch 1, Pt 13 …. 11.6 Sch 1, s 5(1) …. 11.6 Sch 1, s 7(1) …. 11.6, 11.59 Sch 1, s 10 …. 11.6 Sch 1, s 11 …. 5.66 Sch 1, s 14 …. 11.7 Sch 1, s 16 …. 11.7 Sch 1, s 17 …. 11.7 Sch 1, s 20 …. 11.7 Sch 1, s 30(1) …. 11.7, 11.59 Sch 1, s 30(2) …. 11.59 Sch 1, s 42 …. 5.68, 11.19 Sch 1, s 42(2) …. 11.19 Sch 1, s 42(4) …. 11.19

Sch 1, s 44(1) …. 11.7 Sch 1, s 44(2) …. 11.7 Sch 1, s 48 …. 11.7 Sch 1, s 70 …. 5.66, 5.67 Sch 1, s 72 …. 11.8 Sch 1, s 74 …. 11.8 Sch 1, s 76 …. 5.66, 11.8 Sch 1, s 76(1) …. 11.8 Sch 1, s 76(2) …. 11.8 Sch 1, s 77(d) …. 5.66 Sch 1, s 82 …. 11.7 Sch 1, s 88 …. 11.7, 11.59 Sch 1, s 92 …. 11.59 Sch 1, s 93 …. 11.7 Sch 1, s 230(2) …. 11.7 National Credit Code see National Consumer Credit Protection Act 2009; Sch 1 National Security Act 1939 …. 3.126C s 5 …. 3.126C National Security (General) Regulations reg 54 …. 3.126C, 3.127 Native Title Act 1993 …. 1.60, 3.83, 3.84E, 3.88C, 3.89, 3.98, 3.103C, 3.111C, 3.112, 3.114C, 3.121C

Pt 2, Div 2, Subdiv B …. 3.86 Pt 2, Div 2B …. 3.114C, 3.121C Pt 2, Div 3 …. 3.86 Pt 2, Div 3, Subdiv P …. 3.86 Pt 4, Div 1C …. 3.85 Pt 8 …. 3.85 s 10 …. 3.83, 3.88C s 11 …. 3.83 s 11(1) …. 3.88C s 12 …. 3.89 s 13(1) …. 3.88C s 20 …. 3.86 s 23A(1) …. 3.115, 3.121C s 23G(1)(b)(ii) …. 3.114C s 36 …. 3.86 s 38 …. 3.86 s 61 …. 3.85, 3.88C s 81 …. 3.85 s 86B …. 3.85 s 169 …. 3.85 s 211 …. 3.121C s 223 …. 3.83, 3.84E, 3.88C, 3.89 s 223(1) …. 3.87, 3.88C, 3.89, 3.94, 3.99, 3.100, 3.104, 3.106C s 223(1)(a) …. 3.88C, 3.103C, 3.106C s 223(1)(b) …. 3.88C, 3.92, 3.94, 3.104, 3.106C

s 223(1)(c) …. 3.87, 3.88C, 3.89, 3.94, 3.103C, 3.114C s 223(2) …. 3.90 s 225 …. 3.100 s 225(a) …. 3.100 s 225(c) …. 3.114C s 225(e) …. 3.88C s 226 …. 3.121C s 227 …. 3.121C s 229(3) …. 3.112 s 248 …. 3.112 s 253 …. 3.114C Patents Act 1990 …. 4.7 Racial Discrimination Act 1975 …. 3.77C, 3.78, 3.82, 3.85, 3.112 s 8(2) …. 3.35 Seas and Submerged Lands Act 1973 …. 3.91 Sex Discrimination Act 1984 s 55 …. 3.35 Trade Marks Act 1995 …. 4.7 Trade Practices Act 1974 …. 11.7, 11.111, 11.112 s 52 …. 8.79, 8.210, 11.110, 11.111 s 52(aa) …. 8.79 s 53A …. 8.79 Wireless Telegraphy Act 1905–1936 …. 1.46C

AUSTRALIAN CAPITAL TERRITORY Administration and Probate Act 1929 s 39 …. 3.64 s 45 …. 3.12 s 49 …. 3.6 s 49Q …. 6.4 s 52 …. 3.64 Sch 6 …. 3.6 Charter of Human Rights 2005 …. 1.14 Civil Law (Property) Act 2006 …. 3.1, 4.27, 11.3 Pt 2.5 …. 6.81 s 3 …. 3.28 s 201 …. 4.91, 6.60, 8.32 s 202 …. 8.32 s 203 …. 8.32 s 204 …. 4.32E s 207 …. 3.39 s 208 …. 6.58 s 209 …. 6.3 s 210 …. 6.20 s 211 …. 6.27 s 223 …. 3.67 s 226 …. 2.58

ss 243–244 …. 6.82 s 244(3) …. 6.81, 6.82 s 301 …. 11.61 s 305 …. 11.107 s 305(d) …. 11.107 s 425(1) …. 8.154 s 426(1) …. 8.153E, 8.156 s 426(5) …. 8.154 Common Boundaries Act 1981 …. 10.48 Conveyancing Act 1951 …. 5.8 Domestic Relationships Act 1994 …. 4.126C s 3 …. 4.137 s 12(1) …. 4.137 s 15 …. 4.136 Forfeiture Act 1991 s 3 …. 6.73 s 4 …. 6.73 Human Rights Act 2004 …. 1.64, 1.65E s 12 …. 2.82 s 30 …. 2.82 s 31 …. 2.82 Imperial Act Application Act 1986 …. 6.41 Imperial Acts (Repeal) Act 1988

s 3(2) …. 6.41 Land Titles Act 1925 …. 5.129, 10.6, 10.117, 11.24 s 12 …. 9.29 s 14(1)(e) …. 5.122 s 17 …. 5.17 s 38 …. 4.29 s 47 …. 5.121 s 48(6) …. 11.35 s 49 …. 5.121 s 52 …. 5.28 s 54(1) …. 6.24, 6.76 s 54(2) …. 6.24 s 55 …. 6.76 s 58 …. 5.29E s 58(1) …. 5.161 s 58(l)(a) …. 5.161 s 58(1)(b) …. 5.141, 5.161, 10.120 s 58(1)(c) …. 5.126, 5.161 s 58(1)(d) …. 5.130 s 58(1)(e) …. 5.130, 5.161 s 58(l)(f) …. 5.150, 5.161 s 58(2) …. 5.161 s 59 …. 5.161 s 69 …. 2.57, 2.98, 5.149, 5.161, 10.139

s 77 …. 8.147 s 77(1) …. 10.72 s 79 …. 3.74 s 81 …. 10.39 s 82 …. 5.129 s 83 …. 5.56, 10.120 s 84 …. 11.135 s 85 …. 5.130, 10.120 ss 88–91 …. 5.129 s 92A …. 11.35 s 93 …. 11.24, 11.61 s 94 …. 11.61 s 94(4) …. 11.35 s 94(5) …. 11.101 s 96 …. 11.127, 11.142 s 97 …. 11.95, 11.117 s 98 …. 11.117 s 99 …. 11.142 s 103B …. 10.6, 10.117 s 103C …. 10.10 s 103D …. 10.20 s 103E …. 10.110 s 103E(4) …. 10.115 ss 104–108 …. 5.168 s 104(2) …. 5.172

s 105(2) …. 5.174 s 105(3) …. 5.174 s 108 …. 5.177 s 109 …. 9.26E s 118 …. 11.43 s 119(a) …. 8.119 s 124 …. 5.162 s 143 …. 5.209 s 145 …. 5.209 s 146 …. 5.209 s 147 …. 5.217 s 152 …. 5.33 s 154 …. 5.208, 5.209 s 155 …. 5.208, 5.209, 5.215 s 159 …. 5.33, 5.45 s 160 …. 5.122 s 162 …. 5.79 s 194(1) …. 5.209 Sch 1 …. 10.39 Land Titles (Unit Titles) Act 1970 …. 9.121 s 27 …. 10.97 Law Reform (Abolitions and Repeals) Act 1996 …. 3.3 s 5 …. 8.182 Leases (Commercial and Retail) Act 2001 …. 8.5

Limitation Act 1985 …. 2.72 s 43 …. 2.74 Married Person’s Property Act 1986 s 13 …. 4.111 Perpetuities and Accumulations Act 1985 …. 7.15, 7.20 s 3 …. 7.76 s 8 …. 7.24, 7.75 s 9 …. 7.47E, 7.75, 7.80, 7.81 s 10 …. 7.17, 7.52, 7.75, 7.82 s 10(1) …. 7.79 s 10(3) …. 7.58E, 7.77 s 14 …. 7.17 s 15 …. 7.64 s 16(1)(b) …. 7.17, 7.69 s 16(2) …. 7.70 s 17 …. 7.16 s 18 …. 7.62 s 19 …. 7.17, 7.74 Personal Property Securities Act 2009 …. 11.4 s 8(1)(f)(i) …. 11.4 s 8(1)(f)(j) …. 11.4 s 117 …. 11.4 s 118 …. 11.4 s 119 …. 11.4

Real Property Act 1925 s 93 …. 11.99C s 93(1) …. 11.99C s 94(1) …. 11.99C s 94(2) …. 11.99C, 11.100 s 94(3) …. 11.99C s 94(5) …. 11.99C, 11.100 s 95 …. 11.104 s 120(1)(a) …. 8.92 Registration of Deeds Act 1957 …. 5.10 Residential Tenancies Act 1997 …. 8.213 Pts 6–7 …. 8.231 s 6A …. 8.213 ss 6C–6F …. 8.214 s 8 …. 8.218, 8.222E, 8.224, 8.228 s 9 …. 8.215 s 20 …. 8.226 s 37 …. 2.67, 8.230 ss 43–55 …. 8.227 s 49 …. 8.229 s 65 …. 8.225 s 71 …. 8.225 s 71(2) …. 8.218 s 125 …. 8.231

Sch 1, cl 34 …. 8.225 Sch 1, cl 52 …. 8.218 Sch 1, cl 54(1)(d) …. 8.224 Sch 1, cll 59–62 …. 8.224 Sch 1, cll 63–64 …. 8.222E Sch 1, cl 88 …. 8.228 Sch 1, cl 94 …. 8.228 Sale of Goods Act 1954 …. 4.10 s 23 …. 4.10 Statute Law Amendment Act 2001 No 2 Sch 3, Pt 3.9 …. 3.28 Supreme Court Act 1933 s 33 …. 4.70 Transplantation and Anatomy Act 1978 s 44 …. 1.38 Trustee Act 1957 s 12(1) …. 7.17 Unit Titles Act 2001 …. 5.233, 6.1 Wills Act 1968 s 7(2) …. 3.12, 3.46 s 27 …. 3.28 s 255 …. 3.46

NEW SOUTH WALES Aboriginal Land Rights Act 1983 …. 3.76, 5.156 s 40(2) …. 5.156 Agricultural Tenancies Act 1990 …. 8.6 ss 5–7 …. 1.94 ss 6–8 …. 1.94 s 14 …. 1.94 Civil Procedure Act 2005 s 20 …. 2.56 Companies Act 1961 …. 10.147C Consumer, Trader and Tenancy Tribunal Act 2001 Pt 5A …. 8.231 s 27(2) …. 8.231 s 27(3) …. 8.231 s 27(6) …. 8.231 s 31(1) …. 8.231 s 49(1) …. 8.231 s 49(2) …. 8.231 s 61 …. 8.231 Contracts Review Act 1980 …. 5.112, 8.211 Pt 2 …. 5.67 s 6(2) …. 8.211 s 7 …. 8.211

s 7(1)(a) …. 8.211 s 7(1)(b) …. 8.211 s 7(1)(c) …. 8.211 s 7(1)(d) …. 8.211 s 8 …. 8.211 s 19 …. 8.211 Conveyancing Act 1919 …. 3.1, 3.66E, 4.27, 5.8, 8.32, 8.97, 9.5, 9.37, 9.89, 9.92C, 9.115C, 11.3 Pt 1, item 5 …. 9.81C Pt 2 …. 9.37, 9.81C Pt IV, Div 6 …. 6.81, 6.83 Pt V …. 10.49 Pt XXIII …. 5.15 s 2(4) …. 5.165 s 3 …. 5.39, 5.121 s 6(1) …. 5.165 s 7 …. 4.93C, 6.20, 8.193C s 7(1) …. 10.67 s 9 …. 3.39 s 11 …. 11.138, 11.139E s 12 …. 8.148, 9.29 s 14 …. 4.27 s 16(1) …. 3.66E s 16(2) …. 3.65 s 19 …. 3.14

s 19(1) …. 3.28 s 23A …. 7.14 s 23B …. 4.27, 8.37C, 8.43, 8.135 s 23B(1) …. 8.32, 10.109, 10.149 s 23B(2) …. 8.32 s 23B(3) …. 4.27, 8.32 s 23C …. 4.91, 4.102C, 4.103, 8.37C s 23C(1) …. 4.102C, 8.32 s 23C(1)(a) …. 4.93C, 4.101, 4.102C s 23C(1)(b) …. 4.93C, 4.101, 4.102C, 6.60 s 23C(1)(c) …. 4.102C s 23C(2) …. 4.93C, 4.102C s 23D …. 8.37C s 23D(1) …. 4.91, 8.32 s 23D(2) …. 4.27, 8.32, 8.43 s 23E …. 4.91, 8.32, 8.37C s 24 …. 6.58 s 25 …. 6.3 s 26 …. 6.18, 6.19E, 6.22, 6.23, 6.25 s 26(1) …. 6.20, 6.25 s 26(2) …. 6.20, 6.21C s 27 …. 6.27 s 35 …. 6.4 s 35(3) …. 6.20 s 36A …. 6.86

s 36C …. 9.5, 9.7C s 38 …. 4.26 s 44(2) …. 6.58 s 45 …. 5.33, 5.45 s 45(1) …. 10.58 s 45A …. 10.57 s 46 …. 10.150 s 47 …. 3.28 s 47(1) …. 3.28 s 47(2) …. 3.28 s 47(6) …. 10.110 s 47(6A) …. 10.110 s 50(2) …. 2.58, 2.60 s 51 …. 8.129, 8.130E, 8.131, 8.147 s 52 …. 8.221 s 53(1) …. 5.8, 5.129 s 53(3) …. 5.9, 5.56 s 54(1) …. 5.8 s 54(10) …. 5.9 s 54A …. 4.32E, 4.102C, 4.103, 4.115C, 4.149C, 8.37C s 54A(1) …. 10.149 s 54A(3) …. 4.33 s 66F …. 6.81 s 66F(2) …. 6.82 s 66G …. 6.33C, 6.35, 6.40, 6.41, 6.81, 6.85, 6.86

s 66G(1) …. 6.81, 6.83 s 66G(4) …. 6.82, 6.83 s 66H …. 6.82 ss 66J–66O …. 4.61 s 67 …. 10.67, 10.72, 10.142C s 67(5) …. 10.72 s 69 …. 10.20 s 70 …. 9.26E, 9.62C s 70(1) …. 9.52C s 70A …. 8.125, 9.45 s 70A(1) …. 9.52C s 73 …. 10.108 s 74 …. 8.90 s 75 …. 11.124 s 84 …. 8.90 s 84(1)(a) …. 8.119 s 84(1)(b) …. 8.91 s 85 …. 8.90 s 85(1)(a) …. 8.92 s 85(1)(d) …. 8.151 s 85(2) …. 8.151 s 86 …. 8.90 s 87A …. 10.146 s 87A(1) …. 5.85 s 87A(2) …. 5.85

s 87A(3) …. 5.85 s 87B(1) …. 5.85 s 87B(3) …. 5.85 s 88 …. 9.58, 9.59E, 9.79, 9.92C, 9.115C, 9.122, 10.58, 10.117 s 88(1) …. 9.52C, 9.58, 9.79, 9.92C, 9.115C, 9.122, 9.123, 10.7, 10.37 s 88(1)(c) …. 9.59E s 88(1A) …. 10.7 s 88(2A) …. 10.10 s 88(3) …. 9.52C, 9.92C, 9.109, 9.114, 9.115C s 88(3)(a) …. 9.92C s 88(3)(b) …. 9.92C, 9.93, 9.115C s 88(3)(c) …. 9.92C, 9.115C s 88(4) …. 10.7 s 88AA …. 10.146, 10.150 s 88AB …. 10.146 s 88AC(1) …. 10.5 s 88A …. 10.8, 10.9E, 10.10 s 88A(1) …. 10.7 s 88A(2) …. 10.10, 10.39 s 88A(2A) …. 10.10 s 88BA …. 9.42, 9.96 s 88BA(1) …. 10.53 s 88BA(2) …. 10.53 s 88BA(3) …. 10.53 s 88BB …. 10.39

s 88B …. 9.81C, 9.92C, 9.115C, 9.123, 10.6, 10.7, 10.14C, 10.27C, 10.117, 10.150 s 88B(2) …. 9.123 s 88B(2)(c1) …. 10.110 s 88B(3) …. 9.123 s 88B(3)(a) …. 10.10 s 88B(3)(b) …. 10.10 s 88B(3)(c)(ii) …. 9.92C, 10.20, 10.56 s 88B(3)(c)(iii) …. 9.91, 9.92C, 10.115 s 88B(3A) …. 10.56, 10.110 s 88C …. 9.89 s 88D …. 9.37, 9.42 s 88D(2) …. 9.42, 9.96 s 88E …. 9.37, 9.42 s 88E(2) …. 9.42, 9.96 s 88EA …. 10.146 s 88F …. 9.42 s 88F(2)(a) …. 9.42 s 88H …. 9.42 s 88I …. 9.42 s 88K …. 1.71, 10.98, 10.101 s 88K(1) …. 10.102C s 89 …. 9.59E, 9.62C, 9.92C, 9.96, 9.115C, 10.35C, 10.116 s 89(1) …. 9.92C, 10.106C, 10.108 s 89(1)(a) …. 9.115C, 10.116

s 89(1)(b) …. 9.96, 10.106C, 10.108 s 89(1)(c) …. 9.108 s 89(1A) …. 9.98, 10.108 s 89(3) …. 9.92C, 10.106C s 89(5) …. 9.96 s 93 …. 11.124 s 94 …. 11.125 s 95 …. 11.125 s 96A …. 6.15 s 98 …. 11.126 s 99 …. 6.15 s 100 …. 11.115, 11.119 s 102 …. 11.119 s 103 …. 11.95 s 103(2) …. 11.116 s 104 …. 11.107 s 106 …. 11.136 s 107 …. 11.136 s 106A …. 5.85 s 109 …. 4.203C s 109(1)(a) …. 11.61 s 109(1)(c) …. 11.121 s 109(5) …. 11.61, 11.121 s 110 …. 4.203C s 111 …. 4.203C, 11.61

s 111A …. 11.94 s 111A(1)(a) …. 11.90 s 112(3)(a) …. 4.203C s 112(3)(b) …. 11.99C s 115(3) …. 11.121 s 115(8) …. 11.121 s 115A …. 11.121 s 116 …. 8.147, 8.149, 8.226 s 117 …. 8.139E, 8.143, 8.190C s 118 …. 8.139E s 119 …. 8.149 s 120 …. 8.109 s 120A(1) …. 8.55 s 120A(3) …. 8.54 s 120A(5) …. 8.53 s 123 …. 8.109 s 127 …. 5.211, 8.37C, 8.39, 8.45, 8.47C, 8.49, 8.193C s 127(1) …. 8.36, 8.40, 8.43 s 128 …. 8.193C s 129 …. 5.225C, 8.154, 8.157, 8.166C, 8.169, 8.183C, 8.193C, 8.194, 8.197C s 129(1) …. 8.153E, 8.154, 8.156, 8.197C s 129(2) …. 5.217, 8.171E, 8.176 s 129(6)(a) …. 8.154 s 129(6)(e) …. 8.154

s 129(8) …. 8.154, 8.193C, 8.197C s 129(10) …. 8.154 s 130 …. 8.179 s 133A(1) …. 8.107 s 133A(2) …. 8.107 s 133B …. 8.110, 8.113 s 133B(1) …. 8.110, 8.196 s 133B(2) …. 8.106 s 133B(3) …. 8.118 ss 133C–133G …. 8.121 s 164 …. 4.189, 5.119C s 177 …. 10.97 s 177(4) …. 10.97 s 178 …. 10.96 s 179 …. 10.96 s 181A …. 10.43, 10.49 s 181A(1)–(3) …. 10.39 s 181B(1) …. 10.47 s 184 …. 5.54 s 184G …. 5.11 s 195D …. 10.110 s 196A …. 5.152 s 201 …. 5.214 s 282 …. 5.162 Sch 4 …. 8.90, 8.97, 8.115

Sch 4A …. 10.39 Sch 8 …. 10.39, 10.43, 10.49 Conveyancing (Amendment) Act 1930 …. 5.138C, 9.79, 9.92C s 19 …. 9.109 Conveyancing (Strata Titles) Act 1961 …. 5.119C, 5.231 s 4 …. 5.232 ss 5–8 …. 5.232 s 9 …. 5.231 s 9(2) …. 5.231 s 9(3) …. 5.231 s 11 …. 5.232 s 13(3) …. 5.232 s 14 …. 5.231 s 15 …. 5.231 s 18 …. 5.231, 5.232 s 19 …. 5.232 Sch 1 …. 5.232 Sch 2 …. 5.232 Crimes Act 1900 Pt 15A …. 6.33C s 562D …. 6.33C Crown Lands Act 1989 s 170(3) …. 2.86

s 172 …. 1.108 Dividing Fences Act 1991 …. 10.48 Encroachment of Buildings Act 1922 …. 1.106, 2.99 Environmental Planning and Assessment Act 1979 …. 9.81C s 4(1) …. 9.81C s 4B(1) …. 9.81C s 28 …. 9.80, 9.81C, 9.82, 9.86 s 28(6) …. 9.80 s 123 …. 5.157 Equity Act 1901 s 6 …. 9.115C Family Provision Act 1982 …. 9.7C Forestry Act 1916 s 25F …. 10.150 Forfeiture Act 1995 …. 6.73 s 4 …. 6.73 s 5(2) …. 6.73 s 5(3) …. 6.73 Holiday Parks (Long-term Casual Occupation Act 2002 …. 8.214 Human Tissue Act 1983 s 32 …. 1.38

Imperial Acts Application Act 1969 s 8 …. 3.14, 3.62, 3.68, 6.41 s 18 …. 2.65, 2.66E, 2.67 ss 18–20 …. 2.63 s 19 …. 2.68 s 36 …. 3.3 Inclosed Lands Protection Act 1901 …. 2.68 s 3 …. 2.70 s 4(1) …. 2.63, 2.68, 2.69E Inflammable Liquid Act 1915 …. 8.166C Land Sales Act 1964 …. 11.3 Landlord and Tenant Act 1899 s 2AA …. 2.67 s 8 …. 8.151 ss 8–10 …. 8.167 Landlord and Tenant (Amendment) Act 1948 …. 1.85C, 3.111C, 5.138C, 8.22C, 8.212, 8.214, 8.225 s 5A …. 1.85C s 8(1) …. 5.138C s 62 …. 5.138C Landlord and Tenant Amendment (Distress Abolition) Act 1930 …. 8.182 Landlord and Tenant (Rental Bonds) Act 1977 …. 8.226

s 67 …. 8.226 Law Reform (Law and Equity) Act 1972 …. 4.70 s 5 …. 4.70, 4.71E s 6 …. 4.70, 4.72E, 4.73 Law Reform (Miscellaneous Provisions) Act 1946 s 5(2) …. 8.86C Limitation Act 1969 …. 2.10C, 2.11, 2.72 s 14(1)(b) …. 2.10C s 21 …. 2.10C s 23 …. 2.105 s 27(1) …. 2.86 s 27(2) …. 2.74, 2.85 s 27(4) …. 2.86 s 28 …. 2.91 s 29 …. 2.91 s 30 …. 2.91 s 31 …. 2.103, 2.114 s 32 …. 2.114 s 33 …. 2.115 s 34 …. 2.108 s 34(2) …. 2.118 s 36 …. 2.104 s 37 …. 2.105 s 38(2) …. 2.108

s 38(3) …. 2.89, 2.108 s 38(5) …. 2.106 s 39 …. 2.109 s 47 …. 2.104 s 51 …. 2. 112 s 52 …. 2.112 s 53 …. 2. 112 s 54 …. 2.109 s 55 …. 2. 112 s 56 …. 2. 112 ss 63–68A …. 2.74 s 65(1) …. 2.10C Liquor Act 2007 …. 8.39 Local Government Act 1919 s 45 …. 5.156 s 45(1) …. 5.156, 5.157 s 327AA …. 4.147 Local Government Act 1993 s 45 …. 1.10 Local Government and Conveyancing (Amendment) Act 1964 …. 9.92C Local Government (Covenants) Amendment Act 1986 …. 9.42 Married Persons (Property and Torts) Act 1901 s 22 …. 4.111

Medical Practitioners Act 1938 …. 1.56C s 29 …. 1.56C Moneylenders and Infants Loan Act 1905 …. 5.180C National Parks and Wildlife Act 1974 s 69C(2) …. 9.43 s 69E …. 9.43 s 97 …. 4.5 Neighbouring Land Act 2000 …. 10.103 s 8 …. 10.103 s 12 …. 10.103 s 21 …. 10.103 Partnership Act 1892 s 22(1) …. 6.85 Perpetuities Act 1984 …. 7.15, 7.20 s 4 …. 7.76 s 7 …. 7.24, 7.75 s 8 …. 7.47E, 7.75 s 9 …. 7.17, 7.24, 7.52, 7.75, 7.78 s 9(1)(b) …. 7.78 s 9(4) …. 7.58E, 7.77, 7.82 s 10 …. 7.53 s 13 …. 7.17 s 14 …. 7.64

s 14(3) …. 7.64 s 15 …. 7.70 s 15(b) …. 7.17 s 15(c) …. 7.68 s 16 …. 7.16 s 17 …. 7.62 s 18 …. 7.74 s 19 …. 7.17 Prevention of Cruelty to Animals Act 1979 …. 2.10C Probate and Administration Act 1898 s 29 …. 6.21C s 44 …. 3.64 s 96 …. 3.72 Property Legislation Amendment (Easements) Act 1995 s 42(1)(a1) …. 10.130, 10.131, 10.132C, 10.133, 10.137C, 10.140C, 10.150 Property Relationships Act 1984 …. 6.35, 6.36C s 4 …. 4.137 s 17(1) …. 4.137 s 20 …. 4.136 Public Works Act 1900 …. 2.50C Real Property Act 1862 s 13 …. 5.15

Real Property Act 1900 …. 4.83C, 5.70C, 5.129, 5.138C, 5.152, 5.163C, 5.172, 5.180C, 5.183, 5.201, 5.231, 7.67, 8.37C, 8.47C, 8.48, 8.129, 8.135, 8.143, 8.183C, 9.92C, 9.115C, 10.6, 10.35C, 10.53, 10.117, 10.122, 10.132C, 10.137C, 10.140C, 10.147C, 11.24, 11.26, 11.36, 11.50C, 11.96 Pt 3 …. 5.17 Pt 4B …. 5.21 Pt 6A …. 5.146, 5.161 Pt 7A …. 10.139 Pt 14A …. 1.106, 2.99 Pt 15 …. 10.35C s 2 …. 5.163C s 2(4) …. 5.163C s 3 …. 1.67, 5.163C, 10.10, 10.142C s 4 …. 8.211 s 12(1)(d) …. 5.122 s 12(1)(f) …. 5.185C s 12(3)(d) …. 5.122 s 14(2) …. 5.18 s 14(3) …. 5.18 s 17(2) …. 5.19 s 23(2) …. 5.19 s 28B …. 5.20 ss 28B–28E …. 5.20 s 28D …. 5.22

s 28EA …. 5.22 s 28M(2) …. 5.20 s 28M(3) …. 5.20 s 28T(4) …. 5.21 s 28U …. 5.21 s 28V …. 5.21 s 31A(3) …. 5.152 s 31A(4) …. 5.152 s 31B …. 5.121 s 33A(5)(b) …. 5.201 s 36 …. 5.201 s 36(6)(a) …. 5.201 s 36(6)(b) …. 5.201 s 36(6A) …. 10.133 s 36(9) …. 11.35 s 39 …. 5.28 s 39(2) …. 5.201 s 39(3) …. 5.201 s 40 …. 4.125, 5.25, 5.28, 5.29E, 10.142C s 40(1) …. 5.121 s 40(1)(d) …. 5.130 s 40(1A) …. 5.28 s 40(1B) …. 5.28, 5.120 s 40(3)(e) …. 5.141 s 40(3)(g) …. 5.150

s 41 …. 4.83C, 5.31E, 5.163C, 7.2C, 8.47C s 41(1) …. 5.62C s 42 …. 5.29E, 5.33, 5.39, 5.45, 5.56, 5.86, 5.90, 5.102, 5.114, 5.117, 5.119C, 5.121, 5.156, 5.158, 5.161, 5.203, 5.204, 9.80, 9.92C, 10.124C, 10.137C, 10.140C, 10.142C s 42(1) …. 5.91C, 5.92, 10.137C s 42(l)(a) …. 5.161, 10.140C s 42(1)(a1) …. 5.141, 5.161, 10.30 s 42(1)(b) …. 5.119C, 5.141, 10.123, 10.124C, 10.130, 10.137C s 42(1)(c) …. 5.70C, 5.126, 5.161 s 42(1)(d) …. 5.130, 5.137, 5.138C, 5.161, 5.200C s 42(3) …. 5.158 s 43 …. 5.31E, 5.39, 5.71, 5.119C, 5.161, 5.163C, 5.198, 5.200C, 5.203 s 43(2) …. 5.185C s 43A …. 5.31E, 5.137, 5.138C, 5.139, 5.185C, 5.198, 5.199E, 5.200C, 5.201, 5.202, 5.203, 5.204, 5.205, 5.207, 11.103 s 43A(a) …. 5.200C s 43A(1) …. 5.200C s 43B(1) …. 5.160 s 43B(2) …. 5.160 s 44 …. 5.163C s 45 …. 2.57 s 45C …. 2.98, 5.146, 10.139 s 45D(1) …. 2.98, 5.146 s 45D(2) …. 2.98

s 45D(2A) …. 2.98 s 45D(2B) …. 2.98 s 45D(4) …. 5.146 s 45D(6) …. 2.98 s 45E(2) …. 5.146 s 45F …. 5.146 s 45H …. 5.146 s 45I …. 5.146 s 46 …. 10.6, 10.56, 10.117, 10.130, 10.137C, 10.140C, 10.142C s 46A …. 10.20 s 47 …. 9.92C, 10.56, 10.137C, 10.142C ss 47(1)–6(A) …. 10.6, 10.117 s 47(5) …. 10.10 s 47(7) …. 9.92C, 9.93, 10.20, 10.112, 10.115 s 49 …. 10.110 s 51 …. 10.72 s 53(1) …. 8.31 s 53(4) …. 11.135 s 55A …. 11.128 s 56 …. 11.26, 10.6, 10.117 s 56A …. 11.35 s 56C …. 5.85, 5.221 s 56C(1) …. 5.85 s 56C(2) …. 5.85 s 56C(6) …. 5.85

s 56C(8) …. 5.85 s 57 …. 11.26, 11.61, 11.63C, 11.65, 11.103, 11.127 s 57(1) …. 5.62C, 11.24 s 57(2) …. 11.102 s 57(2)(b) …. 11.65 s 57(3) …. 11.63C, 11.66 s 57(5) …. 11.63C s 58 …. 4.203C, 11.26, 11.61, 11.63C s 58(2) …. 11.102, 11.103 s 58(3) …. 11.35, 11.107 s 59 …. 4.203C, 11.26, 11.103, 11.104 s 60 …. 5.138C, 11.26, 11.127, 11.128, 11.142 s 61 …. 11.117 s 62 …. 11.117 s 63(2) …. 11.127 s 72 …. 5.163C ss 74F–74R …. 5.168 s 74F(2) …. 5.171 s 74F(5) …. 5.172 s 74L …. 5.172 s 74MA …. 5.174 s 74P …. 5.177 s 75 …. 11.43 s 78(1)(c) …. 11.43 s 80 …. 11.43

s 80A …. 5.60, 5.62C s 81 …. 11.43 s 82 …. 5.163C s 83 …. 5.185C s 86 …. 5.163C s 96D …. 5.28 s 97 …. 4.87, 6.56, 6.57 s 97(2)(b) …. 6.56 s 97(5) …. 6.56 s 100 …. 6.24, 6.76 s 100(1) …. 6.25 s 100(2) …. 3.74 s 101 …. 6.76 s 103(2) …. 11.96 s 106 …. 11.136 s 107 …. 11.136 s 112(3) …. 11.102 s 120(2) …. 5.209 s 121 …. 5.18 s 124 …. 5.39, 5.70C, 5.114 s 124(d) …. 5.70C s 124(e) …. 5.70C, 5.126 s 126 …. 5.225C s 126(1)(a) …. 5.213 s 126(2)(c) …. 5.213

s 127 …. 5.152 s 129 …. 5.168, 5.176, 5.211, 5.225C s 129(1)(b) …. 5.215 s 129(1)(e) …. 5.225C s 129(2)(a) …. 5.219 s 129(2)(b) …. 5.219 s 129(2)(c) …. 5.219 s 129(2)(j) …. 5.85, 5.221 s 129(2)(l) …. 5.217 s 129A …. 5.223, 5.224 s 129B …. 5.223 s 131 …. 5.210 s 131(2) …. 5.222 s 132 …. 5.162 s 132(1) …. 5.222 s 132(2) …. 5.225C s 132(2)(a) …. 5.222 s 132(2)(b) …. 5.222 s 133 …. 5.209 ss 133–138 …. 5.168 s 133(1) …. 5.159, 5.172 s 134 …. 9.20 s 134(2) …. 5.208 s 134(2)(b) …. 5.209 s 134(5) …. 5.208

s 135 …. 5.44, 5.70C, 5.173, 5.174, 5.210 s 135(3) …. 5.210 s 136 …. 5.123, 5.173 ss 136–138 …. 10.35C s 137 …. 5.123 s 138 …. 5.79, 5.177 Sch 16 …. 5.185C Real Property Act 1938 s 8(1)(a) …. 5.185C Real Property (Amendment) Act 1970 …. 9.92C s 17(f) …. 5.45 Real Property Amendment (Compensation) Act 2000 Pt 14 …. 5.225C Real Property (Covenants) Amendment Act 1986 …. 9.42 Real Property (Possessory Titles) Amendment Act 1979 Pt 6A …. 2.57 Registration of Deeds Act 1825 …. 5.10 Registration of Deeds Act 1843 …. 5.10 Residential Tenancies Act 1987 s 27 …. 1.95 s 58 …. 8.228 s 59 …. 8.228

Residential Tenancies Act 2010 s 3 …. 8.213 s 7 …. 8.214 s 8(1) …. 8.214 s 8(1)(c) …. 8.213 s 8(1)(f) …. 8.214 s 8(1)(g) …. 8.214 s 8(1)(h) …. 8.214 s 8(1)(i) …. 8.214 s 8(2) …. 8.214 s 13 …. 8.213, 8.214, 8.215 s 15 …. 8.215 s 15(4) …. 8.215 s 21 …. 8.215 s 41(1) …. 8.225 s 43(1) …. 8.225 s 44(1) …. 8.225 s 44(5) …. 8.225 s 50 …. 8.218 s 51(2)(a) …. 8.222E s 64 …. 8.224 s 81 …. 8.227 s 83 …. 8.230 s 84 …. 8.216 s 86 …. 8.216

s 87(1) …. 8.229 s 96 …. 8.216 s 97 …. 8.216 s 98(1) …. 8.229 s 219 …. 8.215 Residential Tenancies Regulation 2010 cl 19 …. 8.17 Retail Leases Act 1994 …. 8.5 Retirement Villages Act 1999 …. 8.214 Sale of Goods Act 1923 …. 4.10 s 23 …. 4.10 Statute of Uses 1971 …. 10.58 Strata Schemes Development Act 2015 …. 6.1 Pt 5 …. 5.234 s 76 …. 5.234 s 77 …. 5.234 s 81 …. 5.234 s 84 …. 5.234 Strata Schemes (Freehold Development) Act 1973 s 8AA …. 10.97 Strata Schemes (Leasehold Development) Act 1986 s 8 …. 10.97

Strata Schemes Management Act 1996 …. 5.233 Strata Titles Act 1973 …. 5.231 Succession Act 2006 Ch 4 …. 3.12 s 3 …. 3.12, 3.46 s 4 …. 3.12, 3.46 s 16(1) …. 3.65 s 38 …. 3.28 s 44(2) …. 3.67, 3.68 s 50(1) …. 3.46 s 136 …. 3.6 Supreme Court Act 1970 …. 4.70, 8.167 s 63 …. 11.113 s 64 …. 4.70 s 78 …. 11.113 Supreme Court Rules 1970 Pt 25, r 8(4) …. 1.41 Trustee Act 1925 s 11(2) …. 7.17 s 87 …. 6.86 s 100 …. 3.6 Uniform Civil Procedure Rules 2005 …. 2.56 r 1.12 …. 2.71

r 10.15 …. 2.56 r 14.15 …. 2.56 r 16.4 …. 2.56 r 36.5 …. 2.71 Western Lands Act 1901 …. 3.113

NORTHERN TERRITORY Administration and Probate Act s 62 …. 3.12 Business Tenancies (Fair Dealings) Act …. 8.5 Commercial Tenancies Act 1979 …. 8.5 Crown Lands Act s 19(2) …. 10.11 De Facto Relationships Act 1991 s 3A(3)(a) …. 4.137 s 16(1) …. 4.137 s 18 …. 4.136 Encroachment of Buildings Act …. 1.106, 2.99 s 13 …. 1.101 Fences Act 1972 …. 10.48 Human Tissue Transplant Act s 24 …. 1.38

Land Title Act 1994 …. 4.27, 8.32, 10.6, 10.117 s 9 …. 8.32 ss 9–11 …. 4.91 s 9(1) …. 4.27 s 10 …. 8.32 s 11 …. 8.32 s 62 …. 4.32E, 8.147 Land Title Act 2000 s 17(1)(b) …. 5.124 s 17(5) …. 5.124 ss 20–26 …. 5.124 s 39 …. 5.25 s 47 …. 5.28, 5.121 s 48 …. 5.17 s 57 …. 6.24 s 57(2) …. 6.20 s 63 …. 11.43 s 67 …. 11.135 s 69(IV) …. 10.120 s 76 …. 11.24 s 77 …. 4.49 s 79 …. 11.35 s 80 …. 11.61 s 81 …. 10.6, 10.117

s 83 …. 10.120 s 85 …. 10.120, 11.117 s 88 …. 11.35 s 90 …. 10.56 s 90(1) …. 11.85 s 96 …. 10.6, 10.117 s 111 …. 3.74 s 115(7) …. 8.53 ss 125–126 …. 5.162 s 136 …. 5.218 s 137 …. 5.172 ss 137–147 …. 5.168 s 138(1)(c) …. 5.171 s 142 …. 5.168 s 143 …. 5.174 s 144 …. 8.36 s 146 …. 5.177 s 183 …. 5.73 s 188 …. 5.29E s 188(2)(a) …. 5.31E s 188(2)(c) …. 5.33 s 188(3)(a) …. 5.161 s 188(3)(b) …. 5.161 s 189(1)(a) …. 5.103 s 189(l)(b) …. 5.161

s 189(1)(c) …. 5.141, 5.161 s 189(2)(b) …. 5.161 s 189(3) …. 5.161 s 189(3)(d) …. 5.161 s 189(3)(e) …. 5.161 s 189(3)(f) …. 5.161 s 191 …. 5.79 ss 192–196 …. 5.208 s 192(1)(b) …. 5.215 s 194 …. 5.209 s 195 …. 5.217 s 196 …. 5.209 s 198 …. 2.98, 5.149, 5.161 s 251 …. 10.139 Law of Property Act 2000 …. 10.11, 11.3 Pt 5, Div 2 …. 6.81 Pt 11 …. 7.15, 7.20, 7.64 s 4 …. 6.20, 10.11 ss 9–11 …. 6.60 s 12 …. 9.14 s 13(4) …. 6.58 s 19 …. 7.17 s 21 …. 3.3 s 22 …. 3.28 s 29 …. 3.28

s 30 …. 3.69 s 31 …. 3.46 s 34 …. 6.3 s 35 …. 6.20 s 35(2)(c) …. 6.20 s 36 …. 6.27 s 37 …. 6.82 s 37(1) …. 6.81 s 40 …. 6.81 s 40(7) …. 6.82 s 41 …. 6.82 s 43 …. 6.86 s 45 …. 6.41 s 56 …. 9.14 s 62 …. 3.12, 10.72 s 86 …. 11.142 s 86(e) …. 11.127 s 89(1)(a) …. 11.64 s 89(2) …. 11.64 s 92 …. 11.102 s 93 …. 11.35, 11.107 s 103 …. 6.15 s 104 …. 11.125 s 109 …. 11.95 s 117 …. 8.91

s 117(1) …. 8.119 s 118 …. 8.91 s 119(1)(a) …. 8.92 s 137 …. 8.154 ss 137–138 …. 8.153E, 8.156 s 137(1) …. 2.67 s 138(6)(b) …. 8.154 s 155 …. 10.11 s 156 …. 10.11 s 158(2) …. 10.11 s 159 …. 10.11 s 162 …. 10.97 ss 163–164 …. 10.98 s 187 …. 7.23 s 187(1) …. 7.23 s 187(2) …. 7.23 s 188 …. 7.38E s 189 …. 7.42E s 190 …. 7.47E, 7.48, 7.64 s 191 …. 7.17, 7.52 s 191(4) …. 7.58E s 192 …. 7.53 s 195 …. 7.17 s 196(4) …. 7.64 s 197(b) …. 7.17, 7.68, 7.69

s 198 …. 7.16 s 199 …. 7.62 s 201 …. 7.14 s 202 …. 7.74 s 216(2)(d) …. 6.4 s 221 …. 3.14, 7.64 Sch 4 …. 3.14 Pastoral Land Act …. 8.6 Perpetuities Act 1994 …. 7.20, 7.64 Residential Tenancies Act 1999 …. 8.213 s 4 …. 8.214, 8.215 s 29 …. 8.226 s 41 …. 8.225 s 42 …. 8.225 s 49 …. 8.224 s 51 …. 8.222E s 60 …. 8.224 s 63 …. 8.224 s 66 …. 8.218 s 82 …. 8.227 s 87 …. 8.229 s 89 …. 8.228 s 95 …. 8.228 s 104 …. 8.230

ss 137–38 …. 8.213 Sale of Goods Act 1972 …. 4.10 s 9 …. 4.25 s 23 …. 4.10 Supreme Court Act 1979 s 68 …. 4.70 Territory Parks and Wildlife Conservation Act s 62 …. 4.5 Trustees Act s 29 …. 7.17 s 193(2) …. 7.17 Unit Titles Act 1975 …. 5.233, 6.1 s 25 …. 10.97 Validation (Native Title) Act Pt 3C …. 3.114C Wills Act s 6 …. 3.12, 3.46, 3.62 s 37 …. 3.28

QUEENSLAND Body Corporate and Community Management Act 1997 …. 5.233, 6.1 Building Units and Group Titles Act 1980 …. 5.233

Consumer Credit (Queensland) Act 1994 …. 4.11, 11.5 s 15 …. 4.11 s 66 …. 4.11 s 68 …. 4.11 s 70 …. 4.11 Criminal Code Act 1899 s 70 …. 2.63 s 71 …. 2.63, 2.68 s 278 …. 2.63 s 359B(c) …. 1.52 Dividing Fences Act 1953 …. 10.48 Fauna Conservation Act 1952 …. 1.9, 3.120 s 7(1) …. 1.9 Fisheries Act 1887 …. 3.121C Land Act 1910 …. 3.111C s 204 …. 3.111C Land Act 1962 …. 3.111C s 6(1) …. 3.111C s 14 …. 3.111C s 14(1) …. 3.111C s 64(3) …. 3.111C s 295 …. 3.111C s 297(2) …. 3.111C

s 299(1) …. 3.111C s 299(2) …. 3.111C Land Act 1994 s 13A …. 1.108 Land Title Act 1994 …. 5.73, 5.129, 5.233, 10.6, 11.24 Pt 6, Div 2 …. 5.129 Pt 6, Div 4, Subdiv B …. 10.56 Pt 6, Div 4A …. 9.112 Pt 7A …. 5.197 s 44 …. 10.126, 10.127 s 47 …. 5.17 s 55 …. 3.74 s 56 …. 6.24 s 56(2) …. 6.20 s 59 …. 6.56 ss 64–71 …. 5.129 s 66 …. 11.135 s 74 …. 11.24 s 75 …. 4.49, 11.27 s 78 …. 11.43, 11.61, 11.127, 11.142 s 78(2) …. 11.117 s 79 …. 11.104 s 81 …. 11.139E s 82 …. 11.29, 10.6, 10.117

s 82(2) …. 11.39 s 82(3) …. 11.39 s 83 …. 10.6, 10.117 s 85 …. 10.6, 10.117 ss 86–88 …. 10.20 s 87 …. 11.101, 11.102 s 88 …. 10.115 s 89 …. 10.10 s 90 …. 10.110 s 93 …. 10.7 s 95 …. 10.7 s 97A …. 9.109 s 97A(2) …. 9.39 s 98 …. 2.98 s 99 …. 11.95, 11.116, 11.126 ss 121–131 …. 5.168 s 122(1)(c) …. 5.171 s 126(1)(a) …. 5.171 s 127 …. 5.174 s 130 …. 5.177 s 167 …. 11.43 s 178 …. 11.35 s 180 …. 5.73 s 183 …. 4.77 s 184(3)(a) …. 5.161

s 184(3)(b) …. 5.161 s 185(l)(b) …. 5.161 s 185(l)(c) …. 5.161, 10.120 s 185(l)(d) …. 5.161 s 185(l)(e) …. 5.161 s 185(l)(f) …. 5.161 s 185(l)(g) …. 5.161 s 185(2) …. 5.161 s 185(3) …. 5.161 s 191 …. 4.54 Limitation of Actions Act 1974 …. 2.72, 5.147 s 6(4) …. 2.86 s 10(6)(b) …. 2.105 s 12(2) …. 2.74 s 13 …. 2.74, 2.85 s 14(1) …. 2.91 s 14(2) …. 2.91 s 14(3) …. 2.91 s 15(1) …. 2.103, 2.114 s 15(2) …. 2.103 s 15(3) …. 2.103 s 16 …. 2.104, 2.105 s 17 …. 2.114 s 18 …. 2.118 s 18(3) …. 2.115

s 19(1) …. 2.89 s 19(2) …. 2.108 s 21 …. 2.109 s 22 …. 2.106 s 24 …. 2.74 s 27 …. 2.104 s 29 …. 2.112 s 29(2)(b) …. 2.112 ss 35–37 …. 2.109 s 38 …. 2.112 Married Women’s Property Act 1890 s 21 …. 4.111 Mixed Use Development Act 1993 …. 5.233 Nature Conservation Act 1992 s 83 …. 4.5 Perpetuities and Accumulations Act 1972 …. 7.20 Property Law Act 1974 …. 3.1, 4.27, 5.8, 8.32, 9.5, 10.98, 11.3 Pt 5, Div 2 …. 6.81 Pt 6, Div 4 …. 11.3 Pt 8, Div 6 …. 1.94 Pt 11 …. 1.106 Pt 11, Div 1 …. 2.99 Pt 14 …. 7.15, 7.20

Div 4 …. 5.124 s 3 …. 10.67 s 4 …. 5.130 s 8 …. 4.27 s 9 …. 10.57 s 10 …. 4.27 s 10(1) …. 8.32 s 10(2)(b) …. 8.32 s 10(2)(c) …. 8.32 s 11 …. 4.91 ss 11–12 …. 6.60 s 11(1)(a) …. 8.32 s 11A(1)–(3) …. 5.84 s 11B(1)–(3) …. 5.84 s 12 …. 4.91, 8.32 s 13 …. 9.14 s 14(3) …. 6.58 s 15 …. 5.122 s 15(1) …. 5.124 s 15(1)(b) …. 5.124 s 15(2) …. 5.124 s 15(3)(a) …. 5.124 s 15(8) …. 5.124 s 19 …. 7.17 s 21 …. 3.3

s 28 …. 5.160 s 29 …. 5.160 ss 31–36 …. 8.214 s 34 …. 6.3, 5.160 s 35 …. 6.20, 6.25 s 35(2)(c) …. 6.20 s 36 …. 6.27 s 37 …. 6.81 ss 37–41 …. 5.25 s 37A …. 6.82 s 38 …. 6.81 s 38(4) …. 6.82 s 39 …. 6.82 ss 41–42 …. 6.86 s 41(1) …. 6.86 s 43 …. 6.41 s 45 …. 4.29 s 46 …. 5.28, 5.121 s 47 …. 4.29 s 51 …. 8.147 s 52 …. 5.197 s 52(4) …. 5.197 s 52(5A) …. 5.197 s 53(1) …. 9.26E s 53(2) …. 9.45, 8.125

s 55 …. 9.14 s 58 …. 4.62 s 59 …. 4.31 s 62 …. 5.57, 8.147, 10.72 s 63 …. 4.62 s 64 …. 4.62, 5.129 s 77 …. 11.35, 11.61, 11.121 s 78 …. 11.118 s 82 …. 11.38E s 83(1)(a) …. 11.61 s 83(1)(c) …. 11.121 s 84 …. 11.61 s 84(3) …. 11.38E s 85 …. 11.90, 11.91 s 85(1) …. 11.77, 11.90, 11.91 s 85(1A) …. 11.90 s 85(3) …. 11.91 s 88 …. 11.35, 11.107 s 92 …. 8.225 s 92(1) …. 11.121 s 92(2) …. 11.121 s 92(8) …. 11.121 s 93 …. 6.15 s 94 …. 11.125 s 97 …. 11.119

s 98 …. 5.147 s 99 …. 5.147, 11.95, 11.116, 11.126 s 102(1) …. 8.55 s 102(3) …. 8.54 s 102(5) …. 8.53 s 103 …. 5.147 s 104 …. 4.147 s 105 …. 5.147 s 105(1)(b) …. 8.91 s 106 …. 8.91 s 107(a) …. 8.92 s 108 …. 5.147 s 108A …. 5.147 ss 109–110 …. 5.162 s 112(1) …. 8.107 s 112(2) …. 8.107 s 117 …. 8.139E, 8.142C, 8.143, 8.147 s 118 …. 8.139E, 8.143 s 119 …. 8.109 s 121 …. 5.172, 8.110, 8.118 s 121(2) …. 8.106 ss 123–128 …. 8.167 s 124 …. 8.168 s 124(1) …. 8.153E, 8.156 s 124(6)(a) …. 8.154

s 124(6)(c) …. 8.154 s 124(7) …. 8.154 s 124(9) …. 8.154 s 125 …. 8.179 s 126 …. 5.168 s 128 …. 8.121 s 129(1) …. 4.68, 8.36 s 130 …. 5.177 s 138 …. 5.197 s 141(1) …. 5.197 s 141(2) …. 5.197 s 142(2) …. 8.171E s 149(5) …. 8.53 s 150 …. 5.197 ss 153–167 …. 8.6 s 155 …. 1.94 s 177(1) …. 5.197 s 178 …. 10.96 s 179 …. 10.97 s 180 …. 1.71, 5.69, 10.98, 10.99, 10.100C, 10.127 s 181 …. 9.96, 10.116 s 181(1)(b) …. 9.101, 9.102E, 9.103 s 181(4) …. 9.103 s 183 …. 5.69 s 184 …. 5.29E, 5.45

s 184(2)(a) …. 5.31E s 184(2)(b) …. 5.33 s 185(1)(a) …. 5.103, 5.110 s 185(1)(b) …. 5.130 s 185(1)(c) …. 5.141, 8.124 s 185(1)(d) …. 5.147 s 185(1A) …. 5.84 s 185(2) …. 5.130 s 185(3) …. 5.141 s 185(4) …. 5.141 s 185(5) …. 5.84 s 187 …. 5.45, 5.79, 5.124 ss 188–190 …. 5.208 s 188(1)(a) …. 5.216 s 188(1)(b) …. 5.215 s 188(2) …. 5.209 s 188C …. 5.222 s 188D …. 5.159 s 189 …. 5.217 s 189(1)(a) …. 5.217 s 189(1)(ab) …. 5.84, 5.221 s 189(1)(b) …. 5.218 s 189(1)(j) …. 5.217 s 189(1)(k) …. 5.217 s 189(1)(l) …. 5.152

s 189(2) …. 5.218 s 189A …. 5.223 s 190 …. 5.209 ss 195–198 …. 1.101 s 196 …. 1.99, 1.100E s 198A …. 10.96 s 199 …. 9.29 s 200 …. 4.81, 4.82, 4.87, 6.55 s 209(1) …. 7.23 s 209(3) …. 7.23 s 210 …. 7.53 s 210(1) …. 7.47E s 210(4)–(5) …. 7.33E s 212 …. 7.42E s 213 …. 7.17, 7.52, 7.53 s 213(3) …. 7.58E s 213(4) …. 7.58E s 214 …. 7.38E s 215 …. 7.62 s 216 …. 7.14 s 218 …. 7.17, 7.68 s 218(1) …. 7.69 s 219 …. 7.64 s 220 …. 7.17 s 221 …. 7.16

s 222 …. 7.74 s 234A …. 10.72 s 237(1) …. 5.8 s 237(6) …. 5.9 s 238 …. 5.8 s 238(12) …. 5.9 s 239 …. 10.67, 10.72 s 241 …. 5.11 ss 241–249 …. 5.15 s 246 …. 5.11 s 256 …. 4.189 s 260 …. 4.137 s 286 …. 4.136 s 287(a) …. 4.137 Sch 2 …. 5.147 Real Property Act 1861 …. 4.68, 5.48C s 44 …. 5.48C s 123 …. 5.48C s 124 …. 5.48C s 124(d) …. 5.48C Real Property Act 1877 …. 5.70C Real Property Acts Amendment Act of 1952 Pt III …. 5.48C Residential Tenancies Act 1994

s 53 …. 8.229 Residential Tenancies and Rooming Accommodation Act 2008 …. 8.213 Ch 5, Pt 1 …. 8.227 s 12(2) …. 8.213 s 55 …. 8.182 s 91 …. 8.225 s 103(2)(c) …. 8.102 s 124(1) …. 8.215 s 183 …. 8.218 s 184 …. 8.222E s 188 …. 8.222E ss 210–11 …. 8.224 ss 216–221 …. 8.224 s 277 …. 2.67 ss 293–300 …. 8.230 s 326 …. 8.228 ss 397–433A …. 8.231 Retail Shop Leases Act 1994 …. 8.5 Sale of Goods Act 1896 …. 4.10 s 8 …. 4.27 s 21 …. 4.10 s 25 …. 2.17 Stamp Act 1894 …. 5.48C

s 53(5) …. 5.48C Succession Act 1981 …. 3.12 Pt I …. 3.62 Pt III …. 3.12 s 3 …. 3.14, 3.62, 3.69 s 7 …. 3.62, 3.69 s 8 …. 3.46 s 22 …. 3.28 s 25 …. 3.39 s 29(1) …. 3.28 s 30 …. 3.69 s 31 …. 3.46 s 33K …. 3.28 s 45 …. 3.64 s 65 …. 6.4 Sch 2 …. 3.6 Sch 6 …. 3.14, 3.62 Supreme Court Act 1995 s 242 …. 4.70 s 249 …. 4.70 Sustainable Planning Act 2009 …. 9.112 s 87 …. 9.112 Transplantation and Anatomy Act 1979

ss 40–42 …. 1.38 Trustee Act 1973 s 98 …. 5.178

SOUTH AUSTRALIA Administration and Probate Act 1919 Pt IIIA …. 3.12 s 6 …. 11.61, 11.121 s 7 …. 3.46 s 10(a) …. 3.46 s 12 …. 3.39 s 25 …. 3.65 s 44(2) …. 11.116 s 45 …. 3.64, 11.125 s 46 …. 3.12, 3.64 s 47(1)(a) …. 11.61 s 47(1)(c) …. 11.121 s 48 …. 11.61 s 49 …. 3.12 s 50 …. 11.107 s 53(1) …. 11.121 s 53(2) …. 11.121 s 53(8) …. 11.121 s 55A …. 11.66

s 55A(2) …. 11.66 s 55B(2) …. 11.56 s 72C …. 3.12 s 72G(e) …. 3.6 s 75 …. 3.74 Agricultural Holdings Act 1891 ss 6–22 …. 1.94 Community Titles Act 1996 …. 5.233, 6.1 De Facto Relationships Act 1996 s 3(1) …. 4.137 s 9(2) …. 4.137 ss 10–11 …. 4.136 Encroachments Act 1944 …. 1.106, 2.99 Estates Tail Act 1881 …. 3.14 Fences Act 1975 …. 10.48 Fisheries Act 1971 …. 3.123 s 29 …. 3.123 Landlord and Tenant Act 1936 s 4 …. 8.151, 8.167 s 5 …. 8.167 s 7 …. 8.167 s 9 …. 8.167

s 10 …. 8.153E, 8.156, 8.215 s 11 …. 8.171E s 12 …. 8.179 s 12(5) …. 8.154 s 12(6) …. 8.154 s 47 …. 8.109 s 50 …. 8.149 Law of Property Act 1936 …. 3.1, 4.27, 5.8, 8.32, 9.5, 11.3 Pt VIII …. 6.77 s 6 …. 5.165 s 7 …. 10.67 s 8 …. 4.27 s 15 …. 9.29 s 22 …. 10.96 s 24C …. 6.3 s 26 …. 4.32E s 27 …. 5.18 s 28 …. 4.27 s 28(1) …. 8.32 s 28(2)(c) …. 8.32 s 28(2)(d) …. 8.32 s 29 …. 4.91 ss 29–31 …. 6.60 s 29(1)(a) …. 8.32 s 30 …. 8.32

s 30(1) …. 4.91 s 30(2) …. 4.27 s 31 …. 4.91 s 31(c) …. 8.32 ss 32–34 …. 5.19 s 34 …. 9.5 s 36 …. 5.19, 10.67 s 40(3) …. 6.58 s 41 …. 4.29, 4.74C s 41(2) …. 4.29 s 41A …. 10.10 s 41AA …. 4.29 s 44 …. 5.177 s 50 …. 5.121, 11.107 s 51 …. 5.121 s 54 …. 6.15 s 55 …. 6.15 s 57 …. 5.121 ss 60–63 …. 5.123 s 61 …. 7.15 s 61(1)(b) …. 7.14 s 61(1)(c) …. 7.74 s 62 …. 7.74 s 69 …. 5.25, 5.29E, 5.51, 5.73 s 69(1) …. 6.86

s 69(b) …. 5.51, 5.123 s 69(c) …. 5.126 s 69(d) …. 5.141 s 69(h) …. 5.96, 5.130 s 69(i) …. 5.150 s 71 …. 5.103 s 72 …. 5.31E, 5.96 s 80 …. 5.28 ss 90A–90E …. 10.116 s 105 …. 4.111 ss 116–117 …. 5.129 s 117 …. 4.189, 5.56 s 124 …. 8.119 s 124(b) …. 8.91 s 125(b) …. 8.92 s 162 …. 5.162 s 186 …. 5.31E, 5.96 s 187 …. 5.31E, 5.96 s 191 …. 5.168 s 191(a) …. 5.172 s 191(d) …. 5.174 s 201(4)(a) …. 5.208 s 203 …. 5.209 s 205 …. 5.209 s 207 …. 5.33, 5.45

s 208 …. 5.209, 5.215 s 209 …. 5.223 s 210 …. 5.210 s 211 …. 5.217 s 212 …. 5.217 s 213(h) …. 5.208 s 214 …. 5.217 s 215 …. 5.222 s 216 …. 5.218 ss 217–219 …. 5.209 s 220(f) …. 5.122 s 220(g) …. 5.171 s 220(4) …. 5.79 s 221 …. 5.18, 5.79 s 246 …. 8.55 s 249(1) …. 5.103 Law of Property (Perpetuities and Accumulations) Amendment Act 1996 …. 7.15 Limitation of Actions Act 1936 …. 2.72 s 4 …. 2.74, 2.85 s 6 …. 2.91 s 7 …. 2.91 s 8 …. 2.91 s 9 …. 2.103, 2.114

s 10 …. 2.114 s 11 …. 2.114 s 15 …. 2.118 s 16 …. 2.118 s 17 …. 2.115 s 18 …. 2.109 s 19 …. 2.109 s 20 …. 2.106 s 21 …. 2.109 s 25 …. 2.112 s 28 …. 2.74 s 31 …. 2.104 s 32 …. 2.104 s 42 …. 2.109 s 45 …. 2.112 s 45(3) …. 2.112 Real Property Act 1858 …. 5.14 Real Property Act 1886 …. 5.55C, 5.129, 5.151, 8.85, 9.34C, 9.119C, 10.6, 10.117, 10.140C, 11.24, 11.31C Pt VIIA …. 5.148, 5.161, 10.139 s 3 …. 3.73C, 11.31C s 6 …. 5.158, 11.61, 11.121 s 14 …. 11.139E s 26 …. 5.17

s 42(1)(c) …. 11.43 s 44 …. 11.95 s 49(2) …. 11.102 s 56 …. 5.55C, 11.31C, 11.35 s 69 …. 5.55C, 11.31C s 69(a) …. 5.161 s 69(b) …. 5.51 s 69(c) …. 5.161 s 69(d) …. 5.161, 10.120 s 69(e) …. 5.161 s 69(f) …. 5.161 s 69(h) …. 5.161 s 69II …. 5.51 s 74 …. 6.24, 6.76 s 77 …. 11.31C s 80A …. 5.148 s 80C …. 5.148 s 80F …. 2.98, 5.148 s 81 …. 10.6, 10.11, 10.117 s 83 …. 10.129 s 84 …. 10.129, 10.140C s 86 …. 5.161 s 88 …. 5.117, 10.140C s 89 …. 10.39 s 89A …. 10.39

s 90 …. 10.56 s 90B(1) …. 10.110 s 90B(3)–(4) …. 10.110 s 90C …. 10.20 s 90C(2) …. 10.115 s 96 …. 10.6, 10.117 s 97 …. 9.34C s 111 …. 3.74 s 117 …. 5.55C s 118 …. 11.135 s 119 …. 5.55C s 128 …. 9.34C s 130 …. 11.43 s 132 …. 11.24, 11.61 s 133 …. 11.61 s 134 …. 11.100, 11.102 s 135 …. 11.31C, 11.35, 11.107 s 136 …. 11.104 s 137 …. 11.127, 11.136, 11.142 s 140 …. 11.117 s 141 …. 11.117 s 152 …. 8.137 s 175 …. 3.73C s 180 …. 3.73C s 188 …. 6.76

s 246 …. 4.85, 4.86E s 249 …. 9.34C s 251 …. 5.148, 5.161, 10.139 s 261 …. 11.43 Sch 6 …. 10.39 Real Property (Registration of Titles) Act 1945 …. 5.24 s 3 …. 5.23 Registration of Deeds Act 1935 …. 5.15, 5.24 s 10(2) …. 5.11 Registration of Deeds, Wills, Judgments, Conveyances and Other Instruments Act 1841 …. 5.10 Residential Tenancies Act 1995 …. 8.213 Pt 8 …. 8.231 s 3(1) …. 8.213, 8.223 s 5 …. 8.214 s 41 …. 8.231 s 55 …. 8.225 s 56(1) …. 8.225 s 56(2) …. 8.225 s 60 …. 8.182 s 61 …. 8.226 s 62 …. 8.224 s 65 …. 8.218

s 66 …. 8.224 s 68(3) …. 8.224 s 69 …. 8.221, 8.222E s 70 …. 1.94, 8.224 s 79 …. 8.227 s 80 …. 8.229 s 83 …. 8.228 s 86(2) …. 8.228 s 93 …. 8.230 s 95 …. 2.67 s 97 …. 2.45 Retail and Commercial Leases Act 1995 …. 8.5 s 20B …. 5.157 Sale of Goods Act 1895 …. 4.10 s 18 …. 4.10 Statute Law Revision Act 2003 s 2(2) …. 7.48, 7.64 s 9 …. 7.48, 7.64 Strata Title Act 1988 s 9 …. 10.56, 10.97 Summary Offences Act 1953 s 17D …. 2.63 s 17D(2) …. 2.68 Supreme Court Act 1935

s 28 …. 4.70 Transplantation and Anatomy Act 1983 s 35 …. 1.38 Wills Act 1936 s 4 …. 3.12, 3.46 s 31 …. 3.28

TASMANIA Administration and Probate Act 1935 Pt V …. 3.12 s 4 …. 3.64 s 33(6) …. 3.74 s 33(8) …. 3.74 s 44 …. 3.12 s 45 …. 3.6 s 61(2) …. 3.28 s 65 …. 3.28 s 80(1) …. 3.46 s 80(2) …. 3.65 s 81 …. 3.65 Boundary Fences Act 1908 …. 10.48 Consumer Credit Code …. 4.11 Conveyancing and Law of Property Act 1884 …. 3.1, 4.27, 5.8, 8.32, 9.5,

11.3 Pt XIA …. 5.233 Pt XVA …. 10.116 s 2 …. 10.67 s 3(2) …. 5.8 s 4 …. 4.137 s 5 …. 4.189 s 6 …. 10.67, 10.72 s 7(1)(c) …. 11.43 s 9 …. 5.11 s 9A …. 9.91, 10.113, 10.114E s 10 …. 8.139E, 8.143 s 11 …. 5.18, 8.139E, 8.143 s 12 …. 8.149 s 12(1) …. 5.19 s 12(2) …. 5.19 s 15 …. 8.168 s 15(1) …. 8.153E, 8.156, 8.192 s 15(2) …. 8.171E s 15(3) …. 8.179 s 15(6) …. 8.154 s 15(7) …. 8.154 s 15(8) …. 8.154 s 16 …. 8.109 s 17 …. 5.24, 11.125

s 18 …. 5.22 ss 19–20 …. 5.24 s 21 …. 5.20 s 21(1)(a) …. 11.61 s 21(1)(c) …. 11.121 s 21(2) …. 5.20 s 22 …. 11.61 s 23(3) …. 11.107 s 25 …. 5.20 s 26(1) …. 11.121 s 26(2) …. 11.121 s 26(8) …. 11.121 s 27 …. 11.95 s 27(2) …. 11.116 s 28(2) …. 11.118 s 30 …. 6.15 s 33(1) …. 5.121 s 33(4) …. 5.121 s 34A …. 10.39 s 34B …. 10.39, 10.47 s 34C …. 10.57 s 35(1) …. 5.8 s 35(5) …. 5.9 s 35(6) …. 5.9 s 35A …. 4.189, 9.46

s 36 …. 4.32E s 37(1) …. 4.137 s 38 …. 11.29, 11.38E s 58 …. 10.72 s 59 …. 4.27 s 60 …. 6.60, 8.147 s 60(1) …. 4.27, 8.32 s 60(2) …. 4.91 s 60(2)(a) …. 8.32 s 60(3) …. 4.91, 8.32 s 60(4) …. 4.27, 8.32 s 60(5) …. 4.91 s 60(5)(c) …. 8.32 s 61 …. 9.5 s 62 …. 3.74 s 62(2) …. 6.58 s 62(4)–(6) …. 6.3 s 64(1) …. 5.129 s 64(2) …. 5.129 s 66 …. 8.119 s 66(b) …. 8.91 s 67(a) …. 8.92 s 69(1) …. 5.129 s 71 …. 9.26E s 71A …. 8.125, 9.45

s 73 …. 6.15 s 74 …. 10.58 s 75G …. 10.97 s 80 …. 3.74 s 83 …. 9.20 s 84A …. 9.96 s 84C(1)(c) …. 9.103 s 84C(6) …. 9.103 s 84C(7) …. 9.103 s 84F …. 9.96 s 84G …. 9.96 s 84J …. 1.71, 10.98, 10.116 s 84L …. 6.86 s 84L(1) …. 6.86 s 86 …. 9.29 s 90A …. 10.10 s 90B …. 10.56 s 90E …. 4.62 s 91 …. 10.72, 11.121 s 109 …. 10.112 Criminal Code Act 1924 s 42 …. 2.63 s 79 …. 2.63 s 79(2) …. 2.68

Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 …. 8.5 Human Tissue Act 1985 s 27 …. 1.38 Land Titles Act 1980 …. 5.129, 5.132C, 5.145, 10.6, 10.117, 11.24 Pt I …. 11.43 s 9 …. 5.17 s 19 …. 11.136 s 20 …. 11.136 s 23(2) …. 11.102 s 28 …. 11.43 s 40 …. 5.161 s 40(3)(a) …. 5.161 s 40(3)(b) …. 5.161, 10.119 s 40(3)(c) …. 5.161 s 40(3)(c)(ii) …. 10.119 s 40(3)(d) …. 5.161 s 40(3)(e) …. 5.161, 10.118 s 40(3)(f) …. 5.161 s 40(3)(g) …. 5.161 s 40(3)(h) …. 5.145, 5.161 s 41 …. 5.161 s 44 …. 6.20, 6.24, 6.76 s 48(5) …. 11.35 s 52 …. 11.35

s 63 …. 6.56 s 64(3) …. 11.135 s 70 …. 11.43 s 73 …. 11.24 s 74 …. 11.43 s 76 …. 11.35 ss 77–79 …. 11.61 s 77(3) …. 11.102 s 78 …. 11.35, 11.89, 11.107 s 78(1) …. 11.86 s 78(5) …. 11.102 s 81 …. 11.104 s 82 …. 11.127, 11.142 s 85 …. 11.117 s 86 …. 11.117 s 90 …. 11.43 s 100 …. 6.76 s 102 …. 9.109, 9.114 s 102(2)(a) …. 9.111 s 103(1) …. 9.91 ss 105–106 …. 10.6, 10.117 s 106(2) …. 9.96 s 107 …. 10.150 s 108(1) …. 10.110 s 108(2) …. 10.110

s 109 …. 10.20, 10.115 s 110(2)(b) …. 9.124 s 110(4)–(12) …. 10.98 s 113 …. 3.14 s 138U …. 5.145 s 138V …. 5.145 s 138W(1) …. 5.145 s 138W(2) …. 5.145 s 138W(4) …. 5.145 s 138W(6) …. 5.145 s 138X …. 5.145 s 138Y …. 2.98, 5.145 s 139 …. 5.122 s 141 …. 5.79 s 144 …. 5.18 s 146 …. 11.127, 11.142 s 151 …. 5.217 s 152(2)(b) …. 5.209 s 152(8)(b) …. 5.209 s 152(8)(c) …. 5.209 s 153(1)(b) …. 5.209, 5.215 s 153(2) …. 5.223 s 155 …. 5.210 s 157(3) …. 5.208 s 158 …. 5.222

s 159 …. 5.209 s 160(3) …. 5.171 s 163 …. 5.123 s 164 …. 5.123 Sch 1, Pt I …. 11.43 Sch 2 …. 5.233, 11.43 Landlord and Tenant Act 1935 s 26 …. 1.94 Limitation Act 1974 …. 2.72, 5.145 s 6 …. 2.74 s 6(1) …. 2.46 s 6(2) …. 2.46 s 9 …. 2.105 s 10(1) …. 2.86 s 10(2) …. 2.74, 2.85 s 10(4) …. 2.86 s 10(5) …. 2.86 s 11(1) …. 2.791 s 11(2) …. 2.91 s 11(3) …. 2.91 s 12(1) …. 2.103, 2.114 s 12(2) …. 2.103 s 12(5) …. 2.103 s 13(1) …. 2.104

s 13(3) …. 2.105 s 13(4) …. 2.105 s 14 …. 2.114 s 15 …. 2.118 s 15(3) …. 2.115 s 16(1) …. 2.89 s 16(2) …. 2.108 s 16(4) …. 2.106 s 16A …. 2.74, 2.104, 2.108 s 19 …. 2.109 s 24 …. 2.74, 2.104 ss 26–28 …. 2.112 s 26(4) …. 2.112 ss 29–31 …. 2.109 s 32 …. 2.112 Local Government (Building and Miscellaneous Provisions) Act 1993 s 113 …. 5.22 Married Women’s Property Act 1935 s 8 …. 4.111 Mining Act 1929 …. 1.12C National Parks and Wildlife Act 1970 …. 1.12C Neighbouring Land Act 1992 …. 10.103 Partition Act 1869 …. 6.77

Perpetuities and Accumulations Act 1992 …. 7.15, 7.20 s 6 …. 7.23 s 6(3) …. 7.23 s 7 …. 7.38E s 9 …. 7.47E, 7.53 s 9(6) …. 7.33E s 10 …. 7.42E s 11 …. 7.17, 7.52, 7.53 s 11(3) …. 7.58E s 12 …. 7.62 s 15 …. 7.17 s 15(1) …. 7.69 s 16 …. 7.64 s 17 …. 7.17 s 18 …. 7.16 s 19 …. 7.17 s 21 …. 7.14 s 22 …. 7.74 Prescription Act 1934 …. 10.84, 10.119 s 2 …. 10.85C s 9 …. 10.96 s 10 …. 10.96 Presumption of Survivorship Act 1921 s 2 …. 6.4

Real Property Act 1862 …. 6.59 Registration Act 1827 …. 5.10 Registration of Deeds Act 1935 …. 5.15 Relationships Act 2003 s 40 …. 4.136 Residential Tenancies Act 1997 …. 8.213 s 6 …. 8.214 s 15(1) …. 8.213, 8.215 s 20 …. 8.225 s 23 …. 8.225 s 25 …. 8.226 ss 33–34 …. 8.224 s 37 …. 8.227 s 39 …. 8.228 s 42 …. 8.229 s 43 …. 8.228 s 55 …. 8.218 s 57 …. 8.224 Sale of Goods Act 1896 …. 4.10 s 8 …. 4.11 s 23 …. 4.10 Strata Titles Act 1998 …. 5.233, 6.1 Supreme Court Civil Procedure Act 1932

s 11(5) …. 11.139E s 11(10) …. 4.70 s 11(14) …. 8.167 s 11(14A) …. 8.167 Trustee Act 1898 s 14 …. 7.17 Wills Act 2008 s 4 …. 3.12, 3.46 s 6 …. 3.12, 3.46 s 52(1) …. 3.28

VICTORIA Administration and Probate Act 1958 Pt I, Div 6 …. 3.12 s 4 …. 3.46 s 5 …. 3.12 s 13 …. 3.12, 3.64 s 19(1)(a) …. 3.46 s 38 …. 3.12 s 52 …. 3.12 s 55 …. 3.6 s 60(1) …. 3.28 s 60(6) …. 3.28 s 133 …. 3.39

s 191 …. 3.65 s 192 …. 3.65 s 249 …. 3.14, 3.28 s 250 …. 3.14 s 251 …. 3.14 Charter of Human Rights and Responsibilities Act 2006 …. 2.682 s 7(2) …. 2.82 s 13 …. 2.82 s 18 …. 2.82 s 20 …. 1.14, 1.64, 1.66, 2.82 s 32 …. 2.82 Companies Act 1958 …. 5.230 Consumer Credit (Victoria) Act 1995 s 38 …. 5.156 Crimes Act 1958 s 207 …. 2.63 s 207(2) …. 2.68 Electronic Conveyancing National Law …. 5.85 Fair Trading Act 1999 …. 1.67 s 3 …. 1.67 Fences Act 1968 …. 10.48 Goods Act 1958 …. 1.67, 4.10

s 23 …. 4.10 Human Tissue Act 1982 s 38(1) …. 1.38 s 39 …. 1.38 s 39(2) …. 1.38 Imperial Acts Application Act 1980 s 5 …. 3.3, 3.14, 3.62, 3.70 Imperial Law Re-Enactment Act 1980 …. 3.3 s 6 …. 3.70 Instruments Act 1958 s 126 …. 4.32E, 4.34 Interpretation of Legislation Act 1984 s 35(a) …. 5.155 Land Act 1958 ss 384–385 …. 1.108 Landlord and Tenant Act 1958 s 9 …. 8.165 s 12 …. 8.182 Limitation of Actions Act 1958 …. 2.72 s 5(1) …. 2.46 s 5(1)(d) …. 5.222 s 5(8) …. 2.105 s 6(1) …. 2.46

s 6(2) …. 2.46, 2.74 s 7 …. 2.86 s 7A …. 2.86 s 7AB …. 2.86 s 7B …. 2.86, 2.93 s 8 …. 2.74, 2.85, 2.87, 2.88E, 2.92C s 9(1) …. 2.91, 2.92C s 9(2) …. 2.91 s 9(3) …. 2.91 s 10(1) …. 2.103, 2.114 s 10(2) …. 2.103 s 10(3) …. 2.103 s 11 …. 2.104, 2.105 s 12 …. 2.114 s 13 …. 2.118 s 13(3) …. 2.115 s 14(1) …. 2.89, 2.92C s 14(2) …. 2.108 s 14(4) …. 2.106 s 16 …. 2.109 s 18 …. 2.74, 2.92C s 23 …. 2.112 s 23(1)(c) …. 112 s 24 …. 2.109 s 25 …. 2.109

s 27 …. 2.104, 112 s 32 …. 2.86 Local Government Act 1989 s 187A …. 10.10 s 203 …. 5.153 Marriage Act 1958 s 161 …. 4.111 Owners Corporations Act 2006 …. 5.233 Perpetuities and Accumulations Act 1968 …. 7.15, 7.20, 7.33E, 7.38E, 7.42E, 7.47E, 7.51E, 7.58E, 7.61E, 7.73E s 5(1) …. 7.23 s 5(3) …. 7.23 s 6 …. 7.33E, 7.47E, 7.53 s 6(1) …. 7.46 s 6(4) …. 7.32, 7.34 s 8 …. 7.41, 7.42E s 9 …. 7.19, 7.50, 7.51E, 7.53, 7.58E s 9(1)(b) …. 7.52 s 9(3) …. 7.57 s 9(4) …. 7.57 s 10 …. 7.37, 7.38E s 11 …. 7.60, 7.61E s 12 …. 7.14

s 15 …. 7.17, 7.68 s 15(1) …. 7.69 s 16 …. 7.64 s 17 …. 7.17 s 18 …. 7.16 s 19 …. 7.17, 7.73E, 7.74 s 19(1) …. 7.72 Planning and Environment Act 1987 …. 9.84, 9.85E, 9.86 s 60 …. 9.86 s 60(2) …. 9.86 s 60(5) …. 9.86 Property Law Act 1928 s 300 …. 11.23C Property Law Act 1958 …. 3.1, 4.27, 4.194, 5.8, 8.32, 9.5, 9.97E, 9.106C, 9.113C, 11.3 Pt I …. 5.15 Pt II, Div 2 …. 5.20 Pt IV …. 6.77 s 3(1) …. 5.165 s 4(1) …. 5.23 s 9 …. 5.23 s 10 …. 5.18 s 12 …. 5.20 s 18 …. 5.20

s 18(1) …. 10.67 s 18A …. 3.3 s 19A …. 3.70, 3.71E ss 22–24 …. 5.23 s 26E …. 5.23 s 26S …. 5.19 s 26W …. 5.23 s 27 …. 5.121 s 28 …. 6.3 s 28A …. 6.41 s 33 …. 5.121 s 37 …. 5.62 s 41 …. 5.28 s 42 …. 5.28, 5.29E, 5.70C, 5.154C, 5.194C s 42(1)(b) …. 5.28, 5.126 s 42(2) …. 5.127 s 42(2)(b) …. 5.142, 5.144 s 42(2)(d) …. 5.141 s 42(2)(e) …. 5.131, 5.142, 5.194C s 42(2)(f) …. 5.150 s 43 …. 5.31E, 5.32, 5.154C, 5.181 s 44 …. 5.154C s 44(1) …. 5.8, 5.52 s 44(2) …. 5.33, 5.45 s 44(6) …. 4.194, 5.9

s 45(1) …. 5.8 s 45(11) …. 5.9 s 47(2) …. 5.612 s 51 …. 4.27, 4.28E s 52 …. 4.27, 4.28E s 52(1) …. 4.104, 8.32 s 52(2)(c) …. 8.32 s 52(2)(d) …. 8.32 s 53 …. 4.96, 6.60 ss 53–55 …. 4.91, 4.92E s 53(1) …. 4.32E, 4.104 s 53(1)(a) …. 4.101, 4.104, 8.32 s 53(1)(b) …. 4.101 s 54 …. 4.27, 4.28E, 8.32 s 54(2) …. 8.147 s 55(c) …. 8.32 s 56 …. 5.152, 9.71 s 56(1) …. 9.5, 9.6 ss 60–62 …. 5.144 s 62 …. 9.55, 10.65, 10.66E, 10.72, 10.118 s 65 …. 10.57 s 66(1) …. 5.129 s 67 …. 8.218 s 67(1)(a) …. 8.119 s 67(1)(b) …. 8.91

s 67(1)(c) …. 8.92 s 68 …. 8.219, 8.220E s 71 …. 5.129 s 72 …. 5.142, 6.58 s 73 …. 4.29, 10.116 s 73A …. 4.29 s 73B …. 4.29 s 77(1)(c) …. 4.76, 8.137 s 78 …. 9.26E s 79 …. 9.45, 8.125 s 79A …. 9.63, 9.64E, 9.65, 9.71 s 84 …. 9.96, 9.97E, 9.106C, 9.107 s 84(1) …. 9.107, 9.113C s 84(1)(a) …. 9.103, 9.106C s 84(1)(c) …. 9.106C s 86 …. 11.61, 11.121 s 87 …. 11.115 s 87(1) …. 11.119 s 88 …. 9.114 s 88(2) …. 5.160 s 88(3) …. 5.160 s 89 …. 5.188 ss 89–91 …. 5.168 s 89(1) …. 5.172 s 89A …. 5.188

s 90(3) …. 5.174 s 91 …. 11.95 s 91(2) …. 11.116 s 91A …. 5.60 s 91B …. 5.60 s 94 …. 11.37, 11.38E, 11.39 s 94(1)(b) …. 11.39 s 94(2) …. 11.39 s 95 …. 11.125 s 96 …. 5.70C s 101(1)(a) …. 11.61 s 101(1)(c) …. 11.121 s 102 …. 11.61 s 103 …. 5.79, 11.61 s 103(2) …. 5.122 s 103(3) …. 5.122 s 106(1)(a)(iii) …. 5.171 s 108(3) …. 5.20 s 109(1) …. 11.121 s 109(2) …. 5.217, 11.121 s 109(3)(a) …. 5.209 s 109(4) …. 5.208, 5.209 s 110 …. 5.216, 11.121 s 110(1) …. 5.216 s 110(1)(b) …. 5.216

s 110(1)(c) …. 5.215, 5.216 s 110(2) …. 5.209 s 110(3) …. 5.220 s 110(4) …. 5.223, 5.224 s 111 …. 5.210 s 112 …. 6.15 s 113 …. 6.15 s 115 …. 11.125 s 116 …. 5.18 s 117(2) …. 11.118 s 118 …. 5.177 s 126 …. 5.216 s 134 …. 9.27, 9.28E s 135 …. 5.70C s 137 …. 8.111 s 140 …. 8.149 s 141 …. 8.138, 8.139E, 8.140, 8.143, 8.144, 8.145, 8.146C s 142 …. 8.138, 8.139E, 8.140, 8.143, s 146C s 143 …. 8.109 s 144(1) …. 8.110 s 146 …. 8.152, 8.153E, 8.154, 8.155, 8.168, 8.171E, 8.194 s 146(1) …. 8.154, 8.194 s 146(2) …. 8.170 s 146(4) …. 8.179 s 146(9) …. 8.154

s 146(12) …. 8.154 s 146(13) …. 8.154 s 147 …. 8.107 s 148 …. 8.107 s 149(1) …. 8.55 s 149(3) …. 8.54 s 153 …. 9.20 s 154(3) …. 1.93 s 154A …. 1.93 s 154A(1) …. 1.91, 1.92E, 1.94 s 184 …. 6.4 s 187 …. 6.86 s 194 …. 10.58 s 195 …. 10.96 s 196 …. 10.96 s 197 …. 10.12 s 199 …. 4.187E, 5.193 s 228(1) …. 6.39 s 233(1) …. 6.39 s 233(2) …. 6.39 s 233(3) …. 6.39 s 233(3)(c) …. 6.39 Property Law Amendment Act 1998 …. 6.41 Property (Relationships) Act 1984 …. 5.169

Real Property Act 1918 s 11 …. 7.19 Real Property Act 1900 Relationships Act 2008 s 39 …. 4.137 s 42(2) …. 4.137 s 45(1) …. 4.136 Residential Tenancies Act 1980 s 104 …. 1.95 Residential Tenancies Act 1997 …. 5.130, 8.213 Pt 11 …. 8.231 s 3 …. 8.213 s 6 …. 8.214 ss 6–14 …. 8.214 s 27 …. 8.215 s 44 …. 8.225 s 47 …. 8.225 s 61 …. 8.222E s 63 …. 8.222E s 70 …. 8.224 ss 72–73 …. 8.224 ss 216–228 …. 8.227 s 229 …. 2.67

s 235 …. 8.228 s 246 …. 8.229 s 263 …. 8.228 s 322 …. 8.230 s 406 …. 8.226 Retail Leases Act 2003 …. 8.5 Sale of Land Act 1962 …. 11.3 s 32 …. 4.15 s 32K …. 4.15 ss 34–36 …. 4.62 Settled Land Act 1958 …. 5.18, 5.85, 7.17 Statute of Uses 1980 …. 10.58 Subdivision Act 1988 …. 6.1, 9.84, 9.86 Pt 1 …. 5.233 Pt 5 …. 5.233 s 12 …. 10.56 s 12(2) …. 10.97 s 23 …. 9.86 s 23(1) …. 9.84, 9.85E Subdivision (Miscellaneous Amendments) Act 1991 …. 9.84 Summary Offences Act 1966 s 9(1)(e) …. 2.63 s 9(1)(f) …. 2.63

s 9(1)(g) …. 2.63 Supreme Court Act 1986 s 29(1) …. 4.70 s 49(a) …. 5.154C, 5.155 s 79 …. 8.151 s 85 …. 8.167 Supreme Court (General Civil Procedure) Rules 2005 r 53.03(2) …. 2.71 r 53.05(3) …. 2.71 r 53.08 …. 2.71 Transfer of Land Act 1928 …. 10.118, 11.23C s 72 …. 5.132C s 146 …. 11.23C, 11.24 Transfer of Land Act 1954 …. 5.70C s 42 …. 5.72C s 43 …. 5.72C s 44(2) …. 5.72C s 52(4) …. 5.72C s 68 …. 5.72C s 72 …. 9.109 s 110(3) …. 5.72C s 134 …. 5.72C Transfer of Land Act 1958 …. 5.10, 5.23, 5.29E, 5.31E, 5.48C, 5.72C,

5.129, 9.113C, 10.6, 10.117, 11.24 Pt I …. 11.43 s 8(1) …. 5.17 s 19 …. 3.74 s 30(2) …. 6.24 s 33(4) …. 6.20 s 34 …. 11.35 s 40(3)(d) …. 5.132C s 42 …. 5.153, 5.161 s 42(l)(a) …. 5.161 s 42(1)(b) …. 5.161 s 42(2)(a) …. 5.161 s 42(2)(b) …. 5.161 s 42(2)(c) …. 5.161 s 42(2)(d) …. 6.50, 5.161, 10.118 s 42(2)(e) …. 5.132C, 5.133, 5.135, 5.161, 10.3C s 42(2)(f) …. 5.161 s 43 …. 5.31E, 5.161 s 50 …. 6.76 s 60 …. 2.107 s 62 …. 2.78 s 66 …. 8.146C s 67(2) …. 8.137 s 72 …. 10.6, 10.117 s 72(3) …. 10.39

s 73 …. 10.110 s 73(1) …. 10.110 s 73A …. 10.110 s 74(2) …. 11.24 s 75 …. 11.43 s 75B …. 11.35 s 76 …. 11.61 s 76(1)(c) …. 11.43 s 77 …. 11.61, 11.86, 11.87C s 77(1) …. 11.87C, 11.88 s 77(3) …. 11.35, 11.107 s 77(4) …. 11.104 s 78 …. 11.127, 11.142 s 79 …. 11.117 s 81 …. 11.129, 11.130E s 88 …. 9.114 s 88(1) …. 9.109 s 89 …. 4.213 s 94 …. 11.29 s 96(2) …. 10.144 s 98 …. 5.230, 10.56, 11.139E s 98A(1)(b) …. 5.230 s 98C(3) …. 5.230 s 99 …. 2.97, 11.135 s 100 …. 11.135

s 104(2) …. 11.102 s 105 …. 11.107 s 117 …. 11.43 s 206 …. 11.43 Sch 7, Pt I …. 11.43 Sch 8 …. 11.43 Sch 12 …. 10.39 Transfer of Land (Stratum Estates) Act 1960 …. 5.230 Trustee Act 1958 s 14 …. 7.17 Wills Act 1958 s 4 …. 3.12 Wills Act 1997 s 42 …. 3.28

WESTERN AUSTRALIA Administration Act 1903 Pt II …. 3.12 s 3 …. 3.12 s 6 …. 3.46 s 8 …. 3.64 s 10 …. 3.12 s 13 …. 3.12

s 14(1) …. 3.6 s 17 …. 3.39 s 23 …. 3.14 s 23(1) …. 3.28 s 26(1) …. 3.65 s 26(2) …. 3.65 s 37(1) …. 3.28 s 37(2) …. 3.28 s 39 …. 3.67 Commercial Tenancy (Retail Shops) Agreements Act 1985 …. 8.5 Constitution Act 1889 s 3 …. 3.114C Criminal Code Compilation Act 1913 s 69 …. 2.63 s 70 …. 2.68 s 255 …. 2.63 Criminal Property Confiscation Act 2000 …. 4.130 Distress for Rent Abolition Act 1936 s 2 …. 8.182 Dividing Fences Act 1961 …. 10.48 Escheat (Procedure) Act 1940 …. 3.6 Family Court Act 1997

s 205V …. 4.137 s 205Z(1)(a) …. 4.137 s 205ZG …. 4.136 Human Tissue and Transplant Act 1982 s 29 …. 1.38 s 30 …. 1.38 Imperial Acts Adopting Act 1836 …. 10.84 Iron Ore (Mount Goldsworthy) Agreement Act 1964 s 4(1) …. 3.124C Land Act 1898 …. 3.114C Land Act 1933 …. 3.114C s 16(3) …. 1.105 s 32 …. 3.114C s 106(2) …. 3.114C s 109 …. 3.114C s 116 …. 3.114C Land Administration Act 1997 s 147 …. 10.11 s 195 …. 10.10 Land Regulations 1851–1887 …. 3.114C Law Reform (Property, Perpetuities and Succession) Act 1962 …. 7.20 Law Reform (Statute of Frauds) Act 1962 …. 4.33

Light and Air Act 1902 …. 10.96 Limitation Act 1935 s 3(6) …. 2.89 s 3(6)(d) …. 2.106 s 19 …. 2.74, 2.85 s 19(2) …. 2.86 s 27 …. 2.104, 2.105 ss 35–36 …. 2.112 s 38 …. 2.112 s 42 …. 2.112 s 42(1) …. 2.112 ss 46–51 …. 2.109 s 52 …. 2.112 s 61 …. 2.104 s 65 …. 2.89 s 65(2) …. 2.108 s 66 …. 2.91 s 67 …. 2.91 s 68(c) …. 2.91 s 69 …. 2.114 s 69(1) …. 2.103 s 70 …. 2.114 s 71 …. 2.115 s 72 …. 2.118 s 75 …. 2.74

s 76 …. 2.86 s 78 …. 2.105 s 80 …. 2.105 s 84 …. 2.109 Limitation Act 2005 …. 2.72, 2.104 Married Women’s Property Act 1892 s 17 …. 4.111 Mining Act 1904 …. 3.114C, 3.124C, 4.96 s 117 …. 3.114C s 273 …. 4.97 Mining Act 1978 …. 4.96 Petroleum Act 1936 s 9 …. 3.114C Property Law Act 1969 …. 3.1, 4.27, 4.96, 5.8, 8.32, 9.5, 9.52C, 11.3 Pt XI …. 7.15, 7.16, 7.20 Pt XIV …. 6.77 s 3 …. 5.11, 5.165 s 7 …. 4.97, 10.67 s 9 …. 4.29 s 9(1)(b) …. 4.2 s 11(1) …. 9.14, 9.52C s 11(2) …. 9.14 s 19 …. 7.17

s 20 …. 5.18, 9.29 ss 21–23 …. 5.19 s 25 …. 5.19 s 29 …. 6.3 s 32 …. 4.25 s 33 …. 4.25 s 33(1) …. 8.32 s 33(2)(c) …. 8.32 s 33(2)(d) …. 8.32 s 34 …. 4.91, 4.96, 4.97 ss 34–36 …. 6.60 s 34(1)(a) …. 4.97, 4.100, 4.101, 8.32 s 34(1)(b) …. 4.97, 4.101 s 34(1)(c) …. 4.97, 4.98 s 35 …. 8.32 s 35(1) …. 4.91 s 35(2) …. 4.25 s 36 …. 4.91 s 36(c) …. 8.32 s 39 …. 6.58 s 41 …. 10.67 s 43 …. 8.224 s 44 …. 6.58 s 47 …. 9.26E, 9.52C s 47(1) …. 9.52C

s 48 …. 5.121, 8.125, 9.45, 9.52C s 48(1) …. 9.52C s 49 …. 9.52C, 9.64E, 9.71 s 52 …. 5.121 s 53 …. 11.115, 11.119 s 55 …. 5.162, 11.95 s 55(2) …. 11.116 s 57(1)(a) …. 11.61 s 57(1)(c) …. 11.121 s 58 …. 11.121 s 59 …. 11.61 s 61 …. 11.107 s 63 …. 5.28 s 63A …. 5.142 s 64 …. 5.142 s 65 …. 5.142 s 65(1) …. 11.121 s 65(2) …. 11.121 s 66 …. 11.121 s 67 …. 6.15 s 68 …. 5.29E, 5.126, 6.15 s 68(1) …. 5.130 s 68(1A) …. 5.130, 5.141, 5.144, 5.150 s 69 …. 5.142 s 71 …. 8.36

s 73 …. 8.109 s 74(1) …. 8.55 s 74(3) …. 8.54 s 74(5) …. 8.53 s 76 …. 8.149 ss 76–77 …. 5.123 s 77 …. 8.139E, 8.143 s 78 …. 8.139E, 8.143 s 80(1) …. 8.110 s 81 …. 8.168 s 81(1) …. 8.153E, 8.156 s 81(2) …. 8.167, 8.171E, 8.175 s 81(4) …. 8.179 s 81(8)(b) …. 8.154 s 81(9) …. 8.154 s 81(10) …. 8.154 s 82 …. 10.72 ss 83A–83E …. 8.121 s 91 …. 5.129 s 92(i) …. 8.119 s 92(ii) …. 8.91 s 93(1) …. 8.92 s 95 …. 8.147 ss 99–102 …. 5.129 ss 99–115 …. 7.20

s 101 …. 7.23 s 102 …. 7.42E s 103 …. 7.53 s 103(1) …. 7.47E s 105 …. 7.17, 7.52, 7.53 s 106 …. 7.58E s 107 …. 7.53, 7.58E s 108 …. 7.38E s 109 …. 7.62 s 110 …. 7.17 s 110(1) …. 7.69 s 111 …. 7.64 s 113 …. 7.74 s 114 …. 7.14 s 115 …. 7.17 s 120(d) …. 6.4 s 121 …. 10.96 s 122 …. 2.99 s 123 …. 1.101, 1.106 s 129 …. 6.86 s 134 …. 5.31E Registration of Deeds Act 1856 …. 5.15 Registration of Deeds, Wills, Judgments and Conveyances Affecting Real Property Ordinance 1832 …. 5.10

Residential Tenancies Act 1987 …. 8.213 ss 5–6 …. 8.214 s 29 …. 8.226 s 30 …. 8.225 s 32(3) …. 8.225 s 42 …. 8.222E s 44 …. 8.218 s 45 …. 8.224 s 47 …. 1.95 s 60 …. 8.227 s 62 …. 8.229 s 64 …. 8.228 s 68 …. 8.228 s 71 …. 8.230 s 80 …. 2.67 s 81(1) …. 8.213, 8.215 Rights in Water and Irrigation Act 1914 s 15 …. 1.108 s 16 …. 1.108 Rules of the Supreme Court 1971 O 52, r 3(1)(a) …. 1.41 Sale of Goods Act 1895 …. 4.10 s 4 …. 4.11, 4.12E s 18 …. 4.10

Sale of Land Act 1970 …. 11.3 s 22 …. 5.8 Strata Titles Act 1985 …. 5.233, 6.1 s 11(1) …. 10.97 Supreme Court Act 1935 s 25(12) …. 4.70 s 32 …. 4.160C Titles (Validation) and Native Title (Effect of Past Acts) Act 1995 Pt 2B …. 3.114C s 12M(1)(b)(ii) …. 3.114C Transfer of Land Act 1893 …. 5.129, 9.52C, 10.6, 10.117, 11.24 Pt IVA …. 9.124, 10.56 s 18 …. 5.17 s 19 …. 11.139E s 45(1)(c) …. 11.43 s 53 …. 11.35 s 60 …. 6.24, 6.76 s 60(2) …. 11.102 s 63A …. 10.6, 10.117 s 64 …. 10.6, 10.117 s 65 …. 10.6, 10.39, 10.117 s 68 …. 5.101C, 10.118 s 68(1) …. 5.161

s 68(1A) …. 5.161 s 84 …. 3.74 s 91 …. 11.135 s 95 …. 8.137 s 106 …. 11.24, 11.61 s 108 …. 11.61, 11.102 s 109 …. 11.35, 11.107 s 110 …. 11.104 s 111 …. 11.127, 11.142 s 113 …. 11.43 s 116 …. 11.130E s 121 …. 11.117 s 122 …. 11.117 s 129A …. 9.109, 9.114 s 129C …. 9.52C, 9.96, 10.116 s 134 …. 5.101C, 5.161 s 136C …. 10.7 s 136D(1) …. 9.124 s 136D(2) …. 9.124 s 136D(5) …. 9.124 s 136F(1)(b) …. 9.124 s 136H …. 9.124, 10.20 s 136I …. 9.124 s 136J …. 9.124 ss 136K–142 …. 5.168

s 137 …. 5.169, 5.172 s 138 …. 5.174 s 140 …. 5.177 ss 148–50 …. 5.197 s 170 …. 2.97 s 171 …. 2.97 s 177 …. 2.97 s 188(ii) …. 5.122 s 188(7) …. 5.171 ss 195–196 …. 5.209 s 196 …. 5.217 s 197A …. 10.56 s 199 …. 5.33 s 200 …. 5.79, 5.101C s 201 …. 5.209, 5.215, 5.223 s 202 …. 5.33, 5.45 s 203 …. 5.18 s 205 …. 5.209, 5.215 s 208 …. 5.210 s 210 …. 5.208 s 211 …. 5.222 ss 222–223A …. 5.144 s 227 …. 6.76 s 229A …. 10.110 Sch 9 …. 10.39

Sch 9A …. 10.39 Wildlife Conservation Act 1950 s 22 …. 4.5 Wills Act 1970 s 6 …. 3.12 s 26(e) …. 3.28

CANADA Charter of Rights and Freedom s 1 …. 1.65E Land Title Act 1996 (British Columbia) s 25.1 …. 5.46 s 26(1) …. 5.46 Land Titles Act (Ontario) s 78(4) …. 5.549 s 155 …. 5.49

IMPERIAL Australian Courts Act 1828 (9 Geo IV c 83) …. 10.93 Crown Suits Act 1769 (Nullum Tempus Act) …. 2.86

INTERNATIONAL Convention Relating to International Exhibitions 1928 …. 1.59C

art 9(3) …. 1.59C European Convention on Human Rights and Fundamental Freedoms …. 1.61, 1.63, 2.81 art 1 …. 1.61, 1.63, 1.64, 2.79, 2.80E, 2.81 art 8 …. 1.63 art 8(1) …. 1.53 art 10 …. 1.53 International Covenant on Civil and Political Rights …. 1.61, 1.62 art 2.1 …. 1.65E art 24.1 …. 1.65E art 26.1 …. 1.65E International Covenant on Economic, Social and Cultural Rights …. 1.61 Universal Declaration of Human Rights …. 1.61 art 17 …. 1.61, 1.64, 1.65E

MALAYSIA National Land Code s 327 …. 5.175 s 340 …. 5.46 Registration of Titles Regulations 1891 (Selangor) …. 5.78C s 4 …. 5.78C s 6 …. 5.78C s 7 …. 5.78C

s 28 …. 5.78C

NEW ZEALAND Grantees of Reversion Act 1540 …. 8.138 Land Transfer Act 1952 …. 5.41C s 2 …. 5.41C s 42 …. 5.41C s 62 …. 5.41C, 5.101C s 63 …. 5.41C, 5.101C s 75 …. 5.41C s 80 …. 5.41C s 81 …. 5.41C s 85 …. 5.41C, 5.48C s 100 …. 5.41C s 182 …. 5.41C s 183 …. 5.41C, 5.123 s 183(1) …. 5.45 Land Transfer Act 2010 …. 5.49 Perpetuities Act 1964 …. 7.20 Property Law Act 1952 s 103A …. 11.91

SINGAPORE

Land Titles Ordinance 1956 s 28(30) …. 5.69

UNITED KINGDOM Common Law Procedure Act 1852 …. 2.56 Contingent Remainders Act 1877 …. 3.65, 3.73C, 7.63 Contracts (Rights of Third Parties) Act 1999 …. 9.7C, 9.12 s 1 …. 9.12, 9.13E Conveyancing Act 1881 …. 8.141C s 11 …. 8.141C Conveyancing Act 1882 s 3 …. 4.188C Conveyancing and Law of Property Act 1881 s 58 …. 9.54 Country Court Rules O 26 …. 2.61C County Courts Act 1959 s 74 …. 4.69 Domestic Violence and Matrimonial Proceedings Act 1976 …. 6.33C s 1(1) …. 6.33C s 1(2) …. 6.33C Fines and Recoveries Act 1833 …. 3.14 Fires Prevention (Metropolis) Act 1774 (14 Geo III c 78)

s 83 …. 4.62 Forcible Entry Act 1381 (5 Ric 11 Stat 1, c 7) …. 2.61C, 2.63 Human Rights Act 1988 …. 2.81 Human Rights Act 1998 …. 1.63 Judicature Act 1873 …. 4.66C, 4.69, 4.173, 8.47C, 8.201C Land Registration Act 1925 …. 2.81, 4.191 s 70(1)(g) …. 4.191, 4.192, 5.194C Land Registration Act 2002 Sch 6, 1 …. 2.96 Sch 6, 1–5 …. 2.78 Landlord and Tenant Act 1927 s 19(1)(a) …. 8.115 Landlord and Tenant (Covenants) Act 1995 …. 8.125 Law of Property Act 1922 s 145 …. 8.15C s 382 …. 8.15C Law of Property Act 1925(15 Geo V Ch 20) …. 3.111C, 8.1, 8.141C, 9.52C, 9.53, 11.16, 11.17 s 36(2) …. 6.53C, 6.56 s 40 …. 4.39C, 4.74 s 52 …. 4.39C, 4.99 ss 52–54 …. 8.32 s 53(1)(a) …. 4.99, 4.100

s 53(1)(b) …. 4.99 s 53(1)(c) …. 4.98, 4.99, 4.100 s 55 …. 8.37C s 56 …. 9.7C, 9.11 s 56(1) …. 9.6, 9.8, 9.9, 9.10, 9.14, 9.23C s 62 …. 10.68C, 10.69, 10.70, 10.71 s 62(1) …. 10.68C s 62(2) …. 10.68C s 78 …. 9.23C, 9.25, 9.52C, 9.53, 9.54, 9.62C s 78(1) …. 9.52C s 79 …. 9.52C s 84 …. 9.96, 9.100 s 84(1) …. 9.106C s 84(1)(1A)–(1C) …. 9.100 s 87 …. 9.34C s 91(2) …. 11.95 s 141 …. 8.142C s 142 …. 8.141C s 146 …. 8.201C ss 164–166 …. 7.71 s 199(1) …. 4.188C s 199(1)(ii) …. 4.188C s 199(2) …. 4.188C s 199(3) …. 4.188C Law of Property Act 1969

s 23 …. 5.8 Law of Property (Miscellaneous Provisions) Act 1989 s 2 …. 4.42C, 4.49, 11.18 Legal Aid Sentencing and Punishment of Offenders Act 2012 s 144 …. 2.96 Limitation Act 1939 …. 2.117, 2.119, 8.26 s 9(2) …. 2.119 Lord Cairns’ Act 1858 …. 9.47 Married Women’s Property Act 1882 …. 6.36C s 17 …. 4.111, 4.112, 4.114 Merchant Shipping Act 1854 …. 11.31C Perpetuities and Accumulations Act 1964 …. 7.20 Perpetuities and Accumulations Act 2009 …. 7.20, 7.71 Prescription Act 1832 …. 10.84, 10.90, 10.91, 10.93 s 2 …. 10.85C, 10.90 Public Health Act …. 9.16C Real Property Act 1845 (8 & 9 Vict c 106) s 5 …. 9.6, 9.7C, 9.10 Real Property Limitation Act 1833 …. 2.74 s 12 …. 2.106 Rent Act 1965

s 30(2) …. 8.63 s 32 …. 2.61C Rules of the Supreme Court O 113 …. 2.61C Sale of Goods Act 1893 …. 4.10 Small Business, Employment and Enterprise Act 2015 …. 7.10 Statute of Anne 1705 …. 6.41 Statute of Forcible Entry 1391 (15 Rich 11, c 2) …. 2.63, 2.67 Statute of Frauds 1677 …. 8.32, 9.52C s 1 …. 8.37C s 2 …. 8.37C s 3 …. 4.91 s 4 …. 4.31, 4.33, 4.74, 4.96, 4.100, 4.101, 8.37C s 7 …. 4.91 s 8 …. 4.91 s 9 …. 4.91, 4.98 Statute of Limitations (21 Jac 1, c 16) …. 2.50C Statute of Set-Off (2 Geo II c 22) …. 8.204 Statute of Set-Off (8 Geo II c 24) …. 8.204 Statute of Uses 1535 …. 3.56, 3.57, 3.68, 3.69, 3.70 Statute of Westminster 1275 …. 10.82

Statute of Wills 1540 …. 3.59 Statutes of Mortmain 1279 …. 3.53 Statutes of Mortmain 1290 …. 3.53 Supreme Court of Judicature Act 1875 …. 2.61C Supreme Court of Judicature Act 1925 …. 6.17C s 202 …. 4.73 Theft Act 1968 s 4 …. 1.40 Validation of War Time Leases Act 1944 …. 8.14 Wills Act 1837 s 24 …. 4.162C s 28 …. 3.47

UNITED STATES OF AMERICA California Health and Safety Code s 7054.4 …. 1.36C Constitution Amendment V …. 1.8

Abbreviations

Note: Those books which are referred to frequently in this text are abbreviated as follows. Other texts referred to will include author, title, edition (if subsequent) and year of publication. Full publishing details for all books appear in the bibliography at the end of this book. Baalman

Baalman (Woodman and Grimes), The Torrens System in New South Wales, 2nd ed, Lawbook Co, Sydney, 1974

Bradbrook and Croft

Bradbrook, Croft and Hay, Commercial Tenancy Law in Australia, 3rd ed, LexisNexis Butterworths, Sydney, 2009

Bradbrook, MacCallum,

Bradbrook, MacCallum, Moore and

Moore and Grattan

Grattan, Australian Real Property Law, 5th ed, Lawbook Co, Sydney, 2011

Bradbrook and Neave

Bradbrook and Neave, Easements and

Restrictive Covenants in Australia, 2nd ed, Butterworths, Sydney, 2000 Butt

Butt, Land Law, 6th ed, Lawbook Co, Sydney, 2010

Carter and Harland

Carter and Harland, Contract Law in Australia, 4th ed, Butterworths, Sydney, 2002

Centennial Essays

Hinde (ed), The New Zealand Torrens System Centennial Essays, Butterworths, Wellington, 1971

Cheshire and Burns

Cheshire and Burns, Modern Law of Real Property, 15th ed, Butterworths, London, 1994

Cheshire and Fifoot

Seddon and Ellinghaus, Cheshire and Fifoot’s Law of Contract, 7th Australian ed, Butterworths, Sydney, 1997

Fisher and Lightwood

Tyler, Young and Croft, Fisher and Lightwood’s Law of Mortgage, 7th Aust ed, Butterworths, Sydney, 1995

Fleming

Fleming, The Law of Torts, 8th ed, Law

Book Co, Sydney, 1992 Ford and Lee

Ford and Lee, Principles of the Law of Trusts, 3rd ed, LBC Information Services, Sydney, 1996 (looseleaf)

Gray, Edgeworth, Foster and Gray, Edgeworth, Foster and Dorsett, Dorsett

Property Law in New South Wales, 3rd ed, LexisNexis Butterworths, Sydney, 2012

Gray and Gray

Gray and Gray, Elements of Land Law, 5th ed, OUP, 2009

Grinlinton

Grinlinton (ed), Torrens in the Twenty-first Century, LexisNexis, Wellington, 2003

Harrison

Harrison, Cases on Land Law, 2nd ed, Law Book Co, Sydney, 1965

Helmore

Helmore, The Law of Real Property in New South Wales, 2nd ed, Law Book Co, Sydney, 1966

Holdsworth

Holdsworth, A History of English Law, 4th ed, Sweet and Maxwell, London, 1936

Jackson

Jackson, Principles of Property Law, Law

Book Co, Sydney, 1967 Lawson

Lawson, Introduction to the Laws of Property, Clarendon Press, Oxford, 1958

McRae, Nettheim et al

McRae, Nettheim, Anthony, Beacroft, Brennan, Davis and Janke, Indigenous Legal Issues: Commentary and Materials, 4th ed Thomson Reuters, Australia, 2009

Meagher, Heydon and

Meagher, Heydon and Leeming, Meagher,

Leeming

Gummow and Lehane’s Equity: Doctrines and Remedies, 4th ed, Butterworths, Sydney, 2002

Morris and Leach

Morris and Leach, The Rule Against Perpetuities, 2nd ed, Stevens, London, 1962

Palmer

Palmer, Bailment, 2nd ed, Law Book Co, 1991

Robinson

Robinson, Transfer of Land in Victoria, Law Book Co, Sydney, 1979

Rossiter

Rossiter, Principles of Land Contracts and Options in Australia, LexisNexis Butterworths, Sydney, 2003

Ruoff

Ruoff, An Englishman Looks at the Torrens System, Law Book Co, Sydney, 1957

Sappideen and Butt

Sappideen and Butt, The Perpetuities Act 1984, Law Book Co, Sydney, 1986

Simpson

Simpson, History of the Land Law, 2nd ed, Clarendon Press, Oxford, 1986

Spry

Spry, The Principles of Equitable Remedies; Specific Performance, Injunctions, Rectification and Equitable Damages, 4th ed, Law Book Co, Sydney, 1990

Stein and Stone

Stein and Stone, Torrens Title, Butterworths, Sydney, 1991

Sykes and Walker

Sykes and Walker, The Law of Securities, 5th ed, Law Book Co, Sydney, 1993

Woodman

Woodman, The Law of Real Property in New South Wales, Law Book Co, Sydney, 1980

Content

Preface Preface to the First Edition Acknowledgments Table of Cases Table of Statutes Abbreviations

Chapter 1

The Concept of Property

Chapter 2

Possession and Title

Chapter 3

The Fragmentation of Proprietary Interests in Land

Chapter 4

The Acquisition of Property Rights and Equitable Property

Chapter 5

Title to Land: The Torrens System

Chapter 6

Co-ownership

Chapter 7

The Alienability of Proprietary Interests

Chapter 8

Leases

Chapter 9

Planning Land Use by Private Agreement: Freehold Covenants

Chapter 10

Easements and Profits à Prendre

Chapter 11

Mortgages

Index

A full bibliography and other student learning support is available on Campus at

Detailed Contents

Preface Preface to the First Edition Acknowledgments Table of Cases Table of Statutes Abbreviations

Chapter 1

The Concept of Property Introduction What is property? The right to use or enjoy The right to alienate The right to exclude Property rights and contractual rights Licences: bare, contractual or coupled with an interest Licences and original parties Licences and third parties

Property rights and the rights of persons Are persons property? Property and body parts Property rights and privacy Property and the right to work Property rights and civil rights Property rights and human rights The traditional classification and terminology Land, or realty Boundaries of land Air space rights Chattels, or personalty Boundaries between different types of property The boundary between land and chattels: fixtures The doctrine of fixtures Tenant’s fixtures Right to remove Agricultural and residential tenancies Chattels annexed without permission The boundary between adjoining landowners The doctrine of accretion Encroachments Land bounded by water When chattels merge: the doctrine of accession

Chapter 2

Possession and Title Introduction Why protect ‘possession’? Possession of goods Remedies The plea of jus tertii

Possession by a bailee Claims by bailee against a third party Claims by a bailor against a bailee The rights of finders Finder and occupier of land Finder and employer Abandonment of goods Land Title in actions to recover possession of land Relativity of titles under the Torrens system Assignment of the interest of a person dispossessed by a squatter The self-help remedy Forcible re-entry Limitation of actions How possessory title extinguishes documentary title with the passage of time Justifications for the rule of adverse possession Adverse possession and good faith Adverse possession and human rights The length of the limitation period Commencement of the limitation period General principles Persons presently entitled to possession The elements of adverse possession Possession amounting to a criminal offence not relevant Adverse possession claims to part parcels adjacent to boundaries Does possession of part of a lot amount to possession of the whole?

Future interests Equitable estates Adverse possession by a co-owner Successive adverse possessors Stopping time running Extension of time The effect of effluxion of time Tenancies

Chapter 3

The Fragmentation of Proprietary Interests in Land Introduction Fragmentation in a spatial dimension: the doctrine of tenure No services No incidents Fragmentation in a temporal dimension: the doctrine of estates Introduction The estates — general Fee simple Fee tail Life estate Leasehold estates Creation of freehold estates — words of limitation Fee simple Fee tail Life estate Statutory modifications to the common law Determinable and conditional interests General Effect of void contingencies

When will a condition be void? The doctrine of waste Legal future interests Reversions and remainders Vested and contingent remainders Fragmentation between legal and beneficial ownership: equitable interests in land The development of the use Substitute for wills Avoidance of feudal burdens Providing for grantor’s wife Avoidance of the Statutes of Mortmain Creation of new future interests Enforcement of uses The Statute of Uses 1535 The Statute of Wills 1540 The development of the trust Equitable estates and wills Reform of future interests Systemic fragmentation of interests in land: the common law, tenure and native title Introduction The doctrine of tenure after Mabo Is native title a proprietary interest? The Native Title Act 1993 (Cth) The nature and incidents of native title What rights does the native title ‘bundle of rights’ contain? Connection with the land The extinguishment of native title Grant of a freehold estate

Pastoral leases and extinguishment Leases conferring rights of exclusive possession Leases containing reservations in favour of Indigenous inhabitants Statute

Chapter 4

The Acquisition of Property Rights and Equitable Property Introduction Acquisition through taking possession Land and goods Chattels — wild animals Manufacture or creation of objects Patents, copyright and trademarks Consensual transactions with proprietary interests — legal and equitable Sale Goods Formal requirements for the contract for sale of goods Land — legal and equitable interests The sale transaction — real property Formal requirements for the passing of a legal interest in land Formal requirements for contracts for the sale of land The equitable doctrine of part performance Equitable interests arising out of enforceable contracts Gifts Land Express trusts

Formal requirements Equitable doctrines: resulting trusts, constructive trusts and estoppel Resulting trusts Constructive trusts Common intention constructive trusts Constructive trusts based on unconscionable use of legal title Legislative reform State and Territory legislation Acquisition of an interest in property by estoppel Proprietary estoppel Equitable estoppel Remedies in cases of estoppel — proprietary or compensatory; expectation-based or detriment-based? The problem of minimal detriment Equitable priority rules Introduction Enforceability of legal interests in old system land Earlier legal interest against later legal interest Equitable interests against legal interests Earlier legal interest against a later equitable interest Prior equitable interest against a later legal interest The principle The statutory definition of notice Enforceability of equitable interests Prior equitable interest against a later equitable interest Enforceability of equities

Earlier equity and later equitable interest

Chapter 5

Title to Land: The Torrens System Introduction ‘General law’ or ‘old system’ land The deeds registration system Registrable instruments and the effect of registration The Torrens system Bringing land under the Torrens system Compulsory extension of the Torrens system The principle of indefeasibility The indefeasibility provisions Deferred vs immediate indefeasibility The adoption of immediate indefeasibility The policy debate over deferred and immediate indefeasibility Immediate indefeasibility in the states and territories Instruments void for defects other than forgery Indefeasibility of the terms in a registered instrument What is indefeasible in a void mortgage? Indefeasibility and the all moneys mortgage Relief for the ‘statutory mortgagor’ under the Consumer Credit Code Volunteers Exceptions to indefeasibility The fraud exception Fraud distinguished from carelessness Statutory provisions to impose a duty on mortgagees

Fraud and agency False attestation of instruments Fraud against the holder of a prior unregistered interest Supervening fraud Rights in personam (the ‘personal equities exception’) The types of causes of action that can be asserted against a registered proprietor The requirement of an element of unconscionability Special equity cases Personal equity and breach of trust Personal equities and mistake Personal equity and unlawful action by public authorities Personal equity and easements Conclusions on the scope of the personal equities exception The register Registrar’s powers of correction Other exceptions to indefeasibility Reservations and exceptions in Crown grant Short-term tenancies Easements Adverse possession Rates and taxes Overriding statutes Insuring the risk of unrecorded statutory charges Recording of statutory charges etc Equitable interests and unregistered instruments

The caveat provisions Caveatable interest Does a registered proprietor have a caveatable interest? Requirements for caveats Application for removal of caveat Caveats lodged without reasonable cause Competing equitable interests The significance of notice in equitable priorities Statutory protection for the purchaser between settlement and registration Compensation for loss Last resort or first resort Circumstances giving rise to claim Loss resulting from error or omission Loss resulting from fraud Loss resulting from registration of another person Restrictions on claims Limitation period Measure of damages Strata titles legislation Leasehold scheme Tenancy in common Home unit companies

Chapter 6

Co-ownership Introduction Joint tenancy — essential features Tenancy in common — essential features Creation of co-ownership — joint tenancy or tenancy in common?

At law In equity Business partners Money advanced on mortgage Unequal contributions to the purchase price Statutory reform Co-ownership and the Torrens system Rights of enjoyment inter se of co-owners of land Rights of occupation Occupation rent Ouster The quantum of occupation rent Accounting for rents and profits The Statute of Anne Statute of Anne not applicable Compensation for repairs and improvements to land by one co-owner Liability for waste Disposition of interests by co-owners Severance of joint tenancy Modes of severance Severance by unilateral act Severance by transfer to a stranger Declaration of trust Does grant of a mortgage or a lease sever a joint tenancy? Severance by agreement Severance following a course of dealing Severance following homicide Severance by court order

Severance upon bankruptcy Termination of co-ownership Land The Partition Acts Statutory trusts Chattels Legislative reform

Chapter 7

The Alienability of Proprietary Interests Introduction Judicial doctrines — restraints on alienability The rule against perpetuities Background The rule Statement of the rule Vesting of interests Presumption in favour of vesting The commencement of the perpetuity period Lives in being Certainty of vesting: unborn widows, fertile octogenarians and others The statutory wait-and-see rule Reduction of age contingencies Application of saving provisions The class-closing rules Reform of the all-or-nothing rule Subsequent interests Legal contingent remainders Possibilities of reverter and rights of re-entry Accumulations The Perpetuities and Accumulations Act 1985

(ACT) and the Perpetuities Act 1984 (NSW)

Chapter 8

Leases Introduction Residential tenancies Retail tenancies Agricultural tenancies Leases under the Crown Lands Act Other tenancies The general law of landlord and tenant Terminology Creation of leases Substantive requirements Certainty of duration Exclusive possession Exclusive possession — further exceptions Formal requirements Torrens title Old system Agreement for a lease Implied tenancies at law Yearly periodic leases Other implied periodic leases Tenancy by estoppel Concurrent leases Reversionary leases The doctrine of interesse termini Covenants Introduction Covenants implied by law Quiet enjoyment

Remedies Obligation not to derogate from grant Liability for acts of others Implied condition of fitness for habitation The obligation to repair Duty to take reasonable care for the safety of occupants Tenant’s obligation to use the premises in a tenant-like manner Tenant’s obligation to yield up possession Covenants implied by statute Statutory implied obligation on tenant to repair Statutory implied right of landlord to inspect premises Statutory implied right of re-entry Covenants by necessary implication Express covenants Covenant to repair Exception Inherent defects Measure of damages The covenant against assignment or subletting Covenant as to user Covenant to pay rent Option to renew The enforceability of covenants after assignment Privity of contract Assignment of the lease — privity of estate Assignment of the reversion Remedies Forfeiture of lease by landlord

Enforcement of the right of re-entry No right to forfeit if breach waived Forfeiture must be effective Relief against forfeiture Self-help Remedies of landlord and tenant in contract Repudiation, notice and relief against forfeiture The plea of set-off Bonds Statutory remedies Residential tenancies Introduction What is a residential tenancy? Creating residential tenancies Types of tenancies Parties’ obligations Quiet enjoyment Repairs Urgent repairs Rent Introduction Bonds Termination Termination by notice: without any ground Termination by notice: following breach Order for termination and possession Tribunal

Chapter 9

Planning Land Use by Private Agreement: Freehold Covenants Introduction

Privity of contract The running of covenants at common law The burden The benefit The running of covenants in equity The burden Covenant must benefit the land Covenant must be negative in substance Covenant must be intended to run with the land Covenant as an equitable interest The benefit Annexation of the benefit of the covenant to the land Express annexation Statutory annexation Identification of the land The covenant must ‘touch and concern’ the land Express assignment of the benefit of the covenant Creation of a building scheme Common vendor Benefit to all purchasers Purchase on footing that restrictions would enure to benefit all lots Planning instruments Construction of covenants Discharge of restrictive covenants By operation of law By agreement By statute Restrictive covenants and the Torrens system

Chapter 10

Easements and Profits à Prendre The characteristics of easements Dominant and servient tenements Formal requirements for creation of easements Easements in gross Accommodation of dominant tenement The dominant and servient tenements must not be owned and occupied by the same person The easement must be capable of forming the subject matter of a grant Types of easements Rights of way Rights to light and air Rights of support Party walls Fencing easements Other examples of easements Protection from the weather? Creation of easements Express and implied grants Easements expressly created Easements created by implication — implied grants Easements created by implication — implied reservation Acquisition by long user Rights of support Creation of easements by court order Remedies Extinguishment of easements Abandonment

Express release Alteration to the dominant tenement Unity of dominant and servient tenement Statutory extinguishment Easements and the Torrens system General exemption of unregistered easements to indefeasibility — Victoria, Western Australia and Tasmania Partial exemption to indefeasibility in favour of ‘omitted and misdescribed easements’ — other jurisdictions Enforceability of easements that do not come within the statutory exception Unregistered express easements Unregistered implied easements Prescriptive easements Profits à prendre Introduction — general Creation of profits à prendre Old system Torrens title Reform

Chapter 11

Mortgages Introduction The secured loan transaction When is a mortgage granted? How is a secured loan agreement structured? How does the law achieve a balance between the mortgagor and the mortgagee? How does a mortgage support the purchase of property?

The nature of mortgages Introduction The general law mortgage The Torrens system mortgage Priorities, mortgages and tacking General law Torrens land Tacking and priorities between Torrens system mortgagees Covenants in mortgages Remedies of the mortgagor Equitable doctrines protecting the mortgagor Clogs on the equity of redemption Penal provisions in mortgages Penal provisions in mortgages under the National Credit Code Remedies of the mortgagee Power of sale Statutory duty: notice to the mortgagor Equitable duty — conduct of sale Sale to an associate or a related party Auction sales Does the equitable duty amount to a negligence test? Timing of sale Statutory duties in the exercise of the power of sale Court-ordered sale Protection of purchaser from mortgagee in cases of breach of statutory and equitable duties Application of proceeds of sale

Application by mortgagor for injunctive relief to restrain exercise of power of sale Exceptions to the requirement of payment into court Foreclosure General law Torrens Right to sue on personal covenants Power to appoint a receiver Remedies of the mortgagee — equitable mortgages The mortgagor and mortgagee inter se Mortgagor’s right to redeem Mortgagee’s right to possession of land Torrens General law Power to lease Torrens General law Rights of mortgagor and mortgagee against third parties General law Torrens Index

A full bibliography and other student learning support is available on Campus at

[page 1]

The Concept of Property

CHAPTER

1

INTRODUCTION 1.1

Property is the institution by means of which societies regulate access

to material resources. As with all social institutions, property has a legal dimension. This book examines the legal principles and rules regulating the creation, transfer and enforceability of interests in things. Property rules vary greatly depending on time, place and historical circumstances. The rules governing property in traditional societies, for instance, differ greatly from those of contemporary societies. Moreover, the differences between the legal rules governing access to, and use of, things may differ greatly even between industrialised societies. Until recently, one of the major differences between capitalist and communist societies was the approach that these societies took to private property. Capitalist societies offer extensive protection to private property because of a belief that the ability to own private property is an essential incentive for wealth creation. By contrast, communist societies have traditionally favoured publicly-owned property, particularly in the sphere of

economic production, on the grounds that private property is the source of oppression and inequality. Today, most countries have mixed economies in which some resources are privately owned, some assets are owned by the State and free enterprise is subjected to some State regulation. Even Communist China now has private property enshrined in law. In the advanced Western democracies private property predominates, though certain resources (for example, beaches and public parks) are treated as common property that can be used by all members of the community. In Australia, the diversity of forms of property rules is reflected in the mix of traditional rules and practices alongside modern forms of property, as evidenced in Indigenous land rights. Private property in land was introduced at the time of colonisation, displacing, though not destroying, systems of Aboriginal law based on common ownership. The two highly divergent property regimes continue to co-exist today. 1.2

Property law is one of the constituent categories of private law. Private

law governs the relationships between private individuals and is to be contrasted with public law, which governs the relationships between individuals and the State, and between States. It is conventionally subdivided into property law, contract, tort and unjust enrichment. Property law defines the relationship between legal persons with respect to things. Because property is both a legal as well as a social institution, it is difficult, if not impossible, to understand property law in

[page 2]

isolation from its historical, economic and social context. Political and economic conditions have also had an important influence on the development of property law. Because property ownership confers political and economic power, citizens with large amounts of property often have greater influence than those who have little in determining what the basic structure of the law of property should be. The important role played by these causal factors means that property law cannot be fully explained in purely doctrinal terms. The objects of property also change in response to changes in social conditions. For instance, the development of new technology has forced courts and legislatures to consider novel questions such as whether human cells or body parts should be treated as property: see Moore v Regents of the University of California (1990) 793 P2d 479 (1.36C), and whether novel types of statutory rights such as grazing licences are property: see R v Toohey: Ex parte Meneling Station (1982) 158 CLR 327 (1.10). This chapter will examine the dominant categories of property in law. It will also focus on the shifting boundary between property rights and other types of private law rights, such as contractual rights, and personal rights, and the boundary between public rights and private property rights. Finally, the chapter will examine the rules that determine when types of property change their classification, as in the case of fixtures. 1.3

The study of property law reveals concepts which are basic to the legal

system, including notions of possession and title, the fragmentation of proprietary interests, the distinction between legal and equitable interests and the different ways in which common law and statutory regimes reconcile

competing claims to property interests. Traditionally, Australian law has emphasised the extent to which property law has been shaped by its historical origins in the English common law. More recently, the extent to which specialised forms of land tenure evolved in response to Australian conditions has been given greater emphasis as the native title cases Mabo v Queensland (3.77C) and Wik Peoples v Queensland (3.111C) show. But this emphasis is, in itself, a reflection of the historical importance of land as a form of wealth in England in earlier times. While problems concerning the protection and recovery of property interests are sometimes most clearly exemplified in cases involving land, excessive emphasis on real property tends to obscure the increasing contemporary importance of other forms of wealth (intellectual property, for example) and the extent to which the same questions arise in relation to other forms of property. Thus, wherever possible, this book illustrates the legal issues by examples drawn from both land law and the law relating to personal property. 1.4

Any understanding of the central principles of property law must be

preceded by a critical examination of the concept of property itself. At one level, the concept is significant because it is formally embodied in a number of legal rules which differentiate between proprietary and other interests. One example

is

the

constitutional

requirement

(s

51(xxxi))

that

the

Commonwealth may only acquire ‘property’ compulsorily if it does so on just terms. Another is the ability of the Family Court, under s 79 of the Family Law Act 1975 (Cth), to redistribute the ‘property’ of the parties. This provision also imposes limitations on the court’s ability to make orders in relation to financial resources, such as prospective entitlements to

superannuation, which do not come within the traditional definition of property. More fundamentally, an understanding of the concept enables the rules and procedures comprising property law to be placed within an intelligible analytical framework. The remainder of this chapter discusses four broad questions: What do we mean when we say that a person has a property right, and how do property rights fit into the general schemes of private and public law?

[page 3]

What are the major categories of property law? To what extent has property changed historically? What factors do courts and legislatures take into account in deciding whether or not to recognise new forms of property?

WHAT IS PROPERTY? 1.5

In his ‘Dialogue on Private Property’,1 Felix Cohen explores the nature

of property and provides a good introduction to analytical thinking concerning property by challenging assumptions often made about its meaning. He suggests a definition of the term ‘property’ which emphasises that to talk about property is to talk not about objects but about relations between human beings, or more accurately about relations between persons in relation to things (at 362–3). According to Cohen, the right to use and to

alienate (dispose of) the item is not always an essential attribute of private property, but the concept must at least involve the right of the owner to exclude others from doing something in respect of the object of ownership (at 369–70): C. … The criterion of use as a mark of ownership breaks down at both ends. We can have use without ownership [as in the case of a right to sing a song] and ownership without use [for instance, where a corporation owns copyright in a song]. What about the other half of your criterion, the possibility of charging others for the use of something? Suppose you secure a lease on an apartment with the condition that you can’t assign the lease, can’t sublease the apartment, can’t have pets or babies on the premises and can’t take in boarders. Might you not still have a property interest even though you couldn’t sell it? F. Yes, I suppose there is such as thing as non-saleable property … C. … I could charge you for walking across the Brooklyn Bridge if you were willing to pay for it and that would not be proof that I had a property right in Brooklyn Bridge, would it? F. No, but in that case I could walk across Brooklyn Bridge without paying you, and in the case of the song, if you owned the song, you could exclude me from the use of the song unless I made the payment … C. Well, then, we are really talking about a right of exclusion aren’t we? What you are really saying is that ownership is a particular kind of legal relation in which the owner has a right to exclude the non-owner from something or other … F. Yes, I think that is where [to] find a difference between property and other rights.

1.6

Cohen’s argument is heavily influenced by an earlier theorist, Wesley

Hohfeld, who concluded that the term ‘property’ tends to be used in three different senses: Sometimes it is employed to indicate the physical object to which various legal rights, privileges, etc., relate; then again — with far greater discrimination and accuracy — the word is used to denote the legal interest (or aggregate of legal relations) appertaining to

[page 4]

such physical object. Frequently there is a rapid and fallacious shift from one meaning to the other. At times, however the term is used in such a blended sense as to convey no definite meaning whatever.2

This discussion about property is further elaborated in the following extract. 1.7E

The Idea of Property in Law K Gray and S F Gray in Bright and Dewar (eds), Land Law: Themes and Perspectives, Oxford University Press, 1998, 15–18

Few concepts are quite so fragile, so elusive and so often misused as the idea of property. Most everyday references to property are unreflective, naive and relatively meaningless. Frequently the lay person (and even the lawyer) falls into the trap of supposing the term ‘property’ to connote the thing which is the object of ‘ownership’. But the beginning of truth about property is the realization that property is not a thing but rather a relationship which one has with a thing. It is infinitely more accurate, therefore, to say that one has property in a thing than to declare that the thing is one’s property. To claim ‘property’ in a resource is, in effect, to assert a strategically important degree of control over that resource; and to conflate or confuse this relationship of control with the actual thing controlled may often prove to be an analytical error of some substance. ‘Property’ is, rather, the word used to describe particular concentrations of power over things and resources. The term ‘property’ is simply an abbreviated reference to a quantum of socially permissible power exercised in respect of a socially valued resource. Used in this way, the word ‘property’ reflects its semantically correct root by identifying the condition of a particular resource as being ‘proper’ to a particular person. In this deeper sense … the language of ‘property’ may have more in common with ‘propriety’ than with entitlement; and the notion of a ‘property right’ may ultimately have more to do with perceptions of ‘rightness’ than with any understanding of enforceable exclusory title. It may be noted, furthermore, that the power relationship implicit in property is not absolute but relative: there may well be gradations of ‘property’ in a resource. The amount of ‘property’ which a specified person may claim in any resource is capable of calibration — along some sort of sliding scale — from a maximum value to a minimum value. Of course, where this value tends towards zero it will become a misuse of language to say that this person has any ‘property’ at all in the resource in question. Apart from such cases, however, it remains feasible — and indeed important — to measure the quantum of ‘property’ which someone has in a particular resource at a particular time. Far from being a monolithic notion of standard content and invariable intensity, ‘property’

thus turns out to have an almost infinitely gradable quality. And it follows, moreover, that to have ‘property’ in a resource may often be entirely consistent with the acquisition or retention by others of ‘property’ in the same resource. It is, in fact, the complex interrelation of these myriad gradations of ‘property’ which comprises the stuff of modern land law. But let us explore some of these ideas in a less abstract context. Gradations of property … This apparently straightforward analysis of property in land is, of course, capable of permutation through several hypothetical changes of circumstance. Suppose that, instead of [page 5] inviting you to dinner in our home, we installed you as a lodger in one of the attic bedrooms. In return for a weekly rent, you now enjoy the use of this room together with a share of the kitchen and bathroom facilities in the house. Or suppose, alternatively, that we converted a complete floor of our house into a self-contained flat which we let to you for a period of two years. Or even imagine that during our dinner party we agreed to sell you the entire house and have since transferred the registered title to you … Ambivalent conceptual models of property The task of the present chapter is to outline the various ways in which English law and perhaps, more generally, common law jurisprudence handles the idea of property in land. It will be argued that our dominant models of property in land fluctuate inconsistently between three rather different perspectives. It will be suggested that this doctrinal uncertainty — this deep structural indeterminacy — explains the intractable nature of some of land law’s classic dilemmas, whilst simultaneously impeding constructive responses to the more immediately pressing challenges of twenty-first century land law. The common law world has never really resolved whether property in land is to be understood in terms of empirical facts, artificially defined rights, or duty-laden allocations of social utility. Although these three perspectives sometimes interact and overlap, it remains ultimately unclear whether the substance of property resides in the raw data of human conduct or in essentially positive claims of abstract entitlement or in the socially directed control of land use. In short, the idea of property in land oscillates ambivalently between the behavioural, the conceptual, and the obligational, between competing models of property as a fact, property as a right, and property as a responsibility …

1.8

In determining whether a person has ‘property’ in a thing within the

meaning of the 5th Amendment to the US Constitution, the US Supreme Court considers the person’s relation to the thing, emphasising the rights to use the thing, to dispose of it and to exclude others. In the Aboriginal land

rights case Milirrpum v Nabalco (1971) 17 FLR 141 at 171 Blackburn J applied this approach as follows: I think that property in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate. I do not say that all these rights must co-exist before there can be a proprietary interest, or deny that each of them may be subject to qualifications.

It follows that it is possible to say I have a full property right in my car because I have the right to use and enjoy it, to alienate it, that is, to transfer it to whomsoever I like, and the right to exclude others from it. But importantly, as Blackburn J emphasises in the above quote, though it is ‘generally’ the case that the meaning of property in legal discourse implies these elements, it is nonetheless possible for property to exist where one or other of these features is missing as the following examples demonstrate.

The right to use or enjoy 1.9

In Yanner v Eaton (1999) 201 CLR 351, Gleeson CJ, Gaudron, Kirby

and Hayne JJ concluded that the term ‘property’ does not necessarily mean full, exclusive or beneficial

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ownership. They interpreted the term ‘property’ in s 7(1) of the Fauna Conservation Act 1952 (Qld) as follows: In the Fauna Act, as elsewhere in the law, ‘property’ does not refer to a thing; it is a description of a legal relationship with a thing. The concept of ‘property’ may be elusive. Usually it is treated as a

bundle of rights. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing … Much of our false thinking about property stems from the residual perception that ‘property’ is itself a thing or resource rather than a legally endorsed concentration of power over things and resources … [At [17]; emphasis added.]

In Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 at 431, Finkelstein J referred to Hohfeld’s view that ‘property comprised legal relations not things’, and that it was not necessary that ‘the dominion of the owner be absolute or fixed’. In the same case Sackville J (at 426) emphasised that: From a lawyer’s perspective, the concept of property is inextricably interwoven with the content of legal rules and principles. As Jeremy Bentham observed (Theory of Legislation, Kegan Paul ed (1911), 113): ‘Property and law are born together; take away laws, and property ceases … Doubtless it is unwise to be dogmatic about the indicia of a proprietary interest … The test of whether there has been “an acquisition of property” for the purposes of s 51(xxxi) of the Constitution, for example, may not be the same as that for determining whether a floating charge constitutes a “security” for the purposes of legislation preserving priority among lenders or is subject to the Statute of Frauds …’

The right to alienate 1.10

As Mason J noted in R v Toohey; Ex parte Meneling Station Pty Ltd

(1982) 158 CLR 327 at 342–3: Assignability is not in all circumstances an essential characteristic of a right of property. By statute some forms of property are expressed to be inalienable. Nonetheless, it is generally correct to say, as Lord Wilberforce said [in National Provincial Bank Limited v Ainsworth [1965] AC 1175 at 1247–8] that a proprietary right must be ‘capable in its nature of assumption by third parties’ …

There are many examples of non-assignable rights treated as property

rights by courts and legislatures. In addition to the frequently encountered non-assignable lease referred to by Cohen in 1.5, in Re Potter (decd) [1970] VR 352, for example, a beneficiary under a will was held to have acquired a non-assignable right to reside in a certain house as long as he desired. This right was clearly regarded by Menhennitt J as proprietary in character. It has also been held that the so-called ‘statutory tenancy’ of a tenant whose lease has expired, but who remains in possession pursuant to legislation controlling rents and security of tenure, has a non-assignable interest in the land.3 Also, in New South Wales, ‘community land’ held by local councils for the community benefit is declared by statute to be inalienable.4

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The right to exclude 1.11

Because property typically entails a right to exclude others, it is an

essentially private right exercisable against the general public, including the State. It therefore makes little sense to talk about rights that all citizens, as citizens, jointly enjoy over things as property rights. These types of rights are public rights, because they are rights equally shared with other members of the public over land or goods. An example of such a right is the common law public right to fish and navigate in the open sea.5 This right extends to tidal waters.6 These rights were brought to Australia on settlement, and continue to apply, unless modified by statute.7 Public rights are to be distinguished from public ownership of utilities or industries, where the State owns assets

on behalf of the public so as to regulate their use for the public benefit. In this instance, the State ownership is of a similar nature to that of a large corporation. There are no ‘public rights’ exercisable in relation to such assets. Public rights are often conferred by statute. The following case provides a typical example. 1.12C

Stow v Mineral Holdings (Australia) Pty Ltd (1977) 180 CLR 295; 14 ALR 397 High Court of Australia

[The respondents were conducting mining activities on land adjacent to the South West National Park in Tasmania. The appellants lodged objections to mining with the warden on the grounds that prospecting or mining would damage the park. The warden concluded that the evidence suggesting that mining would have a deleterious effect was ‘overwhelming’, and refused to grant the respondents a prospector’s licence. The respondents were successful in appeals to the Supreme Court and to the Full Court.] Aickin J: The critical question under the [Mining] Act in its present form is the nature of the jurisdiction conferred upon the warden and the effect of an order made by him. It is in my opinion clear, as was held by the Supreme Court, that the warden has no power whatever to accept or reject an application; that is a power vested in the Minister who is to act upon the recommendation of the Director of Mines. It is for the Minister to determine whether as a matter of policy it is desirable that the licence should be granted or refused. It is for him to weigh up the relative merits of the economic advantages said to flow from the successful establishment of a mining operation and the other competing contentions as to what is, in the public interest, a suitable use to which the land may properly be put … Since the only permitted objectors are those claiming some estate or interest in the land, a possible implication is that the Act contemplates that objections will be based only on conflicting interests in the land or possible adverse effects upon the estate or interest of the objector. The first question to be considered is whether any of the objectors had an estate or interest in the land. In my opinion it is clear that none of them had an estate or interest in the land and indeed none of them claimed to do so … The expression ‘interest in land’ is not defined in [page 8]

any relevant Act, nor is the compound expression ‘estate or interest in land’. The word ‘right’ in that definition does not in its context mean a public right; it means an individual right of a proprietary nature and I do not think that the word ‘demand’ in this context has any more extended meaning. In my opinion the ordinary meaning of the compound expression ‘estate or interest in land’ is an estate or interest of a proprietary nature in the land. This would include legal and equitable estates and interests, eg, a freehold or a leasehold estate, or incorporeal interests such as easements, profits à prendre, all such interests being held by persons in their individual capacity. It does not embrace interests in which the person concerned has no greater claim than any other member of the public. All members of the public have a right to pass freely along or across public highways but none have in their capacity as members of the public any estate or interest in the land. Likewise members of the public generally may be entitled pursuant to particular statutes to use specified areas of Crown Land for the purpose of recreation. However, statutes such as the National Parks and Wildlife Act 1970 (Tas) were relied on to give rights to all members of the public as such. All members of the public may have the right to go upon such land in the sense that they may freely walk thereon or in defined portions thereof and may resist attempts by the Crown or anyone else to eject them from such land. The fact that some are more disposed than others, derive more benefit therefrom and use the statutory right more often than others, does not elevate that which is a public right enjoyed by all members of the public equally into a private right capable of being described as an estate or interest in the land. [Stephen and Mason JJ agreed; Barwick CJ and Murphy JJ dissented, but on a different point.]

1.13 Questions 1.

Why is a right to walk through a national park not a property right? What type of right is it? Is it a public right?

2.

How does one distinguish between a private right and a public right?

3.

Do you agree that private property must involve a right to exclude others from doing something?

4.

Consider the public rights to fish, and to navigate, referred to in 1.11. Why are they not property rights?

5.

Consider the case of a landlord who leases a building to a tenant

for a term of five years. Does the landlord have a right to ‘exclude others’ from the building during the term of the lease? Is it necessary to modify the concept of the ‘right to exclude’ in order to accommodate this kind of case? If so, how? Might there be cases in which a right to exclude exists without property?8 6.

Is it reasonable to argue that because the holder of a public right of access to a park can exclude others from infringing that right, it is appropriate to describe it as a proprietary right?

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1.14

The fundamental elements of property can be seen by examining the

boundaries that property rights share with other classes of rights within the scheme of private law. Private law can be subdivided into two distinct categories: (i) property rights; and (ii) obligations. The latter category refers to the rights of persons against other persons that arise from certain events. Another way of emphasising this contrast is by distinguishing between property rights on the one hand, and personal rights on the other. The rights differ to the extent that property rights are in rem (enforceable in respect of a thing), while personal rights are in personam (enforceable against a person). The categories of obligations, or personal rights, generally are contracts, torts and unjust enrichment. This broad spectrum of private rights is to be contrasted with the category of public law, which is sometimes referred to as civil rights, or political rights. Recently, the potential overlap between

property rights and a different category of rights originating in public law, namely human rights, arises in the Australian context in the appearance of human rights enactments in Victoria and the Australian Capital Territory.9 By examining the (sometimes blurred) boundary that property rights share with these other classes of legal rights, we will be in a better position to see the distinctiveness of property. The following material examines the boundary between property rights and some forms of personal rights.

PROPERTY RIGHTS AND CONTRACTUAL RIGHTS 1.15

As we have seen above, in general, property rights are rights over

things enforceable against other persons. Contractual rights, by contrast, are rights enforceable against particular persons. They do not necessarily give rise to rights over things. Property rights, however, may arise from a contract, so there is an overlap between the two systems of rights. Take the example of a contract to sell a car. If A offers to sell the car to B for a particular sum, and B agrees, but A later refuses to do so, B’s primary right is to sue A for damages. This right to get redress from A for the loss is a personal right. But if B can secure an order from a court that A perform his or her obligations under the contract — the remedy of specific performance — it is possible to say that B then has a proprietary right over the car: the seller is under an obligation to deliver up possession, and transfer title, of the car to the purchaser. In relation to land, as we shall see later in 4.50–4.61, contracts for the sale of an interest generally attract the remedy of specific performance. In these

examples of contracts, two sets of legal relationships exist alongside one another: the personal right to sue for damages on the contract, and the proprietary right exercisable over the thing. A separate distinction is evident where rights granted over a thing by its owner have been held by the courts to be insufficiently substantial to confer on the non-owner a definable interest right in the thing. The clearest example of these rights is the licence in land, as noted in 1.7E above. The licence is an example of a right which is an insufficiently substantial ‘concentration of power’ over the thing in question. In general, therefore, even if licences are created by means of a binding contract, they do not give rise to proprietary interests. It is

[page 10]

helpful to examine the different types of licences to identify the boundary between property rights and other types of rights.

Licences: bare, contractual or coupled with an interest 1.16

A licence arises when permission is given by one person to another to

do an act on the licensor’s land which would otherwise constitute a trespass.10 For example, where a landowner permits a person to picnic on the land, or to camp on it, a licensor-licensee relationship is created. This kind of licence is known as a bare licence, since it is not associated with a contractual

relationship between licensor and licensee, nor with the grant of a proprietary interest in the land. It has always been accepted that a bare licence may be revoked at the will of the licensor, and for any reason whatever.11 The licensee becomes a trespasser if he or she does not leave the land within a reasonable time after revocation of the licence. A second type of licence arises where the licence is created by means of a contract, as for example, when a person purchases a ticket to see a film. If the ticket holder breaches the terms of the contract pursuant to which the licence is granted then the contract may be terminated on ordinary contractual principles. Where the licensee is not in breach the question of revocability becomes more difficult. At law, the position was taken that a licence could be revoked at the will of the licensor, though by such a revocation the licensor might become liable for breach of contract. The theatre or stadium proprietor is entitled at law to eject the patron at any time notwithstanding the purchase of the ticket and is not liable in assault provided no more than reasonable force is used.12 The proprietor’s contractual liability in general is limited to the price of the ticket, although the measure of damages may be greater if the contract can be interpreted as containing an express or implied promise to provide enjoyment or pleasure.13 A third example of a licence arises where the licence is coupled with the grant of a proprietary interest. In this case the licence cannot be revoked. So, if A grants B a profit à prendre (a right to remove a natural product from the land of another), permitting B to enter A’s land and quarry for gravel, the licence to enter the land cannot be revoked as long as the quarry is in operation.14 1.17

The cases appearing below deal with two separate problems. The first

problem concerns the revocability of a contractual licence as between the

original parties to the contract. At this point the question of the availability of the remedies of specific performance and injunction is crucial to determine whether it is possible to conclude that the licensee has some rights over the land. The second problem relates to the enforceability of the rights conferred by a contractual licence against a third party. If contractual licences are regarded as binding on third parties they come within the recognised concept of a proprietary interest and it is necessary to define their sphere of enforceability.

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Licences and original parties 1.18C

Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605; [1937] ALR 273 High Court of Australia

Latham CJ: The plaintiff sued the defendant respondent for damages for assault. The defence was that the plaintiff was trespassing on the defendant’s land and that the defendant’s servants and agents requested him to leave the land, which he refused to do, and the defendant’s servants and agents thereupon removed him, using no more force than was necessary for that purpose, and that the said removal of the plaintiff was the alleged assault. The plaintiff, for reply on equitable grounds, said that the defendant was conducting a race meeting on the said land and that in consideration of the plaintiff paying four shillings the defendant promised to allow him to remain on the racecourse and view the races, gave him leave and licence to enter and remain on the racecourse for that purpose and promised not to revoke the licence; that the plaintiff paid four shillings, but the defendant, in breach of the promise alleged, revoked the leave and licence and assaulted the plaintiff in ejecting him from the racecourse. The defendant demurred to this pleading and the Full Court of the Supreme Court of New South Wales upheld the demurrer, following Naylor v Canterbury Park Racecourse Co Ltd (1935) 35 SR (NSW) 281, and ordered that judgment be entered for the defendant. The plaintiff has appealed to this court. The question which arises in the appeal is whether this court should follow the decision

in Hurst v Picture Theatres Ltd [1915] 1 KB 1; [1914–15] All ER Rep 836. The Full Court of the Supreme Court of New South Wales in Naylor’s case refused to apply Hurst’s case in New South Wales. The facts pleaded in this case are indistinguishable from those in Hurst’s case. In Hurst’s case it was held that Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351; [1843–60] All ER Rep 190, even if originally rightly decided, was no longer good law … The doctrine of Wood v Leadbitter is clear and coherent. If a man creates a proprietary right in another and gives him a licence to go upon certain land in order that he may use or enjoy that right, the grantor cannot divest the grantee of his proprietary right and revest it in the grantor, or simply determine it, by breaking the agreement under which the licence was given. The grantee owns the property to which the licence is incident, and this ownership, with its incidental licence, is unaffected by what purports to be a revocation of the licence. The revocation of the licence is ineffectual. Easements and profits à prendre supply examples of interests to which licences to enter and remain upon land may be incidental. The majority judgment in Hurst’s case modified, if it did not reject, the law of Wood v Leadbitter by holding that a ‘right to see’ a spectacle was an interest which could be granted so that a licence to go into a theatre or a racecourse to see a play or to witness races was, when given for value, irrevocable because it was a licence coupled with an interest … [T]he decision, in my opinion, ignores the distinction between a proprietary right and a contractual right. In Wood v Leadbitter there was obviously a contractual ‘interest’. The plaintiff had bought and paid for a contractual right to go upon land for the purpose of witnessing a spectacle. But this fact, which was treated as irrelevant in Wood v Leadbitter, is made the foundation of the first ground of the judgment in Hurst’s case. In that case Buckley LJ interpreted ‘interest’ in a sense quite different from that in which the word was used in Wood v Leadbitter. The learned judge said that there was a grant of a right to come to see a spectacle. The licence is described [page 12] as ‘only something granted to him for the purpose of enabling him to have that which had been granted to him, namely, the right to see’. The ‘right to see’ is treated as the ‘interest’ which has been ‘granted’. It is clear that the learned judge used the word ‘grant’ in a sense very different from that in which it was used in Wood v Leadbitter. It was there used in relation to interests in land which were, if they existed at all, clearly proprietary interests. The right to see a spectacle cannot, in the ordinary sense of legal language, be regarded as a proprietary interest. … There is, strictly, no grant of any interest. What is created is something quite different, namely, contractual rights and obligations … In my opinion, the first ground upon which Hurst’s case was decided (that there was in that case a licence coupled with an interest) cannot be supported … It is clear that equity would never have decreed the specific performance of a contract to provide an entertainment. Equity would never have granted an unconditional injunction restraining the proprietor of a place of entertainment from excluding from that place a person who had bought a ticket of admission. Any injunction granted would necessarily

have been subject at least to the condition that the plaintiff coming into equity should behave himself with due propriety during the entertainment … Consider further a case where a building devoted to entertainment becomes overcrowded by persons who have bought tickets … If, however, the legal position is as stated in Hurst’s case, it is impossible for anyone (except possibly a constable) to remove any of the persons, either for the safety of the audience as a whole or in order to secure the observance of the law, without subjecting himself to the possibility of numerous actions for assault. It is doubtful whether such consequences were realised in Hurst’s case … A much more realistic approach [to implying a right to invoke the licence in certain circumstances] is provided by the application of the simple principle of Wood v Leadbitter, namely, that no ‘grant’ of any proprietary right, that is, of any jus in rem, has been made to the plaintiff. He has simply obtained a contractual right which is enforceable in personam by an action for damages. … I am of opinion, for reasons which I have stated, that Hurst’s case is manifestly wrong, and it is not possible to extract from it any general principle which is consistent with well-recognised principles of law. Hard cases may be put on both sides. One cannot but sympathise with the position of a person who is asked to leave a place of entertainment without just cause. On the other hand, there are grave inconveniences involved in the adoption of Hurst’s case as sound law, and it may be added that, if the law is not correctly stated in Hurst’s case, such a person may successfully avoid indignity by recognising the law and going quietly … In my opinion Naylor’s case was rightly decided and the Full Court was right in this case in upholding the demurrer. The appeal should be dismissed. Evatt J: … But the question remains, was Hurst’s case correctly decided? There are several aspects from which the decision may be regarded. First, it is critical of the strictly legal position laid down in Wood v Leadbitter … The main part of the reasoning in Wood v Leadbitter was based on the well-known judgment of Vaughan CJ in Thomas v Sorrell (1673) Vaugh 330 at 351; 124 ER 1098 at 1109, distinguishing there between licences or ‘dispensations’ (eg to come into a man’s house), and licences coupled with a grant of property (eg a licence to hunt and carry away the deer). It must be conceded that the ‘grants’ intended to be referred to in Wood v Leadbitter (a licence ‘coupled with a grant’) was a grant of some ascertainable property which is capable of being granted: Holdsworth’s History of English Law, vol vii, p 328. It may therefore be admitted that [page 13] Lord Wrenbury went too far in assimilating the right to view an entertainment with the grant of a proprietary right in or over land or chattels. But, in my opinion, as an application of equitable principles to the complex relationship between entrepreneur and patron, Hurst’s case is a convincing decision. As early as 1901, Cozens-Hardy MR suggested that Wood v Leadbitter might be of ‘very

doubtful’ validity if equitable principles were to be applied to its facts: Lowe v Adams [1901] 2 Ch 598 at 600 … Buckley LJ’s view was (a) that a contract giving a licence to enter and remain on land solely for the purpose of viewing an entertainment should be regarded by a court of equity as not subject to arbitrary revocation during the entertainment by a party to the contract in his capacity as occupier of the land, and (b) that a court of equity should give efficacy to a contract not to exercise the legal right of revocation of the licence, by restraining the occupier either from exercising such legal right, or, at any rate, from subsequently setting up to his own advantage his own breach of contract and his own attempted revocation of the licence … But a broad and just principle of equity appears from the judgments of Buckley LJ and Kennedy LJ to the effect that, although a court of law will still treat the transaction between entertainment proprietor and patron as creating only a revocable licence, a court of equity should regard the licence as irrevocable in all proceedings in which equitable principles have to be recognised. A consequential rule is that a defence to an action of assault that the licence had been duly revoked by the proprietor, though good at law, would be contrary to the equitable principle of irrevocability of licence and the equitable principle should prevail so as to avoid the defence. I think the fallacy in the criticism of Hurst’s case lies in the continuous insistence upon discovering a proprietary right as a condition of equitable intervention … As a Canadian commentator has recently said, in relation to the theory that a strict ‘property’ interest must be the foundation of the intervention of equitable jurisdiction, ‘the danger in the application of the limitation lies in the circumstances that unenlightened courts are apt to apply it as a limitation of their jurisdiction, except in orthodox property interest cases, even though the situation is one to which the injunctive method is peculiarly appropriate’: 10 Can BR 175. In my opinion, the appeal should be allowed, and judgment entered for the plaintiff on the demurrer. [Dixon, Starke and McTiernan JJ delivered judgments to the same effect as Latham CJ.]

1.19 Questions 1.

If the High Court in Cowell’s case had ruled in favour of the plaintiff, would that effectively have created a proprietary interest in the plaintiff? Does Latham CJ assume that a decision in favour of the plaintiff would have had that result?

2.

As a matter of policy, what should have been the result in Cowell’s case? Latham CJ suggests that certain inconvenient results would

stem from a decision in favour of the plaintiff. Would such a decision necessarily produce these inconvenient results? 3.

Does Cowell’s case stand for the proposition that equity will never intervene to prevent the revocation of a licence in breach of contract, except in the case of a licence coupled with the grant of an interest? If not, what is the ratio decidendi of Cowell’s case?

[page 14]

4.

Why is Latham CJ so definite in asserting that a court of equity never specifically enforces a contract to provide entertainment? Or is the plaintiff asking for something less difficult?15 Refer to Gray and Gray’s analysis above. In their terms, the rights conferred by the licence are ‘land-based rights … at all times essentially personal …’ Does this argument offer some insight as to the rationale that underpins the majority judgments, and that of the case law generally on the enforceability of licences?

1.20

More recent case law has not followed Cowell’s case in every respect.

In certain circumstances courts have determined that equity may intervene to prevent a contractual licensor from pleading that the licence has been effectively revoked (although in breach of contract). In other words, equity may treat a contractual licence as irrevocable and determine the rights of the parties accordingly. In Heidke v Sydney City Council the council agreed to

allow a youth group to use an oval for sporting purposes on a number of agreed dates.16 The agreement was made for valuable consideration. The council repudiated the agreement and refused to allow members of the group to use the oval on the first of the agreed dates. Hardie AJ concluded (a) that the contract contained no express or implied term allowing revocation; and (b) that the award of damages to the plaintiff in this case would not be adequate compensation for their loss. He granted an injunction preventing the council from repudiating the agreement. Accordingly, the plaintiffs were able to exercise their rights to use the oval on the agreed dates. In Verrall v Great Yarmouth Borough Council,17 the English Court of Appeal upheld the grant of a decree of specific performance of a contractual licence (to use a hall for a two-day annual conference). The licensor, the council, had repudiated the agreement to allow the National Front (an extremist anti-immigration party) to use the hall, following a change in the political make-up of the council. The court held that the contract contained an implied stipulation that the licence would not be wrongfully revoked. One factor relied on by the Court of Appeal in deciding to exercise its discretion to order specific performance of the contract was the importance of allowing free political discussion. 1.21

The general principles governing the availability of specific

performance will be central to the grant of equitable relief. It is sometimes said that a decree of specific performance is available to a plaintiff in two situations. The first situation is where the contract between the parties is executory. The plaintiff seeks to have the transaction completed in order to put the parties in the position which was intended by the contract. The

parties’ rights are settled by the court ordering that a document be executed, or some other formal act be performed, which will thereafter define the parties’ rights and duties.18 A typical example is where parties enter into an agreement for a lease which the defendant repudiates, and the court orders the agreement

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be specifically performed by the execution of a lease in proper form. The second situation arises where the parties have entered into a final and formally valid agreement, but a decree of specific performance is required to enforce a particular contractual obligation.19 The remedy in each case is discretionary and flexible. The court may refuse a decree on the basis of such discretionary considerations as hardship to the plaintiff or the defendant; lack of ‘clean hands’ by the plaintiff; or delay or acquiescence on the part of the plaintiff.20 1.22

Generally, equity will not intervene to compel the performance of

services or to compel the maintenance of a personal relationship, such as an employment relationship, between the parties.21 Nor will equity in general intervene where the granting of a decree for specific performance would involve the court in constant supervision.22 Hardie AJ in Heidke v Sydney City Council (1952) 52 SR (NSW) 143 (at 149) provided the following overview of the kinds of agreements for which equitable remedies will not be available to prevent breaches of contractual licences:

There is no doubt that in many cases, where a licence to go upon land is granted, equitable remedies are not available. In such case, the licence is part and parcel of an agreement which courts will not enforce directly or indirectly — agreements under which employees have rights to use and occupy premises of the employer; agreements under which building contractors have a right to go on land and build; agreements under which share-farmers have a right to use the land of the owner; and agreements under which boarders are entitled to use premises of the owner of the boarding establishment. In those cases, equitable remedies are not available, mainly for the reason that they are contracts which involve a substantial element of personal service and thus are not susceptible of direct or indirect enforcement by a court of equity.

A court will not grant an injunction to prevent wrongful revocation of a contractual licence in respect of contracts for which the decree of specific performance is not available. In Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93 the plaintiff builder sought an injunction to prevent eviction from the building site until the work was completed. Helsham J refused to grant an injunction on the grounds that the licence was not coupled with an interest in the land; and as a building contract, it would not in general attract the remedy of specific performance. His Honour added that even if the contract contained an implied term that it would not be wrongfully revoked he would have not exercised his discretion to grant the builder an injunction. This was a case in which the licence was secondary to the object of the contract, which was to enable the licensee to build on the land. In a case where the licence itself is the subject matter of the contract, a court will more readily grant specific enforcement of an express or implied promise not to revoke it wrongfully.23

[page 16]

In New South Wales Rifle Association Inc v Commonwealth (2012) 293 ALR 158, the plaintiff Rifle Association occupied an area of Commonwealth land on the Malabar Headland pursuant to a contractual licence for use as a rifle range. The Commonwealth proposed to transfer the land to the State of New South Wales for use as a national park, which would be inconsistent with the plaintiff’s use of the land as a rifle range. The plaintiff sought an injunction to restrain an anticipatory breach of contract. White J granted an injunction to restrain the Commonwealth from transferring the land, unless the transfer were on terms that entitled the plaintiff to enforce against the transferee the rights it enjoyed under its licence granted by the Commonwealth. Is it possible to say, as a result of this decision, that the plaintiff licensee had a property right over the area of land? Consider this question in relation to the material in the next section. In order to determine whether a licence has the full characteristics of a property right, we need to examine whether it is enforceable against third parties: that is, whether it confers a full ‘right to exclude’.

Licences and third parties 1.23

If it is accepted that a contractual licence may be irrevocable by the

licensor, at least in certain circumstances, it follows that the licensee has some limited property right in the land. In Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 Davies J (at 700) held that where equity will grant the decree of specific performance of a licence, the licensee acquires a ‘proprietary interest in the land, beyond a mere personal interest to

use the land in common with others’. But the measure of a full proprietary interest is generally considered to go beyond this: it is established not just by whether it is specifically enforceable against the grantor, but can also be enforceable independently against third parties. If the licence is so enforceable, it has assumed a more enduring proprietary character. It has been transformed from a right against an identifiable person (in personam) into a right over the thing (in rem), that is, the land itself. 1.24C

King v David Allen & Sons, Billposting Ltd [1916] 2 AC 54; [1916–17] All ER Rep 268 House of Lords

[The appellant held the fee simple estate in certain premises. By an agreement made in July 1913 the appellant (called in the agreement ‘the licensor’) agreed with the respondents (called ‘the licensees’) to give them permission to affix bills and posters to a wall on the side of a picture theatre to be erected on the premises. The ‘licence’ was to last for a term of four years from the date the theatre was erected and thereafter was terminable on six months’ notice by either party. The respondents agreed to pay a rental of £12 per annum. The appellant undertook that while the licence remained in force, he would not permit any other person to affix any bills or posters on the wall. In August 1913, the appellant agreed with the trustee for a company about to be formed to grant a lease to the company for 40 years and to assign his interest in the agreement the appellant had made with the respondents. The trustee agreed that when the new company was registered the company would execute the lease and ratify the agreement between the appellant and the respondents. In due course the company was incorporated and executed the lease, but the agreement made with the respondents was not referred to in the lease, and its benefit was not assigned

[page 17]

to the company. The theatre was completed in May 1914. In June 1914, the respondents attempted to post their bills on the theatre wall, but were forcibly prevented by the company’s

servants. The appellant, who was the director of the company, protested against the action of the company and his co-directors. He did his best to have the agreement of July 1913 honourably kept, but without success. Thereupon the respondents commenced the present action against the appellant, claiming damages for breach of the agreement. The appellant, while denying liability, applied to bring in the company as third party, but the application was refused. The Court of Appeal in Ireland affirmed a judgment in favour of the respondents for £80 damages.] Lord Buckmaster LC: My Lords, it is impossible to approach the consideration of this case without feeling and expressing great regret for the unfortunate position in which the appellant, Mr King, has found himself. He seems to me to have acted throughout the whole of these transactions with perfect straightforwardness and with a sincere and anxious desire to discharge the obligation which he undertook towards David Allen & Sons Ltd; but by circumstances which have passed beyond his control there has, in my view, been a breach of his obligation to the respondents, and for that breach he must be made responsible … [I]t is obviously a very undesirable thing to say any words by way of criticism of persons who are not represented before your Lordships’ House, and I will therefore pass by the temptation to comment upon this action of the company, an action which appears to have been insufficiently and indeed inaccurately explained in some of their letters. The matter then is left in this way. There is a contract between the appellant and the respondents which creates nothing but a personal obligation. It is a licence given for good and valuable consideration and to endure for certain time. But I fail to see … that there is any authority for saying that any such document creates rights other than those I have described. A case of Wilson v Tavener [1901] 1 Ch 578 was indeed referred to, but it really affords no assistance, for there the right conferred was to erect a hoarding upon the defendant’s ground, while in the present case the sole right is to fix bills against a flank wall, and it is unreasonable to attempt to construct the relationship of landlord and tenant or grantor and grantee of an easement out of such a transaction, and I find it difficult to see how it can be reasonably urged that anything beyond personal rights was ever contemplated by the parties. Those rights have undoubtedly been taken away by the action on the part of the company, who have been enabled to prevent the respondents from exercising their rights owing to the lease granted by Mr King, and he is accordingly liable in damages, although it was certainly not with his will, and indeed against his own express desire, that the company has declined to honour his agreement. My Lords, for these reasons I am of opinion that this appeal must be dismissed. Earl Loreburn: My Lords, I agree in the opinion expressed by the Lord Chancellor, and with him I greatly regret the position in which Mr King has been placed, which seems to be hard upon him. He has behaved perfectly honestly in the whole business, and one cannot help regretting the expense to which he has been put. I have very little to add to what has been said, but I look at the case in this way. The plaintiffs say that Mr King promised them for four years the use of a certain wall for advertising purposes by the agreement of 1 July 1913, and they say that after that Mr King demised [that is, leased] that land, and that Mr King’s lessees refused to make good

the promise in regard to [the] advertisement. Well, if the agreement of 1 July, which purports to be on the face of it a licence, was equivalent to creating an incorporeal hereditament [for example, an easement] or a sufficient interest in land, Mr King did not break his contract in making the lease, and would not be responsible for any trespasses that were committed by his licensees. But we [page 18] must look at the document itself, and it seems to me that it does not create any interest in land at all; it merely amounts to a promise on the part of Mr King that he would allow the other party to the contract to use the wall for advertising purposes, and there was an implied undertaking that he would not disable himself from carrying out his contract. Now Mr King has altered his legal position in respect of his control of this land. Those to whom he granted the lease have disregarded his wishes and refused to allow his bargain to be carried out, and they have been practically enabled to do so by the reason of the demise that he executed. In these circumstances it seems to me that there has been a breach in law of the contract of 1 July, and Mr King has disabled himself from giving effect to it as intended by parting with his right to present possession. That is enough to establish a case for damages against Mr King. There may be a remedy over against the lessees. I say nothing of that, because they are not here, and I do not wish either to encourage or to discourage any further proceedings; but this I think is clear: that the existence of such a remedy, if remedy there be, does not release Mr King from his liability to answer for breaking the contract which he made. Lord Atkinson: My Lords, I concur and I have nothing to add. Appeal dismissed.

1.25

It is clear from the court’s reasoning that the parties had failed to

create a proprietary interest in the building. It follows that a licence does not confer a sufficient plenitude of rights over the land to qualify as a proprietary right. And only proprietary rights are enforceable against third parties. Also, it is clear from the judgments that whether or not the licence was irrevocable against the licensor, and might attract the remedy of an injunction or specific performance, it would still not be enforceable against the third party. As Meagher et al conclude: ‘What is meant by denying that he [the licensee] has an interest in the land is to deny that he has an estate or interest recognised as

such by law or equity … It does not follow that he should necessarily be without curial remedies to remain on the land’.24 But the parties could have created a proprietary interest, as the court acknowledged, if the instrument clearly conferred a lease or easement over the land. In Claude Neon Ltd v Melbourne and Metropolitan Board of Works (1969) 43 ALJR 69 a majority of the High Court held that the parties intended to create a lease over the roof, parapets and part of the exterior walls by a grant to the appellant that conferred a right of exclusive possession over these parts of the building.

1.26 Questions 1.

If Mr King had acted ‘perfectly honestly’, why was he liable in damages to the billposting company?

2.

Earl Loreburn refers to the possibility of Mr King being able to sue the theatre company (the lessees) to recover the damages he was obliged to pay to the billposting company. On what principle might Mr King have been able to maintain such an action?

3.

Why was the billposting company unable to proceed against the theatre company directly?

[page 19]

4.

As a result of the agreement with Mr King, what rights did the billposting company obtain in the premises? Did the company acquire a proprietary interest?

5.

Against whom could the company enforce its rights?

6.

Against whom could a tenant of the land under a properly executed lease enforce his or her rights?

7.

Why does the House of Lords regard the billposting company as having only a licence over the premises?

8.

What is the difference between the rights of a ‘licensee’ and those of a tenant under a lease? See Chapter 8.

9.

What are the policy reasons in favour of withholding proprietary status from licensees? Why should licensees not be protected in the same way as lessees are?

1.27

It is important to note that an interest is not a proprietary interest

simply because it is enforceable against third parties. Such reasoning, as Kevin Gray and Susan Francis Gray emphasise,25 is viciously circular: If naively we ask which rights are proprietary, we are told that they are those rights which are assignable to and enforceable against third parties. When we then ask which rights these may be, we are told that they comprise, of course, the rights which are traditionally identified as ‘proprietary’. Property is property because it is property; property status and proprietary consequence confuse each other in a deadening embrace of cause and effect.

This point has been acknowledged by the High Court. In Yanner v Eaton (1999) 166 ALR 258 a majority of the court concluded that this ‘apparent circularity of reasoning … may illustrate some of the limits to the use of “property” as an analytical tool’ (per Gleeson CJ, Gaudron, Kirby and Hayne JJ at 264). A preferable approach is to see in property rights, as Blackstone

insisted, a distinctive measure of ‘despotic dominion which one man claims over the external things of the world, in total exclusion of the right of any other individual in the universe’.26 By this definition, despite its overstated and exaggerated tone, the licence does not qualify as a proprietary right because the licensee is given insufficient dominion over the land. In Gray and Gray’s terms, there is too little ‘legally endorsed concentration of power’ over the land.27 It is in consequence of this fact that the law does not allow this right, even where it is enforceable against the licensor, to bind third parties. This rule is no less applicable in cases where, as in King, third parties have notice of it.

[page 20]

1.28C

Georgeski v Owners Corporation Strata Plan 49833 (2004) 62 NSWLR 534; 12 BPR 22,573 Supreme Court of New South Wales

[The plaintiff held a licence from the Crown over a portion of riverbank and the abutting riverbed on the Georges River in Sydney. In accordance with the terms of the licence, the plaintiff built a jetty and a slipway on it. The defendants held an easement of way along the western edge of the plaintiff’s land down to the riverbank. The plaintiff sought an order declaring her rights over the jetty and slipway, and an injunction prohibiting the defendants from trespassing on them.] Barrett J: I have concluded that the plaintiff’s right of occupation rests in contract only (whether or not there is an interest in the nature of a profit à prendre to take away the jetty and the slipway after termination of the licence) and that she has no leasehold or other right of possession in respect of the relevant land, being land of which the jetty and the slipway, as fixtures, form part. The plaintiff’s claims against the second and third defendants must be considered in the light of that conclusion. The claims for injunctive relief … proceed on the footing that the second and third defendants are, as against the

plaintiff, capable of committing trespass by entering upon the jetty or the slipway; also that they are, as against her, legally precluded from ‘interfering with [her] enjoyment of’ the jetty and the slipway. The declarations the plaintiff seeks … are predicated on the existence of a legal right of the plaintiff that is inconsistent with (and excludes) an entitlement of the second and third defendants to ‘use’ the jetty and the slipway otherwise than for certain purposes … Resisting trespass to land Against that background, I return to the question of the position that a plaintiff must occupy in relation to land to support a claim based on trespass to that land. In Western Australia v Ward (above), McHugh J said (at [504]): In contrast to the lessee, a licensee, whose occupation is wrongly terminated or interfered with, must sue in contract or for some tort other than trespass to the land. If wrongly ejected from the land, the licensee cannot maintain an action in ejectment. If ejected by the grantor, the licensee may be able to obtain an injunction restraining the grantor from breaching the personal contract. If ejected by a stranger, the licensee may have an action in trespass to the person or some other tort. But in neither case is the action of ejectment or trespass to land available to the licensee … This result emerged because trespass to land entails interference with possession and is maintainable only by someone who has a right of possession. As between landlord and tenant, it is the tenant who may sue for trespass. As between licensor (freeholder) and licensee, where no right of possession is involved, it is the licensor who may sue for trespass. The latter proposition requires qualification where the licence is coupled with the grant of an interest, such as a profit à prendre. In such a case, the licensee may, because of the interest, sue in trespass for direct interference with the subject matter of the grant, although if the interest is equitable only the remedy may be confined to equitable relief. But the remedy, whether at law or in equity, is merely commensurate with the interest, as distinct from the contractual right with which it is associated: see Fitzgerald v Firbank [1897] 2 Ch 96; Moreland Timber Co Pty Ltd v Reid [1946] VLR 237. [page 21] It was submitted on behalf of the plaintiff that the traditional approach to which I have referred requires re-examination in the light of the decision of the English Court of Appeal in Manchester Airport plc v Dutton [2000] 1 QB 133. That case arose from plans by the owner of the airport at Manchester to build a second runway in such a position that its flight path would be over a wood owned by the National Trust. To make the new runway safe, some trees in the wood needed to be lopped or felled. The National Trust granted to the airport company a licence to enter and occupy the wood for the purpose of removing trees. Before grant of the licence, however, protesters had entered the wood and set up camps preventing the carrying out of such works. The airport company, having been granted the licence, brought summary possession proceedings against these occupiers and was successful. The Court of Appeal (Laws and Kennedy LJJ, Chadwick LJ

dissenting) dismissed an appeal and the House of Lords refused leave to appeal. Chadwick LJ in dissent took an approach consistent with traditional trespass jurisprudence: The question is whether a person who has a right to occupy under a licence but who does not have any right to exclusive possession can maintain an action to recover possession. But, in that context, the observations of Windeyer J in the High Court of Australia, in Radaich v Smith (1959) 101 CLR 209 at 222, adopted with approval by Lord Templeman in Street v Mountford [1985] 2 All ER 289 at 300; [1985] AC 809 at 827, are of relevance. Laws LJ, with whom Kennedy LJ agreed (adding observations of his own), expressly rejected this line of reasoning. Laws LJ said that in the older cases one could hear the ‘rattle of mediaeval chains’ resonating in the evolution of the modern writ of possession out of the peculiar law of ejectment. At pp 149–150 he said: But I think there is a logical mistake in the notion that because ejectment was only available to estate owners, possession cannot be available to licensees who do not enjoy de facto occupation. The mistake inheres in this: if the action for ejectment was by definition concerned only with the rights of estate owners, it is necessarily silent upon the question, what relief might be available to a licensee. The limited and specific nature of ejectment means only that it was not available to a licensee; it does not imply the further proposition, that no remedy by way of possession can now be granted to a licensee not in occupation. Nowadays there is no distinct remedy of ejectment; a plaintiff sues for an order of possession, whether he is himself in occupation or not. The proposition that a plaintiff not in occupation may only obtain the remedy if he is an estate owner assumes that he must bring himself within the old law of ejectment. I think it is a false assumption … In my judgment the true principle is that a licensee not in occupation may claim possession against a trespasser if that is a necessary remedy to vindicate and give effect to such rights of occupation as by the contract with his licensor he enjoys. There is no respectable distinction, in law or logic, between the two situations. An estate owner may seek an order whether he is in possession or not. So, in my judgment, may a licensee, if other things are equal. In both cases, the plaintiff’s remedy is strictly limited to what is required to make good his legal right. The principle applies although the licensee has no right to exclude the licensor himself. Elementarily he cannot exclude any occupier who, by contract or estate, has a claim to possession equal or superior to his own. Obviously, however, that will not avail a bare trespasser. [page 22] … That reasoning has, however, been criticised by several commentators: see … W Swadling, ‘Opening the numerus clausus’ (2000) 116 LQR 354 … Swadling’s main criticism of the majority position in Manchester Airport v Dutton appears from this passage:

The error into which, with respect, Laws LJ falls in failing to notice that a contractual licensee in occupation of land has rights derived from two separate sources, some from the contract, some from the fact of possession. Those derived from the contract prevent the licensor from denying him possession of the land. But those rights, because of the doctrine of privity, and notwithstanding the recent reform of that doctrine, bind the licensor alone. It is the rights derived from the second source, from the fact of possession, which bind third parties. But since the protesters were not party to the contract entered into by the plaintiff company and the National Trust, and since the plaintiff did not have any factual possession of the land, then, unless a contractual licence to occupy land has suddenly leapt the personal/property divide, it could not have bound the protesters. There is, therefore, a distinction which does still need to be drawn between a plaintiff whose right to occupy the land in question arises from title and one whose right arises from the contract alone. I must prefer the approach taken by Chadwick LJ in dissent. To do otherwise would be to fail to accept principles about the nature of trespass to land which are deeply rooted in Australian law and have been recognised by the High Court. The issue that the majority in Manchester Airport v Dutton had with the traditional approach to trespass was some perceived illogical distinction between a licensee in possession and a licensee out of possession. But focus on the licensee’s bare rights overlooks the nature of the wrong of trespass and its foundation in possession … Mere physical presence or physical use can never satisfy that test. Conclusions in relation to the plaintiff’s claims based on trespass The plaintiff has no legal right of possession in respect of the land the subject of the licence. Its effect is no more than to confer on her the landowner’s permission to occupy for a stated purpose. Nor, as a factual matter, is she in possession. The land is unfenced and open and, under the terms of the licence (clause 44), the plaintiff may not construct any fence or other barrier on the land without the Crown’s consent. The plaintiff does not reside on the land or conduct any sustained activity there that causes other persons to be excluded in a physical and factual sense as in Radaich v Smith (above) — indeed, her right to occupy is only for the limited purpose of ‘Jetty and Slipway (concrete with sliprails)’ and that is not a purpose that contemplates sustained activity of a kind that would be expected to entail ongoing physical exclusion of other persons. The plaintiff is, by the terms of the contract granting her licence, subject to an explicit requirement that she allow access by the public over the land. I have postulated above (paragraph [72]) the possibility that the provisions of the licence giving the plaintiff a right to remove the jetty and the slipway (which, as fixtures, are incorporated into the land) may have the effect of causing the plaintiff to have an equitable interest in the land in the nature of a profit à prendre. I have also referred to the possibility that the plaintiff may be entitled to bring proceedings based on trespass in the event of direct interference with the subject matter of the grant. If such an interest in the land in truth existed and a person took action towards dismantling the jetty or the slipway and taking them away, the plaintiff might, by reference to her interest, rely on trespass as a means of obtaining injunctive relief to restrain that action. But it would be in no sense inconsistent with or an invasion of the postulated interest in the land for any person

[page 23] merely to enter upon the jetty or the slipway. The possibility that such an interest therefore need not be considered further in these proceedings where there is no suggestion that the second defendant or the third defendant has any intention of dismantling and removing the jetty or the slipway and the plaintiff’s complaints are confined to their entering upon those structures in a normal way. Claim dismissed.

1.29

The rationale referred to by Barrett J that underpins the property law

of most modern legal systems, no less than Australian law, is commonly known as the numerus clausus principle. This is the principle implicitly evoked by the Law Lords in King v David Allen where they suggested that if an easement or lease had been created by the parties, either would have qualified as a fully-fledged proprietary interest and would then have bound the incoming tenant. A licence, by contrast, does not come within the class of recognised proprietary interests. The following extract describes the ambit of, and the reasons for, this principle. 1.30E The Numerus Clausus Principle in Australian Property Law B Edgeworth (2006) 32 Mon LR 387 at 387–8, 394–5 Conventionally described as ‘the numerus clausus principle’ — in English, the ‘closed list’ principle — it expresses the stringency of the common law’s approach to property rights, particularly over land. In essence, the principle holds that landowners are not at liberty to customise land rights, in the sense of re-working them in an entirely novel way to suit their particular individual needs and circumstances. Rather, any new rights must fit within firmly established pigeonholes, of which the law permits only a small and finite number. The principle applies regardless of the terms of any agreement that parties might reach for the purpose of creating such an interest, so it is irrelevant that a specific contractual arrangement to create a wholly novel interest might be free and fair. It is also

quite beside the point that the objectives expressed in that agreement might be mutually convenient, highly desirable or economically efficient. In this respect, property law is highly prescriptive: the system of rights in rem is a strictly circumscribed one, with a tight regulatory regime governing the range and form of available rights over land. By contrast, parties may agree to bind themselves contractually to any type of arrangement of rights and responsibilities. Contract law, with its inbuilt principle of free exchange, displays none of the restrictiveness of property law when confronted with new packages of rights. In only the most extreme circumstances, such as where the contract involves illegality, will contractual provisions be struck down. In the celebrated pronouncement of Lord Brougham LC in 1834, in the case of Keppell v Bailey [(1834) 2 M & K 517 at 536; 39 ER at 1049], contract law allows parties ‘the fullest latitude’ when formulating rights and obligations as between themselves over real and personal property. Property law adopts a very different approach; for it is concerned not so much with rights between parties to agreements, as with those rights that are capable of binding third parties. Accordingly, the numerus clausus principle prevents rights that do not fit neatly into the recognised categories of corporeal and incorporeal hereditaments from entering the pantheon of proprietary interests. A clear doctrinal gulf therefore separates property and contract: expansive freedom of contract allows [page 24] parties to fashion rights over land at will, while property narrowly limits the kinds of rights that may attach to the land so as to bind successors in title … According to Bernard Rudden, the term numerus clausus refers to ‘a restricted list of entitlements which [the law] will permit to count as property interests, or “real rights”’. In a lengthy comparative study, he found that virtually all modern, that is to say, postfeudal, legal systems operate with a closed list of recognised proprietary rights. Civil law jurisdictions are marked by this foundational arrangement no less than the common law systems. Rudden identified ‘less than a dozen’ categories of entitlement to land. They are those that confer possession, namely the estates: the fee simple, the life interest, and the leasehold. Then follow interests often referred to collectively as the ‘servitudes’, such as easements, profits, and restrictive covenants. Finally, come the security interests: mortgages and other charges. To rank as an interest in land, a right must come within one item on this menu of interests. If not, it will fail to be enforceable as property; and that means it will be impotent against successors in title, even if they have full knowledge of its existence at the time they acquire their interest. The same closed list is roughly applicable in Australian law. So, the fullest interests in land, conferring possession of the land for various periods of time, from the infinite all the way down to the short fixed-term, are the estates: fee simple, life estate and leasehold. Then follow the lesser interests: easements, freehold covenants and profits, and finally the security interests, such as mortgages. This finite list means that, for example, contractual licences cannot qualify as proprietary interests. Nor can such rights as a ius spatiandi (a right to wander over another’s land) assume the status of property, or a right to unobstructed television reception … Three separate mischiefs are targeted by this restrictive approach to the creation of

novel interests in land. The first of these is the concern to maximise the uses to which land can be used. This policy can be understood fully only by reference to the time and place it emerged. The context was the burgeoning market-oriented economic order in the middle of the 19th Century in England. If this new order were to evolve, it required breaking from the earlier overlapping networks of property rights, and the multiple layers of feudal obligations that impeded the efficient use of land. The fragmentation of property rights into smaller, discrete bundles capable of individual ownership was an essential element for the commodification of land, and, in consequence, for the introduction of economically efficient uses of land. If parties were free to restrict the usages of land by agreements capable of binding successors in title indefinitely, land could be shackled in ways that might revive all the impediments to economic reform that were endemic in feudal real property law. A second policy evident in dicta in these cases addresses the vice of adding to the already existing difficulties that confront third parties who purchase the land. Any proliferation of the number and range of rights will tend to make the conveyancing process more complex, time-consuming and hazardous. This policy may be better understood in economic terms. If the categories of property rights over land are too openended, enormous transaction costs may arise for persons planning to acquire an interest in the land. It follows that the numerus clausus principle can be justified as a balancing act by means of which the largest number of property rights is allowed consistent with the imposition of a reasonably efficient system of conveyancing. The third policy is that of protecting the integrity of what Lord Brougham refers to as ‘the science of the law’. This phrase refers to the process of systematisation and rationalisation of the common law that was a dominant concern in 19th Century English legal culture. If property owners were able to create at whim any kind of property right, the process of [page 25] measured categorisation of interests by judges, legislators and commentators — the foremost practitioners of ‘legal science’ — would be frustrated. In turn, the capacity for the legal system to develop would founder. No shared professional knowledge about property rights could be firmly established if particular rights could not be described as falling within well-defined categories, and conforming to settled understandings about core principles. The numerus clausus assists in this exercise.

1.31

Compare the reasoning in King v David Allen and Georgeski with the

much debated case of Errington v Errington [1952] 1 KB 290; [1952] 1 All ER 149. A father purchased a house as a residence for his son and daughterin-law. He promised that when the mortgage loan was repaid in full, he

would convey the house to the couple. He died before the loan was repaid. At this time the son and daughter-in-law were licensees. The father’s widow, to whom the house had been devised by will, commenced an action claiming possession of the house. Lord Denning considered that the relationship between the couple and the father was a contractual licence. He then went on to say that a contractual licence could not be revoked in breach of contract. This contract could not be disregarded by the licensor or anyone claiming through him, except a purchaser for value without notice. Thus, the contractual licence was enforceable against the father’s widow as his successor in title. Hodson and Sommerville LJJ delivered judgments to the same effect. This extension of the enforceability of contractual licences has been severely criticised.28 The latest example is the decision of the English Court of Appeal in Ashburn Anstalt v Arnold [1988] 2 WLR 706 which rejected the reasoning in Errington as being inconsistent with the long-standing authority of King v David Allen. It follows that King still represents the preferable position of licensees vis-à-vis third parties. Notwithstanding this return to orthodoxy in England, Manchester Airport plc v Dutton suggests that there is still a clear divergence between Australian and English law in the area of licences over land in relation to third parties. This was affirmed recently in Bropho v Western Australia [2007] FCA 519 where Nicholson J (at [474]) held that: ‘In my view the reliance which the applicant places on the majority reasoning in Manchester Airport [2000] 1 QB 133 finds no support in Australian law and should not be followed here’. However, despite the general unenforceability of the licence against third parties in Australia, it might in some exceptional

circumstances be protected against third parties by means of a constructive trust, as will be seen later at 4.115ff.

1.32 Questions 1.

Should property law recognise a licence as an interest in land?

2.

What reasons are in favour of the licence qualifying as a property right? What reasons are against it?

[page 26]

3.

Are there certain types of licences that more readily qualify for proprietary status than others? Is the reasoning of Barrett J in Georgeski convincing? Compare it with the English approach in Manchester Airport plc v Dutton. Which is the more defensible? Does Manchester Airport offer support to licensees such as Mr King?

4.

If a third party had trespassed on the part of the Malabar Headland occupied by the New South Wales Rifle Association, referred to above (1.22), would the association be able to sue in trespass? Would the Commonwealth? What rights would the association have against the Commonwealth if it failed to act?

5.

What is the basic difference between property law and contract law in the treatment of novel packages of rights?

What is the numerus clausus principle? What policy reasons support 6.

it? Are those reasons still valid today, over 150 years after it was first established?

7.

What are the basic categories of rights available over land in Australian law that the numerus clausus allows?

PROPERTY RIGHTS AND THE RIGHTS OF PERSONS 1.33

Fundamental to the discussion of the meaning of property above is

the idea that property rights are to be distinguished from personal rights within the general framework of private law: that is, the law that governs the interaction between private individuals. This reflects a basic ontological and ethical distinction drawn in contemporary societies between persons and things. As Mosk J argues in Moore’s case below (1.36C), this reflects the fact that ‘our society acknowledges a profound ethical imperative to respect the human body as the physical and temporal expression of the unique human persona’. Of course, such a distinction has not always been so. In the past, groups lacking political power have often been disqualified from the benefits of property ownership. In an extreme form this has meant that persons have become ‘objects’ of property rights, akin to ‘things’, or chattels, in law. Societies based on slavery are typically of this order. More commonly, marginalised groups have been denied rights to own property. Such groups have included Jews in England,29 slaves in parts of America30 and married

women in England and Australia31 until the enactment of married women’s property legislation in the late nineteenth century. Also, the structure of feudalism effectively denied property rights to all ‘unfree’ tenants, or ‘villeins’ who held their land at the whim of their lords, with no enforceable rights in the courts. Changes in community values embodied in legislation now preclude the treatment of human beings as slaves who can be freely sold, women as the property of their husbands, or certain citizens automatically denied access to courts to protect property rights. A linked historical development was the extension by legislation of the right to acquire and own property to all citizens, and a general right to enter into contracts. This extension of private law rights to all citizens was paralleled in the sphere of public law with the extension of rights to vote, and stand to all.

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The definition of personal rights includes the rights that a person has over his or her own body. Among personal rights we normally include rights to protect and safeguard the body, most obviously protected by the torts of assault and battery. Furthermore, aspects of personality are protected, such as one’s reputation, by the tort of defamation, and more recently by legislation protecting the privacy of individuals. But the dividing line between personal rights and property rights is not always easy to draw. For instance, is one’s reputation property which can be commercially exploited by affording property rights to it? Is the right to pursue a profession, a right of

demonstrable economic and social value, a property right? The question of the proprietary character of personal rights is particularly relevant in the case of rights over human tissue, organs and other body parts. This section will examine aspects of property law and the body.

Are persons property? 1.34E

Are Persons Property? Legal Debates about Property and Personality M Davies and N Naffine Ashgate, United Kingdom, 2001, 1–3 (footnotes omitted)

The central question we pose in this book is ‘Are persons property?’. There is perhaps a deliberate provocation intended in this simple inquiry — a provocation to lawyers and also a provocation to the political sensibilities of the citizenry at large. For it may seem that we are asking whether persons in the ‘free’ common law world are in some way still to be regarded as slaves, when surely our law and our society have long condemned slavery. Indeed the idea that persons are now all free and equal is supposed to be fundamental to modern liberal legal systems — the free person is not only the basic legal unit, but also the very raison d’etre of our law. So were our question to have only this one meaning, were we only asking about the retention of explicit and legal forms of slavery, it would seem that there is necessarily only a brief reply to be given and hardly a book in it. For the short answer is that we do not recognise slavery; one person cannot own another. It is regarded as an abomination to commodify another human being in this manner. The Western democracies outlawed slavery in the nineteenth century, though as Russell Scott has observed, it has ‘not all disappeared from the Eastern world, nor from the African and South American continents’. Indeed it seems that English common law never openly countenanced slavery, even though England was home to a number of slavers who derived immense wealth from a traffic in persons (English slavers wisely conducted their trade in other parts of the world). As Rosemary Owens explains, ‘In the famous Sommersett’s Case [of 1772], English law decided against slavery, proclaiming its allegiance to the Enlightenment person and promising a protection for freedom’. In Sommersett’s Case, it was concluded that there was no ‘positive, or legislative, authorisation of slavery in England’. It could therefore be said with some confidence that Anglo-Australian law is in accord with the views of two of the leading philosophers of political and legal liberty, John Locke and Immanuel Kant, who, in different ways, both condemned the idea of treating other persons as property. According to Kant, ‘a person cannot be property and so cannot be a

thing which can be owned, for it is impossible to be a person and a thing, the proprietor and the property’. Locke, too, was adamant about the importance of freedom from possession by [page 28] others. In The Second Treatise on Government Locke begins his discourse on slavery by saying that ‘The Natural Liberty of Man is to be free from any Superior Power on Earth, and not to be under the Will of Man, not to be subject to the inconstant, uncertain, unknown, Arbitrary Will of another man’. He goes on to say that: This Freedom from Absolute, Arbitrary Power, is so necessary to, and closely joyned with a Man’s Preservation, that he cannot part with it, but by what forfeits his Preservation and Life together. For a Man, not having the Power of his own Life, cannot, by Compact or his own Consent, enslave himself to anyone. No body can give more Power than he has himself; and he that cannot take away his own Life, cannot give another power over it. According to modern legal orthodoxy, Locke, Kant and modern law are ad idem in that the categories of person and property are now meant to be utterly separate and distinct. To be a person, it is said, is precisely not to be property. Thus it might be argued that the one concept negatively defines the other …

1.35

Consider Davies’ and Naffine’s argument in relation to the cases and

statutory provisions considered below. After examining this material, and the subsequent case extracts, do you think that they provide a convincing overview of the law?

Property and body parts 1.36C

Moore v Regents of the University of California (1990) 793 P 2d 479 Supreme Court of California, In Bank

[In 1976, Moore was treated for leukaemia at the Medical Centre of the University of California at Los Angeles. In the course of diagnosing and treating Moore’s illness, samples were taken of

his blood, bone marrow, skin, semen and other body substances. On the advice of his physician, the defendant Golde, Moore’s spleen was removed. Prior to the operation Golde was aware that Moore’s body substances and spleen were likely to be valuable for research and commercial purposes. Moore signed a routine consent to the removal of his spleen, which was a necessary part of his treatment, but did not consent to its use for scientific purposes and was unaware of the potential commercial value of his cells. Between 1976 and 1983 Golde continued to treat Moore, who flew from his home in Seattle to Los Angeles to have samples of bodily substances taken from him. Some time before August 1979 Golde established a cell line from Moore’s cells. Because of Moore’s leukaemia his cells overproduced a kind of protein. The establishment of a cell line meant that these proteins would continue to be reproduced indefinitely. In 1981, the Regents of the University of California applied for a patent on the cell line, naming Golde and the defendant Quan, a researcher, as inventors. With the assistance of the Regents, Golde negotiated agreements for the commercial development of the cell line and products to be derived from it. Under these agreements Golde was to receive shares in a company involved in the development and payments amounting to at least $450,000. In 1983, when

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Moore discovered that his cells had been used for this purpose, he brought action against Golde, Quan, the Regents and licensees of the patented cell line, claiming, inter alia, damages for conversion of his cells. The defendant demurred against many of his causes of action and the demurrers were upheld at first instance. The California Court of Appeal held, inter alia, that Moore had established a cause of action in conversion. The defendants appealed.] Panelli J: [After holding that Moore had a cause of action against Golde for breach of fiduciary duty or failure to obtain informed consent, Panelli J went on to consider his claim in conversion.]32 Moore also attempts to characterize the invasion of his rights as a conversion — a tort that protects against interference with possessory and ownership interests in personal property. He theorizes that he continued to own his cells following their removal from his body, at least for the purpose of directing their use, and that he never consented to their use in potentially lucrative medical research. Thus, to complete Moore’s argument, the defendants’ unauthorized use of his cells constitutes a conversion. As a result of the alleged conversion, Moore claims a proprietary interest in each of the products that any of the defendants might ever create from his cells or the patented cell line. No court,

however, has ever in a reported decision imposed conversion liability for the use of human cells in medical research … Invoking a tort theory originally used to determine whether the loser or the finder of a horse had the better title, Moore claims ownership of the results of socially important medical research, including the genetic code for chemicals that regulate the functions of every human being’s immune system. Moore’s claim under existing law To establish a conversion, plaintiff must establish an actual interference with his ownership or right of possession … [citations omitted] Since Moore clearly did not expect to retain possession of his cells following their removal, to sue for their conversion he must have retained an ownership interest in them … Neither the Court of Appeal’s opinion, the parties’ briefs, nor our research discloses a case holding that a person retains a sufficient interest in excised cells to support a cause of action for conversion. We do not find this surprising, since the law governing such things as human tissues, transplantable organs, blood, fetuses, pituitary glands, corneal tissue, and dead bodies deal with human biological materials as objects sui generis, regulating their disposition to achieve policy goals rather than abandoning them to the general law of personal property. [Here Panelli J referred to a number of statutory provisions regulating, inter alia, disposal of blood, foetuses and pituitary glands.] It is these specialised statutes, not the law of conversion, to which courts ordinarily should and do look for guidance on the disposition of human biological materials. Lacking direct authority for importing the law of conversion into this context, Moore relies, as did the Court of Appeal, primarily on decisions addressing privacy rights. One line of cases involves unwanted publicity … Not only are the wrongful-publicity cases irrelevant to the issue of conversion, but the analogy to them seriously misconceives the nature of the genetic materials and research involved in this case. Moore, adopting the analogy originally advanced by the Court of Appeal, argues that ‘[i]f the courts have found a sufficient proprietary interest in one’s persona, [page 30] how could one not have a right in one’s own genetic material, something far more profoundly the essence of one’s human uniqueness than a name or a face?’. However, as the defendants’ patent makes clear — and the complaint, too, if read with an understanding of the scientific terms which it has borrowed from the patent — the goal and result of the defendants’ efforts has been to manufacture lymphokines. Lymphokines, unlike a name or a face, have the same molecular structure in every human being and the same, important functions in every human being’s immune system. Moreover, the particular genetic material which is responsible for the natural production of lymphokines, and which the defendants use to manufacture lymphokines in the laboratory, is also the same in every person; it is no more unique to Moore than the number of vertebrae in the spine or the chemical formula hemoglobin. Another privacy case offered by analogy to support Moore’s claim establishes only that patients have a right to refuse medical treatment: Bouvia v Superior Court of California (1986) 179 Cal App 3d 1127; 225 Cal Rptr 297 … Yet one may earnestly wish to protect privacy and dignity without accepting the extremely problematic conclusion that interference with

those interests amounts to a conversion of personal property. Nor is it necessary to force the round pegs of ‘privacy’ and ‘dignity’ into the square hole of ‘property’ in order to protect the patient, since the fiduciary-duty and informed-consent theories protect these interests directly by requiring full disclosure. The next consideration that makes Moore’s claim of ownership problematic is California statutory law, which drastically limits a patient’s control over excised cells. Pursuant to Health and Safety Code s 7054.4, ‘[notwithstanding any other provision of law, recognizable anatomical parts, human tissues, anatomical human remains, or infectious waste following conclusion of scientific use shall be disposed of by interment, incineration, or any other method determined by the state department [of health services] to protect the public health and safety’. [Panelli J held that Moore’s spleen, and his virusinfected cells were included within this statutory provision.] A primary object of the statute is to ensure the safe handling of potentially hazardous biological waste materials. Yet one cannot escape the conclusion that the statute’s practical effect is to limit, drastically, a patient’s control over excised cells. By restricting how excised cells may be used and requiring their eventual destruction, the statute eliminates so many of the rights ordinarily attached to property that one cannot simply assume that what is left amounts to ‘property’ or ‘ownership’ for purposes of conversion law … Finally, the subject matter of the Regents’ patent — the patented cell line and the products derived from it — cannot be Moore’s property. This is because the patented cell line is both factually and legally distinct from the cells taken from Moore’s body. Federal law permits the patenting of organisms that represent the product of ‘human ingenuity’, but not naturally occurring organisms: Diamond v Chakrabarty (1980) 447 US 303 at 309–310; 100 S Ct 2204 at 2208; 65 L Ed 2d 144. Human cell lines are patentable because ‘[l]ong-term adaptation and growth of human tissues and cells in culture is difficult — often considered an art …’, and the probability of success is low: OTA Report, supra, p 33. It is this inventive effort that patent law rewards, not the discovery of naturally occurring raw materials. Thus, Moore’s allegations that he owns the cell line and the products derived from it are inconsistent with the patent, which constitutes an authoritative determination that the cell line is the product of invention … Should conversion liability be extended? … There are three reasons why it is inappropriate to impose liability for conversion based upon the allegations of Moore’s complaint. First, a fair balancing of the relevant policy considerations counsels against extending the tort. Second, problems in this area are better [page 31] suited to legislative resolution. Third, the tort of conversion is not necessary to protect patients’ rights. For these reasons, we conclude that the use of excised human cells in medical research does not amount to a conversion. Of the relevant policy considerations, two are of overriding importance. The first is protection of a competent patient’s right to make autonomous medical decisions. That right, as already discussed, is grounded in well-recognized and long-standing principles of

fiduciary duty and informed consent … This policy weighs in favour of providing a remedy to patients when physicians act with undisclosed motives that may affect their professional judgment. The second important policy consideration is that we not threaten with disabling civil liability innocent parties who are engaged in socially useful activities, such as researchers who have no reason to believe that their use of a particular cell sample is, or may be, against a donor’s wishes … We need not, however, make an arbitrary choice between liability and non liability. Instead, an examination of the relevant policy considerations suggests an appropriate balance: liability based upon existing disclosure obligations, rather than an unprecedented extension of the conversion theory, protects patients’ rights of privacy and autonomy without unnecessarily hindering research … Unfortunately, to extend the conversion theory would utterly sacrifice the other goal of protecting innocent parties. Since conversion is a strict liability tort, it would impose liability on all those into whose hands the cells come, whether or not the particular defendant participated in, or knew of, the inadequate disclosures that violated the patient’s right to make an informed decision. In contrast to the conversion theory, the fiduciary-duty and informed-consent theories protect the patient directly, without punishing innocent parties or creating disincentives to the conduct of socially beneficial research. Research on human cells plays a critical role in medical research. The extension of conversion law into this area will hinder research by restricting access to the necessary raw materials … At present, human cell lines are routinely copied and distributed to other researchers for experimental purposes, usually free of charge. This exchange of scientific materials, which still is relatively free and efficient, will surely be compromised if each cell sample becomes the potential subject matter of a lawsuit … Indeed, this is a far more compelling case for limiting the expansion of tort liability than Brown [Brown v Superior Court (1988) 44 Cal 3d 1049; 245 Cal Rptr 412; 751 P 2d 470]. In Brown, eliminating strict liability made it more difficult for plaintiffs to recover actual damages for serious physical injuries resulting from their mothers’ prenatal use of the drug diethylstilbestrol (DES) … In this case, by comparison, limiting the expansion of liability under a conversion theory will only make it more difficult for Moore to recover a highly theoretical windfall. Any injury to his right to make an informed decision remains actionable through the fiduciary-duty and informed-consent theories. If the scientific users of human cells are to be held liable for failing to investigate the consensual pedigree of their raw materials, we believe the Legislature should make this decision. Complex policy choices affecting all society are involved, and ‘[l]egislatures, in making such policy decisions, have the ability to gather empirical evidence, solicit the advice of experts, and hold hearings at which all interested parties present evidence and express their views …’: Foley v Interactive Data Corp (1988) 47 Cal 3d 654 at 694; 254 Cal Rptr 211; 765 P 2d 373 … Finally, there is no pressing need to impose a judicially created rule of strict liability, since enforcement of physicians’ disclosure obligations will protect patients against the very type of harm with which Moore was threatened. So long as a physician discloses research and economic interests that may affect his judgment, the patient is protected from conflicts [page 32]

of interest. Aware of any conflicts, the patient can make an informed decision to consent to treatment, or to withhold consent and look elsewhere for medical assistance. As already discussed, enforcement of physicians’ disclosure obligations protects patients directly, without hindering the socially useful activities of innocent researchers. For these reasons, we hold that the allegations of Moore’s third amended complaint state a cause of action for breach of fiduciary duty or lack of informed consent, but not conversion. [Lucas CJ, Eagleson and Kennard JJ concurred. Arabian J also concurred in a separate judgment. Broussard J dissented from the majority view on conversion. Broussard J held that on the facts of the instant case, where the defendants, but not Moore, were aware of the proposed use of the cells prior to their removal, an action in conversion was available to enable the plaintiff to recover the economic value of the right to control use of his body parts. This would not necessarily include the value of the patent and the derivative products. However, conversion would not be available where the doctor was unaware of the scientific or commercial value of cells when the patient consented to their removal, since in such a situation the patient would be treated as having abandoned the property. In the course of his judgment Broussard J commented:] In analysing the conversion issue, the majority properly begins with the established requirements of a common law conversion action, explaining that a plaintiff is required to demonstrate an actual interference with his ‘ownership or right of possession’ in the property in question. Although the majority opinion, at several points, appears to suggest that a removed body part, by its nature, may never constitute ‘property’ for purposes of a conversion action … there is no reason to think that the majority opinion actually intends to embrace such a broad or dubious proposition. If, for example, another medical center or drug company had stolen all of the cells in question from the UCLA Medical Center laboratory and had used them for its own benefit, there would be no question but that a cause of action for conversion would properly lie against the thief, and the majority opinion does not suggest otherwise. Thus, the majority’s analysis cannot rest on the broad proposition that a removed body part is not property, but rather rests on the proposition that a patient retains no ownership interest in a body part once the body part has been removed from his or her body … Justice Arabian’s concurring opinion suggests that the majority’s conclusion is informed by the precept that it is immoral to sell human body parts for profit. But the majority’s rejection of plaintiff’s conversion cause of action does not mean that body parts may not be bought or sold for research or commercial purposes or that no private individual or entity may benefit economically from the fortuitous value of plaintiff’s diseased cells. Far from elevating these biological materials above the marketplace, the majority’s holding simply bars plaintiff, the source of the cells, from obtaining the benefit of the cells’ value, but permits defendants, who allegedly obtained the cells from plaintiff by improper means, to retain and exploit the full economic value of their ill-gotten gains free of their ordinary common law liability for conversion …

Mosk J: [Mosk J referred to the need for Moore to show that he had property in his cells and the majority view that he had no such property. He then discussed the six premises on which the majority based its rejection of Moore’s conversion claim.] The majority’s first reason is that ‘no reported judicial decision supports Moore’s claim, either directly or by close analogy’ … Neither, however, is there any reported decision rejecting such a claim. The issue is as new as its source — the recent explosive growth in the commercialization of biotechnology. [page 33] The majority next cite several statutes regulating aspects of the commerce in or disposition of certain parts of the human body, and conclude in effect that in the present case we should also ‘look for guidance’ to the Legislature rather than to the law of conversion … Surely this argument is out of place in an opinion of the highest court of this State. As the majority acknowledge, the law of conversion is a creature of the common law … My point is that if the cause of action for conversion is otherwise an appropriate remedy on these facts, we should not refrain from fashioning it simply because another court has not yet so held or because the Legislature has not yet addressed the question. We need not wait on either event, because neither is a precondition to an exercise of our long-standing ‘power to insure the just and rational development of the common law in our State’: Rodrigues v Bethlehem Steel Corp (1974) 12 Cal 3d 382 at 394; 115 Cal Rptr 765; 525 P 2d 669. The majority’s second reason for doubting that Moore retained an ownership interest in his cells after their excision is that ‘California statutory law … drastically limits a patient’s control over excised cells’ … [Mosk J concluded that in authorising ‘scientific use’ of human tissue excised from patients, s 7054.4 of the California Health and Safety Code did not authorise its commercial exploitation.] … [However], even if [the legislation] does permit defendants’ commercial exploitation of Moore’s tissue under the guise of ‘scientific use’, it does not follow that — as the majority conclude — the statute ‘eliminates so many of the rights ordinarily attached to property’ that what remains does not amount to ‘property’ or ‘ownership’ for purposes of the law of conversion … The concepts of property and ownership in our law are extremely broad. A leading decision of this court approved the following definition: ‘The term “property” is sufficiently comprehensive to include every species of estate, real and personal, and everything which one person can own and transfer to another. It extends to every species of right and interest capable of being enjoyed as such upon which it is practicable to place a money value’ … Being broad, the concept of property is also abstract: rather than referring directly to a material object such as a parcel of land or the tractor that cultivates it, the concept of property is often said to refer to a ‘bundle of rights’ that may be exercised with respect to that object — principally the rights to possess the property, to use the property, to exclude others from the property, and to dispose of the property by sale or by gift.

‘Ownership is not a single concrete entity but a bundle of rights and privileges as well as of obligations’ … But the same bundle of rights does not attach to all forms of property. For a variety of policy reasons, the law limits or even forbids the exercise of certain rights over certain forms of property. For example, both law and contract may limit the right of an owner of real property to use his parcel as he sees fit. Owners of various forms of personal property may likewise be subject to restrictions on the time, place, and manner of their use. Limitations on the disposition of real property, while less common, may also be imposed. Finally, some types of personal property may be sold but not given away, while others may be given away but not sold, and still others may neither be given away nor sold. In each of the foregoing instances, the limitation or prohibition diminishes the bundle of rights that would otherwise attach to the property, yet what remains is still deemed in law to be a protectible property interest … The same rule applies to Moore’s interest in his own body tissue: even if we assume that s 7054.4 limited the use and disposition of his excised tissue in the manner claimed by the majority, Moore nevertheless retained valuable rights in that tissue. Above all, at the time of its excision he at least had the right to do with his own tissue whatever the defendants did with it: that is, he could have contracted with researchers and [page 34] pharmaceutical companies to develop and exploit the vast commercial potential of his tissue and its products. Defendants certainly believe that their right to do the foregoing is not barred by s 7054.4 and is a significant property right, as they have demonstrated by their deliberate concealment from Moore of the true value of his tissue, their efforts to obtain a patent on the Mo cell line, their contractual agreements to exploit this material, their exclusion of Moore from any participation in the profits, and their vigorous defence of this lawsuit. The Court of Appeal summed up the point by observing that ‘Defendants’ position that plaintiff cannot own his tissue, but that they can, is fraught with irony’. It is also legally untenable. As noted above, the majority cite no case holding that an individual’s right to develop and exploit the commercial potential of his own tissue is not a right of sufficient worth or dignity to be deemed a protectible property interest. In the absence of such authority — or of legislation to the same effect — the right falls within the traditionally broad concept of property in our law. The majority’s third and last reason for their conclusion that Moore has no cause of action for conversion under existing law is that ‘the subject matter of the Regents’ patent — the patented cell line and the products derived from it — cannot be Moore’s property’ … The majority then offer a dual explanation: ‘[t]his is because the patented cell line is factually and legally distinct from the cells taken from Moore’s body’. Neither branch of the explanation withstands analysis. [Mosk J held that patent law did not preclude Moore’s claim that he was entitled to compensation for unauthorised use of his body cells, prior to patenting of the Mo cell line.] The majority begin their analysis [of the ambit of the tort of conversion] by stressing the

obvious facts that research on human cells plays an increasingly important role in the progress of medicine, and that the manipulation of those cells by the methods of biotechnology has resulted in numerous beneficial products and treatments. Yet it does not necessarily follow that, as the majority claim, application of the law of conversion to this area ‘will hinder research by restricting access to the necessary raw materials’, that is, to cells, cell cultures, and cell lines. The majority observe that many researchers obtain their tissue samples, routinely and at little or no cost, from cell-culture repositories. The majority then speculate that ‘[t]his exchange of scientific materials, which still is relatively free and efficient, will surely be compromised if each cell sample becomes the potential subject matter of a lawsuit’ … There are two grounds to doubt that this prophecy will be fulfilled. To begin with, if the relevant exchange of scientific materials was ever ‘free and efficient’, it is much less so today. Since biological products of genetic engineering became patentable in 1980 (Diamond v Chakrabarty (1980) 447 US 303; 100 S Ct 2204; 65 L Ed 2d 144), human cell lines have been amenable to patent protection … With such patentability has come a drastic reduction in the formerly free access of researchers to new cell lines and their products: the ‘novelty’ requirement for patentability prohibits public disclosure of the invention at all times up to one year before the filing of the patent application … An even greater force for restricting the free exchange of new cell lines and their products has been the rise of the biotechnology industry and the increasing involvement of academic researchers in that industry. When scientists became entrepreneurs and negotiated with biotechnological and pharmaceutical companies to develop and exploit the commercial potential of their discoveries — as did defendants in the case at bar — layers of contractual restrictions were added to the protections of the patent law. In their turn, the biotechnological and pharmaceutical companies demanded and received exclusive rights in the scientists’ discoveries, and frequently placed those discoveries under [page 35] trade secret protection. Trade secret protection is popular among biotechnology companies because, among other reasons, the invention need not meet the strict standards of patentability and the protection is both quickly acquired and unlimited in duration … Secrecy as a normal business practice is also taking hold in university research laboratories, often because of industry pressure … Second, to the extent that cell cultures and cell lines may still be ‘freely exchanged’, for example, for purely research purposes, it does not follow that the researcher who obtains such material must necessarily remain ignorant of any limitations on its use: by means of appropriate record-keeping, the researcher can be assured that the source of the material has consented to his proposed use of it, and hence that such use is not a conversion. To achieve this end the originator of the tissue sample first determines the extent of the source’s informed consent to its use — for example, for research only, or for public but academic use, or for specific or general commercial purposes; he then enters

this information in the record of the tissue sample, and the record accompanies the sample into the hands of any researcher who thereafter undertakes to work with it … In any event, in my view whatever merit the majority’s single policy consideration may have is outweighed by two contrary considerations, that is, policies that are promoted by recognizing that every individual has a legally protectible property interest in his own body and its products. First, our society acknowledges a profound ethical imperative to respect the human body as the physical and temporal expression of the unique human persona. One manifestation of that respect is our prohibition against direct abuse of the body by torture or other forms of cruel or unusual punishment. Another is our prohibition against indirect abuse of the body by its economic exploitation for the sole benefit of another person. The most abhorrent form of such exploitation, of course, was the institution of slavery. Lesser forms, such as indentured servitude or even debtor’s prison, have also disappeared. Yet their spectre haunts the laboratories and boardrooms of today’s biotechnological research industrial complex. It arises wherever scientists or industrialists claim, as defendants claim here, the right to appropriate and exploit a patient’s tissue for their sole economic benefit — the right, in other words, to freely mine or harvest valuable physical properties of the patient’s body … A second policy consideration adds notions of equity to those of ethics. Our society values fundamental fairness in dealings between its members, and condemns the unjust enrichment of any member at the expense of another. This is particularly true when, as here, the parties are not in equal bargaining positions. In the case at bar, for example, the complaint alleges that the market for the kinds of proteins produced by the Mo cell line was predicted to exceed $3 billion by 1990. These profits are currently shared exclusively between the biotechnology industry and the universities that support that industry … There is, however, a third party to the biotechnology enterprise — the patient who is the source of the blood or tissue from which all these profits are derived. While he may be a silent partner, his contribution to the venture is absolutely crucial: as pointed out above, but for the cells of Moore’s body taken by defendants there would have been no Mo cell line at all. Yet defendants deny that Moore is entitled to any share whatever in the proceeds of this cell line. This is both inequitable and immoral. There will be such equitable sharing, if the courts recognize that the patient has a legally protected property interest in his own body and its products … [Mosk J then held that the existence of statutes permitting the sale of body parts and blood in certain circumstances, impliedly supported Moore’s view that he had property in

[page 36]

his cells. Finally Mosk J referred to the actions for non-disclosure and breach of fiduciary duty and identified certain restrictions on the availability and usefulness of such action to plaintiffs in the position of Moore. In relation to the action for non-disclosure he concluded that ‘the nondisclosure cause of action (1) is unlikely to be successful in most cases, (2) fails to protect

patients’ rights to share in the proceeds of the commercial exploitation of their tissue, and (3) may allow the true exploiters to escape liability. It is thus not an adequate substitute, in my view, for the conversion cause of action’.]

1.37 Questions 1.

What is the relevance of Panelli J’s comment that ‘the particular genetic material which is responsible for the natural production of lymphokines … is no more unique to Moore than the number of vertebrae in the spine’?

2.

Do courts recognise proprietary interests only in ‘things’ which are unique?

3.

What policy issues did the majority emphasise in determining that Moore had failed to establish a cause of action in conversion? Did Mosk J consider similar policy issues? If so, why did he disagree with the majority?

4.

What adverse consequences did Panelli J suggest would result from a decision that Moore had property in his cells?

5.

Why did Panelli J suggest that a decision in favour of Moore on the ground of lack of informed consent or breach of fiduciary duty would not have adverse policy consequences?

6.

Does a person have property in his or her blood?33

7.

Suppose that X, a laboratory assistant, had removed Moore’s cells from Dr Golde’s laboratory. Would Golde have had a cause of

action in conversion against X? If so, does the case hold that no proprietary interest can exist in human cells? 8.

Panelli J suggested that questions relating to property in cells should be resolved by legislatures, rather than courts. By contrast, Mosk J argued that courts should be prepared to extend the common law to resolve the moral issues presented by the development of biotechnology. What are the advantages and disadvantages of relying on legislation to create new forms of property?

1.38

Improvements in technology have created an increasing capacity to

remove and preserve human body parts which can be used for the purposes of transplantation.34 Note also that under the Human Tissue Act 1982 (Vic) s 38(1) ‘… a person shall not sell, or agree to sell, tissue (including his own tissue) or the right to take tissue from his body’. Section 39

[page 37]

also makes it an offence to buy, agree to buy, offer to buy or hold himself or herself out as willing to buy tissue. In certain circumstances a permit may be granted to a person to purchase tissue: s 39(2).35 1.39

State legislation regulating the donation of human tissue generally

excludes foetal tissue, spermatozoa, ova and fertilised embryos. Couples whose gametes, or fertilised embryos, are stored for future use may later die,

divorce or disagree about the use of such material. A dispute arising on separation of the parties or after the death of one of them could give rise to a claim in conversion, which would require the court to decide whether a property right could exist in such material. Does the existence of a statutory provision prohibiting the sale or purchase of human tissue necessarily preclude a person whose tissue has been dealt with without his or her consent (as in Moore’s case) from bringing an action for conversion of the tissue? Consider the case of a person who cuts off their hair and sells it to a wig manufacturer. Does the manufacturer have a right to sue if the hair is stolen before the wig is made? Consider the following cases. 1.40

There is no right of property in a dead body (Haynes Case (1614) Co

Rep 113), unless it has undergone some process or application of human skill such as stuffing or embalming: Doodeward v Spence (1908) 6 CLR 406.36 In Doodeward, the appellant purchased for the purposes of public display the preserved foetus of a two-headed child, still-born some 40 years previously. Police confiscated the item, and the appellant brought an action in detinue (see 2.8) to recover it. A majority of the High Court held in favour of the appellant, Griffith CJ concluding (at 414) that ‘when a person has by the lawful exercise of work or skill so dealt with a human body or part of a human body in his lawful possession that it has acquired some attributes differentiating it from a mere human corpse awaiting burial, he acquires a right to possession of it …’. He added that this principle affords protection to ‘the many collections of anatomical and pathological specimens or preparations formed and maintained by scientific bodies’ (at 413). In Dobson v North Tyneside Health Authority [1996] 4 All ER 474 the English Court of

Appeal refused to extend this principle to the case where a brain was removed and preserved in paraffin following a post-mortem. In R v Kelly [1998] 3 All ER 741 the English Court of Appeal found that body parts unlawfully removed from the custody of the Royal College of Surgeons came within the meaning of ‘property’ in s 4 of the Theft Act 1968 (UK). The removal and preservation of these parts was achieved ‘by virtue of the application of skill, such as dissection or preservation techniques, for exhibition or teaching purposes’ (per Rose LJ at 749–50). Rose LJ added (at 750) that ‘the common law does not stand still. It may be that if, on some future occasion, the question arises the courts will hold that human body parts are capable of being property for the purposes of s 4, even without the acquisition of different attributes, if they have a use or significance beyond their mere existence. This may be so if, for example, they are intended for use in an organ transplant operation, for the extraction of DNA or, for that matter, as an exhibit in a trial’ (emphasis added).

[page 38]

1.41

In Pecar v National Australia Trustees Ltd [1996] NSWSC 2518 the

plaintiff wished to establish that he was the natural child of Ivan Ulrich, who had died intestate. In order to do so, he sought an order from the Supreme Court authorising a medical expert to examine tissue of the deceased held by a pathology business. Bryson J considered the reference to ‘any property’ in rule 8(4) of Pt 25 of the Supreme Court Rules (NSW) which relates to the inspection of property for the purposes of gathering evidence. Relying on

Doodeward v Spence, he held that the retention of autopsy specimens in a paraffin block demonstrated the requisite standard of skill to give rise to property rights: ‘In my opinion the pathology specimen is property within the general meaning of that term which connotes that property has an owner’ (at 5). In Roche v Douglas [2000] WASC 146 the plaintiff sought an order to conduct tests on the tissue of Edward Rowan (deceased) whom she claimed was her father. The court’s rules (O 52 r 3(1)(a)) allow an order ‘for the purpose of enabling the proper determination of any cause or matter’ relating to ‘the taking of samples of any property’. Master Sanderson held that the human tissue was property, concluding that ‘[t]o deny that tissue samples are property, in contrast to the paraffin in which the samples are stored, would be in my view to create a legal fiction. There is no rational or logical justification for such a result’ (at 13). Can these decisions be reconciled with Moore’s case? Is Australian law different from the position in the United States? Consider the following argument. 1.42

In Edwards; Re the Estate of Edwards [2011] NSWSC 478, a woman

sought possession of her dead husband’s sperm which had been extracted from his body after his death by earlier order of the Supreme Court. The court in the later action considered the possession application. RA Hulme J held that the plaintiff, Mrs Edwards, was entitled to possession of the sperm as an object of property relying on Doodeward v Spence on the ground that removal and storage of the sperm required work and skill to preserve it (at [82]). Also, the plaintiff had the best right to it because it was removed, preserved and stored on her behalf ([86]–[91]). In Re H, AE (No 2) [2012] SASC 177, the Supreme Court of South Australia applied the reasoning of

RA Hulme J in declaring the applicant entitled to possession of her deceased husband’s sperm which had been extracted posthumously by order of the court. Compare the approach taken by the Court of Appeal of England and Wales in Yearworth v North Bristol NHS Trust [2009] 3 WLR 118, which held that sperm, stored by the trust on behalf of men undergoing chemotherapy, belonged to the men. The court relied on the Doodeward v Spence rationale that they had property rights by virtue of work and skill involved, but preferred the alternative, and broader, reason that it belonged to the men because they ‘had generated and ejaculated’ it (at [45]).37 1.43E

Proprietary Rights in Human Tissue R Magnusson in Interests in Goods, N Palmer and E McKendrick (eds), 2nd ed, 1998, Informa Publishing, 25–62 at 44

Proprietary actions such as theft and conversion are clearly appropriate to ensure that the terms of a tissue bailment are respected. In the Australian context, the terms of the bailment would limit the purposes to which donated tissue could be put to the purposes specified in human tissue legislation. Similar terms, it is submitted, would also be implied at common [page 39] law, where tissue is donated for transplantation or scientific research. In both Australia and the UK, proprietary remedies are necessary since no specific legislative offences exist for the maltreatment or destruction of validly donated tissue. To apply the ‘no property’ rule here would be to open up a cavernous regulatory vacuum which will rapidly widen as umbilical cords, frozen blood vessels, bones, joints and freeze-dried nerves (to name just a few) join blood and blood products as items of storage in tissue banks. The technology for the longer-term storage of body parts such as scalps, noses, ears, fingers and human eggs is improving steadily. Torts against the person provide no protection for the maltreatment of removed tissue, or for the use of tissue for unauthorised purposes. The tort of battery, for example, is inappropriate, since nothing which is done to removed tissue can constitute interference with the ‘person’ of the donor. Finally, although economic loss will often be negligible, this will not usually be a motivation for a person wishing to vindicate their rights.

1.44 Questions 1.

Do you agree that extending property rights is the best regulatory approach to the problem of rights over human tissue? Or is it a second-best approach in the absence of a more detailed statutory framework that specifically balances all the relevant interests?38

2.

Should human tissue, removed from patients during medical procedures, in the absence of a contrary agreement, be considered as donated to the medical institution where the procedure is performed? Would such a policy satisfactorily resolve the issues raised in Moore?

3.

Do the later Australian and British cases involve an extension or restriction of the ruling in Moore’s case?

Property rights and privacy 1.45

Courts and legislatures are often called upon to decide whether or not

people should have property rights in a novel ‘thing’ (which may be tangible or intangible). In most cases the courts refuse to create new property rights, deferring to the legislature as is consistent with the separation of powers doctrine. But in other cases they clearly have introduced property rights previously unknown to the law by incremental extension of existing principles to novel situations. The cases below illustrate the factors which may be taken into account in reaching such decisions. When reading Victoria Park Racing

and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479; 43 ALR 597 below, you should consider how judicial decisions to recognise or refuse recognition of novel proprietary interests are influenced by more general theories about the purposes and justifications for the existence of private property.

[page 40]

1.46C Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479; 43 ALR 597 High Court of Australia Latham CJ: This is an appeal from a judgment for the defendants given by Nicholas J in an action by the Victoria Park Racing and Recreation Grounds Co Ltd against Taylor and others. The plaintiff company carries on the business of racing upon a racecourse known as Victoria Park. The defendant Taylor is the owner of the land near the racecourse. He has placed an elevated platform on his land from which it is possible to see what takes place on the racecourse and to read the information which appears on notice boards on the course as to the starters, scratchings, etc, and the winners of the races. The defendant Angles stands on the platform and through a telephone comments upon and describes the races in a particularly vivid manner and announces the names of the winning horse. The defendant, the Commonwealth Broadcasting Corporation, holds a broadcasting licence under the regulations made under the Wireless Telegraphy Act 1905–1936 and carries on the business of broadcasting from station 2UW. This station broadcasts the commentaries and descriptions given by Angles. The plaintiff wants to have the broadcasting stopped because it prevents people from going to the races and paying for admission. The evidence shows that some people prefer hearing about the races as seen by Angles to seeing the races for themselves. The plaintiff contends that the damage which it thus suffers gives, in all the circumstances, a cause of action … I am unable to see that any right of the plaintiff has been violated or any wrong done to him. Any person is entitled to look over the plaintiff’s fences and to see what goes on in the plaintiff’s land. If the plaintiff desires to prevent this, the plaintiff can erect a higher fence. Further, if the plaintiff desires to prevent its notice boards being seen by people from outside the enclosure, it can place them in such a position that they are not visible to such people. At sports grounds and other places of entertainment it is the lawful, natural and common practice to put up fences and other structures to prevent people who are not prepared to pay for admission from getting the benefit of the entertainment. In

my opinion, the law cannot by an injunction in effect erect fences which the plaintiff is not prepared to provide. The defendant does no wrong to the plaintiff by looking at what takes place on the plaintiff’s land. Further, he does no wrong to the plaintiff by describing to other persons, to as wide an audience as he can obtain, what takes place on the plaintiff’s ground. The court has not been referred to any principle of law which prevents any man from describing anything which he sees anywhere if he does not make defamatory statements, infringe the law as to offensive language etc, break a contract, or wrongfully reveal confidential information. The defendants did not infringe the law in any of these respects … It has been argued that by the expenditure of money the plaintiff has created a spectacle and that it therefore has what is described as a quasi-property in the spectacle which the law will protect. The vagueness of this proposition is apparent upon its face. What it really means is that there is some principle (apart from contract or confidential relationship) which prevents people in some circumstances from opening their eyes and seeing something and then describing what they see. The court has not been referred to any authority in English law which supports the general contention that if a person chooses to organise an entertainment or to do anything else which other persons are able to see, he has a right to obtain from a court an order that they shall not describe to anybody what they see. If the claim depends upon interference with a proprietary right it is difficult to see how it can be material to consider whether the interference is large or small — whether the description is communicated to many [page 41] persons by broadcasting or by a newspaper report, or only to a few persons in conversation or correspondence. Further, as I have already said, the mere fact that damage results to a plaintiff from such description cannot be relied upon as a cause of action. I find difficulty in attaching any precise meaning to the phrase ‘property in a spectacle’ … No authority has been cited to support such a proposition … Dixon J: The foundation of the plaintiff company’s case is no doubt the fact that persons who otherwise would attend race meetings stay away because they listen to the broadcast made by the defendant Angles from the tower overlooking the course. Beginning with the damage thus suffered and with the repetition that may be expected, the plaintiff company says that, unless a justification for causing it exists, the defendants or some of them must be liable, in as much as it is their unauthorised acts that inflict the loss. It is said that to look for a definite category or form of action into which to fit the plaintiff’s complaint is to reverse the proper order of thought in the present stage of the law’s development. In such a case it is for the defendants to point to the ground upon which the law allows them so to interfere with the normal course of the plaintiff’s business as to cause damage. There is, in my opinion, little to be gained by inquiring whether in English law the foundation of a delictual liability is unjustifiable damage or breach of specific duty. The law of tort has fallen into great confusion, but, in the main, what acts and omissions result in responsibility and what do not are matters defined by long-established rules of

law from which judges ought not wittingly to depart and no light is shed upon a given case by large generalisations about them. We know that, if upon such facts as the present the plaintiff could recover at common law, his cause of action must have its source in an action upon the case and that in such an action, speaking generally, damage was the gist of the action. There is perhaps, nothing wrong either historically or analytically in regarding an action for damage suffered by words, by deceit or by negligence as founded upon the damage and treating the unjustifiable conduct of the defendant who caused it as [a] matter of inducement. But, whether his conduct be so described or be called more simply a wrongful act or omission, it remains true that it must answer a known description, or, in other words, respond to the tests of criteria laid down by establishing principle. The plaintiff’s counsel relied in the first instance upon an action on the case in the nature of nuisance. The premises of the plaintiff are occupied by it for the purpose of a racecourse. They have the natural advantage of not being overlooked by any surrounding heights or raised ground … The feature in which the plaintiff finds the wrong of nuisance is the impairment or deprivation of the advantages possessed by the plaintiff’s land as a racecourse by means of a non-natural and unusual use of the defendants’ land. This treatment of the case will not, I think, hold water. It may be conceded that interferences of a physical nature, as by fumes, smell and noise, are not the only means of committing a private nuisance. But the essence of the wrong is the detraction from the occupier’s enjoyment of the natural rights belonging to, or in the case of easements, of the acquired rights annexed to, the occupation of land. The law fixes those rights. Diversion of custom from a business carried on upon the land may be brought about by noise, fumes, obstruction of the frontage or any other interference with the enjoyment of recognised rights arising from the occupation of property and, if so, it forms a legitimate head of damage recoverable for the wrong; but it is not the wrong itself. The existence or the use of a microphone upon neighbouring land, is, of course, no nuisance. If one, who could not see the spectacle, took upon himself to broadcast a fictitious account of the races he might conceivably render himself liable in a form of action in which his falsehood played a part, but he would commit no nuisance. It is the [page 42] obtaining a view of the premises which is the foundation of the allegation. But English law is, rightly or wrongly, clear that the natural rights of an occupier do not include freedom from the view and inspection of neighbouring occupiers and of other persons who enable themselves to overlook the premises. An occupier of land is at liberty to exclude his neighbour’s view by any physical means he can adopt. But while it is no wrongful act on his part to block the prospect from adjacent land, it is no wrongful act on the part of any person on such land to avail himself of what prospect exists or can be obtained. Not only is it lawful on the part of those occupying premises in the vicinity to overlook the land from any natural vantage point, but artificial erections may be made which destroy the privacy existing under natural conditions. In Chandler v Thompson (1811) 3 Camp 80 at 82; 170 ER 1312 at 1313, Le Blanc J said that, although an action for opening a window to disturb the plaintiff’s privacy was to be read of in the books, he had never known such an action maintained, and when he was in the common

pleas he had heard it laid down by Eyre LCJ that such an action did not lie and that the only remedy was to build on the adjoining land opposite to the offensive window. After that date there is, I think, no trace in the authorities of any doctrine to the contrary. In Johnson v Wyatt (1863) 2 De G J & S 18 at 27; 46 ER 281 at 284, Turner LJ said: ‘That the windows of the house may be overlooked, and its comparative privacy destroyed, and its value thus diminished by the proposed erection … are matters with which, as I apprehend, we have nothing to do’, that is, they afford no ground for an injunction … This principle formed one of the subsidiary reasons upon which the decision of the House of Lords was based in Tapling v Jones (1865) 11 HLC 290 at 317; 11 ER 1344 at 1355. Lord Chelmsford said: … the owner of a house has a right at all times … to open as many windows in his own house as he pleases. By the exercise of the right he may materially interfere with the comfort and enjoyment of his neighbour; but of this species of injury the law takes no cognisance. It leaves everyone to his self-defence against an annoyance of this description; and the only remedy in the power of adjoining owner is to build on his own ground, and so to shut out the offensive windows. When this principle is applied to the plaintiff’s case it means, I think, that the essential element upon which it depends is lacking. So far as freedom from view or inspection is a natural or acquired physical characteristic of the site, giving it value for the purpose of the business or pursuit which the plaintiff conducts, it is a characteristic which is not a legally protected interest. It is not a natural right for breach of which a legal remedy is given, either by an action in the nature of nuisance or otherwise. The fact is that the substance of the plaintiff’s complaint goes to interference, not with its enjoyment of the land, but with the profitable conduct of its business. If English law had followed the course of development that has recently taken place in the United States, the ‘broadcasting rights’ in respect of the races might have been protected as part of the quasi-property created by the enterprise, organisation and labour of the plaintiff in establishing and equipping a racecourse and doing all that is necessary to conduct race meetings. But courts of equity have not in British jurisdictions thrown the protection of an injunction around all the intangible elements of value, that is, value in exchange, which may flow from the exercise by an individual of his powers or resources whether in the organisation of a business or undertaking or the use of ingenuity, knowledge, skill or labour. This is sufficiently evidenced by the history of the law of copyright and by the fact that exclusive right to invention, trade marks, designs, trade name and reputation are dealt with in English law as special heads of protected interests and not under a wide generalisation. [page 43] In dissenting from a judgment of the Supreme Court of the United States by which the organised collection of news by a news service was held to give it in equity a quasiproperty protected against appropriation by rival news agencies, Brandeis J gave reasons which substantially represent the English view and he supported his opinion by a citation of much English authority: International News Services v Associated Press (1918) 248

US 215; 63 L Ed 211. His judgment appears to me to contain an adequate answer both upon principle and authority to the suggestion that the defendants are misappropriating or abstracting something which the plaintiff has created and alone is entitled to turn to value. Briefly, the answer is that it is not because the individual has by his efforts put himself in a position to obtain value for what he can give that this right to give it becomes protected by law and so assumes the exclusiveness of property, but because the intangible or incorporeal right he claims falls within a recognised category to which legal or equitable protection attaches … In my opinion, the right to exclude the defendants from broadcasting a description of the occurrences they can see upon the plaintiff’s land is not given by law. It is not an interest falling within any category which is protected at law or in equity. I have had the advantage of reading the judgment of Rich J but I am unable to regard the considerations which are there set out as justifying what I consider amounts not simply to a new application of settled principle but to the introduction into the law of new doctrine. Evatt J [dissenting]: … Here the plaintiff contends that the defendants are guilty of the tort of nuisance. It cannot point at once to a decisive precedent in its favour, but the statements of general principle in Donoghue v Stevenson are equally applicable to the tort of nuisance. A definition of the tort of nuisance was attempted by Sir Frederick Pollock (Indian Civil Wrongs Bill, c VII s 55), who said: Private nuisance is the using or authorising the use of one’s property, or of anything under one’s control, so as to injuriously affect an owner or occupier of property — (a) by diminishing the value of that property; (b) by continuously interfering with his power of control or enjoyment of that property; (c) by causing material disturbance or annoyance to him in his use or occupation of that property. What amounts to material disturbance or annoyance is a question of fact to be decided with regard to the character of the neighbourhood, the ordinary habits of life and reasonable expectations of persons there dwelling, and other relevant circumstances. At an earlier date, Pollock CB had indicated the danger of too rigid a definition of nuisance. He said (Bamford v Turnley (1862) 3 B & S 66 at 79; 122 ER 27 at 31; [1861–73] All ER Rep 706 at 710): I do not think that the nuisance for which an action will lie is capable of any legal definition which will be applicable to all cases and useful in deciding them. The question so entirely depends on the surrounding circumstances — the place where, the time when, the alleged nuisance, what, the mode of committing it, how, and the duration of it, whether temporary or permanent. In the present case, the plaintiff relies upon all the surrounding circumstances. Its use and occupation of land is interfered with, its business profits are lessened, and the value of the land is diminished or jeopardised by the conduct of the defendants. The defendants’ operations are conducted to the plaintiff’s detriment, not casually but systematically, not temporarily

[page 44] but indefinitely; they use a suburban bungalow in an unreasonable and grotesque manner, and do so in the course of a gainful pursuit which strikes at the plaintiff’s profitable use of its land, precisely at the point where the profit must be earned, viz the entrance gates. Many analogies to the defendants’ operations have been suggested, but few of them are applicable. The newspaper which is published a considerable time after a race has been run competes only with other newspapers, and can have little or no effect upon the profitable employment of the plaintiff’s land. A photographer overlooking the course and subsequently publishing a photograph in a newspaper or elsewhere does not injure the plaintiff. Individuals who observe the racing from their own homes or those of their friends could not interfere with the plaintiff’s beneficial use of its course. On the other hand, the defendants’ operations are fairly comparable with those who, by the employment of moving picture films, television and broadcasting would convey to the public generally (i) from a point of vantage specially constructed; (ii) simultaneously with the actual running of the races; (iii) visual, verbal or audible representations of each and every portion of the races. If such a plan of campaign were pursued, it would result in what has been proved here, viz actual pecuniary loss to the occupier of the racecourse and a depreciation in the value of his land, at least so long as the conduct is continued. In principle, such a plan may be regarded as equivalent to the erection by a landowner of a special stand outside a cricket ground for the sole purpose of enabling the public to witness the cricket match at an admission price which is lower than that charged to the public bodies who own the ground, and, at great expense, organise the game. In concluding that, in such cases, no actionable nuisance would be created, the defendants insist that the law of England does not recognise any general right of privacy. That is true, but it carries the defendants no further, because it is not merely an interference with privacy which is here relied upon, and it is not the law that every interference with private property must be lawful. The defendants also say that the law of England does not forbid one person to overlook the property of another. That also is true in the sense that the fact that one individual possesses the means of watching, and sometimes watches what goes on on his neighbour’s land, does not make the former’s action unlawful. But it is equally erroneous to assume that under no circumstances can systematic watching amount to a civil wrong, for an analysis of the cases of J Lyons & Sons v Wilkins [1899] 1 Ch 255, and Ward Locke & Co (Ltd) v Operative Printers’ Assistants’ Society (1906) 22 TLR 327, indicates that under some circumstances, the common law regards ‘watching and besetting’ as a private nuisance, although no trespass to land has been committed … In the United States, in the case of International News Services v Associated Press (1918) 248 US 215 at 255; 63 L Ed 211, Brandeis J regarded the ‘Our Dogs’ case (Sports and General Press Agency Ltd v ‘Our Dogs’ Publishing Co Ltd [1916] 2 KB 880) as illustrating a principle that ‘news’ is not property in the strict sense, and that a person who creates an event or spectacle does not thereby entitle himself to the exclusive right of first publishing the ‘news’ or photograph of the event or spectacle. But it is an extreme application of the English cases to say that because some overlooking is permissible, all overlooking is necessarily lawful. In my opinion, the decision in the International News

Services case evidences an appreciation of the function of law under modern conditions, and I believe that the judgments of the majority and of Holmes J commend themselves as expositions of principles which are not alien to English law. If I may borrow some phrases from the majority decision, I would say that in the present case it is indisputable that the defendant broadcasting company had ‘endeavoured to reap where it has not sown’, and that it has enabled all its listeners to appropriate to themselves [page 45] ‘the harvest of those who have not sown’ … The fact that here, as in the International News Service case, the conduct of the defendants cannot be regarded as honest should not be overlooked if the statement of Lord Esher is still true that ‘any proposition the result of which would be to show that the common law of England is wholly unreasonable and unjust, cannot be part of the common law of England’ (quoted in Donoghue v Stevenson [1932] AC 562 at 608–9; [1932] All ER Rep 1 at 25). The fact that there is no previous English decision which is comparable to the present does not tell against the plaintiff because not only is simultaneous broadcasting or television quite new, but, so far as I know, no one has, as yet, constructed high grandstands outside recognised sports grounds for the purpose of viewing the sports and of enriching themselves at the expense of the occupier … [McTiernan J delivered a judgment agreeing with the Chief Justice and Dixon J. Rich J agreed with Evatt J.]

1.47 Questions 1.

Of what relevance is the Victoria Park case to a discussion of the nature of property?

2.

Can it be argued that the effect of a decision in favour of the plaintiff would have been to create a proprietary interest in a spectacle, notwithstanding that the dissenters chose to rely on the tort of nuisance?

3.

Do you find the same difficulty as Latham CJ ‘in attaching any

precise meaning to the phrase “property in a spectacle”’? 4.

Did Latham CJ have difficulty in finding that a spectacle could be owned because of the practical problems the plaintiff would have had in preventing all persons from overlooking the racecourse? The converse situation to that arising in the Victoria Park case is where a landowner seeks to protect obstruction of a view enjoyed from his or her property.39

5.

There seems to be a basic difference between the judicial techniques displayed in the judgments of Latham CJ and Dixon J and those utilised by Rich and Evatt JJ. How would you describe the difference? Was Dixon J precluded by authority from reaching a decision in favour of the plaintiff? (Compare the views of Evatt J.) If not, why did Dixon J decline to accept the American doctrine of ‘quasi-property’? Was he influenced by a particular view of the role of courts in making new law? In evaluating the approach of Dixon J it is important to note that even proponents of judicial caution concede that courts are often faced with the problem of deciding whether or not to ‘recognise’ novel proprietary interests.

[page 46]

6.

Evatt J characterises the defendants’ actions as ‘unreasonable’, ‘grotesque’ and ‘dishonest’. Do you agree with this description of the defendants’ conduct? Evatt J also relies on the fact that the

defendants had endeavoured to ‘reap where they had not sown’ and had appropriated the harvest of those who had sown. 7.

What principle would have supported a decision in favour of the plaintiff in Victoria Park? Is the following argument satisfactory? Any expenditure of mental or physical effort, as a result of which there is created an entity, whether tangible or intangible, vests in the person who brought the entity into being, a proprietary right to the commercial exploitation of that entity, which right is separate and independent from the ownership of that entity: Libling, ‘Property in Intangibles’ (1978) 94 LQR 103, 104.

1.48

Traditionally, the action for passing off protected goodwill and

business reputation by conferring a right of action where the defendant used a trade name or get-up in order to lead purchasers to believe the goods or services were those of the plaintiff. More recently, the action for passing off has expanded considerably. A remedy is now available where the defendant has not passed off goods or services as those of the plaintiff, but has represented that they have the qualities or attributes of the plaintiff’s product.40 Could the appellant, Victoria Park, have brought an action against Taylor for passing off the races arranged by the plaintiff as the defendant’s product? 1.49

The Victoria Park case is commonly cited as authority for the

proposition that English (and therefore Australian) law does not recognise a general right of privacy; although, as Evatt J pointed out, it is difficult to regard the plaintiff’s claim in that case as motivated by a desire to protect its ‘privacy’. Even if Australian law does not provide a general remedy for breach

of privacy, there are a number of causes of action which may provide some protection for those whose privacy has been invaded. Where the invasion of privacy takes the form of an unlawful intrusion on a person’s land, an action in trespass will be available. In Emcorp Pty Ltd v ABC [1988] 2 Qd R 169, Williams J in the Supreme Court of Queensland issued an interlocutory injunction restraining the Australian Broadcasting Corporation (ABC) from televising a film made by ABC employees working for ‘The Investigators’ who trespassed on the plaintiff’s business premises to obtain information. In Lincoln Hunt Australia Pty Ltd v Willesee (1986) 4 NSWLR 457, Young J in the Supreme Court of New South Wales held that an injunction may be granted to restrain the broadcast of film footage taken in circumstances of trespass, but only if the publication would be unconscionable and would cause irreparable damage to the plaintiff (at 463–4). In Brighten Pty Ltd v Nine Network Australia Pty Ltd [2009] NSWSC 319, Johnson J refused to grant an injunction to stop the broadcasting of photographs of a resort at which the film crew had stayed ‘under cover’ and complaints about the premises made by other guests. The authorities were reviewed in the following case.

[page 47]

1.50C

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2002) 208 CLR 199; 185 ALR 1 High Court of Australia

[The respondent was a processor of brushtail possums. Members of an animal rights group

trespassed on land owned by the respondent for the purposes of filming activities conducted in the course of the respondent’s business. The video recording showed scenes of animals in distress, and caged in close confinement to each other. The recording was passed to the ABC who prepared to use excerpts from it in a ‘Four Corners’ documentary. The respondent sought to restrain the showing of the program by injunction. The ABC appealed to the High Court from a judgment in favour of the respondent.] Gleeson CJ: The respondent invited this court to depart from old authority; declare that Australian law now recognises a tort of invasion of privacy; hold that it is available to be relied upon by corporations as well as individuals; and conclude that this is the missing cause of action for which everyone in the case has so far been searching. If the activities were private, then the law of breach of confidence is adequate to cover the case. I would regard images and sounds of private activities, recorded by the methods employed in the present case, as confidential. There would be an obligation of confidence upon the persons who obtained them, and upon those into whose possession they came, if they knew, or ought to have known, the manner in which they were obtained … But the lack of precision of the concept of privacy is a reason for caution in declaring a new tort of the kind for which the respondent contends. Another reason is the tension that exists between interests in privacy and interests in free speech … Part of the price we pay for living in an organised society is that we are exposed to observation in a variety of ways by other people. There is no bright line which can be drawn between what is private and what is not. Use of the term ‘public’ is often a convenient method of contrast, but there is a large area in between what is necessarily public and what is necessarily private. An activity is not private simply because it is not done in public. It does not suffice to make an act private that, because it occurs on private property, it has such measure of protection from the public gaze as the characteristics of the property, the nature of the activity, the locality, and the disposition of the property owner combine to afford. Certain kinds of information about a person, such as information relating to health, personal relationships, or finances, may be easy to identify as private; as may certain kinds of activity, which a reasonable person, applying contemporary standards of morals and behaviour, would understand to be meant to be unobserved. The requirement that disclosure or observation of information or conduct which would be highly offensive to a reasonable person of ordinary sensibilities is in many circumstances a useful practical test of what is private … However, the foundation of much of what is protected, where rights of privacy, as distinct from rights of property, are acknowledged, is human dignity … The problem for the respondent is that the activities secretly observed and filmed were not relevantly private. Of course, the premises on which those activities took place were private in a proprietorial sense. And, by virtue of its proprietary right to exclusive possession of the premises, the respondent had the capacity (subject to the possibility of trespass or other surveillance) to grant or refuse permission to anyone who wanted to observe, and record, its operations. The same can be said of any landowner, but it does not make everything that the owner does on the land a private act. Nor does an act become private simply because the owner

of land would prefer that it were unobserved. The reasons for such preference might be personal, or financial. They might be [page 48] good or bad. An owner of land does not have to justify refusal of entry to a member of the public, or of the press. The right to choose who may enter, and who will be excluded, is an aspect of ownership. It may mean that a person who enters without permission is a trespasser. But that does not mean that every activity observed by the trespasser is private … If the appellant, without itself being complicit in impropriety or illegality, obtains information which it regards as newsworthy, informative, or entertaining, why should it not publish. It is, of course, subject to any relevant statute law, including criminal law, and to the law of defamation, breach of confidence, negligence, and any other potential liability in tort or contract. But we have arrived at this point in the argument because of the respondent’s inability to point to any specific legal inhibition on publication. The respondent must explain why the appellant is bound in conscience not to publish; and, bearing in mind the consequences of such a conclusion for the free flow of information, it is not good enough to say that any person who fails to see this dictate of conscience is merely displaying moral obtuseness … Next, reliance was placed upon the act of trespass. Again the difficulty is to bridge the gap between the trespasser’s tort and the appellant’s conscience. There is judicial support for the proposition that the trespassers, if caught in time, could have been restrained from publishing the film. [His Honour referred to dicta of Young J in Lincoln Hunt v Willessee.] If, in the present case, the appellant had been a party to the trespass, I would give an affirmative answer to the question [to grant an injunction restraining publication], based on breach of confidence, provided that the activities filmed were private … A film of a man in his underpants in his bedroom would ordinarily have the necessary quality of privacy to warrant the application of the law of breach of confidence. Indeed, the reference to the gratuitously humiliating nature of the film [as was considered in Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 590] ties in with the first of the four categories of privacy adopted in United States law, and the requirement that the intrusion upon seclusion be highly offensive to a reasonable person. I regard the law of breach of confidence as providing a remedy, in a case such as the present, if the nature of the information obtained by the trespasser is such as to permit the information to be regarded as confidential. But, if that condition is not fulfilled, then the circumstance that the information was tortiously obtained in the first place is not sufficient to make it unconscientious of a person into whose hands that information later comes to use it or publish it. The consequences of a proposition are too large. [Gaudron, Gummow, Hayne, and Kirby JJ agreed that the appeal be allowed. Gummow and Hayne JJ (Gaudron J agreeing) rejected the suggestion that the High Court in Victoria Park held that the tort of invasion of privacy was unknown to Australian law: ‘Victoria Park does not stand

in the path of the development of such a cause of action (of invasion of privacy)’: CLR 248–9; ALR 31. Callinan J expressed a similar opinion, preferring the reasoning of Rich J in Victoria Park to that of the majority. He added that the case would be decided differently today: see CLR 320–3; ALR 89–91.]

1.51 Questions 1.

Would Gleeson CJ have reached a different conclusion in this case if the trespass had been committed by the ABC?

2.

Should a difference be drawn between the trespasser and the broadcaster? In what circumstances might it be appropriate to do so?

[page 49]

3.

Does the High Court’s decision fail to give appropriate protection to the respondent’s proprietary rights?

4.

Is breach of confidence, as Gleeson CJ suggests, the appropriate doctrine to protect privacy?41

1.52

In Grosse v Purvis [2003] QDC 151, Skoien DCJ held the defendant

liable in tort for invasion of privacy for recurrent acts of harassment of the plaintiff over a period of many years which amounted to stalking. His Honour reasoned as follows:

The starting point for an analysis of the relevant elements of a possible tort of invasion of privacy is the decision of the High Court in Australian Broadcasting Corporation v Lenah Game Meat Pty Ltd, (2002) 208 CLR 199 … [I]n my view within the individual judgments certain critical propositions can be identified with sufficient clarity to found the existence of a common law cause of action for invasion of privacy … The development by courts in other common law jurisdictions of a common law claim for invasion of privacy was considered useful in forming the development of this area of law in Australia by Gummow and Hayne JJ, (and thus Gaudron J) at paras 112–119 and Callinan J at paras 325–327. In particular each of those Justices referred to the judgment of the English Court of Appeal in Douglas v Hello! Ltd [2001] QB 967 in which each of the three Justices of Appeal strongly suggested that in England the right of an individual person to privacy was a right protected by the civil law. The Court made clear that the time was now right for consideration as to how and to what extent privacy should be protected at common law in Australia. See the judgments of Gleeson CJ at para 40 (‘the law should be more astute than in the past to identify and protect interests of a kind which fall within the concept of privacy’), of Gummow and Hayne JJ (and Gaudron J) at para 132, and of Callinan J at para 335. At para 332 Callinan J said ‘… principles for an Australian tort of privacy … need to be worked out on a case by case basis in a distinctly Australian context.’ See also Gummow and Hayne JJ at para 124. Finally, some members of the Court elucidated certain matters that would constitute an unacceptable invasion of privacy, which are useful to mould the formulation of this common law right. More than 15 years ago, Young J in Bathurst City Council v Saban (1985) 2 NSWLR 704 at 708 recognised conduct which would apply by analogy to the instant case as being actionable notwithstanding the decision in Victoria Park … It is a bold step to take, as it seems, the first step in this country to hold that there can be a civil action for damages based on the actionable right of an individual person to privacy. But I see it as a logical and desirable step. In my view there is such an actionable right. Mr Curran rightly pointed out the difficulties in taking the step. What are the essential elements of the cause of action? Are there any special defences which should be allowed? It is not my task nor my intent to state the limits of the cause of action nor any special defences other than is necessary for the purposes of this case. In my view the essential elements would be: a)

a willed act by the defendant,

b)

which intrudes upon the privacy or seclusion of the plaintiff,

[page 50]

c)

in a manner which would be considered highly offensive to a reasonable person of ordinary sensibilities,

d)

and which causes the plaintiff detriment in the form of mental psychological or emotional harm or distress or which prevents or hinders the plaintiff from doing an act which she is lawfully entitled to do. Clearly acts of the type specified in s 359B(c) of the Code [the Queensland Criminal Code]

would be actionable behaviour. I have found the defendant to have committed many of such acts, beginning in 1994. The suffering of embarrassment, hurt, distress and, a fortiori, PTSD would be actionable detriment as would enforced changes of lifestyle caused by the intrusion. I have found that the plaintiff has suffered such detriment … It seems to me that a defence of public interest should be available (see Lenah at para 34). No such concept was involved in this case.

1.53

In Hosking v Runting [2005] NZLR 1 the appellants, a celebrity

couple in New Zealand, brought an action on behalf of their 18-month-old daughter who was photographed in a public place without permission, claiming an unlawful invasion of privacy. The New Zealand Court of Appeal approved Gleeson CJ’s comments in Lenah Game Meats, extracted above, in favour of protecting against disclosures that have ‘the necessary quality of privacy to warrant the application of the law of breach of confidence’ and ‘that the intrusion upon seclusion be highly offensive to a reasonable person’. But they preferred to describe the cause of action as a tort of privacy rather than breach of confidence on the ground that the latter action was more appropriately confined to circumstances where information was confided in another person who later breached confidence. An action to protect privacy, by contrast, renders that particular requirement irrelevant. According to Gault P and Blanchard J (at [117]–[118]): The scope of a cause, or causes, of action protecting privacy should be left to incremental development by future courts. The elements of the tort as it relates to publicising private information set down by Nicholson J in P v D provide a starting point, and are a logical development of the attributes identified in the United States jurisprudence and adverted to in

judgments in the British cases. In this jurisdiction it can be said that there are two fundamental requirements for a successful claim for interference with privacy: 1.

The existence of facts in respect of which there is a reasonable expectation of privacy; and

2.

Publicity given to those private facts that would be considered highly offensive to an objective reasonable person. No court can prescribe all the boundaries of a cause of action in a single decision, nor would

such an approach be desirable. The cause of action will evolve through future decisions as courts assess the nature and impact of particular circumstances. However, some general comments may be useful. First, we emphasise that at this point we are concerned only with the third formulation of the privacy tort identified by Prosser and developed in the United States cases: wrongful publicity given to private lives. We need not decide at this time whether a tortious remedy should be available in New Zealand law for unreasonable intrusion into a person’s solitude or seclusion. In many instances this aspect of privacy will be protected by the torts of nuisance or trespass or by laws against harassment, but this may not always be the case. Trespass may be of limited value as an action to protect against information obtained surreptitiously. Long lens photography, audio surveillance and video surveillance now mean that intrusion is possible without a trespass being committed.

[page 51]

Tipping J concurred. Keith and Anderson JJ dissented on this point, concluding that the introduction of this new tort was unnecessary, and would have a chilling effect on freedom of expression. They argued that the existing law, including the law of trespass, provided sufficient protection of privacy. The court unanimously rejected the appellants’ claim that their privacy had been wrongfully invaded in this instance. The court held that the appellants could not have a reasonable expectation of privacy in public places. Moreover, the publication of the image of the appellants’ daughter could not reasonably

be held to have affected her welfare or to concern any aspect of her private life, if it is unaccompanied by any private details or material that might embarrass or inconvenience the child. The plaintiff also failed because of being unable to override the public interest in publication in Andrews v Television NZ [2009] 1 NZLR 220 where footage of car accident victims was later shown in a program on rescuers. The court held that the material was private but not sufficiently sensitive or humiliating to make publication offensive to the reasonable person. An important factor in the development of the United Kingdom jurisprudence in this area is the European Convention on Human Rights, art 8(1) of which imposes a ‘right to respect’ for one’s private and family life and one’s home, and art 10, concerning freedom of expression. In the absence of a common law tort of invasion of privacy, English courts have responded to the Convention by extending the action for breach of confidence. As Lord Hoffman said in Campbell v MGN Ltd [2004] 2 WLR 1232 at [14]–[16]: Now the law imposes a ‘duty of confidence’ whenever a person receives information he knows or ought to know is fairly and reasonably to be regarded as confidential … Information about an individual’s private life would not, in ordinary usage, be called ‘confidential’. The more natural description today is that such information is private. The essence of the tort is better encapsulated now as misuse of private information.

In 2014, the Australian Law Reform Commission (ALRC) recommended that victims of serious invasions of privacy should be able to obtain redress by the provision of a statutory tort of privacy.42 The ALRC observed that Australia was virtually alone among major common law jurisdictions in not recognising a cause of action for privacy. Although the ALRC’s proposal was

drafted largely to deal with privacy issues arising from new technologies, the proposal was strongly opposed by media organisations who saw it as a threat to press freedom.43

1.54 Questions 1.

How, if at all, does the development of the tort of invasion of privacy bear on property rights?

2.

Would the law as expressed by Skoien DCJ have made a difference to the result if applicable to the earlier cases of Victoria Park or Lenah?

3.

Is the approach of the New Zealand Court of Appeal preferable to that of the High Court in Lenah Game Meats?

[page 52]

4.

Would the tort of invasion of privacy as articulated in Grosse v Purvis and Hosking have assisted the respondent in Lenah?

5.

Do you agree with Keith and Anderson JJ that the existing law, including the law of trespass, affords a better balance of the relevant competing values and policies?

6.

Are human rights considerations relevant to the development of the tort? Consider this question in light of the discussion of property and human rights at 1.64ff below.

Property and the right to work 1.55

The ability that one has acquired by reason of education, the

registration by a competent authority of a level of professional skill or trade, or the capacity to exercise physical skills are key determinants of wealth and property. For that reason such qualifications and abilities are of enormous financial as well as personal value. But does this mean that they are property rights? Consider the following cases. 1.56C

Dorman v Rogers (1982) 148 CLR 365 High Court of Australia

[A disciplinary tribunal established under s 29 of the Medical Practitioners Act 1938 (NSW) directed that the name of a medical practitioner be removed from the register of practitioners. An appeal by the practitioner to the Court of Appeal Division of New South Wales was dismissed. He then appealed to the High Court. At the time of the tribunal’s direction Dorman was employed as a senior medical officer by the State Rail Authority of New South Wales. The respondents, who were members of the tribunal, objected to the competency of the appeal.] Gibbs CJ: It was contended on behalf of the appellant that the proceedings ‘involve directly or indirectly a claim, demand or question to or respecting any property or any civil right amounting to or of the value of $20,000 or upwards’ within the meaning of s 35(3)(b) of the Judiciary Act, and that an appeal to this Court therefore lies as of right. It was submitted that the proceedings involve the right of the appellant to practise as a medical practitioner, and that the value of that right to him exceeds $20,000. In fact the appellant is employed as a senior medical officer by the State Rail Authority of New South Wales at a salary which is at present $33,761 per annum. He has been employed in that position for some years, and might have expected to remain in it for some years more. However, if his name is not restored to the register, his employment will, it was said, be terminated. It was submitted that the salary which he would have received in that position would have accrued from the exercise of the right to practise and provides a measure of the value of that right. It was held by this Court in Clyne v NSW Bar Association that no appeal lay as of right from an order striking the name of the appellant off the roll of barristers, notwithstanding that the net income of the appellant from his practice had been, and was likely to be in future, greater than the amount specified in s 35 of the Judiciary Act. The Court said of

the order of the Supreme Court in that case (5): ‘There is no “property” that can be said to be involved, and no civil right capable of being valued.’ That decision governs the present case, and in [page 53] my opinion it was correct. It proceeds on the ground that a right to practise a profession is incapable of valuation. It is true that a person who has a right to practise a profession may earn considerable sums from the exercise of the right, and that many, if not most, would suffer financially if deprived of the right. But what is valuable is the person’s own earning capacity, which is something personal to him. The right to practise is of course not transmissible, and the financial consequences of possessing the right will depend on the skill, ability and fortune of the individual concerned. One man, who has a right to practise, may, because of his own imperfections or misfortune, earn less than he could have obtained from unskilled employment. Another, who has earned a substantial income from practising his profession, may, if he is deprived of the right to practise, earn an even larger income from some other occupation. In other cases the deprivation of the right to practise may not affect the existing employment of the person concerned in any way. In the present case, it may prove possible for the State Rail Authority to continue to employ the appellant in a different capacity. One may venture to hope that such a course, which might greatly assist the appellant in his rehabilitation, may prove convenient to the Authority. All these things support the conclusion reached in Clyne v NSW Bar Association that a right to practise is in itself not capable of being valued for the purposes of s 35 … Stephen J: Registration as a medical practitioner under the Medical Practitioners Act is essentially a matter of mere certification because it does no more than attest the possession by the practitioner of certain qualities regarded as necessary for those who are to practise medicine. This character of registration under the Medical Practitioners Act, as a standing certification of the possession of qualities regarded as requisite to the practice of medicine, stands in high contrast to those licences and permits, the holding of which authorizes engagement in some trade or occupation, entry to which is controlled otherwise than merely by reference to the personal qualifications of applicants. In the case of such licences and permits the law, for a variety of policy reasons, limits the number of entrants, thereby creating a monopoly, shared among the permitted entrants; the operation of taxis, the conduct of hotels or lotteries and the growing of certain primary products where quota limits on production exist are all instances of this. In such cases rights of entry, made valuable by their scarcity, are conferred and are themselves capable of exploitation because of their scarcity value. Registration under the Medical Practitioners Act of itself possesses no such value, it merely certifies the possession of necessary personal qualities. It is only by employing those qualities, and not at all from the exploitation of any share of a monopoly in a particular activity, that a medical practitioner derives economic advantage. He may, popularly but inaccurately, be said to share in a monopoly but that will only be because relatively few possess the personal qualities which the law requires as a prerequisite to practise. The distinction between the two emerges most clearly when transferability is considered. Registration which is merely

certification of the possession of personal qualities is inherently incapable of transfer to another whereas the right to enter upon and share in an activity, entry to which is controlled by the state and is not dependent merely upon the personal qualities of an intending entrant, will be readily transferable, and its scarcity value realizable, so long as the law permits of such transfer. It follows that whatever loss may be suffered following the deregistration of a medical practitioner is no measure of the value of his registration but only reflects the monetary effect of the loss of one or more of those personal qualities which doctors are required to possess if they are to engage in the practice of their profession. It does not flow from any right, civil or otherwise … [Aickin, Wilson, Mason and Brennan JJ agreed.]

[page 54]

1.57

In Forbes v New South Wales Trotting Club (1979) 25 ALR 1 the

plaintiff was warned off racecourses by the defendant. He was a professional punter. He brought an action challenging the order, inter alia, on the ground that he had a right to work, which the defendants were unlawfully preventing him from exercising. The High Court by majority held that he did not have a right to work enforceable against the respondents. However, the court held that where the club made such a decision, it could not do so arbitrarily in breach of its own Rules of Trotting. As we have seen above (1.22) a decree of specific performance will not be granted as a remedy for a breach of a contract of employment. Is this case further proof that the right to work is not a property right? When a court emphasises the power to restrain the exercise of private property rights in cases where owners wield significant power, does this mean that the person in whose favour those rights are granted has acquired a proprietary right?

PROPERTY RIGHTS AND CIVIL RIGHTS 1.58

The development of the law of modern societies is marked by the

extension of political and civil rights to all citizens. These rights are of a different character to property rights: they are rights to participate in public life, rather than rights to exclude others from the enjoyment of things. It is important to emphasise that the emergence of modern societies is reflected in legal classifications by the separation of political rights on the one hand, and property rights on the other. On many occasions civil and political rights will be in conflict with property rights. Courts are frequently required to balance these various sets of rights. The following case demonstrates some of the emerging legal principles. 1.59C

Davis v Commonwealth (1988) 166 CLR 79; 82 ALR 633 High Court of Australia

[The plaintiffs produced shirts with designs on them ‘bearing a discernible similarity’ to designs owned by the defendants under the Australian Bicentennial Authority Act 1980 (Cth). The shirts contained the symbols ‘1788’ and ‘1988’ that were similar to those of the Australian Bicentennial Authority, and they were surrounded by an outer ring containing the words ‘200 years of suppression and depression’. The plaintiffs had already been refused consent by the authority to use the symbols produced on the shirts. The authority relied on s 22 of the Act which made it an offence to use a symbol ‘capable of being mistaken for’ an official symbol.] Mason CJ, Deane and Gaudron JJ: If we ask the question whether the commemoration of the Bicentenary is a matter falling within the peculiar province of the Commonwealth in its capacity as the national and federal government, the answer must be in the affirmative. That is not to say that the States have no interest or no part to play in the commemoration. Clearly they have such an interest and such a part to play, whether as part of an exercise in co-operative federalism or otherwise. But the interest of the States

in the commemoration of the Bicentenary is of a more limited character. It cannot be allowed to obscure the plain fact that the commemoration of the Bicentenary is preeminently the business and the concern of the Commonwealth as the national government and as such falls fairly and squarely within the federal executive power. [page 55] We turn now to the challenge to the validity of ss 22 and 23. The defendants submit that the validity of these sections is sustained by the incidental or implied legislative powers and the specific legislative powers conferred by ss 51(i), (xviii), (xx) and 122 of the Constitution. Thus, s 51(i) clearly supports s 22(1)(d). That provision, being a conditional prohibition of the importation of articles into Australia, necessarily falls within the trade and commerce power. The power conferred by s 51(xviii) with respect to copyright, designs and trade marks may be capable of sustaining the provisions relating to the name and the official symbols of the Authority. But it is difficult to see how this power can support all the wide-ranging provisions contained in ss 22 and 23. The plaintiffs contend that the relevant provisions relate to the use of expressions which do not necessarily identify the goods, their origin or their owner. The plaintiffs also contend that, as the Authority does not itself engage in trade, the provisions go beyond trade mark protection … It is necessary, first, to refer to the four devices or symbols to the plaintiffs’ use of which the Authority refused to consent. The first device consists of the profile of a human head surrounded by the two words ‘AUSTRALIAN BICENTENARY’ with the caption ‘DISCOVERED + DISCOLOURED’. The device is quite different from the official symbols of the Authority. And the words ‘AUSTRALIAN BICENTENARY’, though prescribed by reg 4 for the purposes of s 22(6)(d), are not used in the device in conjunction with ‘1788’, ‘1988’ or ‘88’. Accordingly, the plaintiffs’ proposed use of the expression does not fall within the concluding words of s 22(6)(d). The third and fourth devices to be used by the plaintiffs do not involve the use of a prescribed expression or an official symbol. However, the plaintiffs’ second device stands in a different situation. It has a central symbol, bearing the figures ‘1788’ and ‘1988’, that has a discernible similarity to the first and second official symbols of the Authority. The inner symbol is surrounded with an outer ring in which the words ‘200 YEARS OF SUPPRESSION AND DEPRESSION’ appear. The device involves the use of a prescribed expression, the words ‘200 years’, in conjunction with ‘1788’ and ‘1988’. Furthermore, the device incorporates a symbol that ‘so nearly resembles’ the first and second official symbols ‘as to be capable of being mistaken for’ those symbols. Accordingly, it is only the use of the second of the plaintiffs’ devices that would expose the plaintiffs to liability for the commission of offences against s 22(1)(a), (b) and (c), in the absence of the written consent of the Authority. Section 24 recognizes that ss 22 and 23 are provisions ‘for the protection of (the) name, property or interests’ of the Authority. The defendants submit that, when the two sections are so understood, the executive power, operating in conjunction with the incidental power (s 51(xxxix)) or the implied power, supports them as laws reasonably adapted to the purpose of facilitating and protecting the attainment of the objects of the commemoration of the Bicentenary and the objects of the Authority. This, the defendants

argue, includes the protection of the integrity of the official symbols and the protection of the prescribed expressions. The broad proposition advanced by the defendants travels too widely in two respects. First, it suggests that the relevant exercise of executive and legislative power is directed not to the commemoration of the Bicentenary as such but to the attainment of objects lying beyond the commemoration itself. Secondly, the proposition suggests that the relevant exercise of power extends to the attainment of the objects of the Authority as though they are independent of the commemoration of the Bicentenary. In one respect this is so. The external affairs power supports the prescription in s 22(6)(d)(i) of the last four expressions mentioned in that paragraph. Australia is a party to the Convention Relating to International Exhibitions of 1928 as amended by subsequent Protocols. Expo 88 is an international exhibition to which the Convention applies. By Art 9(3) Australia is bound to: ‘use whatever means it considers most appropriate under its own legislation to act against the organisers of false exhibitions or [page 56] exhibitions to which participants might be fraudulently attracted by false promises, notices or advertisements’ … The difficulties do not stop at this point. Take the prescription of ‘Melbourne’ and ‘Sydney’ in para (d)(i). The use of ‘Family Law Conference Melbourne 1988’, without the prior written consent of the Authority, in connection with a conference of the legal profession in that city this year would infringe s 22(1)(a). Yet it is impossible to perceive how the prohibition of such a use contributes to the protection of the integrity of the commemoration of the Bicentenary or the attainment of the objects of the Authority. Many similar illustrations (eg, clothing or emblems displaying support for sporting teams) might be given of the use of a combination of ‘Melbourne’ and ‘1988’ or ‘Sydney’ and ‘1988’. The illustrations given in the two preceding paragraphs indicate that the effect of the provisions is to give the Authority an extraordinary power to regulate the use of expressions in everyday use in this country, though the circumstances of that use in countless situations could not conceivably prejudice the commemoration of the Bicentenary or the attainment by the Authority of its objects. In arming the Authority with this extraordinary power the Act provides for a regime of protection which is grossly disproportionate to the need to protect the commemoration and the Authority. It is therefore no answer to say that the Authority’s power to refuse written consent is exercisable only for the purpose of ensuring such protection, assuming that to be a permissible construction of s 22(1). Here the framework of regulation created by s 22(1)(a) with s 22(6)(d)(i) and (ii) reaches far beyond the legitimate objects sought to be achieved and impinges on freedom of expression by enabling the Authority to regulate the use of common expressions and by making unauthorized use a criminal offence. Although the statutory regime may be related to a constitutionally legitimate end, the provisions in question reach too far. This extraordinary intrusion into freedom of expression is not reasonably and appropriately adapted to achieve the ends that lie within the limits of constitutional power. …

In the result we would overrule the demurrer so far as it asserts that the plaintiffs lack standing to challenge ss 22 and 23 and that s 22(6) (d)(i) is valid to the extent that it relates to the expression ‘200 years’. Otherwise we would allow the demurrer. We would declare that s 22(6)(d)(i) is invalid to the extent that it refers to the expression ‘200 years’. [Wilson, Dawson and Brennan JJ also held that the provisions were beyond the Commonwealth’s powers.]

1.60 Questions 1.

Would you agree that the defendant’s property rights were limited by the civil or political rights of the plaintiffs?

2.

Did the court achieve a fair balance between the different rights here?

3.

Are the plaintiffs’ rights in their designs property rights or civil rights?

4.

Consider the rights to navigate and fish in coastal waters. They are considered native title interests under the Native Title Act 1993 (Cth). But do they qualify as property by reference to the criteria enunciated in Stow (1.12C)? As we have seen above (1.11), the right to navigate and to fish on the part of non-native title holders in coastal waters is a public right, but of an economic and social, rather than political, nature.

[page 57]

PROPERTY RIGHTS AND HUMAN RIGHTS 1.61

In general, because property rights essentially entail a right to exclude

and to use and enjoy, they may potentially impact adversely on the public rights, or human rights, of others. The extract from Davis v Commonwealth above (1.59C) shows how in certain circumstances, where property rights unreasonably affect civil rights to free expression, they may be curtailed by the courts. Importantly, civil rights are protected not only by municipal law, but also by international human rights instruments such as the Universal Declaration of Human Rights (UDHR), the International Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), and the European Convention on Human Rights (ECHR). In recent years, human rights have come to play a greater role in the domestic law of most countries. And although human rights are typically associated with political and personal rights, such as the right to free expression, to privacy, to freedom of association, and to freedom from arbitrary governmental interference, they also embrace property rights. For instance, art 17 of the UDHR states that ‘(1) Everyone has the right to own property alone as well as in association with others; (2) No-one shall be arbitrarily deprived of his property’. Similarly, art 1 of Protocol No 1 of the ECHR provides that: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding conditions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to

control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions and penalties.

1.62

Clearly these provisions bear directly on property rights. But

ratification of an international human rights instrument does not mean that those human rights norms have domestic force since they are not automatically incorporated into Australian law: Kiao v West (1985) 159 CLR 550 at 570. Nonetheless, even in a country like Australia where human rights legislation (with the exception of the Australian Capital Territory and Victoria: see below) is absent, the international norms may be persuasive authority in cases where existing common law rules do not provide clear guidance. In particular, in common law jurisdictions, norms emanating from supranational human rights instruments infiltrate domestic law ‘vertically’ by offering interpretive guidance to judges in five separate areas: first, in the resolution of ambiguities in statutes; second, in the development of the common law and equity, particularly where principles are uncertain; third, in the review of the exercise of executive discretion; fourth, in the general exercise of judicial discretion; and fifth, in the development of public policy.44 A striking example of this influence is provided by Mabo v Queensland (No 2), where Brennan J (Mason CJ and McHugh J concurring) found support in the ICCPR for the appellants’ claim that the terra nullius doctrine had no place in Australian law. He concluded (at [42]) that: Whatever the justification advanced in earlier days for refusing to recognize the rights and interests in land of the indigenous inhabitants of settled colonies, an unjust and discriminatory

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doctrine of that kind can no longer be accepted … The opening up of international remedies to individuals pursuant to Australia’s accession to the Optional Protocol to the International Covenant on Civil and Political Rights … brings to bear on the common law the powerful influence of the Covenant and the international standards it imports. The common law does not necessarily conform with international law, but international law is a legitimate and important influence on the development of the common law, especially when international law declares the existence of universal human rights.

1.63

The influence of human rights principles on property law is

particularly evident in the European Union, where the ECHR directly binds member states, particularly where it has been incorporated in municipal legislation. The United Kingdom, for example, has enacted the Human Rights Act 1998 (UK) to achieve this objective. The relevance of human rights law to property law is demonstrated in the recent decisions of the European Court of Human Rights in Pye v United Kingdom.45 In this case, the documentary title holder’s land was held by the House of Lords to have been extinguished by the squatter’s period of 12 years’ possession of the land. On appeal to the European Court of Human Rights, a section of the court by a narrow majority held that the legislation allowing title to be extinguished by adverse possession (squatting), particularly because no compensation was payable to the documentary title holder, was contrary to art 1 of Protocol No 1 of the ECHR. This decision was overturned by the Grand Chamber, the majority of which found the legislation to be compliant with the ECHR.46 Contrast Connors v United Kingdom,47 where a family of gypsies was evicted from a local authority site by the owner, the court held that there were insufficient procedural protections of the family’s rights in the local law as required by art 8 of the convention (the right to respect for private and family

life, home and correspondence). The family was awarded compensation for their loss of the site. This principle was affirmed in Manchester City Council v Pinnock (No 1) [2010] 3 WLR 1441; [2010] UKSC 45; where the United Kingdom Supreme Court held that an occupier with limited statutory rights to possess was entitled to have the proportionality required by art 8 considered when the landlord sought a repossession order. The ramifications of these cases have been considered in a series of UK Supreme Court decisions. 1.64

Victoria’s Charter of Human Rights and Responsibilities Act 2006

(Vic), s 20, entitled ‘Property Rights’, is similar to art 17 of the UDHR and art 1 of Protocol No 1 of the ECHR. It provides that: ‘A person must not be deprived of his or her property other than in accordance with law’. The courts will be required to interpret legislation consistently with the charter wherever possible as long as this does not disturb the purpose behind the legislation. The European authorities appear to be directly relevant to the interpretation of this provision. The Australian Capital Territory has also enacted the Human Rights Act 2004 (ACT), though significantly it has no property provision like s 20 of the Victorian Act. In other states such as New South Wales and Tasmania, there is mounting political pressure at present to adopt similar legislation, so that international human rights jurisprudence may come to have increasing relevance in many Australian jurisdictions. Independently of legislative activity, as noted above, international developments in human rights law can influence judicial discretion in hard cases even now, and the delicate balancing act involved when judges in

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other jurisdictions seek to reconcile human rights law with property law will continue to have resonance with policy debates about the legitimate boundaries of property rights in Australia. Whatever the general arguments for and against the enactment of human rights instruments, the inclusion of a property guarantee is controversial, as the following article suggests. 1.65E

Should Australian Bills of Rights Protect Property Rights? S Evans (2006) 31(1) Alt LJ 19–24 (footnotes omitted)

One of the most controversial questions in drafting a Bill of Rights or Charter of Rights is whether or not to protect property rights. The decision to omit property rights from the Canadian Charter of Rights and Freedoms was essential to obtaining political support from the provinces. Conversely, the decision to omit property rights from a proposed Victorian Bill of Rights in 1987 sparked strong dissent within the parliamentary committee making the proposal. And in South Africa the question was one of the key issues in the drafting of the post-apartheid constitution … In this article I ask, in the context of a decision to adopt a Charter of Rights in some form, whether and how an Australian State or Territory Charter of Rights should protect property rights. In my view, a Charter should protect property rights. But it should do so in a way that respects the limited extent to which property rights are properly regarded as human rights: it should not guarantee compensation for expropriation or deprivation of property rights it should protect property rights in a way that recognises the significant protections already afforded to property rights by the common law and by Parliament it should do so in a way that recognises the inappropriateness of the courts secondguessing the Parliament’s decision that legislation strikes an appropriate balance between private rights and the public interest … In my view, it should not contain such a guarantee [of compensation]. My reasons are as follows: A Charter of Rights need not contain such a property rights guarantee [for example

Human Rights Act 2004 (ACT)] both as a matter of general international law and as a matter of principle, such a property rights guarantee is not a human right where constitutions and bills of rights have contained such a property rights guarantee, the results have been undesirable. The courts have been asked to second-guess the parliament’s judgment that legislation strikes an appropriate balance between private rights and the public interest. And the courts have not been able to reach satisfactory and stable interpretations of the property rights guarantee a strong property rights guarantee would not reflect Australia’s political traditions a property rights guarantee in the absence of protection of social and economic rights would be unbalanced the existing parliamentary scrutiny of legislation that affects property and the common law presumption that the legislature does not intend to take or limit property rights without compensation already provide appropriate protection for property. A property rights guarantee asks the courts to decide whether compensation ought to be paid when legislation affects property rights. The questions are not straightforward legal ones. The courts will be asked to engage in a line-drawing exercise: to decide when regulatory legislation ‘goes too [page 60] far’ and warrants compensation. The courts have no particular expertise in the economic, social and political issues involved in that determination. As Jennifer Nedelsky argues: [D]ebates over the meaning of property, of the kinds of power that should be allocated to individuals and the limits of that power (such as landlord-tenant law, environmental regulation, minimum wage law) should be part of the ongoing vigorous debate of the most popularly accessible bodies, the legislative assemblies. That debate should not be obscured or curtailed by constitutionalizing property. Moreover, property rights are not the kinds of rights that Parliament is at all likely to limit without appropriate deliberation and debate. Property rights have high visibility and high salience. They provide a focus for organised interest groups to make Parliament aware of the impact of proposed legislation … Jurisprudence on guarantees of property rights is almost universally incoherent. The lack of clarity in judicial decisions regarding the interpretation of property provision in the Commonwealth Constitution (s 51(xxxi)) is a good example. This problem comes about largely because the courts are attempting to compress the most highly contested political questions into propositions of law. These political questions invariably revolve around the relative value to be assigned to individual rights and the general welfare of the community. These questions do not tend to be amenable to legal solutions … An appropriate model for the recognition of property rights within a Charter of Rights would have four elements:

It would provide that property is defined and regulated by law It would provide that the Parliament may make laws defining and regulating the rights and responsibilities of ownership It would provide that everyone has a right to own property alone as well as in association with others, without discrimination on grounds including race, colour, sex, language, religion, political or other opinion, national or social origin, birth or other status (see ICCPR art 2.1). (Equally, it would provide that the enjoyment of other rights is not to be denied on grounds of property (see ICCPR, arts 2.1, 24.1, 26.1).) It would provide that no one is to be deprived of their property other than in accordance with law (see Universal Declaration of Human Rights, art 17 and compare s 1 of the Canadian Charter) (where law includes the common law and the prerogative) … Most fundamentally, defining a right to property in these terms recognises the core human rights associated with property — the absence of arbitrary and discriminatory restrictions on ownership and a requirement that government act in accordance with law when it does act to limit property rights.

1.66 Questions 1.

Does Evans’ argument represent a convincing compromise between the competing arguments about the place of property rights in charters of human rights?

2.

Is Evans too sanguine about the parliamentary process as a mechanism for effectively protecting property rights? Can you think of recent examples of parliaments offering too little respect for property rights in passing legislation?

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3.

Are there other reasons for limiting the property protections in

charters of human rights? 4.

Does s 20 of the Victorian Act give expression to Evans’ concerns? Would it be possible for the Victorian Parliament to enact legislation providing security of tenure for residential tenants, or extensive environmental protection without falling foul of s 20?

5.

Should

property

owners

be

allowed

compensation

when

legislatures enact legislation that has the effect of significantly reducing the property’s value?

Having examined the external boundaries of property, we are now in a position to examine the traditional internal classification of property rights.

THE TRADITIONAL CLASSIFICATION AND TERMINOLOGY 1.67

The law of property, perhaps more than any other basic area of law, is

characterised by a technical terminology the survival of which is due more to a sense of historical continuity than to analytical precision. Nonetheless, the terminology has to be understood, whatever its imperfections, simply because it forms part of the everyday vocabulary of lawyers. The basic distinction in property law is between real property (land) and personal property (chattels). This distinction is still fundamental, notwithstanding that the dichotomy does not have the same significance for substantive rules of law as it once did. At one time, for example, the principles governing the devolution of real

property (land) and personal property on an intestacy (that is, on the death of a person who dies without having made a valid will) were quite different. Title to real property and to those items of personal property designated as ‘heirlooms’ passed to the ‘heir’ of the person dying intestate, while the remainder of the personal property was distributed among the ‘next of kin’ as defined by a statutory formula. The distinction was removed by legislation in the mid-nineteenth century. The traditional classification is still useful because the legal rules that regulate the use and transfer of real property and personal property differ at least in part because of the essential differences between these two categories. For instance, land is immovable, which means that the rules that govern its use differ from those that regulate the use of chattels. A further reason why the distinction remains important is because legislation is often drafted employing the traditional terminology and classifications. The Goods Act 1958 (Vic), for example, defines ‘goods’ to include ‘all chattels personal other than things in action and money’. Compare the Fair Trading Act 1999 (Vic) which defines ‘goods’ in s 3 as including ‘(a) ships, aircraft and other vehicles; and (b) animals (including fish); and (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas, electricity, water, sewerage and telecommunications’. The definition of ‘land’ in the Real Property Act 1900 (NSW) s 3 includes ‘messuages, tenements, and hereditaments corporeal and incorporeal of every kind and description or any estate or interest therein …’ Legal documents, too, may be drafted by reference to the traditional terminology of property law. It is not uncommon for a testator to

‘devise’ real property to one person and to ‘bequeath’ personal property to another. Real property is generally sub-classified into corporeal hereditaments and incorporeal hereditaments. The former describes rights of possession, or tangible real property (land) and the latter describes lesser rights over land, or intangible real property such as an easement of

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way which entitles the holder only to a right to walk across a certain piece of land owned by another person.48 1.68

In the light of the arguments in 1.5–1.13, the question arises as to

whether the traditional classifications, embodied in the terminology of property law, provide a satisfactory analytical framework for the study of legal principles. The distinction between real and personal property concentrates attention not on proprietary interests themselves but on the objects of those interests. It may be very useful to distinguish between land and, say, goods or patents as objects of proprietary interests for some purposes at least. Since land has the unique characteristics of permanence and immovability it is not surprising that the law recognises proprietary interests in land that are wholly different to rights over goods or patents. The objection is to constructing separate legal compartments on the assumption that there must be inherent differences between the principles applicable to real property and those applicable to personal property. The chapters that follow seek to show that

there are both similarities and differences between the rules governing real and personal property.

Land, or realty 1.69

The origins of the dichotomy between real and personal property lie

in the remedies available at common law for the recovery of tangible objects. If a person dispossessed of an object could recover that object (the res) as of right it was classified as real property. The distinguishing characteristic of real property was the quality of being specifically recoverable in a ‘real’ action. Objects not so recoverable were regarded as personal property. A person dispossessed of such objects had a ‘personal’ action for damages against the wrongdoer, but was not entitled to an order requiring the wrongdoer to deliver the actual object. Since only land was specifically recoverable under the early common law, it followed that the category of real property was limited to land. Things other than land, such as goods, fell within the category of personal property.

Boundaries of land 1.70

How are the rights of owners of land limited by law? Can the owner

of a block of land in the suburbs build a 50-storey office block on it? In the absence of legislation, to what extent is a landowner entitled to exclude third parties from the air space above the land? For example, does the owner of a country estate have an action against a person who overflies the land without permission in order to take photographs of the estate to offer for sale? These

questions were answered to some degree in Baron Bernstein of Leigh v Skyviews & General Ltd [1978] QB 479 at 488; [1977] 2 All ER 902 at 907, where Griffiths J, after referring to the authorities on rights in air space, stated that: [T]he problem is to balance the rights of an owner to enjoy the use of his land against the rights of the general public to take advantage of all that science now offers in the use of air space. This balance is in my judgment best struck in our present society by restricting the rights of an owner in the air space above his land to such height as is necessary for the

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ordinary use and enjoyment of his land and the structures upon it, and declaring that above that height he has no greater rights in the air space than any other member of the public.49

His Honour concluded that scenic flights operating some hundreds of feet above the plaintiff’s land did not constitute a trespass. 1.71

In Bendal Pty Ltd v Mirvac Projects Pty Ltd (1991) 23 NSWLR 464;

74 LGRA 407 it was held that construction facilities and objects encroaching upon the air space above adjacent land constituted a trespass if they were of a nature and at a height which would interfere with any ordinary uses of the land which the occupier may see fit to undertake. This principle was assumed to apply in Lang Parade Pty Ltd v Peluso [2006] 1 Qd R 42, also a case of oversailing crane jibs.50 1.72

As injunction is a discretionary remedy, it may be refused even if

trespass is proved. In Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287, at 322–3, AL Smith LJ said that while, prima facie, an injunction is the

remedy for trespass, damages may be a more appropriate remedy where the following conditions apply: In my opinion, it may be stated as a good working rule that — (1) If the injury to the plaintiff’s legal rights is small, (2) And is one which is capable of being estimated in money, (3) And is one which can be adequately compensated by a small money payment, (4) And the case is one in which it would be oppressive to the defendant to grant an injunction: then damages in substitution for an injunction may be given. There may also be cases in which, though the four above-mentioned requirements exist, the defendant by his conduct, as, for instance, hurrying up his buildings so as if possible to avoid an injunction, or otherwise acting with a reckless disregard to the plaintiff’s rights, has disentitled himself from asking that damages may be assessed in substitution for an injunction.

1.73

The ‘good working rule’ in Shelfer was applied in Jaggard v Sawyer

[1995] 1 WLR 269, where the defendant proposed to construct a driveway over his land to a second property he was to develop behind the land. Each landowner on the street owned the roadway in front subject to a covenant not to use any part of their unbuilt plot except as a private garden. The plaintiff, who also lived on the street, objected to the defendant’s development, but not until after construction was well under way. Action was brought for breach of covenant and for trespass over the plaintiff’s section of roadway. Since the development had progressed so far, and since an injunction would leave the second property without access, the court

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refused to grant an injunction since that would be oppressive to the defendant and awarded damages in lieu. 1.74

In Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd (2007) 20

VR 311, the appellant attached metal cladding to the face of its building which projected into the defendant’s airspace. The appellant claimed it would suffer harm if it were required by an injunction to remove the cladding, and that the intrusion was a minor inconvenience to the plaintiff but of great significance to itself. In upholding the trial judge’s refusal to award damages in lieu of an injunction, the Victorian Court of Appeal said that the ‘good working rule’ in Shelfer did not require a balancing in which the potential harms to each party were given equal status. What must be shown is that the hardship caused to the defendant by granting the injunction is significantly disproportionate to the relief obtained by the plaintiff so that to grant it would be ‘greatly oppressive’ (at 322–8). In LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 490 the plaintiff obtained a mandatory injunction requiring the defendant to remove scaffolding which was erected 4.5 metres above ground level and protruded about 1.5 metres into the air space above the plaintiff’s property. The defendant had previously sought the plaintiff’s permission to erect the scaffolding but the plaintiff had sought payment in return, which the defendant regarded as excessive and refused to pay. In the Supreme Court of New South Wales, Hodgson J (at 496) commented that ‘the case really comes down to whether one person should be permitted to use the land of another person for considerable personal gain for himself, simply because his use of the other person’s land causes no significant damage … As a matter of

general, though not universal principle, I would answer this question no’. The right to land similarly extends below the surface. In Bulli Coal Mining Co v Osborne [1899] AC 351 a person who mined coal beneath land of another person was held liable in trespass.

Air space rights 1.75

Is a right to build higher than would normally be permitted by

council codes a proprietary interest, which can be transferred from one landowner to another? In Uniting Church in Australia Property Trust (NSW) v Immer (No 145) Pty Ltd (1991) 24 NSWLR 510; 74 LGRA 255 (CA) the appellant and the respondent contracted to transfer ‘air space’ rights. These rights are not the interest in the space above a property. They are rights to construct buildings on land higher than would normally be permitted by council planning laws. The legislation permitted transfer of these rights in certain circumstances from one plot-owner to another (so that if, for example, A and B are each able to build up to 20 metres, A may, with council approval, transfer 10 metres to B, so that A may build up to 10 metres and B up to 30 metres). The court held that these rights were transferable so that a contract for sale of these rights was specifically enforceable. The decision was overturned by the High Court, but not on this point. In Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11,314; NSW ConvR ¶55-523, the defendant agreed to sell a building to the plaintiff with an ancillary deed giving the defendant the benefit of ‘floating floor space’ rights. These rights relate to the floor space potential permitted by the local council for a building. The ‘floating floor space’ will be greater where the preservation of

historic places or structures is involved. The deed stated that the rights given to the defendant were proprietary rights in the subject property. However, the court rejected this claim and held that the rights granted under the deed were personal rights, despite their description in the deed.

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Chattels, or personalty 1.76

The distinction between real and personal property broadly

corresponds with the factual distinction between land, which is immovable, and movable objects. One exception to this general rule is the leasehold interest in land. Historically, leaseholds were regarded as personal property for the reason that the early law did not permit the dispossessed leaseholder to recover the land itself. The lessee was limited to an action for damages, mainly because leases were seen as personal commercial arrangements outside the rigid feudal structure of landholding. In time, the leaseholder was enabled to recover the land itself through the action of ejectment, but by that time the anomalous classification of leaseholds as personal property was too well established to be overturned. To accommodate leasehold interests, the category of personal property is itself divided into ‘chattels real’ and ‘chattels personal’ (or ‘pure personalty’). The term ‘chattels real’ covers leasehold interests and is designed to indicate both the ‘personal’ nature of leasehold interests and the fact that they create proprietary interests in land. The term ‘pure personalty’ refers to all other

forms of personalty. It is normally sub-classified into choses in possession, and choses in action. The term ‘choses in possession’ covers movable, physical objects, such as books or furniture. Choses in action include intangibles, such as patents, copyrights, shares in companies and goodwill. It is important to emphasise once more that these forms of property refer to rights exercisable over such things, rather than the things themselves: see 1.5–1.13. 1.77

In industrialised societies such as Australia, various forms of choses in

action, or ‘intellectual property’, such as copyrights, trademarks and patents, have become an important form of wealth. The rules governing the creation and transfer of intellectual property are a specialist body of law, in the same way that a specialist body of rules developed in relation to land, when land was the major source of wealth and political and economic power. As we have seen above, there have also been extensions of the concept of property to provide protection against invasions of privacy, prevent breaches of confidence, and prevent unauthorised exploitation of the ‘personality’ of public figures: see 1.47. The notion that property may exist in intangibles is not confined to advanced industrial societies.51

BOUNDARIES BETWEEN DIFFERENT TYPES OF PROPERTY 1.78

When courts are called upon to adjudicate between the competing

claims of parties over property, they frequently have to decide what type of property the subject matter of the dispute is. So, the questions may be, ‘is the thing a chattel, or is it land? Or was it a chattel, but has now become land?

Also, if it has changed form, has it at the same time changed ownership?’. In addressing these issues, courts frequently rely on policy arguments to justify drawing the line in favour of one litigant or another. When reading the following cases, it is important to bear in mind the various philosophical debates on property rights discussed in the next section to see which of them informs particular legal rules.

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The boundary between land and chattels: fixtures 1.79

One useful way of assessing the practical significance of the common

law distinction between real and personal property is through a study of the law of fixtures. The doctrine of fixtures provides that chattels, by virtue of the circumstances surrounding their annexation to land, may change character from personal to real property. In certain circumstances, a chattel (personal property) which is affixed to or placed on land may become part of the land (real property). Depending upon the ownership of the land, this may result in a transfer of ownership in the particular objects which are affixed. The question whether a chattel has become a fixture is a question of law: Reynolds v Ashby & Son [1904] AC 461 (HL). Disputes about whether a chattel has become a fixture may arise between vendors and purchasers of land (though normally the contract of sale will deal with this issue); between landlords and tenants; between mortgagees of land and owners of chattels; between life

tenants of land and persons with an interest in remainder; and between a devisee and the personal representative of a deceased. In practical terms the doctrine operates as a default rule for resolving contests concerning title to an object in the absence of agreement. The doctrine plays a significant role in tax and stamp duty law where the question of who is the ‘owner’ may determine liability for stamp duty, or other tax liabilities, and as in the case that follows where a building owner and the owner of air-conditioning equipment are in dispute.

The doctrine of fixtures 1.80C

Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 Supreme Court of Victoria

[The plaintiffs, who were owners of a building, entered into a contract with a builder (Guide) for the renovation of their adjoining buildings. In turn, the builder subcontracted with the defendant for the supply and installation of air-conditioning systems. The defendant installed two airconditioning plants on the roofs of the plaintiffs’ buildings. A platform was constructed on each roof to hold a chiller, which stood on its own weight on the platform with pads acting as shock absorbers between the base of the legs of the chiller and its platform. Each chiller was connected to the water reticulation system of its building and electrical supply cables forming part of the structure of the building were connected to an electrical junction box fitted to the chiller on one of the buildings. However, the electric power supply was not connected. The builder failed to make progress payments to the defendant and later went into liquidation. The plaintiffs then entered into a contract with another builder to complete the renovations and the defendant agreed with that builder to complete the installation of the system. The defendant resumed the work of installing the air-conditioning, but later removed the air-conditioning plants incorporating the chillers, compressors and general works. The plaintiffs sought a mandatory

injunction compelling the defendant to deliver up two air-conditioning plants or alternatively damages for detention, conversion and trespass.] Kaye J: … The plaintiff’s claims for relief are based on the premise that at the time of removal from the building, each air-conditioning plant was a fixture. These claims are founded on the general rule of common law that property in materials and fittings, once annexed to a [page 67] building, become part of the freehold. Whether the annexation of the plants was sufficient to constitute the plants fixtures must be determined by the circumstances in which the same were positioned on the platform, and more particularly the intention as evidenced by the degree of annexation and the purpose of the annexation. These principles of law were expressed by Blackburn J in the following passage when delivering the judgment of the Court of Exchequer Chamber in Holland v Hodgson (1872) LR 7 CP 328 at 334–5: There is no doubt that the general maxim of the law is, that what is annexed to the land becomes part of the land; but it is very difficult, if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances as indicating the intention, viz, the degree of annexation and the object of the annexation. When the article in question is no further attached to the land, then [sic] by its own weight it is generally to be considered a mere chattel: see Wiltshear v Cottrell ((1853) 1 EL & BL 674; 118 ER 589), and the cases there cited. But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land: see D’Eyncourt v Gregory ((1866) Law Rep 3 Eq 382). Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard, and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to shew that it was never intended to be part of the land, and then it does not become part of the land. The anchor of a large ship must be very firmly fixed in the ground in order to bear the strain of the cable, yet no one could suppose that it became part of the land, even though it should chance that the shipowner was also the owner of the fee of the spot where the anchor was dropped. An anchor similarly fixed in the soil for the purpose of bearing the strain of the chain of a suspension bridge would be part of the land. Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they are so intended lying on those who assert that they have ceased to be chattels, and

that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel. In Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712– 13, Jordan CJ, with whom Davidson and Nicholas JJ concurred, expressed the principles and test to be applied as follows: A fixture is a thing once a chattel which has become in law land through having been fixed to land. The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is: Holland v Hodgson. The test of whether a chattel which has been to some extent fixed to land is a fixture is [page 68] whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period: Holland v Hodgson, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose: Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74 at 87. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of the land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed: Holland v Hodgson; Reynolds v Ashby & Son [1904] AC 466; Colledge v H C Curlett Construction Co Ltd [1932] NZLR 1060; Benger v Quartermain [1934] NZLR s 13. If it is proved to have been fixed merely for a temporary purpose it is not a fixture: Holland v Hodgson; Vaudeville Electric Cinema Ltd v Muriset. The intention of the person fixing it must be gathered from the purpose for which and the time during which user in the fixed position is contemplated: Hobson v Gorringe [1897] 1 Ch 182; Pukuweka Sawmills Ltd v Winger [1917] NZLR 81. If a thing has been securely fixed, and in particular if it has been so fixed that it cannot be detached without substantial injury to the thing itself or to that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended: Holland v Hodgson; Spyer v Phillipson [1931] 2 Ch 183 at 209–10. On the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts. Whether the intention of the party fixing the chattel was to make it a permanent accession to the freehold is to be inferred from the matters and circumstances including the following: the nature of the chattel; the relation and situation of the party making the annexation vis-à-vis the owner of the freehold or the person in possession; the mode of

annexation; and the purpose for which the chattel was fixed: Reid v Shaw (1906) 3 CLR 656, at 667, per Griffiths CJ. Facts from which the inference may be drawn that the plants were intended to be affixed permanently to the building are: the very nature of the air-conditioning plants; the defendant, who carries on the business of suppliers and fitters of such plant, supplied positioned and connected up the air-conditioning plants as a sub-contractor; the plaintiffs are the registered proprietors of the freeholds; the chillers were positioned on the platforms and connected up by pipes to the water pumps fitted to each platform which in turn were connected to the reticulation system of each building; and the plants, when fitted, formed an essential part of the buildings necessary for their use and occupancy as modern office premises. Mr WJ Martin, counsel for the defendant, submitted that the defendant’s intention ought not to be inferred without regard to its sub-contract with Guide and particularly the circumstance that the sub-contract remained only partly performed; counsel relied upon provisions in cl 12 of the sub-contract by which the defendant agreed to remedy any defect in the plant. It was said that because some repairs could not be carried out in situ it would be necessary to remove the plant for that purpose. Counsel submitted that where by a contract for work and labour and supply of materials to be fitted to the premises of another the supplier agreed that for a definite period he will maintain and repair the materials, the materials do not become annexed to the freehold before the maintenance period has expired. Support for this submission was said to be found in a passage of the judgment of Blackburn J in Appleby v Myers (1867) LR 2 CP 651 at 659. Of the facts of the case then under appeal, his Lordship said: … as to a great part at least of the work done in this case, the materials had not become the property of the defendant; for, we think that the plaintiffs, who were to complete the whole for a fixed sum, and keep it in repair for two years, would have had a perfect right, if they thought that a portion of the engine which they had put up [page 69] was too slight, to change it and substitute another in their opinion better calculated to keep in good repair during the two years, and that without consultation or asking the leave of the defendant. However, his Lordship’s remarks were made in connection with a claim under an agreement between the plaintiff and the defendant whereby the plaintiff agreed to construct certain machinery on the defendant’s premises and to keep it in repair for two years. The distinguishing feature of that case was the contractual relationship between the plaintiff and the defendant, and the absence of any such relationship between the parties in the present action. Counsel’s submission was expressed too widely; the statement of Blackburn J in Appleby v Myers has no application to circumstances where there is no contractual relationship between the person fitting the chattel and the owner of the freehold or person in possession. This is made clear from the judgments of the Court of Appeal in Hobson v Gorringe [1897] 1 Ch 182. In that case the court was concerned with a gas engine which had been affixed by bolts and screws to the

mortgagor’s land under a hire-purchase agreement made by him with the hirer. The mortgagor made default under his hire-purchase agreement, and the mortgagee entered in possession of the land. The hirer sought to restrain the mortgagee from selling the machine, claiming ownership of it, while the mortgagee claimed entitlement of the machine as a fixture. At 193 the court said: It is said that the intention that the gas engine was not to become a fixture might be got out of the hire and purchase agreement, and, if so, it never became a fixture and part of the soil, and it was said that the case of Holland v Hodgson has so decided. For this point it must be assumed that such intention is manifested by the hiring and purchase agreement, though, as before stated, we think it is not. Now, in Holland v Hodgson, Lord Blackburn, when dealing with the ‘circumstances to shew intention’, was contemplating and referring to circumstances which shewed the degree of annexation and the object of such annexation which were patent for all to see, and not to the circumstances of a chance agreement that might or might not exist between an owner of a chattel and a hirer thereof. This is made clear by the examples that Lord Blackburn alludes to shew his meaning. He takes as instances (a) blocks of stone placed in position as a dry stone wall or stacked in a builder’s yard; (b) a ship’s anchor affixed to the soil, whether to hold a ship riding thereto or to hold a suspension bridge. In each of these instances it will be seen that the circumstance to shew intention is the degree and object of the annexation which is in itself apparent, and thus manifested the intention. Lord Blackburn in his proposed rule was not contemplating a hire and purchase agreement between the owner of a chattel and a hirer or any other agreement unknown to either a vendee or mortgagee in fee of land, and the argument that such a consideration was to be entertained, in our judgment, is not well founded. Similarly, Adam J in Kay’s Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 433 said, in connection with the test to be applied for determining whether chattels brought on to land are fixtures, ‘the relevant intention is to be gathered from the circumstances which show the degree and the object of annexation, which are patent for all to see, and not, to quote the judgment of the court in Hobson v Gorringe [1897] 1 Ch 182 at 193, “the circumstances of a chance agreement that might or might not exist between an owner of a chattel and a hirer thereof”’. In Appleby v Myers, Blackburn J added after the passage cited, ‘It is quite true that materials worked by one into the property of another become part of that property. This is equally true, whether it be fixed or movable property. Bricks built [page 70] into a wall become part of the house; thread stitched into a coat which is under repair, or planks and nails and pitch worked into a ship under repair, become part of the coat or the ship’. The learned author of Hudson on Building and Engineering Contracts (10th ed) p 655 commenting on the principle so expressed by Blackburn J states: ‘The principle is so firm that notwithstanding an express provision to the

contrary and to the contract, the builder will not be able to take advantage of it as against a third party entitled to the land’. It was also contended on behalf of the defendant that there was insufficient annexation of the chillers to cause the same to be fixtures. The chillers were connected to water pipes by means of four bolts and nuts so that there was a connection, perhaps indirect, with the building. In any event, such connection may be described as slight only. Nevertheless even slight fixing to the land is sufficient to raise the presumption that a chattel is a fixture. In those circumstances, the onus of proving otherwise rests upon the party so contending; he must do so by showing from the relevant circumstances that it was intended that the article should remain a chattel. The relevant circumstances from which the objective intention is to be inferred are those which I have already described. It follows that the defendant bore the onus of proof which it failed to discharge. In my opinion the correct inference to be drawn from the facts of this case is that the airconditioning plants were intended to be fitted permanently to each building and therefore the same were fixtures at the time of their removal by the defendant. Leave to enter final judgment.

1.81

An important principle in the law of fixtures is the observation of

Lord McNaghten in Leigh v Taylor [1902] AC 157 at 162: To determine that question you must have regard to all the circumstances of the particular case — to the taste and fashion of the day as well as to the position in regard to the freehold of the person who is supposed to have made that which was once a mere chattel part of the realty. The mode of annexation is only one of the circumstances of the case, and not always the most important — and its relative importance is probably not what it was in ruder or simpler times.

Note how Kaye J in Belgrave Nominees above examined all the circumstances (including the status of the person responsible for the affixing, and their relationship to the owner of the freehold). In Agripower Barraba Pty Ltd v Blomfield (2015) 317 ALR 202 at [76], the New South Wales Court of Appeal cited with approval the following observation by Kearney J, in Palumberi v Palumberi (1986) NSW ConvR ¶55-287: It would seem from perusal of [the] authorities in the field that there has been a perceptible decline in the comparative importance of the degree or mode of annexation, with a tendency to

greater emphasis being placed upon the purpose or object of annexation, or, putting it another way, the intention with which the item is placed upon land. This shift has involved a greater reliance upon the individual surrounding circumstances of the case in question as distinct from any attempt to seek to apply some simple rule or some automatic solution.

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The object or purpose of annexation refers to the intention of the person who affixed the object to the land, determined objectively by inference from surrounding circumstances including the degree of annexation. For example, in Ball-Guymer v Livantes (1990) 102 FLR 327, the fact that the affixer was a licensee, and the licence could be terminated by one week’s notice, were factors that indicated that the item remained a chattel. The actual or subjective intention of the original affixer may have some limited relevance: May v Ceedive Pty Ltd (1.86C). In Permanent Trustee Australia Ltd v Esanda Corporation Ltd (1991) 6 BPR 13,420 at 13,423 Rolfe J commented that the ultimate question for determination was whether the intention of the person placing the thing on the land, viewed objectively, was that it should become a fixture. This intention was to be derived from all the relevant facts, including any evidence of actual intention, though this would not always be decisive. Is this a more satisfactory approach? If a general principle emerges from the case law, it is that all of the circumstances of the case, subjective and objective, must be considered.52 1.82

In Leigh v Taylor, a tenant for life affixed valuable tapestries to the

walls of the drawing room. The tapestries were tacked onto canvas which was

stretched over, and nailed to strips of wood which, in turn, were nailed to the walls. The life tenant died and competing claims to the tapestries were made by her executors and by the remainderman (the person succeeding to the mansion upon the life tenant’s death). The House of Lords decided that the tapestries retained their character as chattels and formed part of the personal estate of the life tenant, to which her executors were entitled. The Earl of Halsbury LC contended that, although the tapestries were affixed to the walls, this was the only way that they could be enjoyed as ornamental tapestries. Thus, there was ‘no intention to dedicate these tapestries to the house’. Given their ornamental character, they could not have been affixed more lightly, and, moreover, were easily removable from the structure without causing damage. Lord Lindley observed that the life tenant would in all likelihood not have intended to annex the tapestries for the benefit of the remainderman. Compare Re Whaley [1908] 2 Ch 497, where tapestries attached by the owner were considered to be fixtures first, because they were attached by an owner, and it would be reasonable to expect an owner to intend that they contribute to the improvement of the land; and second, the tapestries were designed to enhance the Elizabethan character of the room. Likewise in Norton v Dashwood [1896] 2 Ch 497, tapestries were held to be fixtures because they could not be removed without damaging the brickwork, tearing the fabric and leaving the room ‘maimed and disfigured’: at 501 per Chitty J. In Famous Makers Confectionery Pty Ltd v Sengos (1993) 6 BPR 13,222, it was held that a large freestanding air-conditioner which sat on a roof and was connected by ducting was a fixture. A similar result was reached

in relation to insulation consisting of panels of aluminium foil resting on girders which supported the roof of the building. 1.83

The effect of a contractual term that an article will not become a

fixture vis-à-vis a person who is not a party to that contract was considered in Hobson v Gorringe [1897] 1 Ch 182; [1895–9] All ER Rep 1231, referred to by Kaye J in Belgrave Nominees. The Court of Appeal held that the gas engine had become a fixture, despite the provision in the agreement between its owner and the hirer. The object of annexation test referred to circumstances which were ‘patent for all to see, and not to the circumstances of the chance agreement that might or might not exist between an owner of a chattel and a hirer thereof’:

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[1897] 1 Ch 182 at 193. Hobson’s contractual right to enter on King’s land and repossess the chattel if there was a default under the hire–purchase agreement was enforceable and therefore gave him an equitable interest in the gas engine. Since Gorringe did not take with notice of this equitable interest (see 4.202–4.213), it was not enforceable against him. The effect of the decision in Hobson v Gorringe was to extinguish Hobson’s proprietary interest in the engine and to vest a similar interest in Gorringe, by way of the mortgage from King. Should this effect occur as the result of physical factors (the degree of annexation)? Would it be preferable for the court to determine the correct decision in terms of proprietary interests? Should not the court

consider the effect of its decision, for example, on the reasonable expectations of the parties?53 1.84

Compare with Hobson v Gorringe the case of Attorney-General (Cth) v

RT Co Pty Ltd (No 2) (1957) 97 CLR 146. In that case, Fullagar J held that two printing presses, each weighing approximately 45 tons, were not fixtures, even though they were attached by nuts and bolts to a concrete foundation in the basement of a building. The main reason was that the annexation was for the purpose of holding the presses steady for their more efficient use as presses. Thus, a Commonwealth Marshal, who was obliged to ‘deliver the possession of land’ acquired under the Lands Acquisition Act 1906 (Cth), was under no duty to remove the presses, since they did not constitute ‘land’. Fullagar J relied in part for his conclusion upon Reid v Smith (1905) 3 CLR 656. In that case, a lessee erected a dwelling house which was not affixed to the land, but simply rested by its own weight upon brick piers. It was the practice to erect dwellings of this nature in the area (Northern Queensland) to avoid destruction by white ants. Upon the termination of the lease, the landlord sought to restrain the lessee from removing the dwelling house on the ground that it had become a fixture. The High Court held that the house could not be removed. Although the building may have been erected as a temporary structure, with the intention of ultimately removing it, this was not decisive in assessing the intention of the parties. The circumstances showed that the building was intended to be part of the freehold. In particular, this was a building lease (one which obliged the lessee to erect certain dwellings, although not the dwelling in question), suggesting that the ‘intention was that any dwelling house put on the land should be considered annexed to the

freehold’. Griffith CJ, however, added that a dwelling house, if unattached to the land, was not necessarily a fixture. In different circumstances, a temporary dwelling, such as a manager’s house erected on a gold mining lease, might retain its character as a chattel.54

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1.85C

May v Ceedive Pty Ltd (2006) 13 BPR 24,147 Court of Appeal of New South Wales

[The appellant lived on land owned by the respondent. At the time when he took up residence, he and the respondent’s predecessor in title signed a contract for sale which specified that the subject matter of the contract was the house, not the land on which it was situated. The contract also purported to lease the land to the appellant in return for the payment of ground rent. This arrangement was consistent with a practice developed over many decades whereby working miners would build their own houses on the land, retaining ownership of them. The trial judge, Levine J, concluded that ‘the uncontested picture is one of the defendants (including Mr May) purchasing their dwellings and then paying weekly ground rent, both sides always regarding the dwellings, ie residences, as the property of the ground lessees’. The respondent sought to evict the appellant because he was in arrears of rent. One of the issues in the case was whether the appellant was protected by security of tenure provisions of the Landlord and Tenant (Amendment) Act 1948 (NSW). In order to establish this, his dwelling had to be ‘prescribed premises’ according to s 5A of the Act. A tenancy of vacant land was not ‘prescribed premises’. The trial judge held that the house was a chattel.] Santow JA: The appellant does not challenge the findings of the trial judge that ‘the appellant’s subjective intention was that he owned the house which stood on the land, but not the land itself’. The essence of the appellant’s submission which I accept, is twofold. First, subjective intention of Mr May, who thought he was buying a house, and the estate agent, who it can be presumed thought he was selling one, cannot prevail over the position at law which obtains if the house were a fixture to the underleased land; it necessarily is leased with that land. Second, the intention which determines the question

whether an object has, in law, become affixed to the land, or, to use the paraphrase emphasised in Elitestone Ltd v Morris [1997] 1 WLR 687 at 690–1 and 693, become part and parcel of the land by affixation is at least predominantly, ‘the objective intention of the person who brings the object on to the land and affixes it there’. That question is determined according to rules of law: Reid v Smith (1905) 3 CLR 656. The starting point under those rules is to identify where the onus of proof lies. If an item is affixed to land to any extent (other than merely resting by its own weight), it is presumed, though the presumption is rebuttable, to be a fixture. The burden of proof lies on those who assert that such an object so resting is not a fixture. Clearly enough the house in question does not rest on its own weight but is affixed to the land. The picture of the house (Blue, 163) and the valuation report of Mr Begg earlier referred to make it clear enough that not only is the house affixed to the land but its removal is not equivalent to putting a portable house on the back of a truck and removing it elsewhere. It is a reasonable inference which I draw that its removal would involve significant destruction of the house if not its total destruction … The authorities in Australia, while emphasising likewise that the original affixer’s intention is determined objectively, allow of the possibility that the original affixer’s actual (subjective) intention may have limited bearing. This is ‘at least to the extent that it helps indicate such matters as the period of time the item is intended to remain in position and the function to be served by its annexation’: Peter Butt, Land Law (LBC, 2006) at [307] and the authorities cited in footnote 27 [namely, N H Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241 at 9244–5 per Mahoney JA; Ball-Guymer v Livantes, supra; Eon Metals NL v Commissioner for State Taxation (WA) (1991) 22 ATR 601 at 606–7; NAB v Blacker (2000) 104 FCR 288.] [page 74] Moreover, I would agree with the submission of the appellant that the primary judge erred in considering the intention of Mr May to be relevant to the question of whether the house had the initial status of a fixture or a chattel. It was not Mr May who affixed the house to the land in the first place but his predecessor more than 50 years back. Therefore Mr May’s subjective belief that he was purchasing the house, based upon the documentation earlier referred to, would not alter the position at law. This on the evidence was that the house as a matter of law remained the property of the registered proprietor of the land. The earlier documentation between Mr May and Mr Breen, the real estate agent, presumably representing the relevant owner in 1969 could not alter the position otherwise obtaining. There was never for example, any agreement that the house could be dealt with separately from the underlease, or even that it could be severed. This is quite apart from the likely physical impossibility of doing so other than as building materials. One important factor pointing strongly in favour of the house being a fixture is the fact that all the evidence points to the house being affixed with the intent that it remain in position permanently or for an indefinite or substantial period, in this case from at least since 1910. No predecessor to Mr May purported to sever or remove it, nor has Mr May. There is certainly no suggestion that the house was intended to remain in position only

for some temporary purpose such as a mining operation that had long ceased; clearly the houses have remained whether for mining purposes or otherwise for their continued occupation on the Pottery Estate. The house thus satisfied the test enunciated by Sir Frederick Jordan in Australian Provisional Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712–13 … If one were instead to look, as more recent authority suggests, at all the surrounding circumstances (see for example N H Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241 at 9246 per Glass JA and more recently NAB v Blacker (2000) 104 FCR 288 at 295–6 per Conti J) and not simply the degree of annexation to the realty and the function served by that annexation, the circumstances here in their totality do not rebut the presumption in favour of the house being a fixture. On the contrary, the circumstances indicate fairly clearly that the house is affixed to the land. It must be taken as a matter of law to be a fixture constituting part and parcel of the relevant land, notwithstanding expressions of subjective intention to the contrary. [Mason P and Beazley JA concurred.]

1.86

The importance of examining ‘all the surrounding circumstances’ as

emphasised by Santow JA in May v Ceedive Pty Ltd above explains why a particular item may be a chattel in one case, and a fixture in the next. In Australian Provincial Co Ltd v Coroneo (1938) 38 SR (NSW) 700, a theatre, subject to a mortgage, contained rows of seats which were bolted to the floor and fastened together. It was held that they remained chattels because the seats were regularly moved around: the best seats went to the back for picture shows and to the front for concerts. Compare Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74, where the premises were used exclusively as a cinema, cinema chairs which were bolted in place by the owner were held to be fixtures because the object of annexation was to provide a permanent benefit for the building.55

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1.87

Eon Metals NL v Commissioner of State Taxation (WA) (1991) 22

ATR 601 concerned mining plant and equipment which, without being moved from the mine where it was installed, was sold to the appellant. The question was whether the agreement for the sale of the plant and equipment should be charged with stamp duty at the rate applicable to personalty or realty. In deciding that some of the equipment remained a chattel, Ipp J took into account ‘the limited life of the mine, the transportable character of the equipment concerned, the common practice to transfer equipment of that kind, the economic incentive to remove it, the relevantly slight degree of attachment to the ground, and the facility with which detachment could occur’. In National Australia Bank Ltd v Blacker (2000) 179 ALR 97, the court held that items of irrigation equipment were chattels. The electric pumps and sprinkler heads rested on their own weight for operational purposes, and the valves attached to hoses could be easily removed. Unlike the earlier decision of Litz v National Australia Bank [1986] Q ConvR 54229 at 57,550, where items of irrigation equipment were held to be fixtures, no damage would be caused to either the land or the chattel upon removal in this instance. Also, the intention of the parties was that the equipment would be readily movable around the property whenever needed, thus indicating no intention to annex. A houseboat, moored to a pontoon in a river and used as rental accommodation, was held not to be a fixture, even though electricity, gas and other services were connected to it. There was no sufficient degree of annexation, as the houseboat could be easily moved without injury to it, or to the land; nor did the parties demonstrate any intention to attach the chattel

permanently to the land: Chelsea Yacht and Boat Co Ltd v Pope [2000] 1 WLR 1941. But if moored more securely and on a more permanent basis, a boat (used as a nightclub) may become part of the land: Rudd v Cinderella Rockerfellas Ltd [2003] 1 WLR 2423.

1.88 Questions 1.

What was the effect, in proprietary terms, of the decision in Belgrave Nominees that the air-conditioner had become a fixture? Why was the defendant concerned to establish that it had not become a fixture?

2.

What was the original function of the fixtures doctrine? Bearing in mind that under the old law of property a deceased person’s realty would often go to one person (the heir) and the personalty to other people (the next of kin), what would have been the result if, for example, materials used to construct a house retained their character as personalty? Could it be said that the doctrine served the goal of conservation of community resources by preventing the wasteful process of dismantling objects securely affixed to the land? Does this explain the emphasis upon ‘degree of annexation’ as a test for determining whether an object has become a fixture?

3.

To what extent are decisions that an article is or is not a fixture authority in subsequent cases? In Holland v Hodgson (1872) LR 7 CP 328; [1861–73] All ER Rep 237, when Blackburn J spoke of the ‘object of annexation’, what did he mean? Was he referring to

the actual wishes of the parties? If the object of annexation refers to the objective intention of the parties, in the sense of what a reasonable person would consider to be the purpose of attaching the chattel to the land, what factors are relevant in considering this objective intention? In the view of Walsh J

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in Anthony v Commonwealth (1973) 47 ALJR 83 at 89: ‘… the question is not one of ascertaining the actual intention, but one of determining from the circumstances of the case, and in particular from the degree of annexation and the object of annexation, what is the intention that ought to be presumed’. 4.

The object of annexation was not introduced as a test of deciding whether an object had become a fixture until the nineteenth century. Why do you think it may have been introduced? Do you think it was to mitigate the rigidity of a rule which focused exclusively on the physical fact of annexation? Might the emergence of the rule have been influenced by the historically novel nature of chattels in industrial buildings in the nineteenth century and, in particular, the practice of bolting machines into place?

5.

Is the intention as manifested by the use of nuts and bolts to fasten machinery to factory floors, an intention to attach them

temporarily or permanently?

Tenant’s fixtures 1.89

In certain circumstances, the common law recognised that a person

who had affixed chattels to land had the right to remove them, despite the fact that they had become fixtures. ‘Tenant’s fixtures’, as they were known, were the most important example of this principle. The rule giving tenants a right to remove certain fixtures provides a good example of the moulding of the common law to economic considerations, providing tenants with an incentive to annex chattels during the currency of the lease, particularly in the case of commercial tenancies: see Lord Kenyon CJ in Penton v Robart (1801) 2 East 88 at 91; 102 ER 302 at 303. Thus, the common law permitted a tenant to remove any trade, ornamental and domestic fixtures affixed by the tenant during the term of the lease or, in some situations, for a reasonable period after termination. Examples of trade fixtures are shelves and counters: Harding v National Insurance Co (1871) 2 AJR 67. For an example of domestic and ornamental fixtures, see Spyer v Phillipson [1931] 2 Ch 183, where wooden panelling, ornamental chimneypieces and fireplaces were held to be removable ‘tenant’s fixtures’. This right will usually be expressly granted, or be subject to restrictions, in the lease.56

Right to remove 1.90

While the lease is in force and the fixture attached to the land, the

lessor is said to be the owner of the fixture subject to the tenant’s right of

removal.57 The tenant may remove the fixture at any time up to expiry of the lease, unless the lease prohibits or restricts the right. The right to remove after the lease comes to an end is less clear. The tenant of a lease of uncertain duration, for example, a tenancy at will, has a reasonable time after the termination of the tenancy to remove fixtures: D’Arcy v Burelli Investments Pty Ltd (1989) 8 NSWLR 317. The tenant may also remove within a reasonable time after the lease is determined if the lease expressly confers this right. This right does not usually apply where the lease was forfeited

[page 77]

or surrendered. However, if after expiration or surrender, a tenant remains in possession by virtue of a new tenancy express or implied, which follows immediately, the tenant usually is still entitled to remove tenant’s fixtures: New Zealand Government Property Corp v H M & S Ltd [1982] QB 1145; [1982] 1 All ER 624. In that case (at QB 1161; All ER 630), Dunn LJ summarised the matter thus: If a tenant surrenders his lease and vacates the premises without removing the tenant’s fixtures, then he is held to have abandoned them. But if he surrenders his lease, either expressly or by operation of law, and remains in possession under a new lease, it is a question of construction of the instrument of surrender whether or not he has also given up his right to remove his fixtures. If nothing is said, then the common law rules applies, and he retains his right to remove the fixtures so long as he is in possession as a tenant.

1.91

In D’Arcy v Burelli Investments Pty Ltd (1989) 8 NSWLR 317, it was

held that a tenant for a fixed term could not remove tenant’s fixtures after the

expiration of the term, except, as recognised by Dunn LJ in the New Zealand Government Property Corp case, where a new lease was granted, or where the tenant remained in possession under ‘colour of right’, for example, where the tenant had a dispute with the landlord about the date on which the term expired. The ‘colour of right’ principle was applied in Concepts Property Ltd v McKay [1984] 1 NZLR 560 to allow a tenant who claimed he had a fixedterm lease under an equitable assignment a reasonable time to remove fixtures after expiration of the periodic tenancy which was found to exist between the landlord and the tenant. At common law, the personal representatives of a life tenant also had a right to remove trade, ornamental and domestic fixtures (but not agricultural fixtures) provided they were removed within a reasonable time of the determination of the life estate. In Victoria, the complex common law rules relating to the removability of trade, ornamental and domestic fixtures have been replaced by broader rights for tenants, other than residential tenants. The Property Law Act 1958 (Vic) s 154A(1) provides as follows: 1.92E

Property Law Act 1958 (Vic)

154A(1) A tenant who at his or her own cost or expense has installed fixtures on, or renovated, altered or added to, a rented premises owns those fixtures, renovations, alterations or additions and may remove them before the relevant agreement terminates or during any extended period of possession of the premises, but not afterwards.

1.93

Section 154A does not apply to the extent that the lease provides

otherwise or the landlord and the tenant otherwise agree: s 154(3). As to what constitutes a provision to the contrary, see Dawson v Stevenson [1920]

VLR 564. In Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351, Ormiston JA noted that a predecessor of this provision was ‘unique in Australia’ by abrogating the common law rule. It followed that items attached to the land by the tenant do not lose their character as chattels and become part of the realty during the period of the lease or any extended period of possession by the tenant. If the tenant fails to remove them within that time, the items are thereafter treated as fixtures if they would be so treated under the common law rule. One consequence is that the tenant can transfer the items during the period in which the tenant possesses the premises: Liubinas v Vicport Fisheries Pty Ltd [2016] VCAT 927.

[page 78]

Agricultural and residential tenancies 1.94

At common law, the tenant’s rights of removal did not extend to

agricultural fixtures: Elwes v Maw (1802) 3 East 38; 102 ER 510. Legislation in New South Wales, Queensland, Tasmania and Victoria has modified this rule, giving tenants of agricultural land the right to remove certain fixtures in specified circumstances. This is, however, generally subject to the statutory right of the landlord to purchase the fixtures for a reasonable price.58 There are also certain provisions entitling a tenant to receive compensation from the landlord at the determination of the tenancy for specified improvements made by the tenant to agricultural land.59

1.95

Residential tenancies legislation in some states varies the common

law rules. In general, these provisions prevent tenants affixing or removing fixtures to residential premises without the landlord’s consent.60 The South Australian legislation permits the removal of a fixture affixed by a tenant unless removal would cause irreparable damage to the premises. The Victorian legislation requires the tenant to restore the premises to the condition they were in prior to affixation or to compensate the landlord for doing so, at the termination of the lease.

Chattels annexed without permission 1.96

The general rule is that, in the absence of agreement, a person who

annexes a chattel to the owner’s land has no right to recover it. In Chateau Douglas Hunter Valley Vineyards Ltd v Chateau Douglas Hunter Valley Winery and Cellars Ltd (Receivers Appointed) [1978] ACLD 258, a company built a winery on land owned by a vineyard company adjacent to its own land. No member of the boards of directors of either company was aware at the time that the winery was not sited on the winery company’s land. The court held that the winery and certain plant and equipment fitted to it were fixtures. In Brand v Chris Building Society Pty Ltd [1957] VR 625 the plaintiff held the fee simple estate in a block of land. He alleged that the defendant company had, without his knowledge or consent, erected a house on his land, and he sought, inter alia, to restrain the defendant from entering upon his land and demolishing the house. The evidence showed that a building was erected and was nearly completed. The evidence for the defendant was that it had a contract with Joe and Mary Pulis to erect a house on the adjoining block, that

it had built in error on the plaintiff’s land by mistake induced by Joe Pulis pointing out the wrong block, that the defendant was prepared to remove the structure and put the plaintiff’s land back into its previous state, or alternatively accept £2,145 from the plaintiff, being the cost without profit of the labour and materials, including the loose chattels. The defendant contended that the plaintiff knew of the mistake shortly after building commenced in October 1956, but took no steps until 30 November 1956 when he informed the defendant that it had built on the wrong block. However, Hudson J accepted the plaintiff’s

[page 79]

evidence that he knew nothing of the building until he discovered the building operations on 30 November. His Honour entered judgment for the plaintiff and concluded as follows: The position therefore is this, that the plaintiff as the owner is entitled to possession, the defendant under an honest mistake which was not contributed to by the plaintiff entered upon the land without any authority or licence of the plaintiff, became a trespasser and proceeded to build a house on it; and when the plaintiff found out, he took immediate steps to prevent the continuance of the trespass … In cases such as the present, it must be shewn that the plaintiff was guilty of something in the nature of a fraud, and there is nothing of that kind here and I can find no ground which could raise an equity in favour of the defendant … On the face of it, the result of the case seems very hard on the defendant and he may well feel that the decision is unjust; but he must realise that the court must be guided in its decision by principles of law. It has been said that the plaintiff is hard in insisting on his strict legal right, but it does appear that there were certain negotiations made in an effort to settle the matter. What the

offers were that were made I am not concerned to inquire, nor can I say whether either side is reasonable or unreasonable. The injunctions are to be prefaced by an undertaking with respect to the doors and loose materials.

1.97 Questions 1.

Why did counsel not refer to the law of fixtures? Could counsel have urged the court to develop an exception to the usual principles relating to fixtures in order to cover the case of objects affixed to land by mistake?

2.

Does the case not demonstrate the unsatisfactory consequences of concentrating upon the physical fact of annexation of an object to land, rather than upon the ‘real’ question of whether the owner of the land should acquire a proprietary interest in the object so affixed?

3.

Would the case have been decided the same way if the house erected on the plaintiff’s land were prefabricated?

1.98

Hudson J in Brand v Chris Building Society rejected a submission by

the plaintiff on the basis of unjust enrichment because counsel could not identify authorities that would establish such a principle. But the tide seems to be turning. In Pavey & Matthews v Paul (1986) 162 CLR 221, Deane J offered a definition of unjust enrichment where work is performed on property (at 263):

What the concept of monetary restitution involves is the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or ‘enrichment’ actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (eg remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied).

Deane J went on to add that payment of the full value of the work performed would be unreasonable where ‘unsolicited but subsequently accepted work is done in improving property in circumstances where remuneration for the unsolicited work calculated at what was a reasonable rate would far exceed the enhanced value of the property’. In Nepean District

[page 80]

Tennis Association v Penrith City Council (1988) 4 BPR 9645 Hodgson J, relying on Pavey & Matthews v Paul, awarded the plaintiff compensation for their expenditure in re-surfacing tennis courts because the council acquiesced in it by contributing to the expense of constructing a levee bank to protect the courts. In Angelopoulos v Sabatino (1995) 65 SASR 1 the court held that the defendant was unjustly enriched by the plaintiff’s improvements to the property, and was therefore required to reimburse the plaintiff for this cost. Chief Justice Doyle, with the concurrence of Duggan and Nyland JJ, reviewed the judgments in Pavey & Matthews and concluded at 9–10: [T]he decision in Pavey’s case suggests that acceptance of a benefit is relevant as a basis for recovery in restitution. However, it is clear that more is involved than the simple fact of acceptance. The consideration of the judgments in Pavey’s case, and of other case law in this area, suggests that one must also consider the basis upon which the provider of the benefit acted, the

choice which the recipient of the benefit had in deciding whether or not to accept the benefit and the conduct of the defendant, by which I mean the defendant’s knowledge of what the plaintiffs were doing and the basis upon which they did it.

1.99

In Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214, a purchaser

under a contract of sale went into possession prior to completion. Despite a provision in the contract that the purchaser would not add to the property without the vendor’s consent, the plaintiff made various improvements. After the vendor rescinded the contract for failure to complete, the plaintiff sought restitution for improvements. It was held that the plaintiff was not entitled to restitution because the enrichment was not ‘unjust’ on account of the breach of the agreement, and there was no inducement by the vendor. Where a person was let onto a racecourse in the expectation that he would be granted a lease, made various improvements (some of which were financed by the defendant), he was entitled to restitution for his expenditure, particularly because of the conduct of the defendant, specifically because they ‘endorsed the improvements by advancing money for them, and sought advantages from them in leasehold negotiations’: Fensom v Cootamundra Racecourse Reserve Trust [2000] NSWSC 1072 per Bryson J. In Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425 the appellant, while in possession of land, with the knowledge and acquiescence of the deceased former owner, had spent a large amount of money and time in converting a dry sheep farm into a rich agricultural property growing rice, soy beans and hay, greatly enhancing its value and income-earning capacity. The appellant had occupied first under a licence and an option to purchase and later, under a contract for the sale of the land. The appellant was found by the trial judge

to have repudiated the contract. The appellants claimed relief, inter alia, by way of compensation for the improvements in the nature of restitution on the basis that to allow the owner to keep the benefit would amount to unjust enrichment. Giles and Stein JJA concluded that no claim for unjust enrichment was made out because the rights of the parties were laid out in detail in the contract with no express provision for compensation. The parties therefore knew that entitlement to the improvements would be resolved in favour of the purchaser if the contract was completed, or the vendor if rescinded. In 1973, the Queensland legislature enacted the following provision to deal with the problem of mistaken improvements (Property Law Act 1974 s 196):

[page 81]

1.100E

Property Law Act 1974 (Qld)

196 Where a person makes a lasting improvement on land owned by another in the genuine but mistaken belief that — (a) such land is the person’s property; or (b) such land is the property of a person on whose behalf the improvement is made or intended to be made; application may be made to the court for relief under this division.

1.101

The court has power to order, inter alia, the vesting in the applicant

of the whole or any part of the land on which the improvement is made, the

removal of the improvement, the payment of compensation to any person where appropriate and the delivery up of possession of the land or improvement or part thereof: ss 195–198. The Encroachment of Buildings Act (NT) s 13 is expressed in similar terms. Compare the slightly more restrictive s 123 of the Property Law Act 1969 (WA) which, for example, applies only to a building and not to other ‘lasting improvements’, such as the clearing of land. In 2010, the Victorian Law Reform Commission61 recommended enactment of a similar provision to the Queensland provision, but concluded that ‘[a]n improvement for the purpose of mistaken improver relief should be defined as a fixture on land’ (at 63).

1.102 Questions 1.

What result should a court reach in applying the Queensland legislation to the situation in Brand v Chris Building Society Ltd? Is the unjust enrichment approach preferable?

2.

Does the emerging case law on unjust enrichment confer a right to restitution on improvers such as the plaintiff in Brand? Is it less flexible than the legislative solutions of Queensland and the Northern Territory? Note that a number of equitable doctrines may provide remedies to assist persons who annex chattels to, or build on, the land of another: see 4.115ff.

3.

Should relief for mistaken improvements be confined to fixtures, or to lasting improvements? Why?

The boundary between adjoining landowners 1.103

Land may have either artificial or natural boundaries. Artificial

boundaries are fixed until such time as the adjacent owners agree to shift them, and remain unaffected by movements in the land itself. Natural boundaries may shift from time to time by the operation of natural forces, especially where the boundary is water. Different rules apply depending on whether the water is tidal or non-tidal. Though the natural processes of accretion and erosion have the

[page 82]

effect of modifying the physical boundaries of land, the legal boundaries will only change if the following requirements are met. First, the erosion or accretion must be so gradual as to be imperceptible to the naked eye: Gifford v Lord Yarborough (1828) 5 Bing 163; 130 ER 1023. Rapid transformations of boundaries, for instance, by avulsion, earthquake or flood, will not affect legal boundaries. In the case of land bounded by the sea, in the case of accretion, title to the increase in land will be in the landowner. The principle of erosion works in a parallel way, so that any decrease in land will accrue to the Crown: Hill v Lyne (1893) 14 LR (NSW) 449. The principles of accretion and erosion apply equally to tidal and non-tidal land, so that the rights of private, adjacent landowners will be modified in the same way. The limitations on the doctrine of accretion can be varied in the conveyance so as to include any changes in the boundaries by the operation of

natural forces: Baxendale v Instow PC [1981] 2 All ER 620. Such a grant is known as a ‘movable freehold’. The following case examines the relevant principles.

The doctrine of accretion 1.104C Southern Centre of Theosophy Inc v South Australia [1982] AC 706; [1981] 1 All ER 283; 38 ALR 587 Privy Council [The appellant was the registered proprietor of a perpetual lease of some 500 acres of land to the west of Lake George in South Australia. The boundary of the land was referred to in the lease as being ‘delineated in the public maps deposited in the Land Office’ and corresponded to the highwater mark of the lake when the lease was granted in 1911. Since that time, the high-water mark had receded, due in part to the deposit of sand by wind and water. At the time of the action about 20 acres of land previously covered by water were exposed. The appellant claimed that it had acquired this land by accretion and that its land still had a water frontage. The appellant succeeded in the Supreme Court but this decision was reversed on appeal to the Full Court. The appellant appealed to the Privy Council.] The judgment of their Lordships was delivered by Lord Wilberforce: … The principal ground on which [the decision of the trial judge] was reversed by the Full Court was that the doctrine of accretion was excluded from application by the express terms of the two leases. In both the subject land was described ‘as the same as delineated in the public maps’ (ie the maps already referred to). As it was put by King CJ, the doctrine of accretion could not apply to property whose boundary is delineated by a line of a plan which is not expressed to be the water’s edge. Zelling J similarly held that since the appellant’s predecessor in title was granted a lease of land ‘as delineated in the public maps’ and since it was possible to identify the original boundary at the time of delineation, the doctrine of accretion did not apply. Wells J also considered that the case turned on conveyancing issues and that the word ‘delineated’ was crucial. Whether this approach was correct was the main issue before the Board. [Before dealing with this issue, their Lordships considered two subsidiary issues and decided (i) that at common law the doctrine of accretion applies to the land formed on the edge of an inland

lake; and (ii) that the doctrine of accretion applies to leases including leases of Crown land. Lord Wilberforce continued:]

[page 83]

Before examining the authorities, which are copious and in their result clear, their Lordships find it advisable to consider briefly the nature of the doctrine of accretion. This is a doctrine which gives recognition to the fact that where land is bounded by water, the forces of nature are likely to cause changes in the boundary between the land and the water. Where these changes are gradual and imperceptible (a phrase considered further below), the law considers the title to the land as applicable to the land as it may be so changed from time to time. This may be said to be based on grounds of convenience and fairness. Except in cases where a substantial and recognisable change in the boundary has suddenly taken place (to which the doctrine of accretion does not apply), it is manifestly convenient to continue to regard the boundary between land and water as being where it is from day to day or year to year. To do so is also fair. If part of an owner’s land is taken from him by erosion, or diluvion (ie advance of the water) it would be most inconvenient to regard the boundary as extending into the water; the landowner is treated as losing a portion of his land. So, if an addition is made to the land from what was previously water, it is only fair that the landowner’s title should extend to it. The doctrine of accretion, in other words, is one which arises from the nature of land ownership from, in fact the long-term ownership of property inherently subject to gradual processes of change. When land is conveyed, it is conveyed subject to and with the benefit of such subtractions and additions (within the limits of the doctrine) as may take place over the years. It may of course be excluded in any particular case, if such is the intention of the parties. But if a rule so firmly founded in justice and convenience is to be excluded, it is to be expected that the intention to do so should be plainly shown. The authorities have given recognition to this principle. They have firmly laid down that where land is granted with a water boundary, the title of the grantee extends to that land as added to or detracted from by accretion, or diluvion, and that this is so whether or not the grant is accompanied by a map showing the boundary, or contains a parcels clause stating the area of the land, and whether or not the original boundary can be identified … But there are even stronger authorities [than Williams v Booth (1910) 10 CLR 341]. There is first the decision of this Board in Attorney-General of Southern Nigeria v John Holt & Co (Liverpool) Ltd [1915] AC 599. The point now under consideration was there dealt with in the most explicit terms: ‘To suppose that lands which, although of specific measurement in the title deeds, were de facto fronted and bounded by the sea were to be in the situation that their frontage to the sea was to disappear by the action of nature to the effect of setting up a strip of land (it might be yards, feet, or inches) between the receded foreshore and the actual measured boundary of the adjoining lands, which strip was to be the property of the Crown, and was to have the effect of converting land so held into inland property, would be followed by grotesque and well-nigh impossible results, and violate the doctrine which is founded upon the general security of landholders and upon the general advantage’ (at 612).

It is true that in that case the properties were described, in one way and another, as bounded by the sea, and the respondent invoked this as a relevant distinction. But there is no logic or reason, in their Lordships’ opinion, in distinguishing a case where property is described as bounded by water from one where the relevant map shows beyond doubt that a water boundary is intended. The same ‘grotesque and well-nigh impossible results’ follow in either case if it is said that the original boundaries are to remain in spite of alluvial changes … [O]n the general argument, principle and overwhelming authority lead their Lordships to conclude that the doctrine of accretion was not excluded by the terms of the Perpetual Lease. If the doctrine of accretion applies, there is no difficulty as regards such accretion as has taken place by gradual deposit of sand or soil by the waters of the lake. This has occurred [page 84] in the northern or beach area, and the respondent does not, as a matter of fact, dispute it. It does, however, maintain that the position is different in the southern sector. The question here is whether the appellant can make good its claim to such portion of the accretion as has been caused, or mainly caused, by windswept sand. This question is divisible into two sub-questions: (i) whether the legal doctrine of accretion is, in principle, capable of application to the case of windswept sand, and (ii) whether the evidence satisfactorily establishes that extension of the appellant’s land has been brought about by accretion caused by windswept sand. As to (i) their Lordships know of no authority for or against the proposition that the doctrine is capable of applying to such a case. Accretion is, however, a doctrine of the common law and is therefore capable of adjustment and expansion by the use of analogy. In the first place it is necessary to limit the question to a case such as the present where what is involved is the alteration of a land/water boundary: other cases where alterations of boundaries may occur through windswept sand may give rise to different issues which their Lordships do not wish to preempt. In relation to such an alteration there seems to be no reason in principle why the doctrine should be confined to such changes as are effected solely through fluvial action: a logical category would be that of natural causes which would embrace additions to (or detractions from) land brought about by the action of either or both elements, water and air. It is common ground that changes caused by human action (other than deliberate action of the claimant) are within the doctrine of accretion, a fact which is inconsistent with the proposition that accretion is confined to the natural action of water … Further, as the present case well shows, it may be impossible in practice to ascertain to which cause (by air or by water) a given accretion is to be attributed or to apportion it between contributory causes — viz the fluvial action by the waters of the lake, the wind and the man-made operations. It is obvious that some drifting sand will enter the water directly and so be available to be added to the land by water deposit. This is mainly what happened in the northern beach sector of the appellant’s land where by the action of longshore drift, water-carried sand brought about an accretion of such traditional kind. Why then distinguish between this accretion and such accretion as occurred in the

southern section largely by direct addition to the land brought about by wind force, but presumably to a minor extent by water? In such a case, then as the present (and their Lordships repeat that they confine their observations to it), their Lordships are of opinion that the doctrine of accretion is capable of application. … (ii) The doctrine of accretion must be applied according to established principle. One of these is that the accretion must take place by gradual and imperceptible means … The word [imperceptible] of course, has to be interpreted. In R v Yarborough, Abbott CJ, giving the judgment of the King’s Bench ((1824) 3 B and C 91 at 107), said that it must be understood as ‘expressive only of the manner of accretion … and as meaning imperceptible in its progress, not imperceptible after a long lapse of time’. The gain to the land in that case, by recession of the sea, was said to have been on average, over 26–27 years, of about 5 yards in a year, or (according to other witnesses) greater and it was held that the jury could properly hold this to be imperceptible. In the opinion which Best CJ, on behalf of the judges, later gave to the House of Lords there is this passage: ‘Land formed by alluvion must become useful soil by degrees, too slow to be perceived. What is deposited by one tide will not be so transient as to be removed by the next. An embankment of a sufficient consistency and height to keep out the sea must be formed imperceptibly’ (2 Bligh (NS) 147 at 158) … [page 85] How then is this test of imperceptibility to be applied to the facts, in particular to the movement of sand dunes in the southern portion? Walters J, in a passage naturally much relied on by the appellant, found that the test was satisfied: ‘On the balance of probability I find that the alluvion on the eastern boundary of Section No 16 SW has become subject to the doctrine of accretion, and that that land has been gained, gradually, insensibly, and imperceptibly from Lake George, not at any particular moment, but in the same way “as the motion of the palm of a horologe is insensible at any instant, though it be very perceivable when put together in less than the quarter of an hour” (quoting from Lord Stair’s Institutions of the Law of Scotland)’. The respondent’s criticism of this passage was that it did not properly distinguish between what occurred in the northern beach section, which was admitted to be accretion, and the dune movement in the southern section, as to which there was evidence of ‘jump’ and perceptible movement … [Their Lordships considered the expert evidence presented at first instance, and decided that evidence as to long- and short-term movement was not conclusive as to whether the advance of the land had or had not been imperceptible. They therefore concluded that it was for the trial judge (who in fact viewed the location) to consider together the two indications as to long- and short-term movement. Taken together they provide material on which, in their Lordships’ opinion, his Honour was entitled to come to the conclusion that the movement was imperceptible

within the meaning of the authorities. The case was finely balanced, but the evidence was not such that he was bound to draw an inference that any sudden movements of the dunes were necessarily accompanied by consolidated intrusions of the shoreline into the lake. On this point therefore their Lordships uphold the finding of the trial judge.]

1.105

In Verrall v Nott (1939) 39 SR (NSW) 89, the owner of four lots

under the general law, that were described in the grants as being bounded by ‘North Harbour’, was held entitled to the benefit of any accretion to his land from the sea. This was so despite the fact that the Maritime Services Board, from whose land the accretion derived, had a Torrens system certificate of title covering the bed of the harbour ‘as bounded by high water mark’. It was held that the ‘high water mark’ did not refer to the mark at the time the certificate of title issued, but the mark as it existed in fact from time to time. The situation is different in Western Australia, by virtue of Land Act 1933 s 16(3) which provides that the boundaries of land fronting on the sea: … or any sound, bay or creek, or any part … affected by the ebb or flow of the tide or of any lake, lagoon, swamp, river or main stream, shall be limited in every case where possible by straight lines, as near to the high water mark as the Minister shall decide.

Such lines are to be marked on the ground, and the area between the line and the high-water mark is to vest in the Crown. The doctrine of accretion applies to imperceptible changes in the course of a river, tidal or non-tidal. Thus, if a river forms the boundaries between two plots, and it changes course imperceptibly (through silting up or otherwise), the boundary will change accordingly. There is some doubt as to whether the doctrine of accretion applies to the case of a shifting river, not forming

(initially at least) the boundary between two plots. Lindley J in Foster v Wright (1878) 4 CPD 438 held that it did, but Harrison, Cases on Land Law (1965), 35–6, casts doubt

[page 86]

upon the decision on the ground that the rationale of the doctrine is to avoid the difficulty of determining the precise boundary where there is a gradual shift in the course of the river.62

Encroachments 1.106

Some states have special legislation dealing with buildings

encroaching on a neighbour’s land. The legislation follows a similar approach to that dealing with improvements by mistake; indeed, the Property Law Act 1969 (WA) s 123 covers encroaching buildings as well as cases of mistakes as to the identity of land.63

Land bounded by water 1.107

If land is bounded by tidal waters, either because it is situated on the

sea, or on a tidal river or lake, the owner owns the land up to the mean highwater mark: Attorney-General v Chambers (1854) 4 De GM & G 206. The mean high-water mark is the mean, assessed on an annual basis, of the highest and lowest high tides of each lunar month of the year. The rule applies to land held under the Torrens system: Verrall v Nott (1939) 39 SR

(NSW) 89. Land below the mark belongs to the Crown in right of the state: Hill v Lyne (1893) 14 LR (NSW) 449. 1.108

At common law, if land contained non-tidal waters (whether in the

form of a river or lake) the owner retains exclusive rights to the bed: the ‘alveus’: Orr Ewing v Colquhoun (1877) 2 AC 839. But if land is bounded by non-tidal waters, ownership of the land confers rights up to the ‘middle line’ (in Latin, medium filum) of the water: Lord v Commissioners for the City of Sydney (1859) 12 Moo PC 473; 14 ER 991. The rule has been held to apply to Torrens title land: Lanyon Pty Ltd v Canberra Washed Sand Pty Ltd (1966) 115 CLR 342. The common law rule is effectively obsolete in regard to both non-tidal rivers and lakes by legislation in four states which vests title to alveus in the Crown, so that the owner’s rights end where land and water meet.64 The doctrine of accretion applies: Southern Centre of Theosophy Inc v South Australia [1982] AC 706.

When chattels merge: the doctrine of accession 1.109

Accession is a doctrine that originated in Roman law. It governs the

ownership of chattels that have been merged. In particular, it deals with the problem of the rights of the parties in circumstances where it is no longer possible to separate the chattels easily.

[page 87]

1.110C

Rendell v Associated Finance Pty Ltd [1957] VR 604 Supreme Court of Victoria

[The complainant, Rendell, hired a Chevrolet car engine to one Pell under a hire–purchase agreement in the usual form, dated 2 September 1955. In August 1955, Pell had hired a 1942 Chevrolet utility truck from the defendant company under a hire–purchase agreement, also in the usual form. This agreement contained a clause providing that ‘any accessories or goods supplied with or for or attached to or repairs executed to the goods shall become part of the goods’. At some time after 2 September 1955, Pell removed the old engine from the truck and replaced it with the engine hired from Rendell. Rendell did not assist in this operation but became aware of it soon after it was completed. Pell failed to meet the payments due for the hire of the truck and on 15 February 1956 the defendant, Connley, acting with the authority of the company, repossessed the truck. At that time, neither Connley, who had guaranteed Pell’s performance of the hire–purchase agreement with the company, nor the company knew that a different engine had been substituted for the one originally in the truck. Connley paid the amount due under the hire–purchase agreement, pursuant to the guarantee, and the company agreed that the truck and the engine should thereafter belong to Connley. The complaint claimed the sum of £53 from the defendants as damages for conversion of the engine. The magistrate found in the complainant’s favour and the defendants obtained an order nisi returnable before the Full Court to review the magistrate’s order.] O’Bryan J: [delivering the judgment of the court, Lowe, O’Bryan and Barry JJ] … If [the engine] had been Pell’s own engine, by attaching it to the hired truck he would have passed his right of ownership therein to the defendant company, by reason of the condition contained in his hire-purchase agreement with the defendant company: see Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477. But as he had no greater rights in it than that of hirer, the clause in his agreement with the defendant company that accessories or goods attached to the hired truck should become part of the truck, could not operate proprio vigore [by its own force] to pass the property in the engine to the company: see Akron Tyre case at 483, 485 and 489 … The first ground of the order nisi is that the magistrate should have held that the engine, in consequence of its having been installed by Pell in the motor truck, became the property of the defendant company and had prior to any act of conversion by the defendants ceased to be the property of the complainant … [T]he fundamental principle in English law in relation to the passing property by reason of the annexation of one chattel to another looks at the necessity of the occasion.

Two Australian decisions of strong persuasive authority in relation to accessories added to a motor vehicle were brought to our attention. In Bergougnan v British Motors Ltd (1929) 30 SR (NSW) 61, the Full Court of New South Wales had to consider the question whether the property in motor tyres belonging to A which had been put into a motor lorry belonging to B, passed to B. It was held that the tyres did not so merge into the motor lorry so that the ownership in them passed to the owner of the lorry. The basis of the decision appears to have been that there was no change of ownership because they were readily identifiable and could be detached without damage to the lorry. There was, however, no real discussion of the doctrines of accession, but this absence is readily explainable on the view that the facts did not require resort to such a doctrine. The same question in relation both to tyres and other accessories which had been attached to a motor primemover trailer was considered again by the Full Court of New South Wales in Lewis v Andrews and Rowley Pty Ltd (1956) 73 WN (NSW) 670. Ferguson J, in a judgment in which [page 88] Roper CJ in Eq concurred, emphasised at the outset that it is a general rule of English law that property in chattels is transferred only when the owner so intends; that the doctrine of accession is an exception to that rule, but that doctrine is only applied where the circumstances require its application. He rejected the submission that if the attached articles are essential to the operation of the vehicle, they became, when affixed, incorporated with it so that the property in them thereby passes to the owner of the vehicle. In his opinion the doctrine of accession is applied only as a matter of practical necessity. He accordingly held that the property in those accessories which were readily identifiable and could be detached from the vehicle without damage thereto did not pass to the owner of the vehicle. He also expressed the opinion that once it was proved that the articles claimed belonged to the plaintiff at the time when they were attached to the vehicle and that he intended to retain his ownership therein, it was for the defendant on proper evidence to establish that the property in them had passed to the owner of the vehicle … We consider the test laid down by Ferguson J (in which Roper CJ in Eq concurred) is the proper one to apply in this class of case in which accessories in the nature of spare parts are attached to a motor vehicle. Prima facie the property in the accessory does not pass to the owner of the vehicle if the owner of the accessory did not intend it to pass. It is for the defendant by proper evidence to show that the necessity of the case requires the application of principles whereby the property is deemed to pass by operation of law. The accessories continue to belong to their original owner unless it is shown that as a matter of practicability they cannot be identified, or, if identified, they have been incorporated to such an extent that they cannot be detached from the vehicle. It is clear in this case that the plaintiff was the owner of the engine when it was annexed to the truck and that he intended to retain the property in the engine until Pell exercised his option to buy it. In our opinion, he is entitled to rely on the presumption that he continued to remain the owner, so that in the absence of evidence to the contrary the engine continued to belong to him, which, in this case, would require evidence from the defendants that as a matter of practicability it had been so attached to the truck that

it could not be detached therefrom. But even if the ultimate onus was on the plaintiff, as Mr McInerney contended, to prove that at the date of conversion he was still entitled to possession of the engine, or in other words to prove that its manner of annexation did not as a matter of justice require that it should remain where it was, so that the property in it should be deemed to have passed to the owner of the truck, the proper inference from the meagre material placed before the magistrate was that it had not been so annexed or attached but could be detached without difficulty or harm to anything … This is an age when automobile parts are generally standardised and interchangeable, at all events in the case of motor vehicles of the same make and year of manufacture. The court should not shut its eyes to what is common knowledge. For these reasons we are of opinion that the property in the engine remained throughout the property of the complainant, Rendell, and that the magistrate arrived at the correct decision in this regard. Nothing that we have said is intended to cover a case where the plaintiff’s chattel has been annexed to another by his authority, either express or implied, or where his conduct is such as to estop him from contending that he is still entitled to his chattel. These are questions which do not arise in this case. This disposes of ground 1 of the order nisi … [O’Bryan J then rejected other grounds of the order nisi. In particular, he held that Connley, when he repossessed the truck, committed the tort of conversion even though he was acting honestly. The tort of conversion was committed by an intentional taking regardless of whether the taker had a mistaken belief as to the ownership of the object taken.]

[page 89]

1.111 Questions 1.

What is the justification for the doctrine of accretion?

2.

Why must the accretion be gradual and imperceptible before the doctrine operates?

3.

In what circumstances does the doctrine of accession affect proprietary interests in chattels? Does the Supreme Court propound an objective or subjective test to determine the

application of the doctrine? If the test is subjective, why is the approach different from that used in the law of fixtures? 4.

The Supreme Court commented that prima facie property in an accessory does not pass unless the owner intended it to pass. Is this the same approach which is taken to the doctrine of fixtures?

5.

The doctrine of accession is also said to apply to accession by natural means, as in the case of animals: cf Tucker v Farm and General Investment Trust Ltd [1966] 2 QB 421; [1966] 2 All ER 508. What economic reasons support the application of the doctrine in these circumstances?

1.112

The doctrine of accession is closely related to that of intermixture,

referred to in the judgment in Rendell’s case. The doctrine of intermixture applies where separate objects are mixed so as to become indistinguishable. An example is where separate consignments of wheat are stored in the one silo.65 In McKeown v Cavalier Yachts Pty Ltd (1988) Aust Torts Reports ¶80172, the plaintiff, who owned the hull of a yacht, agreed to complete the yacht with the defendant for $20,000 as well as the plaintiff’s old yacht as a trade-in. Later, the defendant agreed to sell its business and assets to the second defendant, Spartech, but did not formally assign to Spartech the benefit of contracts which Cavalier had with its customers. Spartech took possession of the hull and did extensive work on it. The plaintiff sued in detinue to recover the yacht, or in equity for specific restitution, arguing that the hull was his property and the additional material added to the yacht had

also become his property by virtue of the doctrine of accretion. The court held that by the doctrine of accretion McKeown, rather than Spartech, had property in the yacht because the improvements could not be removed without destroying the original chattel. In Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25; [1979] 3 All ER 961, resin once mixed with chipboard was held not to exist as a separate chattel with the result that the plaintiff lost title to it.

1.

(1954) 9 Rutgers LR 357.

2.

W Hohfeld, ‘Some Fundamental Legal Conceptions as Applied in Judicial Reasoning’ (1913) 23 Yale Law Journal 16 at 21–2.

3.

Hamilton v Porta [1958] VR 247; (1957) 65 ALR 620.

4.

Local Government Act 1993 (NSW) s 45; see Kogarah Municipal Council v Golden Paradise Developments Pty Ltd (2007) 12 BPR 23,651 and in particular comments by Basten JA at [101]– [102].

5.

Blundell v Catterall (1821) 5 B & Ald 268; 106 ER 1190.

6.

Case of the Royal Fishery of the Banne (1610) Dav 55; 80 ER 540.

7.

Commonwealth v Yarmirr (2001) 208 CLR 1; 184 ALR 113.

8.

For further discussion of these issues, see Coval, Smith and Coval, ‘The Foundations of Property and Property Law’ (1986) 45 Cam LJ 457; Underkuffler, ‘On Property: An Essay’ (1990) 100 Yale LJ 127; Brudner, ‘The Unity of Property Law’ (1991) 4 Can J of Law & Juris 3; Butler, ‘The Pathology of Property Norms: Living Within Nature’s Boundaries’ (2000) 73 Southern California Law Review 927.

9.

Charter of Human Rights 2005 (ACT); Charter of Human Rights and Responsibilities Act 2006 (Vic) s 20. These will be examined below at 1.61–1.66.

10. Thomas v Sorrell (1673) Vaughn 330; 124 ER 1098. 11. Wood v Leadbitter (1845) 13 M&W 838; 153 ER 351. 12. Ibid.

13. Jarvis v Swan Tours [1973] QB 233; Jackson v Horizon Holidays Ltd [1975] 3 All ER 92. 14. Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (1981) 148 CLR 121; 36 ALR 257. 15. For a discussion of the problems of contractual licences, see Wade, ‘What is a Licence?’ (1948) 64 LQR 57; ‘Stern Licences and Self-Help — The Ticket Cases Revisited’ (1968) 32 Conv & PL 49; Moriarty, ‘Licences and Land Law: Legal Principles and Public Policies’ (1984) 100 LQR 376. More generally, see Merrill and Smith, ‘The Property/Contract Interface’ (2001) 101 Columbia Law Review 773. 16. (1952) 52 SR (NSW) 143. 17. [1980] 1 All ER 839. 18. See Wolverhampton & Walsall Railway Co v London and North & Western Railway Co (1873) LR 16 Eq 433 at 439 per Lord Selborne LC. 19. Dougan v Ley (1946) 71 CLR 142. Some writers suggest that specific performance, strictly so called, is confined to the first situation. For an explanation of the difference, see Dixon J in J C Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 282 at 297; [1931] ALR 157 at 161. 20. Dowsett v Reid (1912) 15 CLR 695 (hardship); Harrigan v Brown [1967] 1 NSWR 342 (clean hands); Lamshed v Lamshed (1963) 109 CLR 453 (delay). 21. Hill v C A Parsons & Co Ltd [1972] Ch 305; [1971] 3 All ER 1345. 22. J C Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 282; [1931] ALR 157. 23. Humphries v Southern Cross Ski Club [2012] VSC 232 [58]–[62]; Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd [2004] VSCA 242 [31]. 24. Meagher, Heydon and Leeming, 766. 25. Gray and Gray, 2009, 90. 26. Blackstone, Commentaries, Bk II, 2. 27. See Gray, [1991] CLJ 252. 28. See, for instance, National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1251–2 per Lord Wilberforce, and Lord Upjohn (at AC 1239) pointed out that the decision underestimated the difficulties created by King v David Allen. For a general discussion of these issues, see McFarlane, ‘Identifying Property Rights: A Reply to Mr Watt’ [2003] Conv 473. 29. Pollock and Maitland, The History of English Law, 2nd ed, 1968, vol 1, 451. 30. Higginbotham and Kopytoff, ‘Property First, Humanity Second: The Recognition of the Slave’s Human Nature in Virginia Civil Law’ (1989) 50 Ohio St LJ 511.

31. Hardingham and Neave, Australian Family Property Law (1984), Chs 1–3. 32. The judgments in this case are copiously footnoted. Most of these footnotes have been omitted from the extract. Those which have been retained are set out at the end of the extract. 33. Mortimer, ‘Proprietary Rights in Body Parts: The Relevance of Moore’s case in Australia’ (1993) 19 Mon LR 217. For a criticism of the policy arguments made by the majority, see Magnusson, ‘The Recognition of Proprietary Rights in Human Tissue in Common Law Jurisdictions’ (1992) 18 MULR 601; Zodrow, ‘The Commodification of Human Body Parts: Regulating the Tissue Bank Industry’ (2003) 32 Southwestern University Law Review 407. 34. For a discussion of the legal issues raised by transplantation, see Scott, The Body As Property (1981); Davies and Naffine, 2001, Ch 7; and Australian Law Reform Commission, Human Tissue Transplants, Report No 7 (1977). 35. Compare Transplantation and Anatomy Act 1978 (ACT) s 44; Human Tissue Act 1983 (NSW) s 32; Human Tissue Transplant Act (NT) s 24; Transplantation and Anatomy Act 1979 (Qld) ss 40–42; Transplantation and Anatomy Act 1983 (SA) s 35; Human Tissue Act 1985 (Tas) s 27; Human Tissue and Transplant Act 1982 (WA) ss 29, 30. 36. For a general discussion see Atherton, ‘Claims on the Deceased: The Corpse as Property’ (2000) 7(4) Journal of Law and Medicine 361–75, and other articles in this special issue on the body and property, and Australian Law Reform Commission, Essentially Yours: The Protection of Human Genetic Information in Australia, Report 96 (2003). 37. For a discussion of this case, see L Bennett Moses, ‘Property in Sperm’ (2011) 1 Prop L Rev 135 and J Edelman, ‘Property Rights to Our Bodies and Their Products’ (2015) 39 UWALR 47. 38. On a regulatory approach to this question, see C Dent, ‘Stepping Back from the Property Line: a Perspective from Regulatory Theory’ (2013) 21 Jo Law & Med 330. 39. For further discussion of the contrasting approaches of the High Court of Australia in Victoria Racing Park and Recreation Grounds Co Ltd v Taylor see 1.46C; and of the US Supreme Court in International News Services v Associated Press, see Gray, ‘Property in Thin Air’ [1991] Cambridge LJ 252, 266ff; Coval, Smith and Coval, ‘The Foundations of Property and Property Law’ (1986) 45 CLJ 457. For a discussion of the action for nuisance in relation to the obstruction of views, see Gillespie, ‘Private Nuisance as a Means of Preventing Views from Obstruction’ (1989) 6 Env and Planning Law Journal 94. 40. For a detailed discussion of the passing off action, see Ricketson, Chs 24–26. 41. For a general discussion of these issues, see J Caldwell, ‘Protecting Privacy Post Lenah: Should the

Courts Establish a New Tort or Develop Breach of Confidence?’ (2003) 26(1) UNSWLJ 90. 42. ALRC, Serious Invasions of Privacy in the Digital Era (Report 123) (2014). 43. See further, N Witzleb, ‘A Seed on Barren Ground? The ALRC’s Recommendation for a Statutory Privacy Tort’ (2014) 42 Aust Bus Law Rev 403. 44. A Cunningham, ‘The European Convention on Human Rights, Customary International Law and the Constitution’ (1994) 43 International and Comparative Law Quarterly 537–67 at 553. See also M Kirby, ‘The Role of International Standards in Australian Courts’, in P Alston and M Chiam eds, Treaty-Making and Australia: Globalization versus Sovereignty, Federation Press, Sydney, 1995, 81–92. 45. JA Pye (Oxford) Ltd v United Kingdom [2005] ECHR 921. For further discussion, see 2.76. 46. JA Pye (Oxford) Ltd and JA Pye (Oxford) Land Ltd v United Kingdom [2007] ECHR 700. 47. [2004] EHRR 189. 48. For a critical analysis of the traditional classification, see Jackson, 23–31; and, generally, Lawson, Ch 2. 49. See also Bradbrook, ‘The Relevance of the Cujus Est Solum Doctrine to the Surface Landowner’s Claims to Natural Resources Above and Beneath the Land’ (1988) 11 Adel L R 462. For a general discussion of the relevant case law from a number of jurisdictions, see Grattan, ‘Judicial Reasoning and the Adjudication of Airspace Trespass’ (1996) 4 APLJ 128. 50. Legislation in Queensland, New South Wales and Tasmania has now given the courts power to impose easements in circumstances similar to those in LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd: Property Law Act 1974 (Qld) s 180; Conveyancing Act 1919 (NSW) s 88K; Conveyancing and Law of Property Act 1884 (Tas) s 84J. See further 10.98. 51. Property in intangibles, such as charms, spells and songs, also exists in many non-industrialised societies: see Lowie, ‘Incorporeal Property in Primitive Society’ (1928) 37 Yale LJ 551; Hoebel, The Law of Primitive Man, 1954, 56–63. 52. Collier, ‘Distinguishing Chattels and Fixtures: Intent and Annexation’ (1994) 2 APLJ 189; Butt, 41–7. 53. For modern cases applying Hobson v Gorringe, see Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429; Pan Australian Credits (SA) Pty Ltd v Kolim Pty Ltd (1981) 27 SASR 353; Sanma Australia Leasing Ltd v National Westminster Finance Australia (1988) 4 BPR 97,294.

54. See also Maori Trustee v Prentice [1992] 3 NZLR 344; Anthony v The Commonwealth [1972–73] ALR 769; (1973) 47 ALJR 83 at 89–90; Wellsmore v Ratford (1973) 23 FLR 295; Best, ‘Competing Claims to Ownership of Fixtures’ (1995) 3 APLJ 221. For a discussion of the problems arising over mortgaged land, see Butt, ‘Removing Fixtures Against Mortgagees’ (1995) 69 ALJ 858. 55. On this point, see L Griggs, ‘The Doctrine of Fixtures: Questionable Origin, Debatable History, and a Future that is Past!’ (2001) 9 APLJ 51. 56. See, for example, Dr Bronte Douglass v Lawton Pty Ltd [2007] NSWCA 89. 57. Bain v Brand (1876) 1 App Cas 762 at 772; Northshore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1939–1940) 63 CLR 52 per Dixon J at 68, who observed that removable tenant’s fixtures are part of the soil unless and until removed. 58. Agricultural Tenancies Act 1990 (NSW) s 14 (see also ss 5–7) (this applies only to land of minimum size of one hectare used solely or mostly for agricultural purposes); Property Law Act 1958 (Vic) s 154A(1); Property Law Act 1974 (Qld) s 155; Landlord and Tenant Act 1935 (Tas) s 26. 59. See, for example, Agricultural Tenancies Act 1990 (NSW) ss 6–8; Property Law Act 1974 (Qld) Pt 8 Div 6; Agricultural Holdings Act 1891 (SA) ss 6–22. 60. See Residential Tenancies Act 1987 (NSW) s 27; Residential Tenancies Act 1995 (SA) s 70; Residential Tenancies Act 1980 (Vic) s 104; Residential Tenancies Act 1987 (WA) s 47 (an agreement may provide to this effect). 61. Victorian Law Reform Commission, Review of the Property Law Act 1958: Final Report, 2010. 62. See generally Moore, ‘Land by the Water’ (1968) 41 ALJ 532. See also Bradbrook, MacCallum, Moore and Grattan 802–8; Butt, 26–37; Gray, Edgeworth, Foster and Dorsett, 40–1. 63. Encroachment of Buildings Act 1922 (NSW); Real Property Act 1900 (NSW) Pt 14A; Encroachment of Buildings Act (NT); Property Law Act 1974 (Qld) Pt 11; Encroachments Act 1944 (SA). For cases discussing the application of these provisions, see Gesmando v Anastasiou (1975) 1 BPR 9297; Kostis v Devitt (1979) 1 BPR 9231; Ex parte Achterberg [1984] 1 Qd R 160; Cuthbert v Hardie (1989) 17 NSWLR 321; Amatek Ltd v Googoorewan Pty Ltd (1993) 176 CLR 471; 112 ALR 1; 67 ALJR 339; Tallon v The Proprietors of Metropolitan Towers Building Units Plan No 5157 [1997] 1 Qd R 102. See also Butt, 62–7. In 2010, the Victorian Law Reform Commission in its Review of the Property Law Act 1958: Final Report, Ch 4, recommended enactment of similar legislative provisions.

64. Crown Lands Act 1989 (NSW) s 172; Land Act 1994 (Qld) s 13A; Land Act 1958 (Vic) ss 384– 385; Rights in Water and Irrigation Act 1914 (WA) ss 15, 16. 65. For the rules concerning intermixture, see Fisher, Commercial and Personal Property Law, 1997, 112–20. See generally Guest, ‘Accession and Confusion in the Law of Hire-Purchase’ (1964) 27 Mod L R 505; Alston, ‘Chattels Attached to Chattels’ (1996) 45 APLJ 120.

[page 91]

Possession and Title

CHAPTER

2

INTRODUCTION 2.1

This chapter examines some fundamental principles of the modern law

relating to land and goods. Historically, tangible forms of wealth constituted the economic backbone of pre-industrial societies. And where the majority of the population is illiterate, it is not surprising that the law of such societies has placed great emphasis on the physical holding of land and goods. As Holmes J wrote in Missouri v Holland 252 US 416 at 434 (1920): ‘Wild birds are not in the possession of anyone; and possession is the beginning of ownership.’ So, the concept of possession was central to the remedies developed by the early common law. The historical position was outlined in Government of the Islamic Republic of Iran v The Barakat Galleries Ltd [2007] EWCA Civ 1374; [2009] QB 22 at [15] (per Lord Phillips of Worth Matravers CJ, Wall and Lawrence Collins LLJ): Originally the common law did not differentiate between possessory title and proprietary title. Possession of a chattel gave title to it. Where there was an involuntary transfer of possession, as a

result for instance of loss or theft of the chattel, the person who had first possessed the chattel would have a superior title to the subsequent possessor.

2.2

Possession continues to play a role, if a much-diminished one, in the

modern law. The general principle is that a person in possession of land or goods, even as a wrongdoer, is entitled to take action against anyone interfering with the possession unless the person interfering is able to demonstrate a superior right to possession. Possession is to be contrasted with ‘title’, the term we use to describe the ‘owner’s’ rights and the evidence adduced to establish them. The various ‘title’ systems of Australian land law will be examined in Chapter 5, but before title is considered, an examination of how the law protected possession is required.

Why protect ‘possession’? 2.3

The emphasis of the common law on possession as a source of

proprietary interests has attracted the attention of many writers.1 In The Common Law,2 the American jurist

[page 92]

Oliver Wendell Holmes explained the law’s protection of possession as a safeguard of peace and good order, instancing the common law’s recognition of rules developed by hunters to regulate claims to captured animals: Possession is a conception which is only less important than contract … Why is possession protected by the law, when the possessor is not also an owner? … The courts have said but little on

the subject. It was laid down in one case that it was an extension of the protection which the law throws around the person: Rogers v Spence (1844) 13 M&W 571 at 581; 153 ER 239 at 243. So it has been said, that to deny a bankrupt trover against strangers for goods coming to his possession after his bankruptcy would be ‘an invitation to all the world to scramble for the possession of them’, and reference was made to ‘grounds of policy and convenience’: Webb v Fox (1797) 7 TR 391 at 397; 101 ER 1037 at 1040. I may also refer to the cases of capture … In the Greenland whalefishery, by the English custom, if the first striker lost his hold on the fish, and it was then killed by another, the first had no claim; but he had the whole if he kept fast to the whale until it was struck by the other, although it then broke from the first harpoon. By the custom in the Gallapagos, on the other hand, the first striker had half the whale, although control of the line was lost: Fennings v Lord Grenville (1808) 1 Taunt 241; 127 ER 825; Littledale v Scaith (1788) 1 Taunt 243, n (a); 127 ER 826; cf Hogarth v Jackson (1827) Mood & M 58; 173 ER 1080; Skinner v Chapman (1827) Mood & M 59, n; 173 ER 1081. Each of these customs has been sustained and acted on by the English courts, and Judge Lowell has decided in accordance with still a third, which gives the whale to the vessel whose iron first remains in it, provided claim be made before cutting in: Swift v Gifford 2 Lowell 110. The ground as put by Lord Mansfield is simply that, were it not for such customs, there must be a sort of warfare perpetually subsisting between the adventurers.

POSSESSION OF GOODS 2.4

Fundamental to property law is the distinction between real property

(realty) and personal property (otherwise known as chattels, or personalty). For historical reasons, leases have been classified as ‘chattels real’, a species of personalty, but are more conveniently considered under the heading of real property. Pure personalty, or ‘chattels personal’ can be classed as either: (1) choses in possession, which are tangible property other than land, such as jewellery, motor vehicles and other goods; or (2) choses in action, which are

intangible property such as shares, debts and copyright. Choses in possession, or goods, are distinctive because they can be physically possessed. 2.5

The legal test for possession of goods is met when two conditions are

fulfilled: (1) actual physical control; and (2) an intention to possess, or animus possidendi. These requirements are the same as those required to establish a possessory title to land.3 In Young v Hichens,4 two fishing vessels were separately attempting to catch the same shoal of fish. It was held that the plaintiffs, who had partially enclosed their net around the fish, did not have possession in law because they did not have de facto control. It followed that they could not maintain an action in trespass (see 2.8 below) to prevent the defendants taking the fish. Contrast this case with

[page 93] The Tubantia,5 where a salvage company had laid buoys and lights around the site where the ship was located, and had cut access holes in the ship’s hull. A competitor sought to extract material from the ship. The first salvage company was held to have possession of a sunken ship and its contents because its acts were held sufficient to establish de facto control and animus possidendi. 2.6

Possession usually coincides with ownership. But rights to possession

and ownership, or title, to goods, are often held by different persons. Some common examples are:

contractual bailment, where the owner grants a temporary right of possession to another; hire–purchase agreements; contracts for the sale of a chattel where the seller retains custody of the chattel; finders of lost or mislaid chattels; and where goods have been stolen. 2.7

In these situations, the possessor has a proprietary interest different in

kind to that of the owner of goods, or the title holder. The possessor was protected in law differently to the owner out of possession. By contrast, the owner out of possession had two different kinds of rights, either: (1) an immediate right to possession, which would arise where, for example, a bailment had come to an end, but the bailee still retained possession, or, where a finder had possession of a lost chattel; or (2) a right to future possession, as where a bailee held the chattel during the currency of the contractually agreed term of the bailment. During this time, the owner did not have a right to possess the chattel.

Remedies 2.8

The law provides a range of remedies in tort to all those who hold

proprietary interests in chattels. The tort of negligence protects the holder of an interest in a chattel, regardless of the nature of their interest, against reasonably foreseeable harm to it: Mears v London and South Western Railway

Co (1862) 11 CBNS 850; 142 ER 1029. The intentional torts also provide redress for wrongful interference with goods. These torts are trespass, detinue, conversion and action on the case. They differ from negligence to the extent that all four actions provide remedies where only one or some of the different proprietary rights in goods are affected. In particular: Trespass lies where there is an interference with the plaintiff’s actual possession, such as the wrongful taking of goods, and is actionable without proof of damage. A non-owner who was in actual possession at the time of the taking can sue in trespass, while an owner who was not in actual possession, either personally or through the custody of a servant, agent or bailee at will, cannot: Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 225. Conversion lies at the suit of a plaintiff who was in actual possession of the goods at the time of the wrong or had an immediate right to possession, the gist of the action being an intentional denial of the plaintiff’s dominion over the goods. Title to sue in conversion depends on the right to possession, not proof of absolute ownership. ‘Conversion consists of a positive wrongful act of dealing with goods in a manner inconsistent with the rights of the owner’: Maynegrain Pty Ltd v Compafina Bank [1984] 1 NSWLR 258 at 264 (Privy Council);

[page 94]

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 229. Conversion

commonly occurs where goods are transferred into the possession of the wrongdoer or a third party who is not entitled to them. In Cook v Saroukos (1989) 97 FLR 33 at 41 it was stated: ‘The delivery of goods to a third party with the intent to pass ownership, or even possession, constitutes conversion.’ Mere detention or handling is not sufficient to found a claim of conversion. It is necessary to show a degree of use amounting to employing goods as if they were one’s own: Kuwait Airways Corp v Iraqi Airways Co [2002] AC 883; [2002] UKHL 19 at [42]–[45]. Detinue lies at the suit of a plaintiff who was in actual possession or had an immediate right to possession at the time of the wrong, the gist of the action being that the defendant wrongfully retains the plaintiff’s goods following the plaintiff’s lawful demand for their return. The plaintiff need not prove title or ownership, but the right to possession must derive from some proprietary or possessory interest in the chattel: Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR 14,360; Russell v Wilson (1923) 33 CLR 538. The elements for a cause of action in detinue will usually ground an action in conversion; for example, where the defendant wrongfully took the goods from the plaintiff’s possession and refused to return them on demand.6 Action on the case lies at the suit of an owner out of possession who has a mere right of future possession, but the damage to the chattel is ‘special’, that is to say, enduring, as where the chattel is completely destroyed. In such situations, the owner’s future, or reversionary interest, is harmed.7 In

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 at 230 Dixon J referred to this action as: … a special action on the case and does not depend on the plaintiff’s having immediate right to possession … the foundation of the action is the damage and ‘permanent’ damage to the chattel must have occurred, that is damage which would enure to the ‘reversioner’.

In Mears v London and South Western Railway Co (1862) 11 CBNS 850; 142 ER 1029 the owner of a barge, Mears, hired it to Russell. During the term of the bailment, Russell employed the defendants who seriously damaged it. Williams J held that ‘where there is a permanent injury, the owner may maintain an action against the person whose wrongful act has caused that injury’ (at 854–5). Although the damage in Mears was caused by negligence, the principle of the case also extends to intentional damage, and even where the injury to the chattel is caused by negligence, the action still appears to be framed as an action on the case.8 See also O’Sullivan v Williams [1992] 3 All ER 385 (below) at 2.30. 2.9

Despite the overlap, there are differences in the remedies available for

conversion and detinue. In an action for conversion, the normal remedy is damages, while detinue developed as a proprietary action for return of the specific chattel, or its assessed value, plus damages for its detention: A principle on which the court has long acted is not to order delivery of goods which are ordinary articles of commerce with no special value or interest, whether to the plaintiff

[page 95]

or others, when damages will fully compensate. If a plaintiff can easily replace the goods detained by purchasing their equivalent on the market, then the payment of damages out of which the price of the equivalent may be paid is adequate compensation to the wronged plaintiff …9

In McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303, the plaintiff claimed specific restitution of a yacht which the defendant refused to deliver. At the time of the yacht coming into the possession of the defendant, it consisted only of a laminated hull but at the time of the action, the yacht was ready to sail. Young J held that a person’s yacht was unique and, for that reason, susceptible to the remedy of specific restitution.10 His Honour also held that the doctrine of accretion applied, so that chattels added to the hull became the property of the original owner. Animals are considered chattels in law. The following case raises the question of rights to the progeny of animals that have been converted or unlawfully detained. 2.10C

Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 New South Wales Court of Appeal

McColl JA: YYH Holdings Pty Ltd (‘YYH Holdings’) and Hamoud Ali Al-Khalaf (trading as Transportation EST), the respondents, brought an action in detinue and conversion against Phillip and Karen Grant, the appellants, for the return of 16 Awassi sheep, all other sheep which had been bred from those sheep and any other sheep of any cross containing Awassi genetics. Rolfe DCJ found that although the cause of action in respect of the 16 sheep had expired, the same was not the case for the progeny and semen of those sheep. Accordingly, his Honour ordered that the appellants deliver up to the respondents all of the progeny and any embryos and/or straws and pellets of semen of the 16 original sheep: YYH Holdings Pty Ltd v Grant (District Court of New South Wales, Rolfe DCJ, unreported, 23 March 2012). The appellants appeal from those orders. The issue on appeal is whether the respondents’ claim to the progeny and ‘genetics’ of the 16 original sheep is also statute barred. Section 14(1)(b) of the Limitation Act 1969 provides, relevantly, that ‘[a]n action on a cause of action founded on tort is not maintainable if brought after the expiration of a limitation period of six years running

from the date on which the cause of action first accrues to the plaintiff’. The following provisions of the Limitation Act are also relevant: s 21 Where: (a) a cause of action for the conversion or detention of goods accrues to a person, and (b) afterwards, possession of the goods not having been recovered by the person or by a person claiming through the person, a further cause of action for the conversion or detention of the goods or a cause of action to recover the proceeds of sale of the goods accrues to the person or to a person claiming through the person, an action on the further cause of action for conversion or detention or on the cause of action to recover the proceeds of sale is not maintainable if brought after the expiration of a limitation period of six years running from the date when the first cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims. [page 96]

[Pursuant to a contract of sale, ownership of the Awassi Sheep was transferred to the respondents on 4 November 2003, but attempts to take possession in January 2004 were rebuffed by the appellants in whose possession they remained as shareholders of the company that originally owned the sheep. Many subsequent attempts were made to reclaim the sheep, including threats of legal action, which did not eventuate until 8 December 2010, after the respondents found out that the appellants were advertising the sale of 209 Awassi sheep at auction in November 2010]. The respondents’ claimed entitlement to the progeny of the original 16 sheep is based on the maxim that offspring of domestic animals are the property of the owner of the dam: Case of Swans [1572] EngR 403; (1572) 7 Co Rep 15b (at 17b); 77 ER 435 cited with approval in Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351 (at [24]) per Gleeson CJ, Gaudron, Kirby and Hayne JJ; see also Big Top Hereford Pty Ltd v Gavin Thomas as Trustee of the Bankrupt Estate of Douglas Keith Tyler [2006] NSWSC 1159 (at [35]) per Brereton J. A cause of action in conversion accrues once the person in possession of the goods engages in an act which is repugnant to the owner’s right to possession, for example, by retaining the goods after a lawful demand: see Bunnings Group Ltd v CHEP Australia Ltd (at [117]–[121]). Mere unauthorised possession of another’s chattel is not a conversion of it: Bunnings Group Ltd v CHEP Australia Ltd (at [117]). The essence of detinue lies in a wrongful refusal to deliver up goods to a person having the immediate right to the possession of those goods: CHEP Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 (at [183]) per McDougall J. Similarly, the cause of action in detinue accrues once a lawful demand for the return of possession of the chattel is made and the demand is refused: Philpott v Kelley (1835) 3 Ad & El 106; (1835) 111 ER 353; Miller v Dell [1891] 1 QB 468; Lloyd v Osborne (1899) 20 LR (NSW) 190. Accordingly at the end of six years after the accrual of the cause of action, the title of the original owner to the converted or wrongfully detained chattel, and hence any cause of action for conversion and/or detinue, is extinguished: s 65(1) Limitation Act. There may be different limitation periods if the facts establish that the causes of action

in conversion and detinue accrued at different times: John F Goulding Pty Ltd v Victorian Railways Commissioners [1932] HCA 37; (1932) 48 CLR 157 (at 169–170). The appellants relied upon Seay v Bacon (1856) 4 Sneed (TN) 99; 36 Tenn 99 (Tenn); 1856 WL 2500 (Tenn), a decision of the Supreme Court of Tennessee where the court held that ‘By our law, the issue of a female slave follows the condition of the mother. The children are part of the mother, and, potentially, exist in her before they have a being. The ownership of the mother carries with it the property in the children born of her during the period of such ownership. The mother and her issue are treated, in respect of the title and rights of the owner, as an aggregate property.’ Whatever affects the rights or remedies of the owner as respects the mother, equally affects his rights and remedies in respect to her issue. [They argued that the case] support[ed] their contention that the progeny of the original 16 sheep are ‘aggregate property’, and, accordingly, the same ‘goods’ for the purposes of s 21 of the Limitation Act. I do not accept that submission. As the passages emphasised in the extract from the case demonstrate, the Tennessee court’s decision appeared to be founded on the law as to slavery in that State which treated slaves as in a special category. However, in Buckley v Buckley, Administratrix of the Estate of Henry A Buckley, (dec’d) 12 Nev 423; 1877 WL 4371 (Nev) (an action brought to recover a flock of ewe sheep or their value, the right to their increase and the wool subsequently shorn from the flock), the Supreme Court of Nevada, having cited the passage the appellants rely upon from Seay v Bacon (at [5]), and referring to other cases dealing with slaves, said (at [6]) that, ‘there was no distinction at that time, as objects of property, between negroes and domestic animals’. [page 97]

Seay v Bacon reflected a view which had currency in some quarters prior to the abolition of slavery, that slaves were regarded as chattels and, accordingly, that actions for their conversion or wrongful detention would lie at the suit of their owners: see Pearne v Lisle (1749) Amb 75 (at 76–77); (1749) EngR 142; 27 ER 47. The conclusion in Buckley v Buckley, Administratrix of the Estate of Henry A Buckley, (dec’d) is consistent with the conclusion reached in Pearne v Lisle. In that case, the Lord Chancellor, Lord Hardwicke, had ‘no doubt that trover will lie for a Negro slave; it is as much property as any other thing’. His Lordship declined to grant specific performance of a contract to provide such slaves saying, by analogy with ‘stock on farm’, that they were not in a special category. As Young J said in Borg v Howlett [1996] NSWSC 153; (1996) 8 BPR 15,535 (at 15, 538), ‘the exact words used by his Lordship are now outdated, and, indeed, the whole thrust of what he said would now be considered abhorrent’. Nevertheless his Honour applied his Lordship’s reasoning insofar as it concerned stock on a farm to conclude that, prima facie, racehorses were not of the nature of a special chattel. That reasoning, in my view, applies, a fortiori, to sheep, even those of the Awassi line which, while perhaps of a distinct genus, are bred for primary production purposes no different from the greater Australian sheep stock. The Seay v Bacon approach to commodification of individuals by treating them as an article of possession was effectively rejected in Somerset v Stewart (Somerset’s Case) (1772) Lofft 1; (1772) 20 State Tr 1; (1772) 98 ER 499 prior to the settlement of the

Colony of New South Wales in 1788. In that famous case, Lord Mansfield held (Lofft, at [19]) that ‘[t]he state of slavery is of such a nature, that it is incapable of being introduced [into the law of England] on any reasons, moral or political’. ‘Chattel slavery’ being ‘full ownership of another human being’ was unlawful under Imperial legislation dating back to colonial times, a position now reflected in s 270.3(1)(a) of the Criminal Code Act 1995 (Cth): R v Tang [2008] HCA 39; (2008) 237 CLR 1 (at [81]) per Kirby J. Seay v Bacon does not, in my view, enunciate a principle concerning the title to the progeny of the sheep which finds a basis in Australian law. The appellants cited no binding or persuasive authority which applied its reasoning concerning ‘aggregate property’ in the present context. There is, in my view, no reason why, as a matter of principle, the owner of the 16 original sheep does not obtain a separate title to the progeny. The progeny have a separate existence. Although the respondents’ ownership of them was derived from their title to the original 16 Awassi sheep, once the progeny were no longer in utero they were separate entities and the respondents had a separate title to them. In any event, in my view the one goods argument cannot be sustained on the facts. The respondents offered to, and did, purchase ‘all Awassi sheep owned by Awassi (Aust) Pty Ltd (in liq)’ from the liquidator. The respondents’ January 2004 demand was ‘to collect the 16 Awassi sheep from [the appellants’] property in Cowra’, while the November 2010 demand was to recover ‘the sixteen original Awassi Sheep, as well as all purebreds and cross-breeds bred from the original sixteen (16) Awassi Sheep directly or indirectly’. It was never put to Mr Daws at trial, that the respondents had purchased the ‘genetic material’ rather than the sheep. Any proposition to that effect would have been inconsistent with the objective evidence of the contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165. While it might be accepted that from time to time Mr Daws used the word ‘genetics’ as, for example when he referred to the first respondent attempting to recover ‘the full genetics that were purchased’, it is plain that he used that expression to refer to ‘the 16 sheep’: see Transcript at 38(45)– (50). As the November 2010 demand demonstrated, the respondents regarded the 16 original sheep as different from the progeny. The appeal must, accordingly fail. [page 98]

Basten JA: The legal basis for the primary submission was derived from s 21 of the Limitation Act. That section provides that where a cause of action for conversion or detention of goods has accrued, an action is not maintainable more than six years after the initial accrual on the basis of a further cause of action arising for the conversion or detention of the goods. The argument was that ‘the goods’ were the ‘genetic material’ which passed from the original flock to the progeny, leading to the assertion that ewe and progeny were, in law, one thing. This argument owed more to ingenuity than commonsense. It sought to draw support from the doctrine of accretion or accession which operates with respect to inanimate products. Thus, in Jones v De Marchant (1916) 28 DLR 561, the Manitoba Court of Appeal (in a judgment delivered by Richards JA) held that the owner of certain beaver skins was entitled to succeed against a defendant who had acquired, by gift, a fur coat made from the beaver skins, property in which was held to remain in the owner by virtue of the principle of ‘accession’ [the joining of one

chattel to another]. Just as it is no longer acceptable to treat people as, in law, chattels (see below) it is neither logical nor morally acceptable to treat animals, though chattels, as in all respects equivalent to inanimate objects. Nor indeed does the law allow such an equation; there are specific offences for cruelty to animals: see, for example, Prevention of Cruelty to Animals Act 1979 (NSW). The secondary argument asserted that, as a matter of law, upon the respondents losing property in the original 16 sheep, they also lost property in the progeny, including, presumably, successive generations. While it is true that the respondents obtained property in the progeny because of their ownership of the ewes at the time the further generations were born, why they should lose property once their title to the original ewes was extinguished, was obscure. The fact that a ewe dies, or is sold, would not ordinarily be thought to extinguish title to her progeny once they had vested in the respondents. If such a legal consequence flowed, to how many generations would it apply? No authority was relied on for the proposition, beyond the concept of ‘aggregate mass’ discussed above. There is a further reason why neither submission should be accepted. It turns on the premise underlying the legal conclusion that title to the original 16 sheep was extinguished, namely the lapse of six years from the demand made in January 2004. The legal consequences flowing from making the demand, and the lapse of time thereafter without commencement of proceedings, must turn on the proper construction of the demand. Once it is accepted that livestock and their progeny may form different ‘goods’ for the purposes of the torts of detinue and conversion, and therefore for the purposes of s 21 of the Limitation Act, the remaining question was whether the demand made in January 2004 related to the progeny and other material extracted from sheep within the flock. Dealing first with the question of progeny, there is a question as to whether it is sensible to talk of a demand for non-existent goods. It is difficult to see how a cause of action could arise in detinue from the refusal to transfer to the putative owner goods which were not in existence. That being so, little time need be spent on the terms of the demand. The uncontroversial evidence was that an agent of the owner rang the first appellant in late January 2004 stating: I want to organise a day with you to collect the 16 Awassi sheep from your property in Cowra. The request was rejected. The appeal must be dismissed. [Tobias AJA concurred].

2.11 Questions 1.

Are animals ‘property’? If so, what type of property are they?

2.

Did the respondents lose title to the original 16 sheep? If so, on what principle?

[page 99]

3.

Why were the progeny considered different goods to the original sheep?

4.

What bearing does the contractual arrangement between the parties bear on the respondents’ rights? Might the terms have restricted them? In what way/s?

5.

Would the respondents have rights to any progeny born to sheep whose title had been already extinguished by the Limitation Act, that is sheep born after January 2010?

6.

After reading 2.24 below, would the respondents (above) have been able to exercise the right of ‘recaption’ over the sheep?

The plea of jus tertii 2.12

If conversion protects the rights of a non-owner in possession of

goods, can the defendant avoid liability by pleading that a third party has a better right to the goods? This plea is known as the jus tertii, or the right of a third party, normally used in the sense of a right superior to that of both the plaintiff and defendant. 2.13C

Jeffries v The Great Western Railway Co (1856) 5 El & Bl 802; 119 ER 680 Court of Exchequer Chamber

[The plaintiff brought an action of trover (a predecessor of the modern tort of conversion) against

the defendants who had taken some railway trucks which had been in the plaintiff’s possession. The plaintiff claimed to own the trucks as a result of an assignment from Owen. The defendants also claimed to own the trucks from an assignment from Owen, after the date of the first assignment, but before the plaintiff took possession of the trucks. The defendants argued that, before the plaintiff took possession of the trucks, Owen had become bankrupt and that the Court of Bankruptcy had made an order requiring the trucks to be sold for the benefit of Owen’screditors. The defendants were trying to prove that at the time of their seizure, the trucks did not belong to the plaintiff, but to the people who had title under the order of the Court of Bankruptcy. Pollock CB said that unless the defendants had evidence that they were claiming under those people, the evidence of the bankruptcy would be rejected. Pollock’s reason was that if the defendants were wrongdoers, they could not set up the jus tertii as a defence. The plaintiff obtained a verdict from the jury and the defendants obtained a rule nisi for a new trial on the ground of misdirection.] Lord Campbell CJ: I am of opinion that the Chief Baron did right in refusing to admit evidence to impeach the title of the plaintiff. The defendants were strangers to the title which they proposed to set up; and the plaintiff had been for some time in possession, when the defendants seized the goods, claiming them as their own, but having, as we must now take it, no right to the goods; and I think that, under such circumstances, the jus tertii could not be set up, by the defendants averring that they themselves were mere wrongdoers at the time of the conversion, but that there were strangers who then had a right to take the goods. I am of opinion that the law is that a person possessed of goods as his property has a good title as against every stranger, and that one who takes them from him, having no title in himself, is a wrongdoer, and cannot defend himself by shewing that there was title in some third person; for [page 100]

against a wrongdoer possession is a title. The law is so stated by the very learned annotator in note (1) to Wilbraham v Snow (1699) 2 Wms Saund 47a, 47f; 85 ER 624, and I think it most reasonable law, and essential for the interests of society, that peaceable possession should not be disturbed by wrongdoers. And I do not find that this doctrine has been impeached by any of the cases cited. It is not disputed that the jus tertii cannot be set up as a defence to an action of trespass and trover; for in truth the presumption of law is that the person who has possession has the property. Can that presumption be rebutted by evidence that the property was in a third person, when offered as a defence by one who admits that he himself had no title and was a wrongdoer when he converted the goods? I am of opinion that this cannot be done, and consequently that the Chief Baron’s ruling was right …

Wightman J: Here the plaintiff was in possession of the trucks on the railway as his own. The defendants took them out of his possession and converted them; and they seek to defeat an action for that conversion by shewing title, not in themselves, or in any one under whom they acted, but title in a stranger against whom they would be wrongdoers; and they ask, by doing this, to defeat the prima facie right arising from possession. The old law upon the property necessary to maintain trover is thus stated in note (1) to Wilbraham v Snow: ‘So possession with an assertion of title, or even possession alone, gives the possessor such a property as will enable him to maintain this action against a wrongdoer; for possession is prima facie evidence of property’. Several cases have been cited in the course of the argument. In some cases the plaintiff was not in actual possession; and, when that is the case, it may well be that the defendant may shew the jus tertii. But I find no case where the person in actual possession has been defeated in an action of trover because the defendant was permitted to set up the jus tertii. I therefore think that the Chief Baron was right. [Crompton J delivered a judgment to the same effect.]

2.14 Questions 1.

Why were the defendants in Jeffries’ case ‘wrongdoers’? What is the policy underlying the reasoning in Jeffries’ case? See also Armory v Delamirie (1722) 1 Strange 505; 93 ER 664: 2.32C.

2.

In what circumstances, if any, could the defendants have relied upon the title of the third party? In particular, what relationship would have had to exist between the defendants and the third party?

3.

What if the persons entitled under the court order had authorised the defendants to seize the trucks from the plaintiff? Would it have been a sufficient defence for the defendants to show that they had returned the trucks to Owen’s assignees?

2.15

Jeffries’ case is generally accepted as deciding that a defendant who

interferes with the plaintiff’s possession is liable to pay the full market value of the chattel, without any deduction for the likelihood of the true owner taking steps to recover the chattel from the plaintiff. It also appears to be settled that the defendant, despite having satisfied the judgment in favour of the plaintiff, will have no defence to a subsequent action by the true owner for recovery of

[page 101]

the chattel or payment of its value: Attenborough v London and St Katharine’s Dock Co (1873) 3 CPD 450 at 454.11 2.16

A mere contractual right to possession, in the absence of prior actual

possession or some other proprietary interest such as an immediate right to possession, is not sufficient title to maintain detinue: see Jarvis v Williams [1955] 1 All ER 108. The same principle was applied by the Court of Appeal to an action of conversion in International Factors Ltd v Rodriguez [1979] QB 351. Assume that A contracted to purchase goods owned by B from C who at all relevant times was in actual possession of the goods. Assume further that the contract did not pass C’s ‘property’ in the goods to A and that A never took possession. If D wrongfully took the goods from C, A could sue in neither detinue nor conversion. D could successfully plead B’s ownership as defeating A’s claim, a correct use of the plea of jus tertii as a denial of the plaintiff’s cause of action? By showing ownership of the goods in B, D has

demonstrated that A cannot show an immediate right to possession, an essential prerequisite in an action of detinue or conversion. 2.17

Sale of Goods legislation in all jurisdictions enables a seller in

possession of goods after sale to pass a good title to a third party acting in good faith and without notice of the previous sale: see, for example, Sale of Goods Act 1896 (Qld) s 25. This legislation may be relevant in cases which would otherwise raise issues similar to those discussed in Jeffries’ case. 2.18

In Jeffries’ case, the defendants were described as ‘wrongdoers’.

Consider the position if the plaintiff, deprived of possession by the defendant, had acquired possession ‘wrongfully’. What if the plaintiff had acquired possession as a result of theft? In Costello v Chief Constable of Derbyshire Constabulary [2001] 1 WLR 1437; [2001] 3 All ER 150, the defendant lawfully took possession of a motor vehicle from the plaintiff in the belief that it had been stolen. Acting under legislative powers, the defendant retained possession of the goods for the permitted statutory period but, upon expiration of the period, refused to return the goods to the plaintiff. The defendant contended that the plaintiff knew that the vehicle had been stolen. Lightman J, with whose judgment Robert Walker and Keene LJJ agreed, in upholding the plaintiff’s entitlement to recover possession of the vehicle from the defendant, summarised the law in these terms: In my view on a review of the authorities, (save so far as legislation otherwise provides) as a matter of principle and authority possession means the same thing and is entitled to the same legal protection whether or not it has been obtained lawfully or by theft or by other unlawful means. It vests in the possessor a possessory title which is good against the world save as against anyone setting up or claiming under a better title. In the case of a theft the title is frail, and of likely

limited value … but nonetheless remains a title to which the law affords protection … The frailty of the protection is reflected in [certain decisions] … that, if the stolen property in the possession of the thief or a receiver is seized by the police and pursuant to statutory authority possession is transferred to someone else (but not otherwise), the transferee obtain the possessory title in defeasance of that of the thief or receiver. There

[page 102]

are authorities … which reveal a natural moral disinclination (on occasion expressed in terms of public policy) to recognise the entitlement of a thief, receiver or other wrong-doer to the protection by the law of his possession … But it is clear … that such a disinclination and public policy do not afford a sufficient ground to deprive a possessor of such recognition and protection. This conclusion is in accord with that long ago reached by the courts that even a thief is entitled to the protection of the criminal law against the theft from him of that which he has himself stolen [at 1450–1; 163–4].

This statement was approved most recently by Leeming JA in Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81 at [37], who added: Possessory title has very deep roots in the common law. The point of Armory v Delamirie (1722) 1 Stra 505; 93 ER 664, after all, is that a mere finder, who has nothing more than possession, has a right against other possessors who lack better title. This extends even to thieves. Possession of a chattel gives rise to a possessory title, and even a thief obtains a good possessory title against someone who is a wrongdoer to the thief … see also Bride v Shire of Katanning [2013] WASCA 154 at [72] (Edelman J, Newnes JA agreeing).

In Webb v Chief Constable of Merseyside Police [2000] QB 427, the plaintiff succeeded in an action to recover from the police sums of money which they had seized that they could not prove to be proceeds of drug trafficking.

Possession by a bailee 2.19

As noted above, bailment arises when one person is the owner of

goods, but another person is temporarily in possession of them. The owner is the bailor and the person in temporary possession is the bailee. Bailment is a very common commercial arrangement. It typically arises under a contract, such as an agreement to hire machinery, a car or to dry-clean clothes. During the term of the contract, the bailee has actual possession. The bailee also has a right to immediate possession of the item should it cease temporarily to be in his or her possession, for instance, if it is lost or taken by a third party without permission. The bailor has a right to future possession at the conclusion of the hire. The bailee may have the custody of another’s goods without reward or consideration (a gratuitous bailment), which may be for a specified term, or until the owner (bailor) demands their return (a bailment at will). For example, the bailor may lend the bailee a car for a week or until the bailor requires its return. The possessor may also be an ‘involuntary’ bailee, where their possession is without the consent of the owner, as in cases of finding, or theft. 2.20

Whether in the case of bailment or otherwise, to succeed in an action

in detinue or conversion, a plaintiff must show that he or she had actual possession or an immediate right to possession at the date of the interference with the goods, or at the date of the demand for the return of the goods. A future or reversionary right to possession is not sufficient, such as where goods are bailed or hired to a bailee for a term which has not expired. Where an owner of goods has given possession of them to another, the terms of the

arrangement will determine whether the owner has an immediate or merely a future right to possession. In the case of goods bailed at will, such as where they are lent to another gratuitously, the bailor has the right to regain possession of the goods at any time, and therefore retains an immediate right to possession during the bailment. In such a case, both the bailee and the bailor have a cause of action against a wrongdoer who interferes with the goods in the bailee’s possession: BIS Cleanaway t/a CHEP v Tatale [2007] NSWSC 378 at [38]–[47].

[page 103]

Claims by bailee against a third party 2.21C

The Winkfield [1902] P 42; [1900–3] All ER Rep 346 Court of Appeal

Collins MR: This is an appeal from the order of Sir Francis Jeune dismissing a motion made on behalf of the Postmaster-General in the case of The Winkfield. The question arises out of a collision which occurred on 5 April 1900 between the steamship Mexican and the steamship Winkfield, and which resulted in the loss of the former with a portion of the mails which she was carrying at the time. The owners of the Winkfield under a decree limiting liability to £32,514 17s 10d paid that amount into court, and the claim in question was one by the Postmaster-General on behalf of himself and the Postmaster-General of Cape Colony and Natal to recover out of that sum the value of letters, parcels, etc, in his custody as bailee and lost on board the Mexican.12 The case was dealt with by all parties in the court below as a claim by a bailee who was under no liability to his bailor for the loss in question, as to which it was admitted that the authority of Claridge v South Staffordsmith Tramway Co [1892] 1 QB 422, was conclusive, and the President accordingly, without argument and in deference to that authority, dismissed the claim. The Postmaster-General now appeals. The question for decision, therefore, is whether Claridge’s case was well decided … For

the reasons which I am about to state I am of opinion that Claridge’s case was wrongly decided, and that the law is that in an action against a stranger for loss of goods caused by his negligence, the bailee in possession can recover the value of the goods, although he would have had a good answer to an action by the bailor for damages for the loss of the thing bailed. It seems to me that the position, that possession is good against a wrongdoer and that the latter cannot set up the jus tertii unless he claims under it, is well established in our law, and really concluded this case against the respondents … And the principle being the same, it follows that he can equally recover the whole value of the goods in an action on the case for their loss through the tortious conduct of the defendant. I think it involves this also, that the wrongdoer who is not defending under the title of the bailor is quite unconcerned with what the rights are between the bailor and bailee, and must treat the possessor as the owner of the goods for all purposes quite irrespective of the rights and obligations as between him and the bailor. I think this position is well established in our law though it may be that reasons for its existence have been given in some of the cases which are not quite satisfactory. I think also that the obligations of the bailee to the bailor to account for what he has received in respect of the destruction or conversion of the thing bailed has been admitted so often in decided cases that it cannot now be questioned; and further, I think it can be shewn that the right of the bailee to recover cannot be rested on the ground suggested in some of the cases, [page 104]

namely that he was liable over to the bailor for the loss of the goods converted or destroyed. It cannot be denied that since the case of Armory v Delamirie (1722) 1 Str 506; 93 ER 664, not to mention earlier cases from the Year Books onward, a mere finder may recover against a wrongdoer the full value of the thing converted. That decision involves the principle that as between possessor and wrongdoer the presumption of law is, in the words of Lord Campbell in Jeffries v Great Western Railway Co (1856) 5 El & Bl 802 at 806; 119 ER 680 at 681, ‘that the person who has possession has the property’. In the same case he says (El & Bl at 805; ER at 681): I am of opinion that the law is that a person possessed of goods as his property has a good title as against every stranger, and that one who takes them from him, having no title in himself, is a wrongdoer, and cannot defend himself by shewing that there was title in some third person, for against a wrongdoer possession is title. The law is so stated by the very learned annotator in his note to Wilbraham v Snow (1670) 2 Wms Saund 47f; 85 ER 624. Therefore it is not open to the defendant, being a wrongdoer, to inquire into the nature of limitation of the possessor’s right, and unless it is competent for him to do so the question of his relation to, or liability towards, the true owner cannot come into the discussion at all; and, therefore as between those two parties full damages have to be paid without any further inquiry. The extent of the liability of the finder to the true owner

not being relevant to the discussion between him and the wrongdoer, the facts which would ascertain it would not have been admissible in evidence, and therefore the right of the finder to recover full damages cannot be made to depend upon the extent of his liability over to the true owner. To hold otherwise would, it seems to me, be in effect to permit a wrongdoer to set up a jus tertii under which he cannot claim. But, if this be the fact in the case of a finder, why should it not be equally the fact in the case of a bailee? Why, as against a wrongdoer, should the nature of the plaintiff’s interest in the thing converted be any more relevant to the inquiry, and therefore admissible in evidence, than in the case of a finder? It seems to me that neither in one case nor the other ought it to be competent for the defendant to go into evidence on that matter. [Collins MR then discussed a number of cases which supported the view that a bailee had the right to recover full damages for loss of the bailed chattel.] It is now well established that the bailee is accountable, as stated in the passage cited and repeated in many subsequent cases. But whether the obligation to account was a condition of his right to sue, or only an incident arising upon his recovery of damages, is a very different question, though it was easy to confound one view with the other … Therefore, as I said at the outset, and as I think have now shewn by authority, the root principle of the whole discussion is that, as against a wrongdoer, possession is title. The chattel that has been converted or damaged is deemed to be the chattel of the possessor and of no other, and therefore its loss or deterioration is his loss, and to him, if he demands it, it must be recouped. His obligation to account to the bailor is really not ad rem in the discussion. It only comes in after he has carried his legal position to its logical consequence against a wrongdoer, and serves to soothe a mind disconcerted by the notion that a person who is not himself the complete owner should be entitled to receive back the full value of the chattel converted or destroyed. There is no inconsistency between the two positions; the one is the complement of the other. As between bailee and stranger possession gives title — that is, not a limited interest, but absolute and complete ownership, and he is entitled to receive [page 105]

back a complete equivalent for the whole loss or deterioration of the thing itself. As between bailor and bailee the real interests of each must be inquired into, and, as the bailee has to account for the thing bailed, so he must account for that which has become its equivalent and now represents it. What he has received above his own interest he has received to the use of his bailor. The wrongdoer, having once paid full damages to the bailee, has an answer to any action by the bailor … The liability by the bailee to account is also well established and therefore it seems to me that there is no such preponderance of convenience in favour of limiting the right of the bailee as to make it desirable, much less obligatory, upon us to modify the law as it rested upon the authorities antecedent to Claridge’s case …

[Stirling and Matthew LJJ concurred.]

2.22 Questions 1.

Does The Winkfield represent a simple application of Jeffries’ case (2.13C)? Do the facts of the two cases differ in any material respect? Note the view of Tilbury: While The Winkfield is itself concerned with ‘bailees’ … it is clear that the word ‘bailee’ is not to be understood in any limited sense, eg as restricted to consensual or conventional bailments. Thus the result in The Winkfield would also be reached in the case of involuntary bailees, such as finders; indeed, in the case of anyone with a limited interest in the goods and with actual possession at the time of the wrong. In such cases, whether the defendant’s liability stems from his inability to raise the jus tertii or simply from the fact that the plaintiff has a better right to possession, the result is that the plaintiff is entitled to claim the full value of the goods without any deduction for the possibility of the true owner’s recovering those goods from the plaintiff.13

2.

In The Winkfield, the court assumes (the point not having been taken at the trial) that the mails on board the Mexican were in the ‘custody’ of the Postmaster-General. If the Postmaster-General were regarded as having only a right to possess the mails at the time of their loss, would he have been entitled to recover their full value? See Maynegrain Pty Ltd v Compafina Bank [1984] 1 NSWLR 258; Palmer, 301–12. In The Jag Shakti [1986] AC 337 the Privy Council applied the rule in The Winkfield to allow a nonpossessing claimant with an immediate right to possession to

recover the full value of the goods. 3.

Why has the law been prepared to protect the possession of the bailee? Why should bailees not have to show accountability to bailors for loss of chattels before being entitled to claim more than the actual loss? Is it an answer to say that the bailor has a right to call on the bailee to account for the damages recovered by the latter from the wrongdoer? What difficulties might arise in enforcing this right?

[page 106]

2.23

The court in The Winkfield asserts that a ‘wrongdoer, having once

paid full damages to the bailee, has an answer to an action by the bailor’: at 61. As noted in 2.15, it seems that a defendant who pays damages or restores a chattel to a person who had been in possession otherwise than as a bailee will have no defence to a subsequent action by the true owner. The rule in The Winkfield, that a bailee may recover the full value of a chattel even though not liable to the bailor for the loss, is an exception to the general principle that damages in contract and tort are compensatory: that is, the function of damages is to restore the person whose rights have been infringed to the same position as if those rights had not been invaded: The Albazero [1977] AC 774 at 841; [1976] 3 All ER 129 at 132. 2.24

The true owner has a right to retake possession of his or her goods

even from an innocent purchaser, see Suttons Motors (Temora) Pty Ltd v

Hollywood Motors Pty Ltd [1971] VR 684 (owner recovering car from innocent dealer by means of a trick); compare Greenwood v Bennett [1973] QB 195; [1972] 3 All ER 586 (order for specific restitution of a chattel should include a condition requiring the owner to compensate an innocent purchaser whose work and expense has increased the market value of the chattel).14 The true owner also has a right of ‘recaption’, namely the right of self-help to recover the chattel: Blades v Higgs (1861) 10 CBNS 713; 142 ER 634. But the right is limited to recovery of those chattels that the possessor knew he or she had no right to: Toyota Finance Australia Ltd v Dennis (2002) 58 NSWLR 101. The owner may also enter onto the land of the wrongdoer to recover the chattel: Cox v Bath (1893) 14 LR (NSW) 263.

Claims by a bailor against a bailee 2.25

The Winkfield (2.21C) involved a claim by a bailee against a third

party responsible for the destruction of the goods subject to the bailment. The question of the defendant’s entitlement to plead the jus tertii also may arise in a claim by the bailor against the bailee. The general principle is that the bailee is estopped from disputing the title of the bailor: Biddle v Bond (1865) 6 B & S 225; 122 ER 1179. It follows that in an action by the bailor against the bailee, the latter cannot maintain the defence of jus tertii, except where the bailee can show that the goods have been taken by someone with a better claim to them or that the claim is defended with the authority of the true owner: see Palmer, 281–94. In Biddle v Bond the exception was held to apply. The plaintiff had seized goods belonging to R under a distress for rent

owing. (Distress was a common law remedy allowing a landlord seizure of certain of the tenant’s chattels if rent were in arrears.) The plaintiff delivered the goods to the defendant auctioneers to be sold, but before the sale, R served a notice on the defendant claiming the distress was void and requiring the proceeds to be retained for him (R). The plaintiff’s claim for the proceeds of sale failed on the ground that the auctioneer could rely on R’s title as he was defending the action with R’s authority and evidence showed that the distress was void. The court emphasised that it was not enough for the defendant merely to be aware of an adverse claim; the defendant must defend on the right and title and by the authority of the true owner. This requirement was satisfied on the facts of the case. 2.26

Austin J of the Supreme Court of New South Wales has commented

that the plea of jus tertii in an action by the bailor against the bailee shares some characteristics with the

[page 107]

modern doctrine of estoppel. In Esanda Finance Corporation Ltd v Gibbons [1999] NSWSC 1094 at [23], his Honour commented: In my view, though they are expressed by reference to the particular case of bailor and bailee, the principles with respect to pleading the jus tertii are best understood not as a series of mechanistic rules but as a series of propositions which relate to the same fundamental concern for fairness which gives rise to the modern law of equitable estoppel. An understanding of the basis of principle should help to avoid confusion about the relevant legal concepts. Essentially, the defendant in an action in conversion in modern times will be precluded from pleading and relying

upon the title of a third party in order to defeat the plaintiff’s assertion of a right to immediate possession, when: (a) the defendant’s conduct has contributed to the plaintiff’s belief that its right to immediate possession exists; and (b) the defendant does not act with the authority of the true owner.

2.27

Does a bailee who is in breach of the terms of the bailment have title

to sue? In Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22, the appellant company was the hirer of a car under a hire–purchase agreement from Esanda Ltd. The appellant left the car with the respondent to sell, without obtaining Esanda’s written consent as required by the hire–purchase agreement. The car was stolen from the respondent’s premises. Subsequently, Esanda Ltd issued a notice seeking repossession. The respondent disputed the appellant’s title to sue, arguing that its breach of the hire–purchase agreement meant that at the time of the theft, only Esanda had the right to immediate possession. The New South Wales Court of Appeal held that the respondent, as bailee from the appellant, could not deny the appellant’s title to sue. Young CJ in Eq said (at [51]): ‘There is an abundance of authority for the proposition that even if a person breaks a bailment, if that person continues in possession of personal property then that person has a title to sue to defend his or her possession.’ The court recognised that if a bailee’s breach was so serious as to amount to a disclaimer of the bailment, it could terminate the contract of bailment, giving the bailor an immediate right to possession. The appellant’s breach did not amount to a disclaimer. Accordingly, the appellant had title to sue.15 2.28

In certain cases, the bailee’s possession may be protected even against

the bailor. In City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477; [1962] ALR 184, the plaintiff, Southern Aerial Super Service Pty Ltd, agreed to purchase a new truck from the defendant, and to trade in an old truck as part payment of the purchase price. The plaintiff applied to a finance company, X, which was associated with the defendant, for finance to cover the balance of purchase money. On being told by the defendant that finance was available, the plaintiff signed an offer addressed to X to hire the new truck. The defendant took possession of the old truck, and delivered the new truck to the plaintiff. Later the old truck broke down, whereupon the defendant told the plaintiff that X had refused the offer to hire the new truck. The plaintiff offered to pay cash for the new truck. Nevertheless, the defendant retook possession of the new truck and returned the cheque which the plaintiff had sent in

[page 108]

payment for it. The trial judge held that property in the new truck had passed to the plaintiff who could accordingly sue in detinue. The High Court dismissed the defendant’s appeal. Dixon CJ, Kitto and Windeyer JJ took the view that the plaintiff had an exclusive possessory right to the truck, which could not be terminated except on the default of the plaintiff. This title as bailee was sufficient to maintain an action of detinue against City Motors. Dixon CJ said (at CLR 483; ALR 188): The possession of the plaintiff company of the Thames diesel truck as bailee was exclusive and in obtaining possession of it from the driver against the strongly expressed will of Gangell [the

managing director of the plaintiff company] the defendant company committed a trespass to goods. That this may be so notwithstanding that the trespasser is the bailor appears to be shewn by the cases discussed in his work on Bailments by Sir George Paton under the head of ‘Theft by Owner from the Bailee’: see s 96 at 444. The bailment seems clearly not to have been at will and the plaintiff company had made no default nor committed any act justifying its termination. There seems to be no reason why the bailee with an immediate right to possession should not maintain detinue against the bailor if the bailor is clearly entitled only ‘in reversion’ …

Compare Standard Electronic Apparatus Laboratories Pty Ltd v Stenner [1960] NSWR 447, where the plaintiff, a bailee of goods from the defendant and holding a lien over them for work performed, was held entitled to claim damages from the defendant who had removed the goods from the plaintiff’s possession. The measure of damages was held not to be the full value of the goods, but the value of the plaintiff’s limited interest in them. 2.29

Where the plaintiff is in actual possession and a stranger has

converted the goods, the rule in The Winkfield applies and the plaintiff’s measure of damages will be the value of the goods. This is not the case when the plaintiff was not in actual possession at the time of the wrong and there is a legal arrangement between the plaintiff and defendant such as a chattel lease. In such a case, the High Court has emphasised the general principle that damages are compensatory and the plaintiff will only recover the true loss sustained: Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185.16 2.30

The Winkfield (2.21C) lays down the rule that while either the bailor

or bailee can sue for the loss of goods, full recovery by the bailee in possession prevents the bailor suing the wrongdoer, and the bailor can only get compensation from the bailee. A, the owner of a motor vehicle, allows B the

use of the car while A is on holidays. The car is irreparably damaged by C. A and B both sue C in separate actions, A claiming damages for the value of the car and other damages, and B claiming damages for nervous shock and loss of the use of the car. A’s claim was settled out of court. In O’Sullivan v Williams [1992] 3 All ER 385, the English Court of Appeal held that once A’s claim arising from use of and damage to the car had been satisfied by C, B had no claim against C arising out of the bailment, and would have to look to A for satisfaction in respect of his interest in the car. B’s claim for personal injuries was not affected and could proceed.17

[page 109]

2.31

In Dee Trading Co Pty Ltd v Baldwin [1938] VLR 173, the owner of

a motor vehicle was able to sue a third party for damage caused to the vehicle, despite the fact that the car was actually in the possession of a bailee under a hire–purchase agreement. The court found that the fact that the owner also had a right to recover the damages from the bailee did not preclude him from pursuing an action on the case for the damage caused to his reversionary interest in the vehicle. The nature of such an injury must be clearly demonstrated: Tancred v Allgood (1859) 4 H & N 438; 157 ER 910. It is clear that a ‘mere wrongful taking’ cannot found such an action because damage to the reversionary interest must be permanent.18

The rights of finders

2.32C

Armory v Delamirie (1722) 1 Strange 506; 93 ER 664 Court of King’s Bench

The plaintiff, being a chimney sweeper’s boy, found a jewel and carried it to the shop of the defendant (who was a goldsmith) to know what it was, and delivered it into the hands of the apprentice who, under the pretence of weighing it, took out the stones and, calling to the master to let him know it came to three halfpence, the master offered the boy the money, who refused to take it, and insisted to have the thing again; whereupon the apprentice delivered him back the socket without the stones. And now in trover against the master these points were ruled: 1.

2. 3.

That the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover. That the action well lay against the master, who gives a credit to his apprentice, and is answerable for his neglect. As to the value of the jewel, several of the trade were examined to prove what a jewel of the finest water that would fit the socket would be worth, and the Chief Justice directed the jury, that unless the defendant did produce the jewel, and shew it not to be the finest water, they should presume the strongest against him, and make the value of the best jewels measure of the damages: which they accordingly did.

2.33 Questions 1.

Is this case an authority on the defence of jus tertii?

2.

At the time of the wrongful act, was the plaintiff in actual possession of the jewel?

3.

What is the ratio decidendi of this case? Would the result have been the same if the plaintiff had discovered the jewel on the floor of the defendant’s shop, neither the

[page 110]

defendant nor his apprentice knowing of the jewel’s existence until the plaintiff handed it to the apprentice? 4.

What duty of care does the finder owe to the owner?19

Finder and occupier of land 2.34C

Parker v British Airways Board [1982] QB 1004; [1982] 1 All ER 834 Court of Appeal

Donaldson LJ: On November 15 1978, the plaintiff, Alan George Parker, had a date with fate — and perhaps with legal immortality. He found himself in the international executive lounge at terminal one, Heathrow Airport. And that was not all that he found. He also found a gold bracelet lying on the floor. We know very little about the plaintiff, and it would be nice to know more. He was lawfully in the lounge and, as events showed, he was an honest man. Clearly he had not forgotten the schoolboy maxim ‘Finders keepers’. But, equally clearly, he was well aware of the adult qualification ‘unless the true owner claims the article’. He had had to clear customs and security to reach the lounge. He was almost certainly an outgoing passenger because the defendants, British Airways Board, as lessees of the lounge from the British Airports Authority and its occupiers, limit its use to passengers who hold first class tickets or boarding passes or who are members of their Executive Club, which is a passengers’ ‘club’. Perhaps the plaintiff’s flight had just been called and he was pressed for time. Perhaps the only officials in sight were employees of the defendants. Whatever the reason, he gave the bracelet to an anonymous official of the defendants instead of to the police. He also gave the official a note of his name and address and asked for the bracelet to be returned to him if it was not claimed by the owner. The official handed the bracelet to the lost property department of the defendants. Thus far the story is unremarkable. The plaintiff, the defendants’ official and the defendants themselves had all acted as one would have hoped and expected them to act. Thereafter matters took what, to the plaintiff, was an unexpected turn. Although the owner never claimed the bracelet, the defendants did not return it to the plaintiff. Instead they sold it and kept the proceeds which amounted to £850. The plaintiff discovered what had happened and was more than a little annoyed. I can understand his annoyance. He sued the defendants in the Brentford County Court and was awarded £850 as damages and £50 as interest. The defendants now appeal. Neither the plaintiff nor the defendants lay any claim to the bracelet either as owner of it or as one who derives title from that owner. The plaintiff’s claim is founded upon the ancient common law rule that the act of finding a chattel which has been lost and taking

control of it gives the finder rights with respect to that chattel. The defendants’ claim has a different basis. They cannot and do not claim to have found the bracelet when it was handed to [page 111]

them by the plaintiff. At that stage it was no longer lost and they received and accepted the bracelet from the plaintiff on terms that it would be returned to him if the owner could not be found. They must and do claim on the basis that they had rights in relation to the bracelet immediately before the plaintiff found it and that these rights are superior to the plaintiff’s. The defendants’ claim is based upon the proposition that at common law an occupier of land has such rights over all lost chattels which are on that land, whether or not the occupier knows of their existence. The common law right asserted by the plaintiff has been recognised for centuries. In its simplest form it was asserted by the chimney sweep’s boy who, in 1722, found a jewel and offered it to a jeweller for sale. The jeweller refused either to pay a price acceptable to the boy or to return it and the boy sued the jeweller for its value: Armory v Delamirie (1722) 1 Stra 505. Pratt CJ ruled: That the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover. In the case the jeweller clearly had no rights in relation to the jewel immediately before the boy found it and any rights which he acquired when he received it from the boy stemmed from the boy himself. The jeweller could only have succeeded if the fact of finding and taking control of the jewel conferred no rights upon the boy. The court would then have been faced with two claimants, neither of which had any legal right, but one had de facto possession. The rule as stated by Pratt CJ must be right as a general proposition, for otherwise lost property would be subject to a free-for-all in which the physically weakest would go to the wall. Pratt CJ’s ruling is, however, only a general proposition which requires definition. Thus one who ‘finds’ a lost chattel in the sense of becoming aware of its presence, but who does no more, is not a ‘finder’ for this purpose and does not, as such, acquire any rights. Some qualification has also to be made in the case of the trespassing finder. The person vis-à-vis whom he is a trespasser has a better title. The fundamental basis of this is clearly public policy. Wrongdoers should not benefit from their wrongdoing. This requirement would be met if the trespassing finder acquired no rights. That would, however, produce the free-for all situation to which I have already referred, in that anyone could take the article from the trespassing finder. Accordingly, the common law has been obliged to give rights to someone else, the owner ex hypothesi being unknown. The obvious candidate is the occupier of the property upon which the finder was trespassing. Curiously enough, it is difficult to find any case in which the rule is stated in this simple form, but I have no doubt that this is the law. It is reflected in the judgment of Chitty J in Elwes v Brigg Gas Co (1886) 33 Ch D 562 at 568, although the chattel

concerned was beneath the surface of the soil and so subject to different considerations. It is also reflected in the judgment of Lord Goddard CJ in Hibbert v McKiernan [1948] 2 KB 142 at 149. That was a criminal case concerning the theft of ‘lost’ golf balls on the private land of a club. The only issue was whether for the purposes of the criminal law property in the golf balls could be laid in someone other than the alleged thief. The indictment named the members of the club, who were occupiers of the land, as having property in the balls, and it is clear that at the time when the balls were taken the members were very clearly asserting such a right, even to the extent of mounting a police patrol to warn off trespassers seeking to harvest lost balls … One might have expected there to be decisions clearly qualifying the general rule where the circumstances are that someone finds a chattel and thereupon forms the dishonest intention [page 112]

of keeping it regardless of the rights of the true owner or of anyone else. But that is not the case. There could be a number of reasons. Dishonest finders will often be trespassers. They are unlikely to risk invoking the law, particularly against another subsequent dishonest taker, and a subsequent honest taker is likely to have a superior title. In the interests of clearing the ground and identifying the problem, let me now turn to another situation in respect of which the law is reasonably clear. This is that of chattels which are attached to realty (land or buildings) when they are found. If the finder is not a wrongdoer, he may have some rights, but the occupier of the land or building will have a better title. The rationale of this rule is probably either that the chattel is to be treated as an integral part of the realty as against all but the true owner and so incapable of being lost or that the ‘finder’ has to do something to the realty in order to get at or detach the chattel and, if he is not thereby to become a trespasser, will have to justify his actions by reference to some form of licence from the occupier. In all likely circumstances that licence will give the occupier a superior right to that of the finder. Authority for this view of the law is to be found in South Staffordshire Water Co v Sharman [1896] 2 QB 44 where the defendant was employed by the occupier of land to remove mud from the bottom of a pond. He found two gold rings embedded in the mud. The plaintiff occupier was held to be entitled to the rings. Dicta of Lord Russell of Killowen CJ, with whom Wills J agreed, not only support the law as I have stated it, but go further and may support the defendants’ contention that an occupier of a building has a claim to articles found in that building as opposed to being found attached to or forming part of it. However, it is more convenient to consider these dicta hereafter. Elwes v Brigg Gas Co 33 Ch D 562, to which we were also referred in this context, concerned a prehistoric boat embedded in land. But I think that, when analysed, the issue really turned upon rival claims by the plaintiff to be the true owner in the sense of being the tenant for life of the realty, of the minerals in the land and of the boat if it was a chattel and by the defendants as lessees rather than as finders … Finally, there is Hannah v Peel [1945] KB 509. This was indeed a finding case, but the claimant was the non-occupying owner of the house in which the brooch was found. The occupier was the Crown, which made no claim either as occupier or as employer of

the finder. It was held that the non-occupying owner had no right to the brooch and that therefore the finder’s claim prevailed. What the position would have been if the Crown had made a claim was not considered. I must now return to the respective claims of the plaintiff and the defendants. Mr Brown, for the plaintiff, relies heavily upon the decision of Patteson J and Wightman J, sitting in banc in Bridges v Hawkesworth (1851) 21 LJQB 75; 15 Jur 1079. It was an appeal from the county court by case stated. The relevant facts, as found, were as follows. Mr Bridges was a commercial traveller and in the course of his business he called upon the defendant at his shop. As he was leaving the shop, he picked up a small parcel which was lying on the floor, showed it to the shopman and, upon opening it in his presence, found that it contained £65 in notes. Mr Hawkesworth was called and Mr Bridges asked him to keep the notes until the owner claimed them. Mr Hawkesworth advertised for the true owner, but no claimant came forward. Three years later Mr Bridges asked for the money and offered to indemnify Mr Hawkesworth in respect of the expenses which he had incurred in advertising for the owner. Mr Hawkesworth refused to pay over the money and Mr Bridges sued for it. The county court judge dismissed his claim and he appealed … Patteson J gave the judgment of the court … I take the text of the report in the Jurist, 15 Jur 1079 at 1082 but refer to the Law Journal version, 21 LJQB 75 at 77– 8, in square brackets where they differ. It reads: [page 113]

We find, therefore, no circumstances in this case to take it out of the general rule of law, that the finder of the lost article is entitled to it as against all persons except the real owner, and we think that that rule must prevail, and that the learned judge was mistaken in holding that the place in which they were found makes any legal difference. Our judgment, therefore, is, that the plaintiff is entitled to these notes as against the defendant; that the judgment of the court below must be reversed, and judgment given for the plaintiff for £50. The ratio of this decision seems to me to be solely that the unknown presence of the notes on the premises occupied by Mr Hawkesworth could not without more, give him any rights or impose any duty upon him in relation to the notes. Mr Desch, for the defendants, submits that Bridges v Hawkesworth 15 Jur 1079, can be distinguished and he referred us to the judgment of Lord Russell of Killowen CJ, with which Wills J agreed, in South Staffordshire Water Co v Sharman [1896] 2 QB 44. Sharman’s case itself is readily distinguishable, either upon the ground that the rings were in the mud and thus part of the realty or upon the ground that the finders were employed by the plaintiff to remove the mud and had a clear right to direct how the mud and anything in it should be disposed of, or upon both grounds. However, I would accept Lord Russell of Killowen CJ’s statement of the general principle in South Staffordshire Water Co v Sharman [1896] 2 QB 44 at 46–7, provided that the occupier’s intention to exercise control over anything which might be on the premises was manifest. But it is impossible to go further and to hold that the mere right of an occupier to exercise such control is sufficient to give him rights in relation to lost

property on his premises without over ruling Bridges v Hawkesworth 21 LJQB 75. Mr Hawkesworth undoubtedly had a right to exercise such control, but his defence failed. … One of the great merits of the common law is that it is usually sufficiently flexible to take account of the changing needs of a continually changing society. Accordingly, Mr Desch rightly directed our attention to the need to have common law rules which will facilitate rather than hinder the ascertainment of the true owner of a lost chattel and a reunion between the two. In his submission the law should confer rights upon the occupier of the land where a lost chattel was found which were superior to those of the finder, since the loser is more likely to make inquiries at the place of loss. I see the force of this submission. However, I think that it is also true that if this were the rule and finders had no prospect of any reward, they would be tempted to pass by without taking any action or to become concealed keepers of articles which they found. Furthermore, if a finder is under a duty to take reasonable steps to reunite the true owner with his lost property, this will usually involve an obligation to inform the occupier of the land of the fact that the article has been found and where it is to be kept. In a dispute of this nature there are two quite separate problems. The first is to determine the general principles or rules of law which are applicable. The second, which is often the more troublesome, is to apply those principles or rules to the factual situation. I propose to confront those two problems separately. Rights and obligations of the finder 1. 2. 3.

The finder of a chattel acquires no rights over it unless (a) it has been abandoned or lost and (b) he takes it into his care and control. The finder of a chattel acquires very limited rights over it if he takes it into his care and control with dishonest intent or in the course of trespassing. Subject to the foregoing and to point 4 below, a finder of a chattel, whilst not acquiring any absolute property or ownership in the chattel, acquires a right to keep it against all [page 114]

4.

5.

but the true owner or those in a position to claim through the true owner or one who can assert a prior right to keep the chattel which was subsisting at the time when the finder took the chattel into his care and control. Unless otherwise agreed, any servant or agent who finds a chattel in the course of his employment or agency and not wholly incidentally or collaterally thereto and who takes it into his care and control does so on behalf of his employer or principal who acquires a finder’s rights to the exclusion of those of the actual finder. A person having a finder’s rights has an obligation to take such measures as if all the circumstances are reasonable to acquaint the true owner of the finding and present whereabouts of the chattel and to care for it meanwhile.

Rights and liabilities of an occupier

1.

2.

3.

4.

An occupier of land has rights superior to those of a finder over chattels in or attached to that land and an occupier of a building has similar rights in respect of chattels attached to that building, whether in either case the occupier is aware of the presence of the chattel. An occupier of a building has rights superior to those of a finder over chattels upon or in, but not attached to, that building if, but only if, before the chattel is found, he has manifested an intention to exercise control over the building and the things which may be upon it or in it. An occupier who manifests an intention to exercise control over a building and the things which may be upon or in it so as to acquire rights superior to those of a finder is under an obligation to take such measures as in all the circumstances are reasonable to ensure that lost chattels are found and, upon their being found, whether by him or by a third party, to acquaint the true owner of the finding and to care for the chattels meanwhile. The manifestation of intention may be express or implied from the circumstances including, in particular, the circumstance that the occupier manifestly accepts or is obliged by law to accept liability for chattels lost upon his ‘premises’ eg an innkeeper or carrier’s liability. An ‘occupier’ of a chattel, eg a ship, motor car, caravan or aircraft, is to be treated as if he were the occupier of a building for the purposes of the foregoing rules.

Application to the instant case The plaintiff was not a trespasser in the executive lounge and, in taking the bracelet into his care and control, he was acting with obvious honesty. Prima facie, therefore, he had a full finder’s rights and obligations. He in fact discharged those obligations by handing the bracelet to an official of the defendants’ [sic] although he could equally have done so by handing the bracelet to the police or in other ways such as informing the police of the find and himself caring for the bracelet. The plaintiff’s prima facie entitlement to a finder’s rights was not displaced in favour of an employer or principal. There is no evidence that he was in the executive lounge in the course of any employment or agency and, if he was, the finding of the bracelet was quite clearly collateral thereto. The position would have been otherwise in the case of most or perhaps all the defendants’ employees. The defendants, for their part, cannot assert any title to the bracelet based upon the rights of an occupier over chattels attached to a building. The bracelet was lying loose on the [page 115]

floor. Their claim must, on my view of the law, be based upon a manifest intention to exercise control over the lounge and all things which might be in it. The evidence is that they claimed the right to decide who should and who should not be permitted to enter and use the lounge, but their control was in general exercised upon the basis of classes or categories of user and the availability of the lounge in the light of the need to clean and maintain it. I do not doubt that they also claimed the right to exclude individual

undesirables, such as drunks, and specific types of chattels such as guns and bombs. But this control has no real relevance to a manifest intention to assert custody and control over lost articles. There was no evidence that they searched for such articles regularly or at all … It was suggested in argument that in some circumstances the intention of the occupier to assert control over articles lost on his premises speaks for itself. I think that this is right. If a bank manager saw fit to show me round a vault containing safe deposits and I found a gold bracelet on the floor, I should have no doubt that the bank had a better title than I, and the reason is the manifest intention to exercise a very high degree of control. At the other extreme is the park to which the public has unrestricted access during daylight hours. During those hours there is no manifest intention to exercise any such control. In between these extremes are the forecourts of petrol filling stations, unfenced front gardens of private houses, the public parts of shops and supermarkets as part of an almost infinite variety of land, premises and circumstances. This lounge is in the middle band and in my judgment, on the evidence available, there was no sufficient manifestation of any intention to exercise control over lost property before it was found such as would give the defendants a right superior to that of the plaintiff or indeed any right over the bracelet. As the true owner has never come forward, it is a case of ‘finders keepers’. I would therefore dismiss the appeal. [Eveleigh LJ and Sir David Cairns in separate judgments also held that the appeal should be dismissed.]

2.35 Questions 1.

Does the formulation of principle by Donaldson LJ take sufficient account of the concept of relativity of title in English law?

2.

Does the judgment sufficiently recognise that prior possession, however acquired, is of itself a good title against all later comers? See Roberts ‘More Lost Than Found’ (1982) 45 MLR 683.

3.

Would the result of Bridges v Hawkesworth have been the same if the finder had been a bank robber who had discovered the notes on the floor while robbing the bank? If not, how could a court

justify a different result?

2.36

The summary of the rights and obligations of the finder given by

Donaldson LJ reflects a policy favouring the finder over a stranger ‘for otherwise lost property would be subject to a free-for-all in which the physically weakest would go to the wall’ (at 1009; 836–7). The policy is not so clear when the rights of the finder are in competition with the rights of an occupier of land. The law has frequently been concerned to uphold the rights of the owner and occupier of land over others. In assessing the rights of the occupier of land, Donaldson LJ

[page 116]

distinguishes between items attached to or embedded in the soil of occupied land and things lying unattached upon the surface. In the case of the former, his Lordship applied the statement of the law developed by Lord Russell of Killowen in South Staffordshire Water Co v Sharman [1896] 2 QB 44 that possession of land embraces possession of all attached to or under the land even if the possessor be ignorant of the thing’s existence. Such a rule favouring the rights of the occupier is grounded in pragmatism and efficiency. However, the argument is less convincing when the moral rights of the finder are considered. Permanent possession goes to the occupier notwithstanding any labour and effort on the part of the finder and notwithstanding lack of any knowledge on the part of the occupier of the existence of the thing.20

Where things are found lying on the surface of land unattached, the occupier of land will have a better claim to the thing than the finder only if the occupier’s intention to exercise control over items on the land is manifest to the finder. The application of the test to exercise control is bound to be difficult in practice and, in the case of public land, probably more so, particularly where the public land is open space. 2.37

In Waverley Borough Council v Fletcher [1996] QB 334, the question

arose as to whether the principles stated by Donaldson LJ in Parker v British Airways Board (see 2.34C) apply to chattels found on public open space. Using a metal detector, Fletcher found and dug up a medieval gold brooch under the soil of a park owned by the council. The council’s title was subject to a covenant that the land was to be used only for the recreation and pleasure of the public. The Court of Appeal rejected the argument that the finder had a better right than the council under a licence from the council. It found that the use of a metal detector was not a permitted mode of recreation and that the unauthorised digging up and removal of the brooch were acts of trespass. The court saw no reason to depart from the ordinary principles as stated by Donaldson LJ in Parker. Having found that the council was the occupier of the park, the court applied the rule that where an article is found in or attached to land, the owner or lawful possessor of the land has a better right to it than the finder. If the brooch had been found unattached to the land, the council would have had a better title only if it ‘exercised such manifest control over the land as to indicate an intention to control the land and anything that might be found on it’. The Court of Appeal indicated that if

that question had arisen, it would have found that the council clearly had the requisite intent and ability to control. 2.38

Elwes v Brigg Gas Co (1886) 33 Ch D 562 and the first proposition of

Donaldson LJ in Parker v British Airways Board [1982] QB 1004; [1982] 1 All ER 834 (2.34C) establish that where chattels have been embedded in the land, so as to form part of the land, the owner of the land has a right superior to a finder, even if the owner is unaware of the existence of the chattel embedded in the land. In Chairman, National Crime Authority v Flack (1998) 86 FCR 16; 156 ALR 501, one issue was whether in relation to chattels not embedded in the land, it is necessary for the owner of the land on which they are found to have knowledge of the existence of the chattel. Mrs Flack was a public housing tenant of premises where she had lived alone since the death of her husband in 1990. Her son Glen had a key to the premises and visited regularly. The premises were searched in April 1994 by officers of the National Crime Authority (‘NCA’) pursuant to a warrant obtained under the Crimes Act 1914 (Cth). The warrant was issued because of a reasonable suspicion of the unlawful importation of cannabis resin and the search

[page 117]

was for goods relating to Glen Flack. During the search a large briefcase was found containing $433,000 in cash. Mrs Flack denied all knowledge of the briefcase. The briefcase and its contents were taken away by the Authority

but despite investigation no person was charged in respect of any offence and the items were no longer required as evidence. No other person having claimed the seized goods, Mrs Flack sought their return to her, arguing that she was presumed to be in possession of them because of her exclusive occupation and control of the premises in which they were found. The NCA refused on the basis that her presumed possession was a question of fact that was rebutted in the circumstances of the case. At first instance, Hill J ordered that the NCA deliver up to Mrs Flack the briefcase together with its contents. The Full Court of the Federal Court dismissed the NCA’s appeal, by a majority (Foster J dissenting). Heerey J said that Mrs Flack, as tenant of the Glebe premises, had possession of the premises in law. This was sufficient to manifest an intention to possess all chattels, known or unknown, on the premises, subject only to a superior right. It made no difference that the briefcase was hidden and that Mrs Flack did not know of its presence. Her denial of prior knowledge and ownership when the briefcase was found did not amount to a denial of intention to exercise control over the briefcase along with other chattels on the premises. Tamberlin J expressly left open the possibility that an occupier’s presumed intent to possess all chattels might be rebutted in the case of an unknown chattel that was a dangerous or prohibited item, such as weapons or drugs, but this was not such a case. The High Court declined special leave to appeal the decision.21

2.39 Questions

1. 2.

What role does the concept of possession play in the determination of the ‘finding’ cases? Does the use of the concept advance the choice facing the court in cases where, until the finding, there is no knowledge of the object and consequently no factual intention by any person in respect of the particular object? Could it be that the statement ‘A had prior possession of this object’ is merely a way of restating the conclusion that A has an interest in the object enforceable against the whole world other than the true owner? In other words, when the court says the question is whether the occupier or finder had prior possession of the object, is this not another way of asking whether the occupier or the finder should be given a proprietary interest in the object?22

Finder and employer 2.40

Donaldson LJ observed that servants or agents who find an object

during the course of employment do so on behalf of the employer or principal. In Willey v Synan (1937) 57 CLR

[page 118]

200, the plaintiff, a boatswain of a ship, discovered a quantity of concealed coins on board the ship. The customs authorities took possession of the coins

and the plaintiff claimed the coins as finder. Dixon J reasoned as follows (at 216–20): It is an important consideration that the goods were concealed in the ship and that this was done for the purpose of exporting them from New Zealand, and, as I think should be inferred, for the purpose of introducing them into Australia. They were not lost. They were stowed where their owner or his agents entertained an intention of exercising over the coins such control and disposal as opportunity might allow. When the plaintiff, as the ship’s boatswain, discovered the coins and handed them to the master, he was the instrument by which this opportunity for control and disposal was displaced in favour of the master. It does not appear what passed between the boatswain and the master when the latter took the coins into his keeping. But it is not to be supposed that the plaintiff asserted an independent possession of his own. The concealment of goods on a ship for the purpose of clandestine carriage is a matter that concerns the master and owners. It would be inconsistent with the duties of a member of the ship’s company to deal with goods so concealed on his own account. Although it may be taken that he found the coins, it does not appear that he took even manual custody of the bags of money. But if he did, it could amount only to custody and not possession. The possession taken was that of the owners, unless it be still true that a ship is in the possession of the master.

2.41

In M’Dowell v Ulster Bank (1899) 33 Ir L To 223 the porter of a

bank, sweeping up the banking chamber after the hours of business, found a roll of notes near the tables where customers wrote out cheques. The porter handed the notes to the manager, but afterwards, on the true owner’s failing to appear, he sought to recover the money from the bank. Palles CB said (at 226): I decided [the case] on the ground of the relation of master and servant, and that it was by reason of the existence of that relationship and in the performance of the duties of that service that the plaintiff acquired possession of the property. I conceive that it is the duty of the porter of the bank, who acts as caretaker, to pick up matters of this description, and to hand them over to the bank. I hold that the possession of the servant of the bank was the possession of the bank itself, and that, therefore, the element is wanting which would give the title to the servant as against the master.

He relies as against his master on the possession. In this case it was the possession of the bank, and the servant held the notes as servant.

Palles CB was careful to say that he did not decide the case on the ground laid down by Lord Russell of Killowen CJ in South Staffordshire Water Co v Sharman [1896] 2 QB 44; [1895–9] All ER Rep 259. That ground was expressed by Lord Russell as (at 47; at 261): … the general principle … that where a person has possession of house or land, with a manifest intention to exercise control over it and the things which may be upon or in it, then, if something is found on that land, whether by an employee of the owner or by a stranger, the presumption is that the possession of that thing is in the owner of the locus in quo. [I]ndependently of the question whether the shipowners or the master on their behalf had a prior possession of the bags of coins as part of the contents of the ship not in the special possession of any person carried upon the ship, the plaintiff, as boatswain, cannot be considered as acquiring a possession for himself. It has been pointed out repeatedly that

[page 119]

Sharman’s case might have been decided on the ground that the employment of the plaintiff to clean out the defendant’s pool involved the consequence that what he found he obtained for the defendant and not for himself. Indeed, Sir John Salmond denied the validity of the ground upon which Lord Russell in fact proceeded and justified the decision upon this ground (Salmond, Jurisprudence (8th ed, 1930) 307): The rings found at the bottom of the pond were not in the company’s possession in fact; and it seems contrary to other cases to hold that they were so in law. But though Sharman was the first to obtain possession of them, he obtained it for his employers and could claim no title for himself. A boatswain looking for stowaways and finding articles in the ship could not, in my opinion,

appropriate them to himself, and, if he did so without honestly believing that he had a claim of right he would be guilty of larceny: see R v Pierce (1852) 6 Cox CC 117. The appellant made no attempt, so far as appears, to appropriate the money to himself, but conceded the custody as well as the possession to the master. On the ground that he never obtained any possessory title to the coins, I think his action against the collectors must fail.

2.42 Questions 1.

What is the basis of Dixon J’s argument in Willey v Synan? Would the same argument apply to a bus conductor finding banknotes in the bus? To a salesman finding the notes on the floor of a shop? To the managing director of a company finding a parcel of notes in the board room?

2.

In Byrne v Hoare [1965] Qd R 135, a policeman, performing special duty at a drive-in theatre, found a gold ingot near the public exit from the theatre. The ingot was found on privately owned land, but the true owner could not be located. One issue in the case was whether the policeman, as the finder, was entitled to the value of the ingot as against his employer, the Crown. A majority of the Full Court decided in favour of the policeman. Does the following passage from the judgment of Gibbs J (at 148– 9) clarify some of the ambiguity surrounding the judgment of Dixon J in Willey v Synan? To give the master a right to a chattel found by his servant, it is clearly not enough that the servant happened to be going about his duties when he found it, for the fact that he was performing his duties may have been accidental, and not the cause of the finding. If, for instance, the ingot had been found by an errand boy who had been

sent by his master to deliver goods at the theatre, or … by a dustman sent to collect the theatre’s rubbish, the finder and not his employer would have been entitled to it, because he would not have acquired possession by reason of his employment, although it is true that if it had not been for his employment he would not have been in the place where the chattel was found. In such cases the employment provided the occasion of the finding but was not the effective cause.

[page 120]

… [Did] the plaintiff acquire possession of the ingot by reason of the fact that he held the office of constable and in the performance of the duties of that office? … [It] appears to me impossible to say that the plaintiff found the ingot by reason of his office of policeman. He was not conducting a search when he found it, and he had not been allowed access to a private place for the purpose of performing his duties, but was walking where any member of the public coming from the theatre might have walked. The fact he was on duty when he happened to see the gold was merely coincidental.

Abandonment of goods 2.43

Most of the finding cases relate to chattels which are lost rather than

abandoned. There is significant Australian judicial support for the proposition that relinquishment of physical possession of a chattel, coupled with a clear and unequivocal intention to renounce ownership, is effective to divest the interest of an owner or possessor: for example, Cook v Saroukos (1989) 97 FLR 33 at 41.23 Divesting abandonment requires evidence of ‘facts from which an intention to abandon property can be inferred or established’:

Sims v SPM Business Consultants Pty Ltd [2002] FCA 1588 at [52]. For example, in Moffatt v Kazana [1969] 2 QB 152; [1968] 3 All ER 271, the vendor of a house, in a remarkable feat of forgetfulness, omitted to take with him a biscuit tin containing 1,987 £1 notes. It was held that the vendor, as owner of the notes, was entitled to succeed in an action against the purchaser of the house, who some years after sale, found the tin hidden in the chimney. Wrangham J considered that more than a faulty memory was required for an intention to abandon title.24 2.44

In Re Jigrose Pty Ltd [1994] 1 Qd R 383, a vendor of land asserted

rights to goods which were not included in the sale, and had been left on the land at the time the land was delivered to the purchaser. Clause 28 of the contract of sale provided that any property of the vendor not removed from the land before delivery of possession ‘shall thereupon be deemed abandoned by the Vendor … and the Purchaser may … appropriate or remove or otherwise dispose of such property’. Kiefel J held that the effect of cl 28 was that as against the purchaser, the vendor was precluded from asserting any rights to the goods after the purchasers took delivery of the land. Title would not pass to the purchasers until they appropriated the goods as their own property. 2.45

Abandonment of chattels commonly arises where a tenant vacates

leased premises. Residential tenancies legislation specifies procedures that landlords must follow to store the chattels, give notice to the tenant, and sell them by public auction if the tenant fails to reclaim them within a specified period: see, for example, Residential Tenancies Act 1995 (SA) s 97.

2.46

When another person takes or retains possession of goods wrongfully,

the owner or prior possessor accrues a cause of action in conversion or detinue. In all jurisdictions, the limitation period for bringing an action for conversion or detinue is six years. See, for example, Limitation Act 1974

[page 121]

(Tas) s 6(1); Limitation of Actions Act 1958 (Vic) ss 5(1), 6(1) and Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 (2.10C). A person in wrongful possession of goods may acquire the best title to them through the operation of the limitation provisions. The legislation in most jurisdictions extinguishes the title of a person whose cause of action has been barred by the expiry of the limitation period: for example, Limitation Act 1974 (Tas) s 6(2); Limitation of Actions Act 1958 (Vic) s 6(2).

LAND Title in actions to recover possession of land 2.47

Possession of land, like possession of goods, creates an interest in the

possessor enforceable against the whole world, except someone with a superior right to the land. A superior right might derive from a better documentary title or even a period of prior possession. One of the issues at stake in the cases extracted below is similar to that raised by the possession of chattels, namely, ‘to what extent, if at all, is a defendant to an action for

possession entitled to raise the jus tertii as a defence?’ That is, can the defendant prevent the plaintiff from being given the land on the grounds that, although the plaintiff’s claim may be better than the defendant’s, there is an even better claim in some third person who is not a party to litigation? The answer to this question not only establishes that possession creates a proprietary interest, but that the critical question for the courts is one of relativity: who has the better right to possession of the land? 2.48C

Asher v Whitlock (1865) LR 1 QB 1 Court of Queen’s Bench

[(i) In 1842 Thomas Williamson enclosed some waste land of a manor. The holder of the freehold estate in the manor was the lord of the manor, not a party to these proceedings. (ii) In 1850 Thomas enclosed more waste land of the manor, building a cottage on the newlyenclosed portion. (iii) In 1860 Thomas died having occupied all the enclosed waste land until his death. By his will he devised all the land to his wife, Lucy during her widowhood and after her death or remarriage to his daughter Mary Ann. (iv) After Thomas’ death both his widow and daughter remained in possession of the enclosed land. In 1861 his widow married the defendant Whitlock, who also came to reside on the land. (v) In February 1863 the daughter died, aged 18. The female plaintiff, Mrs Asher, was the daughter’s heir. (vi) In May 1863 the widow died, but Whitlock continued to occupy the land. (vii) The plaintiffs brought an action of ejectment against Whitlock. At the trial the Chief Justice directed a verdict for the plaintiffs. The defendant obtained the rule nisi to enter a verdict for himself on the ground that Thomas had had no devisable interest in any part of the land at his death.] Cockburn CJ: I am of the opinion that this rule should be discharged. The defendant, on

the facts, is in this dilemma; either his possession was adverse, or it was not. If it was not adverse to the devisee of the person who enclosed the land, and it may be treated as [page 122]

a continuance of the possession which the widow had and ought to have given up, on her marriage to the defendant, then, as she and the defendant came in under the will, both would be estopped from denying the title of the devisee and her heir-at-law. But assuming the defendant’s possession to have been adverse, we have then to consider how far it operated to destroy the right of the devisee and her heir-at-law. Mr Merewether was obliged to contend that possession acquired, as this was, against a rightful owner, would not be sufficient to keep out every other person but the rightful owner. But I take it as clearly established, that possession is good against all the world except the person who can shew a good title; and it would be mischievous to change this established doctrine. In Doe d Hughes v Dyeball (1829) Mood & M 346; 173 ER 1184, one year’s possession by the plaintiff was held good against a person who came and turned him out; and there are other authorities to the same effect. Suppose the person who originally enclosed the land had been expelled by the defendant, or the defendant had obtained possession without force, by simply walking in at the open door in the absence of the then possessor, and were to say to him: ‘You have no more title than I have, my possession is as good as yours’, surely ejectment could have been maintained by the original possessor against the defendant. All the old law on the doctrine of disseisin was founded on the principle that the disseisor’s title was good against all but the disseisee. It is too clear to admit of doubt, that if the devisor had been turned out of possession he could have maintained ejectment. What is the position of the devisee? There can be no doubt that a man has a right to devise that estate, which the law gives him against all the world but the true owner. Here the widow was a prior devisee, but durante viduitate only, and as soon as the testator died, the estate became vested in the widow, and immediately on the widow’s marriage the daughter had a right to possession; the defendant, however, anticipates her, and with the widow takes possession. But just as he had no right to interfere with the testator, so he had no right against the daughter, and had she lived she could have brought ejectment; although she died without asserting her right, the same right belongs to her heir. Therefore I think the action can be maintained, in as much as the defendant had not acquired any title by length of possession. The devisor might have brought ejectment, his right of possession being passed by will to his daughter, she could have maintained ejectment, and so therefore can her heir, the female plaintiff. We know to what extent encroachments on waste lands have taken place; and if the lord has acquiesced and does not interfere, can it be at the mere will of any stranger to disturb the person in possession? I do not know what equity may say to the rights of different claimants who have come in at different times without title, but at law, I think the right of the original possessor is clear. On the simple ground that possession is good title against all but the true owner, I think the plaintiffs entitled to succeed, and that the rule should be discharged. Mellor J: I am of the same opinion. It is necessary to distinguish between the case of the true owner and that of a person having no title. The fact of possession is prima facie

evidence of seisin in fee. The law gives credit to possession unless explained; and Mr Merewether, in order to succeed, ought to have gone on and shewn the testator’s title to be bad, as that he was only tenant at will, but this he did not do. In Doe d Hughes v Dyeball, possession for a year only was held sufficient against a person having no title. In Doe d Carter v Barnard (1849) 13 QB 945; 116 ER 1524, the plaintiff did not rely on her own possession merely, but shewed a prior possession in her husband, with whom she was unconnected in point of title. Here the first possessor is connected in title with the plaintiffs; for there can be no doubt that the testator’s interest was devisable. In the common case of proving a claim to landed estate under a will, proof of the will and of possession or receipt of rents by the testator is always prima facie sufficient, without going on to shew possession for more than 20 years. I agree [page 123]

with the Lord Chief Justice in the importance of maintaining, that possession is good against all but the rightful owner. [Lush J concurred.] Rule discharged.

2.49

Though they reach the same conclusion, Cockburn CJ and Mellor J

do so by slightly different routes. The term ‘seisin’ is an old common law term that refers to the legal possession of land giving to a person a freehold title. The following case applies this old law in an Australian context and with express reference to the notion of relativity of titles. 2.50C

Perry v Clissold [1907] AC 73 Privy Council

[This was an action by the executors of Clissold, seeking a mandamus25 to compel the appellant Perry, Minister of Public Instruction in New South Wales, to make a valuation of certain land compulsorily acquired by the Crown in 1891 for the purpose of erecting a school. Clissold had taken possession of the land without any title in 1881 and had fenced it. The owner of the land was at all times unknown. Clissold’s executors claimed to be entitled to compensation under the

terms of the Act authorising the acquisition, on the ground that Clissold’s possession gave him an interest in the land. Valuation was a necessary step in assessing compensation. The advice of the Judicial Committee (Lord Loreburn LC, Earl of Halsbury, Lords MacNaghten, Davey, Robertson, Atkinson, Sir Ford North and Sir Arthur Wilson) was delivered by Lord MacNaghten:] Lord MacNaghten: … In May 1902, under an order of the Supreme Court, the respondents, who are the present trustees of Clissold’s will, and of whom three are his surviving executors, served notice of their claim to compensation in respect of the land resumed by the notification of 17 July 1891, stating that the claimants were the executors of Frederick Clissold, ‘who at the date of resumption was in possession of such land as the owner thereof, and in receipt of the rents of such lands, and had a title thereto by possession’. It appeared from the papers which were forwarded with the claim that in the year 1881 Frederick Clissold entered into possession of the land, which was then open and vacant, and enclosed it by a substantial fencing, and that ever since the enclosure, up to the time of resumption, Clissold held exclusive possession of the land without notice of any adverse claim, and let it to different tenants and received the rents for his own use and benefit, and duly paid all rates and taxes in respect of the land which stood in his name in the ratebooks of the municipality of Canterbury. The Minister refused to entertain the claim to compensation. The Supreme Court upheld the view of the Minister. The High Court reversed this decision, and granted a mandamus requiring the Minister to cause a valuation to be made. The only question on this appeal was whether or not a prima facie case for compensation had been disclosed. [page 124]

On the part of the Minister it was contended that, upon the plaintiff’s own showing, Clissold was a mere trespasser, without any estate or interest in the land. Their Lordships are unable to agree with this contention. It cannot be disputed that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner. And if the rightful owner does not come forward and assert his title by process of law within the period prescribed by the provisions of the Statute of Limitations applicable to the case, his right is forever extinguished, and the possessory owner acquires an absolute title. The[ir Lordships] do not think that a case for compensation is necessarily excluded by the circumstance that under the provisions of the Act of 1900 the Minister acquired not merely the title of the person in possession as owner, but also the title, whatever it may have been of the rightful owner out of possession, who never came forward to claim the

land or the compensation payable in respect of it, and who is, as the Chief Justice says, ‘unknown to this day’. The Act throughout from the very preamble has it apparently in contemplation that compensation would be payable to every person deprived of the land resumed for public purposes. It could hardly have been intended or contemplated that the Act should have the effect of shaking titles which, but for the Act, would have been secure, and would in process of time have become absolute and indisputable, or that the Governor, or responsible Ministers acting under his instructions, should take advantage of the infirmity of anybody’s title in order to acquire his land for nothing. Even where the true owner, after diligent inquiry, cannot be found the Act contemplates payment of the compensation into court to be dealt with by a court of equity. It only remains for their Lordships to express their opinion that the valuations to be made should be a valuation of the land as at the date of the notification of resumption. When the valuation is made it will be for the claimants to take such proceedings as they may be advised to recover the amount, unless the Minister thinks fit to pay them or to pay the money into court. For these reasons their Lordships humbly advised His Majesty that the appeal should be dismissed, and ordered the appellant to pay the costs of the appeal.

2.51

In Mabo v Queensland (No 2) (1992) 175 CLR 1; 107 ALR 1 (the

facts of the case are extracted in 3.77C), Toohey J (at CLR 206ff; ALR 161ff) examined the concept of ‘common law aboriginal title’ in the context of a claim by the plaintiffs that they acquired a possessory title by reason of possession at common law. His Honour provided a detailed analysis of possessory rights to land at common law: 2.52C

Mabo v Queensland (No 2) (1992) 175 CLR 1; 107 ALR 1 High Court of Australia

Toohey J: … The relationship between possession and title: Does possession give rise to a presumptive title? ‘Possession’ is notoriously difficult to define (see Pollock and Wright pp 1–42; Tay, ‘The Concept of Possession in the Common Law: Foundations for a New Approach’ (1964) 4 Melbourne University Law Review 476) but for present purposes it may be said to be a

[page 125]

conclusion of law defining the nature and status of a particular relationship of control by a person over land. ‘Title’ is, in the present case, the abstract bundle of rights associated with that relationship of possession. Significantly, it is also used to describe the group of rights which result from possession but which survive its loss; this includes the right to possession. In the thirteenth century Bracton wrote (Bracton on the Laws and Customs of England (Thorne Tr) (1977), vol III, p 134): (E)veryone who is in possession, though he has no right, has a greater right [than] one who is out of possession and has no right. It is said that possession is the root of title (Asher v Whitlock (1865) LR 1 QB 1; Perry v Clissold [1907] AC 73; Calder [1973] SCR at 368; (1973) 34 DLR (3d) at 185 … Possession At common law conduct required to prove occupation or possession will vary according to the circumstances including, for example, whether the claimant enters as a trespasser or as of right (Stanford v Hurlstone (1873) LR 9 Ch App 116). And the nature of the land will to a large extent dictate the use that might be made of it. For example, conduct amounting to possession will be different in relation to a dwelling and to uncultivated land (Lord Advocate v Lord Lovat (1880) 5 App Cas 273 at 288; Johnston v O’Neill [1911] AC 552 at 583; Kirby v Cowderoy [1912] AC 599 at 602–3). Some land is barren and unproductive so that it cannot sustain people all the year round. It may be necessary for occupiers to seek water and sustenance elsewhere for part of the year, returning to ‘their’ land as soon as it is possible.

2.53

Consider the following passage from the judgment of the Full Court

of the Supreme Court of New South Wales in Oxford Meat Co Pty Ltd v McDonald [1963] SR (NSW) 423 at 427 per Brereton J: Now the rule as I understand it, is not that a person in possession is entitled to maintain his possession as against all but the true owner; it is that he is entitled to maintain it against all but a person having a better right to possession … A right to possession in a third party is relevant if it demonstrates that the claimant has none; but if the claimant has a right to possession (even though it springs merely from possession prior to ouster), a jus tertii (even in the true owner in fee) is irrelevant. Indeed the confusion only arises from the introduction by textwriters of the unfortunate

phrase jus tertii. The real effect of Perry v Clissold is to affirm that de facto occupation has the status of an inchoate title …

2.54

The principle articulated above by Lord MacNaghten in Perry v

Clissold (2.50C) that ‘that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner’ refers to the theory of ‘relativity of titles’. The theory of relativity of titles is directed principally to the situation where two or more parties make conflicting claims to interests in the same piece of land. Note that Lord MacNaghten in the passage extracted above from Perry v Clissold emphasises that at the end of the limitation period, the documentary title holder’s right ‘is forever extinguished, and the possessory owner acquires an absolute title’ (emphasis added). At this point the squatter in effect becomes the owner of the land. 2.55

The modern action for recovery of possession of land grew out of the

common law action of ejectment, a form of the older action of trespass. The function of ejectment was to

[page 126]

provide a remedy to the possessor of land in respect of damage caused by the intrusion of another person. The plaintiff in proceedings for the recovery of possession of land may wish to recover compensation for loss sustained by reason of the defendant’s wrongful occupation of the land. The plaintiff’s remedy is to claim ‘mesne profits’, which will include such items as the rental

value of the premises during the period of the plaintiff’s ouster. Mesne profits may be claimed in the proceedings for recovery of possession: Fleming, 37– 59. An occupier whose possession has been disturbed by the acts of another, but who does not require an order for possession of the land, may bring an action in trespass claiming an injunction. As to what constitutes sufficient possession for the purpose of bringing an action of trespass, see Ocean Estates Ltd v Pinder [1969] 2 AC 19. 2.56

In New South Wales, the common law action of ejectment has been

abolished and the Civil Procedure Act 2005 s 20 now substitutes a claim for possession of land. The Uniform Civil Procedure Rules 2005 deal with various aspects of the action for possession of land. See, for example, r 14.15 (matters to be pleaded by the defendant); r 10.15 (provision for court to order that originating process be served by affixing a notice to the land); and r 16.4 (default judgment on claim for possession). In other states, the position is similar to that in New South Wales, although there are variations in the rules of court and in some cases, legislation based on the Common Law Procedure Act 1852 (Eng) remains in force.

Relativity of titles under the Torrens system 2.57

The existence in Australia of the Torrens system of registration of

title has radically reduced the significance of possession as a means of proving title to land. The Torrens system creates a register which authoritatively records who owns land, and the state guarantees the accuracy of the register. There is nothing inherently inconsistent between the theory of relativity of

titles and the principles of the Torrens system. However, the creation of an authoritative register of title makes it much easier to identify the ‘true owner’ of land as we shall see in Chapter 3. Nonetheless, the principles discussed in Asher v Whitlock (2.48C) and Perry v Clissold (2.50C) continue to apply to Torrens system land. This is because disputes may occur in which one party is registered, but they are time-barred from asserting their title and recovering the land from someone whose claim is based on possession, or neither party is registered and both are relying on possessory titles. A possessory title over Torrens land can also be used to maintain an action in trespass: see Spark v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970) 92 WN (NSW) 1087; Newington v Windeyer (1985) 3 NSWLR 555; cf Spark v Meers [1971] 2 NSWLR 1. The New South Wales Real Property Act 1900 s 45 originally provided that a registered proprietor’s title could not be statute-barred by any length of possession by another, but it was amended by the Real Property (Possessory Titles) Amendment Act 1979, Pt 6A. Under Pt 6A, a person who has been in adverse possession of a whole parcel of land in circumstances which would have extinguished the title of the holder of the fee simple estate had the land been old system, may apply to the Registrar-General to be registered as proprietor of the fee simple estate. A provision equivalent to s 45 continues to apply in the Australian Capital Territory: Land Titles Act 1925 s 69. The principles discussed in the cases extracted above are also basic to the operation of the limitation of actions legislation: see, for example, Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464. This legislation is discussed in 2.72ff.

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Assignment of the interest of a person dispossessed by a squatter 2.58

In New South Wales, s 50(2) of the Conveyancing Act 1919 may

affect the assignability of the interest of a person dispossessed from land. (Similar provision is found in the Civil Law (Property) Act 2006 (ACT) s 226.) 2.59E

Conveyancing Act 1919 (NSW)

50(2) Any conveyance of a present right of entry in any land, other than a conveyance to the person in possession thereof, and any covenant or agreement for, or promise of a conveyance (other than as aforesaid) of the same shall be void as, against the person in possession or those claiming under him or her unless the person conveying or covenanting, agreeing, or promising to convey, or the person through whom he or she claims has been in possession of the land within twelve months from the date of the conveyance, covenant, agreement or promise.

2.60

The courts have tended to construe s 50(2) narrowly: see Mulcahy v

Curramore Pty Ltd [1974] 2 NSWLR 464 at 480–1. The reasoning of Bowen CJ in Mulcahy v Curramore Pty Ltd was accepted by Bryson J of the Supreme Court of New South Wales in Beever v Spaceline Engineering Pty Ltd (1993) NSW ConvR ¶55-678, where his Honour described the ambit of the section in these terms (at 59,869, 59,870): [A] conveyance by a person who is out of possession is a conveyance of a right of entry within the meaning of s 50(2) although it purports to be a conveyance of the fee simple. If the person

purportedly conveying an interest is not in possession, his rights in relation to the land are equated with his opportunity to gain possession of it by effecting an entry or by legal process.

The self-help remedy 2.61C

McPhail v Persons Unknown [1973] Ch 447; [1973] 3 All ER 393 Court of Appeal

Lord Denning MR: 1 Introduction Mr McPhail is the owner of a leasehold house, 4 Thornhill Square, Islington. There was some furniture in it, but otherwise it seems to have been unoccupied. On Friday 13 April 1973, the premises were left locked and secured. On Sunday 15 April, some persons, the unknown, made entry. They got in by the front door and put a new lock on. On Monday 16 April, Mr McPhail went with a detective inspector, and asked them their names. They did not give them. So he took proceedings for possession under RSC O 113. These were served on them some time on Thursday 19 April, for hearing on 25 April. They then gave their names. They said they believed that the house had been empty for at least two years, and, as they had [page 128]

nowhere to live, they decided to make their home there. On 25 April, Phillips J made an order that Mr McPhail do recover possession … [T]he squatters appeal to the courts. They admit that they have no defence in law, but they ask the court to give them time. They only ask for four weeks, or so. Can the court give it to them? The case raises this question: when the owner of the house asks for an order for possession, is the judge bound to make an order which is enforceable forthwith? Or can he suspend it for a while? 2 The law as to squatters What is a squatter? He is one who, without any colour of right, enters on an unoccupied house or land, intending to stay there as long as he can. He may seek to justify or excuse his conduct. He may say that he was homeless and that this house or land was standing empty, doing nothing. But this plea is of no avail in law. As we said in London Borough of Southwark v Williams [1971] Ch 734 at 744; [1971] 2 All ER 175 at 179: If homelessness were once admitted as a defence to trespass, no one’s house could be safe. So the courts must, for the sake of law and order, take a firm stand. They

must refuse to admit the plea of necessity to the hungry and the homeless; and trust that their distress will be relieved by the charitable and the good. (i) The remedy of self-help. Now I would say this at once about squatters. The owner is not obliged to go to the courts to obtain possession. He is entitled, if he so desires, to take the remedy into his own hands. He can go in himself and turn them out without the aid of the courts of law. This is not a course to be recommended because of the disturbance which might follow. But the legality of it is beyond question. The squatters were themselves guilty of the offence of forcible entry contrary to the statute of 1381: the Forcible Entry Act 1381 (5 Ric 11 Stat 1, c 7). When they broke in, they entered ‘with strong hand’ which the statute forbids. They were not only guilty of a criminal offence. They were guilty of a civil wrong. They were trespassers when they entered, and they continued to be trespassers so long as they remained there. The owner never acquiesced in their presence there. So the trespassers never gained possession. The owner, being entitled to possession, was entitled forcibly to turn them out: see Browne v Dawson (1840) 12 Ad & El 624; 113 ER 950. As Sir Frederick Pollock put in his book on Torts (Pollock’s Law of Torts (15th ed, 1951) p 292): A trespasser may in any case be turned off land before he has gained possession, and he does not gain possession until there has been something like acquiescence in the physical fact of his occupation on the part of the rightful owner. Even though the owner himself should use force, then so long as he uses no more force than is reasonably necessary, he is not himself liable either criminally or civilly. He is not liable criminally (1) because it was said in the old times that none of the statutes of forcible entry apply to the expulsion by the owner of a tenant at will: see Anon (1670) 1 Vent 89; 86 ER 62; R v Dormy (1700) 1 Ld Raym 610; 91 ER 1308; R v Bathurst (1755) Say 225; 96 ER 60; but, even if this is no longer true, (2) in any case the statutes only apply to the expulsion of one who is in possession: see R v Child (1846) 2 Cox CC 102. They do not apply to the expulsion of a trespasser who has no possession. The owner was not civilly liable because the owner is entitled to turn out a trespasser using force, no more than is reasonably necessary: see Hemmings v Stoke Poges Golf Club [1920] 1 KB 720; [1918–19] All ER Rep 798. [page 129]

(ii) The remedy by action. Although the law thus enables the owner to take the remedy into his own hands, that is not a course to be encouraged. In a civilised society, the courts should themselves provide a remedy which is speedy and effective; and thus make self-help unnecessary. The courts of common law have done this for centuries. The owner is entitled to go to the court and obtain an order that the owner ‘do recover’ the land, and to issue a writ of possession immediately. That was the practice in the old action of ejectment which is well described by Sir William Blackstone in his Commentaries on the Laws of England (6th ed, 1774) vol 3, pp 200–5 and Appendix No 11: and by Maitland in his Equity (1909) pp 352–4; and see The Forms of Action at Common Law (1936) pp 58–60. So far as I can discover, the courts of common law never suspended the order for

possession. Once the order was made, the owner could straightaway get a writ of possession for the sheriff to cause the owner to be put into possession. Sometimes the owner, although he got an order, might not wish to get the sheriff to turn out the trespassers, because the sheriff was known to charge extortionate fees. In that case the owner was entitled to take possession at once by his own hand. Seeing that the owner could take possession at once without the help of the courts, it is plain that, when he does come to the courts, he should not be in any worse position. The courts should give him possession at once, else he would be tempted to do it himself. So the courts of common law never suspended the order for possession. It was suggested by counsel for the defendants that, although the courts of common law never suspended the order for possession, nevertheless, the courts of equity might do so; because they had power to issue an injunction to restrain the owner from proceeding with his action at law or with the enforcement of his order. I am satisfied that a court of equity would never intervene in aid of a wrongdoer. In Grafton v Griffin (1830) 1 Russ & M 336 at 337; 29 ER 130 at 130, where some claimants had wrongfully turned a widow out of a house and got possession of it, Lord Lyndhurst LC said: ‘This court will not interfere to support a possession so acquired’. By the Supreme Court of Judicature Act 1875 the old action of ejectment was replaced by an action for the recovery of land; but the practice remained the same, although the machinery was different: see Gledhill v Hunter (1880) 14 Ch D 492 at 498–500. The judgment was, as before, that the plaintiff ‘do recover’ possession. No time was mentioned. No date was given. The plaintiff could at once issue a writ of possession which was executed against the premises themselves. The sheriff’s officers turned out everyone who was there. If there was someone else there, in addition to the defendant, he too would be turned out unless he applied to come in and defend. (iii) The remedy by summons. So the matter rested until some difficulties were discovered recently. When some squatters entered on vacant land belonging to the Manchester Corporation, this court granted an injunction against them, but held that it could not make an order for recovery of possession except in a final judgment: see Manchester Corp v Connolly [1970] Ch 420; [1970] 1 All ER 961. And when some squatters occupied houses in Brighton, Stamp J held that no proceedings could be taken for recovery of possession unless they were named as defendants: see Re Wykeham Terrace, Brighton, Sussex; Ex parte Territorial Auxiliary and Volunteer Reserve Association for the South East [1971] Ch 204. The result was that if the squatters did not give their names, or if one squatter followed another in quick succession, no order for possession could be made. I must confess that I doubt the correctness of that decision. But it does not matter. The position was soon put right by new Rules of Court. RSC O 113 and CCR O 26 are quite clear. A summons can be issued for possession against squatters even though they cannot be identified by name and even though, as one squatter [page 130]

goes, another comes in. Judgment can be obtained summarily. It is an order that the plaintiffs ‘do recover’ possession. That order can be enforced by a writ of possession

immediately. It is an authority under which anyone who is squatting on the premises can be turned out at once. There is no provision for giving any time. The court cannot give any time. It must, at the behest of the owner, make an order for recovery of possession. It is then for the owner to give such time as he thinks right to the squatters. They must make their appeal to his goodwill and consideration, and not to the courts. I think that the judgment of Goulding J in Department of the Environment v James [1972] 1 WLR 1279; [1972] 3 All ER 629, was correct. 3 The position of tenants I must point out, however, that I have referred so far only to squatters who enter without any colour of title at all. It is different with a tenant who holds over after his term has come to an end or after he has been given notice to quit. His possession was lawful in its inception. Even after the tenancy is determined, he still has possession. If he remains in possession and in occupation, there is high authority for saying that the owner is not entitled to take the law into his own hands and remove the tenant by force. He should go to the court and get an order for possession. Otherwise he is guilty of a criminal offence contrary to the statute of forcible entry. He may not be liable to a civil action for damages: see Hemmings v Stoke Poges Golf Club. But, nevertheless, his conduct is unlawful and should not be countenanced by the courts of law. Any doubt on this score is nowadays removed by s 32 of the Rent Act 1965 which says that where a tenancy has come to an end but the occupier continues to reside in the premises, it is not lawful for the owner to recover possession otherwise than by proceedings in the court. Seeing that in the case of a tenancy the owner is not entitled to regain possession himself by his own self-help, and that he is bound to come to the court to recover possession, it follows that the courts are able to fix a date on which possession shall be recovered … My conclusion is that, when the owner of a house comes to the court and asks for an order to recover possession against squatters, the court must give him the order he asks. It has no discretion to suspend the order. But, whilst this is the law, I trust that owners will act with consideration and kindness in the enforcing of it — remembering the plight which the homeless are in. [Orr LJ agreed with the judgment of Lord Denning MR. Lawton LJ agreed that the appeal should be dismissed, but reserved the position of tenants and licensees holding over.] Appeals dismissed. Orders for possession.

2.62 Questions 1.

If the court did have power to order a stay of execution in this case, should the power have been exercised in favour of the squatters? If

so, on what basis? 2.

Why did Lord Denning MR hold that there was no power to suspend the order for possession?

3.

Would the result of the case have been different if the plaintiff had permitted the defendants to remain in possession for several weeks before taking action? In Selwyn Bibby v Suintra Partap [1991] 1 WLR 931, the Privy Council ordered a stay of the order for possession and allowed a squatter to remain on the land pending appeal.

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Forcible re-entry 2.63

In early times the common law allowed a person who had been

dispossessed to retake possession by force within a specified time. As this remedy led to breaches of the peace, a series of Statutes of Forcible Entry was passed: Fleming, 10th ed, [5.12]. The Statute of Forcible Entry 1381 provided that: None from henceforth [shall] make any entry into any lands and tenements, but in case where entry is given by the law; and in such cases not with strong hand, nor with multitude of people, but only in peaceable and easy manner. And if any man from henceforth do to the contrary, and thereof be duly convict, he shall be punished by imprisonment …

The Statute of Forcible Entry 1391 (15 Rich 11, c 2) provided additional summary remedies for the enforcement of the earlier statute. In addition, the

1391 statute created the offence of forcible detainer of land, designed to meet the case of a person wrongfully taking possession of land and then seeking to rely on the 1381 statute to prevent the true owner from recovering possession. The statutes have been replaced by modern equivalents in Australia.26 The Code states supplement their legislation by providing that it is lawful for a person in peaceable possession of land with a claim of right to use such force as he or she reasonably believes to be necessary to defend his or her possession against any person whether entitled by law to possession of the property or not, subject to limits on the extent of bodily harm caused: Qld, s 278; WA, s 255; Tas, s 42. In certain circumstances, wilful trespass constitutes a criminal offence distinct from that of forcible entry. See, for example, Summary Offences Act 1966 (Vic) s 9(1)(e) and (f); Inclosed Lands Protection Act 1901 (NSW), s 4(1). 2.64

In Hemmings v Stoke Poges Golf Club Ltd [1920] 1 KB 720; [1918–19]

All ER Rep 798, the Court of Appeal held that, despite the existence of the offence of forcible entry, a person wrongfully retaining possession of land has no civil action for damages against the rightful owner who forcibly enters the premises unless more force is used than is reasonably necessary, or unless the owner fails to exercise reasonable care in removing the goods of the wrongful possessor. In reaching this conclusion the court examined many cases and overruled several. Scrutton LJ concluded his judgment by observing that (at KB 747; All ER Rep 809): [I]t will still remain the law that a person who replies to a claim for trespass and assault that he ejected a trespasser on his property with no more force than was necessary may be successfully met by the reply that he used more force than was necessary if the jury can be induced to find it. The

risk of paying damages and costs on this finding, and the danger of becoming liable to a prosecution under the statutes of forcible entry may well deter people from exercising this remedy except by order of the court. But I see no reason to add to the existing privileges of trespassers on property which does not belong to them by allowing them to recover damages against the true owner entitled to possession who uses a reasonable amount of force to turn them out.

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2.65

Hemmings v Stoke Poges Golf Club Ltd was followed in Macintosh v

Lobel (1993) 30 NSWLR 441. A tenant had remained in possession after the lease had expired and the landlord obtained a declaration from the Supreme Court that the tenant was a trespasser. Based on that decision the landlord could have obtained a writ of possession and had it executed by the sheriff. Instead, the landlord entered the premises and ejected the tenant using only such force as was reasonable in the circumstances. The tenant argued that s 18 of the Imperial Acts Application Act 1969 (NSW), which re-enacted the Statutes of Forcible Entry, prohibited such action and allowed possession to be obtained only by court process. The section states that: 2.66E

Imperial Acts Application Act 1969 (NSW)

18 No person shall make any entry into land except where such entry is given by law and, in such case, with no more force than is reasonably necessary.

2.67

The court held that the statute does not extinguish the common law

remedy of self-help in regaining possession of land and that a breach of s 18 by the rightful owner of the land would not give a trespasser any civil right to

bring an action for damages. Although the landlord had obtained a declaration that the tenant was a trespasser, Kirby P, with whom Cripps JA agreed, clearly accepted that the landlord could have removed the tenant without approaching the court at all. The landlord’s right of peaceable re-entry to recover possession of residential premises from an overholding tenant without a court order has been abrogated by legislation in all jurisdictions except Tasmania.27 The legislation generally forbids re-entry without the tenant’s consent except in accordance with a judgment, order or warrant of a court or tribunal given after notice to the tenant. The Northern Territory is the only jurisdiction which has abrogated the right of peaceable re-entry for all types of leases: Law of Property Act (NT) s 137(1). In other jurisdictions, the right of peaceable re-entry for tenancies other than residential tenancies is retained but is rarely used because the landlord may incur criminal penalties if the reentry is done in a manner likely to cause a breach of the peace (see state provisions adopting Statute of Forcible Entry: 2.63). 2.68

The squatter is liable to criminal penalties for forcible detainer of

land. All jurisdictions make it an offence for a person in actual but wrongful possession of land to hold it in a manner likely to cause a breach of the peace, or a reasonable apprehension of a breach of the peace, against the person legally entitled to possession.28 Further criminal legislation preventing entry onto, or occupation of land, may apply in certain jurisdictions such as the Inclosed Lands Protection Act 1901 (NSW). By s 4(1):

[page 133]

2.69E

Inclosed Land Protection Act 1901 (NSW)

4(1) Any person who, without lawful excuse …, enters into inclosed lands without the consent of the owner, occupier or person apparently in charge of those lands, or who remains on those lands after being requested by the owner, occupier or person apparently in charge of those lands to leave those lands, is liable to a penalty …

2.70

By s 3, ‘inclosed lands’ means any lands, either public or private,

inclosed or surrounded by a fence, wall or other erection. The fact that the possession of land may also constitute a criminal offence does not prevent time running against the documentary title holder. See further, 2.94 below. 2.71

The result of McPhail’s case (2.61C) might well be different in the

various Australian jurisdictions, depending on the terms of the applicable rules of court. For example, the Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 53.08 provides that a warrant of possession to enforce a judgment for possession given more than three months previously shall not be issued without leave of a judge. The position of an owner faced with squatters whose names are unknown also will depend on the rules in force. The Victorian rules expressly allow for proceedings to be commenced and served against occupiers of the land whose names are unknown to the plaintiff without naming any person as defendant: rr 53.03(2), 53.05(3). See also rr 1.12 and 36.5 of the Supreme Court (Uniform Civil Procedure) Rules 2005 (NSW), whereby a judgment for possession may specify the time for compliance.

LIMITATION OF ACTIONS 2.72

The current legislation on limitation of actions is as follows:

Limitation Act 1969 (NSW); Limitation of Actions Act 1958 (Vic); Limitation of Actions Act 1974 (Qld); Limitation of Actions Act 1936 (SA); Limitation Act 2005 (WA) (for causes of action arising on or after 16 November 2005); Limitation Act 1974 (Tas); Limitation Act 1985 (ACT). (The legislation is referred to in this section by the abbreviation of the state enacting it.)

How possessory title extinguishes documentary title with the passage of time 2.73

It has been seen that possession of land or goods, of itself, generates a

proprietary interest, although the possessor will be forced to yield to a person with a superior interest or title. In all common law jurisdictions, statutes provide that a possessory interest will, after the lapse of a certain period of time, defeat all other interests. For example, if A has a fee simple estate in Blackacre, and is dispossessed by B, B may be ousted at the suit of A. However, if B in turn is dispossessed of the land by C, B has a proprietary interest sufficient to enable him or her to regain the land from C: Asher v Whitlock (1865) LR 1 QB 1; 2.48C. When A is dispossessed by B, A’s right to sue B for possession of the land is extinguished by statute after the effluxion of a specified period, and B will then have an interest effectively enforceable against the whole

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world. This result is achieved by legislation which limits the period within which action for the recovery of land or goods may be brought. 2.74

The legislation operates in a ‘negative way’, by barring A’s claim and

title to the land, rather than by stating that B’s interest is superior to that of anyone else. B’s interest ripens into the best interest in the land, simply because the only person with a superior title has become incapable of asserting that title. Under the English legislation before 1833, only A’s remedy was barred after the expiration of the limitation period, not his or her ‘title’. Thus, if possession of the land could peaceably be regained from B, A could withstand a challenge from B. However, since the enactment of the Real Property Limitation Act 1833 (UK) in England, A’s title as well as his or her remedy is extinguished, and even if A regains possession peaceably, B can succeed in an action to recover possession. This approach has been adopted in Australia with respect to actions for the recovery of land, and sometimes with respect to actions for the recovery of goods.29 The limitation period for actions to recover land is 12 years (NSW, s 27(2); Qld, s 13; WA, s 19; Tas, s 10(2)) or 15 years (Vic, s 8; SA, s 4). The registered title (Torrens) statutes of the Australian states and territories do not deal consistently with extinguishment of title by adverse possession for the limitation period. The provisions are discussed at 2.57–2.94ff.

Justifications for the rule of adverse possession 2.75

In Marquis Cholmondeley v Lord Clinton (1820) 2 Jac & W 1 at 139–

40; 37 ER 527 at 577, Sir Thomas Plumer MR explained the principle of limitation of actions and also attempted to state its rationale: The public have a great interest, in having a known limit fixed by law to litigation, for the quiet of the community, and that there may be a certain fixed period, after which the possessor may know that his title and right cannot be called in question. It is better that the negligent owner, who has omitted to assert his right within the prescribed period, should lose his right than that an opening should be given to interminable litigation, exposing parties to be harassed by stale demands, after the witnesses of the facts are dead, and the evidence of the title lost. The individual hardship will, upon the whole, be less, by withholding from one who has slept upon his right, and never yet possessed it, than to take away from the other what he has long been allowed to consider as his own, and on the faith of which, the plans in life, habits and experiences of himself and his family may have been … unalterably formed and established.

In addition to certainty of title and putting an end to litigation, McCrimmon advances the following as possible justifications for applying the principle of limitation to bar a landowner’s rights:30 1)

protecting those in possession from stale claims that, as a result of the passage of time, may be difficult to defend;

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2)

encouraging holders of the documentary title not to sleep on their rights;

3)

facilitating a conveyance of the land in the event the holder of the documentary title has disappeared, or when, as a result of secret dealings, the documentary title no longer reflects an

accurate state of the title; and 4)

2.76

facilitating the investigation of title to unregistered land.

Arguments (1) and (2) are general justifications for limitation

statutes.31 The ‘sleeping on your rights’ argument has drawn support from Posner, who argues that the law of adverse possession encourages the productive use of land, thereby enhancing economic welfare.32 One problem with this ‘you snooze, you lose’ argument is that it is not necessarily inefficient to leave land idle. For example, to hold land in reserve for future development while awaiting planning approvals or capital formation may be its most economically productive use at the time.33 See, for example, JA Pye (Oxford) Ltd v Graham [2003] AC 419, a case in which squatters acquired title to valuable land set aside for urban development by using it for grazing. Moreover, the law of adverse possession does not actually require landowners to use their land productively, but only to monitor it and eject squatters. Some environmentalists argue that adverse possession tends to lead to the over-exploitation of wilderness areas, which are particularly susceptible to incursions by squatters.34 McCrimmon suggests that arguments (3) and (4), that adverse possession facilitates proof of title where documentary proof is lacking, do not apply to land under the Torrens System, because the register states who holds title and documentary proofs are not required. He finds it incongruous that many Torrens jurisdictions allow the acquisition of title to registered land by adverse possession.35 The English Law Commission observed that while registration of title reduces the need to rely on adverse possession for proof of

title, it still serves a useful function in updating the register in cases where conveyancing formalities were overlooked in the past:36 [I]f land ownership and the reality of possession are completely out of kilter, the land in question is rendered unmarketable if there is no mechanism by which the squatter can acquire title. This situation can easily happen, as for example where — (1) the true owner has disappeared and the squatter has assumed the rights of ownership for a substantial period; or (2) there have been dealings with registered land ‘off the register’, so that the register no longer reflects the ‘true’ ownership of the land.

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2.77

Similar concerns have prompted Australian jurisdictions to recognise

adverse possession: New Zealand and several Australian jurisdictions that originally did not allow adverse possession against a registered owner subsequently amended their statutes to allow it, in order to resolve problems arising from missing owners and informal conveyancing. The problems particularly affected areas where the original sales of Crown land coincided with mining booms, such as in parts of New Zealand, Victoria and western Tasmania. In these areas it has been known for owners to sell their lands without conveyancing formalities, or simply to abandon them if no buyer could be found at the time the owner wished to move on. Some parcels of land have been bought and sold off the register over decades, by occupiers who paid the rates and taxes. Since mortgage lenders will not accept possessory titles as security for loans, these properties tend to remain underdeveloped. The regression to deeds-based conveyancing undermined the accuracy and completeness of the register.37

Adverse possession and good faith

2.78

In many cases a person claiming as adverse possessor is in fact the

true successor to the last documentary owner, but lacks documentary proof. A curious aspect of the law of adverse possession is that it fails to distinguish between the deliberate trespasser and the person who takes possession under colour of right, believing that the land is his or her own. There is no legal requirement that a person in adverse possession believe that he or she is entitled to the land. For example, in Monash City Council v Melville (2000) V ConvR 54-621; [2000] VSC 55, the applicants had knowingly chosen when erecting a boundary fence to enclose an adjacent 20-foot strip of council reserve land with their land, with the intention of claiming it by adverse possession. The council failed to notice that the fence was off boundary. The applicants succeeded in making out their claim for a vesting order under the Transfer of Land Act 1958 (Vic) s 62 to register them as owners of the strip. Some overseas jurisdictions impose more onerous requirements on adverse possession claims where the original trespass was intentional, such as requiring a longer limitation period or more stringent proofs. For example, England’s Land Registration Act 2002 Sch 6, paras (1)–(5) now imposes a good faith test in some cases through a requirement that ‘the applicant (or any predecessor in title) has been in adverse possession for the preceding ten years in the reasonable belief that the land belonged to him’.38

Adverse possession and human rights 2.79

In recent years, limitation statutes that provide for the

uncompensated extinguishment of interests in land through adverse possession have been challenged for inconsistency with human rights.

Human rights instruments in some jurisdictions provide protection for property rights. For example, art 1 of Protocol 1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (‘ECHR’) provides:

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2.80E

European Convention for the Protection of Human Rights and Fundamental Freedoms

Protocol 1, art 1 Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

2.81

The Human Rights Act 1988 (UK) gives effect to the ECHR,

including the protection of property in art 1 of Protocol 1. The ruling of the House of Lords in J A Pye (Oxford) Ltd v Graham [2003] AC 419, was the subject of an appeal to the European Court of Human Rights. The applicant companies complained that their property rights protected by the ECHR had been violated in consequence of the provisions of the repealed Land Registration Act 1925,39 under which they had lost ownership of their land without compensation through the adverse possession of a neighbour for the 12-year limitation period. In J A Pye (Oxford) Ltd and J A Pye (Oxford) Land Ltd v The United

Kingdom (Application No 44302/02) in a judgment given on 30 August 2007, the Grand Chamber of the European Court of Human Rights held, by ten votes to seven, that there had been no violation of the rights of the applicant companies under art 1 of Protocol 1 arising from their loss of ownership of their land through adverse possession. The majority justices noted that the second paragraph of art 1 recognises that states are entitled to control the use of property in accordance with the general interest. In order to be consistent with the general rule stated in the first sentence of the first paragraph of art 1, an interference with the right to the peaceful enjoyment of possessions must strike a ‘fair balance’ between the demands of the general interest of the community and the protection of the individual’s fundamental rights. The applicants had lost their land through the operation of limitation provisions for actions to recover land. It was held that the provisions were part of the general land law and amounted to ‘control of use’ provisions which regulate the use and ownership of land as between persons. There was a general interest in the limitation provisions themselves, and in the statutory extinguishment of title where the cause of action had expired. The majority justices considered that the fair balance required by art 1 was made out. The limitation provisions were of long standing and well known. The applicant companies were not without procedural protection, as there were various courses open to them that would have prevented time running, and they could dispute in court the squatter’s claim to have been in ‘adverse possession’. The absence of provision for compensation did not upset the

balance, since compensation was not consistent with the concept of limitation periods.40

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2.82

Victoria’s Charter of Human Rights and Responsibilities Act 2006

(the Victorian Charter) requires courts to interpret legislation compatibly with the rights listed in the Charter, so far as their purpose allows, and allows them to consider international law and the judgments of foreign courts relevant to a human right: s 32. The listed human rights include a person’s right ‘not to be deprived of his or her property, other than in accordance with law’: s 20; and protection from unlawful or arbitrary interference with his or her family home: s 13. Similar provisions are found in the Human Rights Act 2004 (ACT) ss 12, 30, 31, although the Act lacks the specific protection of property. The Victorian Charter s 7(2) is a general limitations provision. It provides that a human right may be subject under law only to such reasonable limits as can be demonstrably justified in a free and democratic society based on human dignity, equality and freedom, and taking into account a list of relevant factors specified in the subsection. In Abbatangelo v Whittlesea City Council [2007] VSC 529, a defendant to an adverse possession claim argued that the Victorian Charter’s protection of property rights was inconsistent with ‘a rationale which actively encourages people deliberately to enter into possession of another’s land knowing that they would be rewarded with an unassailable title as a result of their wrong’.

The trial judge, Pagone J, rejected the argument, stating (at [3]) that the rule of adverse possession was one which sought to regulate and resolve competing property rights; namely, the right of the documentary title holder and the possessory right that an adverse possessor claims to have acquired. It was not clear that the Charter favoured the rights of the possessor over the documentary title holder. Moreover, the rule of adverse possession served a public interest ‘in ensuring that a person in long term and undisputed possession is able to deal with land as owner’. The point was not argued in the subsequent appeal in Whittlesea City Council v Abbatangelo (2.92C). Do you agree that the effect of the Victorian Charter as between the parties was neutral, given that Vic, s 18 extinguishes the title of one party — the documentary title holder? 2.83

An argument that seeks to reconcile all these competing

considerations proposes to deploy the court-ordered easements approach to possessory title.41 As we shall see below in Chapter 10, in certain circumstances courts may order an easement, typically where a neighbour conducting building operations or otherwise establishes that it is ‘reasonably necessary’ for the use or development of other land. Where such an easement is granted, the court must order compensation reflecting the loss to the documentary title holder. Similar reforms could require the documentary title holder to apply to a court after the limitation period has run to seek compensation for loss. In determining the amount of compensation the court could consider among other factors, the extent of any improvements made to the land by the possessor, whether the possessor or documentary title holder had a particular need for the land, whether the intention to possess was based

on a mistake, and the reasons of the documentary title holder for not seeking to repossess. In extreme circumstances, the figure might equal, but not exceed, market value. Arguably, a flexible approach might better address the competing principles, and in a way the current all-or-nothing rule fails to do.

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The length of the limitation period 2.84

In both England and Australia the approach of the limitation statutes

is to divide legal actions into various categories and to formulate a series of individual rules with respect to each category. State legislation provides for three main limitation periods. The longest of these periods relates to actions to recover land and certain other specific actions such as actions upon a bond or specialty and actions for the enforcement of a judgment. The shortest period, generally three years, applies to claims for damages for personal injuries. The middle period, usually six years, applies, inter alia, to actions founded upon simple contract and tort, and accordingly includes actions for the recovery of goods. For a consideration of the justification for the system of specified limitation periods, as opposed to a discretionary approach, see Jackson, ‘The Legal Effects of the Passing of Time’ (1970) 7 MULR 407 at 466–7. 2.85

The limitation period for actions to recover land is 12 years (NSW, s

27(2); Qld, s 13; WA, s 19; Tas, s 10(2)) and 15 years (Vic, s 8; SA, s 4). 2.86

The approach to claims of adverse possession against the Crown

varies from state to state. The English rule applicable at the time of the European settlement of Australia was that an action by the Crown was barred after a period of 60 years: Crown Suits Act 1769 (Imp) (Nullum Tempus Act). This rule appears to apply in South Australia (South Australian Co v City of Port Adelaide [1914] SALR 16), while in two states the period has been shortened to 30 years.42 In the remaining states, the rule is that there can be no adverse possession of land against the Crown.43 The justifications for refusing to permit time to run against the Crown is that the Crown cannot be expected to monitor the use of all public lands, and that future generations should not be deprived of their patrimony due to the oversight of officials who hold the lands in trust for them.44 The same arguments can be made in respect of lands held by public agencies outside the ‘shield of the Crown’, such as local councils and water authorities, and private bodies that hold land for public purposes such as railway tracks, water catchments and parks. A Victorian minister remarked that many councils ‘hold large areas of unfenced land which people can easily encroach upon and not be detected by doing so or be detected at significant cost’: Victoria Hansard (LA), 16 Sept 2004 (Hon Mr Thwaites, Minister for Environment), 554–5. Victoria has extended protection from adverse possession to councils and certain other bodies: Vic, ss 7A, 7AB and 7B.

Commencement of the limitation period General principles 2.87

The limitation period generally commences from the time the

relevant cause of action accrues. Section 8 of the Limitation of Actions Act 1958 (Vic), for example, provides as follows:

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2.88E

Limitation of Actions Act 1958 (Vic)

8 No action shall be brought by any person to recover any land after the expiration of fifteen years from the date on which the right of action accrued to him or, if it accrued to some person through whom he claims, to that person …

2.89

For the most part the legislation does not specify the circumstances in

which an action accrues, or the time it accrues, leaving these matters to be ascertained from the pre-existing rules of the common law. It is necessary to state that the basic and overriding rule concerning the accrual of the right of action to recover land is that such an action is deemed to accrue only where the person entitled to possession is out of possession and some other person in whose favour the period of limitation can run is in possession (‘adverse possession’). In other words, if A abandons his or her land and, 10 years later, B takes possession, A’s right of action is not deemed to accrue until B takes possession: NSW, s 38(3); Vic, s 14(1); Qld, s 19(1); WA, ss 3(6), 65; Tas, s 16(1). The same result would follow in South Australia, even in the absence of specific legislation: Smith v Lloyd (1854) 9 Exch 562; 156 ER 240. It is irrelevant whether the documentary owner realises that he or she has been dispossessed: Cervi v Letcher [2011] VSC 156, [13]; Re Johnson [2000] 2 Qd R 502, 506. 2.90

A right of action cannot accrue if a person is in possession with the

consent of the owner, but once consent is withdrawn they become a trespasser, and the action accrues. In such a situation, the possession is not ‘adverse’ to that of the documentary title holder: Ramnarace v Lutchman [2001] 1 WLR 1651 (PC). In Cleret v Rago [2014] QCA 158, one partner in a de facto relationship remained in the home from 1995 after the other, the owner of the property left. He was served with an eviction letter in 2011, but refused to leave. The court held that the initial period of possession until the

eviction notice was with consent. The possession was only adverse from 2011 on receipt of the eviction letter, and had thus not run the requisite period.

Persons presently entitled to possession 2.91

Where the person bringing the action to recover land, or some person

through whom such person claims has been in possession thereof and has while entitled thereto ‘been dispossessed or discontinued his possession’, the right of action is deemed to accrue on the date of the dispossession or discontinuance.45 Special provision is made for the case where an action is brought to recover land of a deceased person or to recover land assured (or conveyed) otherwise than by will. In these cases the right of action is deemed, in general, to accrue, respectively, on the death of the deceased or the date the assurance took effect.46

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The elements of adverse possession 2.92C

Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188 Supreme Court of Victoria (Court of Appeal)

[The appeal was from a decision of Pagone J that the respondent, Mrs Abbatangelo, had acquired title to a parcel of general law (unregistered) land (‘the land’) by adverse possession against the appellant council, the documentary owner of the land. The appellant argued that the judge erred in finding that the respondent had acquired title by adverse possession. The land was rectangular in shape, and approximately half an acre in size. Its long boundaries included its

southern frontage. It had been owned by the council or its predecessor since 1908. Prior to 1950, all the boundaries had been fenced and the council had planted trees on the land. In November 1958, Mrs Abbatangelo and her husband (since deceased) bought a five acre property which effectively enclosed the land on three of its four sides, excepting the southern boundary which abutted a public road. The respondent and her family lived on the property from 1958, except for a five-year period from 1970 to 1975 when they resided in Geelong. During the five-year period, they visited the property most weekends to maintain it and to tend livestock. Between 1958 and 2004, when the claim for adverse possession was made, the respondent and her family had used the land for various purposes including grazing, enclosing and sheltering their livestock, sport and recreation, and barbeques and social gatherings. Shortly after they purchased their property, the Abbatangelos installed a gate in the northern boundary fence to give vehicular access to the land from their property, and placed an old bath tub on the land as a water trough to water stock. They built children’s swings and a rudimentary cubby house on the land. In 1986 they removed the fence along the eastern boundary of the land. They maintained the boundary fences and the vegetation on the land, kept the land clear of weeds, pests and fallen timber, mowed the grass, caught rabbits and undertook landscaping work, without any contribution from the council. The respondent relied on all these acts as demonstrating adverse possession since 1958. The trial judge held that there was a continuous period of adverse possession commencing either by the late 1960s, or at the latest, by 1975 when the family resumed living on their property.] Ashley and Redlich JJA and Kyrou AJA: [footnotes omitted] This appeal arises from a decision of a judge of the Trial Division that Laurice Abbatangelo (‘Mrs Abbatangelo’ or ‘the respondent’) had acquired title to a parcel of general law land situated at 581 Bridge Inn Rd, Mernda (‘the land’) by adverse possession against the Whittlesea City Council (‘the Council’ or ‘the appellant’), the paper owner of the land. The appellant contends that the judge erred in finding that the respondent had acquired title to the land by adverse possession. It says that the elements of adverse possession were not made out … For the reasons that follow, we have concluded that the judge’s decision was correct and that the appeal should be dismissed. Applicable principles Section 8 of the Limitation of Actions Act 1958 (Vic) (‘the Act’) provides that no action shall be brought by any person to recover any land after the expiration of 15 years from the date on which the right of action accrued. Section 18 provides that at the expiration of that period, the person’s title to the land shall be extinguished. As to when the right of action accrues, s 9(1) refers to the date upon which the person whose title stands to be extinguished ‘has … been dispossessed or discontinued his possession’, whilst s 14(1) provides that ‘[n]o right

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of action to recover land shall be deemed to accrue unless the land is in possession of some person in whose favour the period of limitation can run (hereafter in this section referred to as ‘adverse possession’)’. Before us, the parties agreed that the following comments made by Ashley J (as his Honour then was) in Bayport Industries Pty Ltd v Watson aptly summarise the relevant principles: The law is clear enough. A number of the basic principles were summarised by Slade J in Powell v McFarlane. Thus, pertinently: ‘It will be convenient to begin by restating a few basic principles relating to the concept of possession under English law: (1) In the absence of evidence to the contrary, the owner of land with the paper title is deemed to be in possession of the land, as being the person with the prima facie right to possession. The law will thus, without reluctance, ascribe possession either to the paper owner or to persons who can establish a title as claiming through the paper owner. (2) If the law is to attribute possession of land to a person who can establish no paper title to possession, he must be shown to have both factual possession and the requisite intention to possess (animus possidendi). (3) Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, … The question what acts constitute a sufficient degree of exclusive physical control must depend on the circumstances, in particular the nature of the land and the manner in which land of that nature is commonly used or enjoyed … It is impossible to generalise with any precision as to what acts will or will not suffice to evidence factual possession … Everything must depend on the particular circumstances, but broadly, I think what must be shown as constituting factual possession is that the alleged possessor has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so. (4) The animus possidendi, which is also necessary to constitute possession, … involves the intention, in one’s own name and on one’s own behalf, to exclude the world at large, including the owner with the paper title if he be not himself the possessor, so far as is reasonably practicable and so far as the processes of the law will allow … the courts will, in my judgment, require clear and affirmative evidence that the trespasser, claiming that he has acquired possession, not only had the requisite intention to possess, but made such intention clear to the world. If his acts are open to more than one interpretation and he has not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the [requisite] animus possidendi and consequently as not having dispossessed the owner.’

To those principles should be added and/or highlighted the following: When the law speaks of an intention to exclude the world at large, including the true owner, it does not mean that there must be a conscious intention to exclude the true owner. What is required is an intention to exercise exclusive control: see Ocean Estates v Pinder [1969] 2 AC 19. And on that basis an intention to control [page 143]

the land, the adverse possessor actually believing himself or herself to be the true owner, is quite sufficient: see Bligh v Martin [1968] 1 WLR 804. As a number of authorities indicate, enclosure by itself prima facie indicates the requisite animus possidendi. As Cockburn CJ said in Seddon v Smith (1877) 36 L.T. 168, 1609: ‘Enclosure is the strongest possible evidence of adverse possession’. Russell LJ in George Wimpey & Co Ltd v Sohn [1967] Ch 487, 511A, similarly observed: ‘Ordinarily, of course, enclosure is the most cogent evidence of adverse possession and of dispossession of the true owner’. It is well established that it is no use for an alleged adverse possessor to rely on acts which are merely equivocal as regards the intention to exclude the true owner: see for example Tecbild Ltd v Chamberlain, 20 P & CR 633, 642, per Sachs LJ. A person asserting a claim to adverse possession may do so in reliance upon possession and intention to possess on the part of predecessors in title. Periods of possession may be aggregated, so long as there is no gap in possession. Acts of possession with respect to only part of land claimed by way of adverse possession may in all the circumstances constitute acts of possession with respect to all the land claimed … Where a claimant originally enters upon land as a trespasser, authority and principle are consistent in saying that the claimant should be required to produce compelling evidence of intention to possess; in which circumstances acts said to indicate an intention to possess might readily be regarded as equivocal … At least probably, once the limitation period has expired the interest of the adverse possessor, or of a person claiming through him, cannot be abandoned. For the purposes of this appeal, the following additional principles are also relevant: a)

b)

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

c)

Intention to possess requires an intention to exercise such custody and control on one’s own behalf and for one’s own benefit. Both elements must be satisfied by a putative adverse possessor, although the intention to possess may be, and frequently is, deduced from the objective acts of physical possession. In considering whether the putative adverse possessor has factual possession, a court has regard to all the facts and circumstances of the case, including the nature, position and characteristics of the land, the uses that are available and the course of conduct which an owner might be expected to follow. Each case must be decided on its own particular facts. Whilst previous cases can provide guidance as to the relevant principles which are to be applied, they should be treated with caution in terms of seeking factual analogies by reference to particular features of a person’s dealings with land. Acts that evidence factual possession in one case may be wholly inadequate to prove it in another. For example, acts done by a putative adverse possessor who lives next to the relevant property may sufficiently evidence a taking of possession, whereas those same acts may be insufficient if done by a person who lives some distance from the property. [page 144]

d)

e) f)

g)

h)

The intention required by law is not an intention to own or even an intention to acquire ownership of the land, but an intention to possess it. The putative adverse possessor need not establish that he or she believes himself or herself to be the owner of the land. A number of acts which, considered separately, might appear equivocal may, considered collectively, unequivocally evidence the requisite intention. Statements about intention by a putative adverse possessor should be treated cautiously, as they may be self-serving. But whilst a statement by a person that he or she intended to possess land will not be enough in itself to establish such an intention, it may be relevant when taken in combination with other evidence suggesting an intention to possess. Mere use falling short of possession will not suffice. In some circumstances, a person’s use of land may amount to enjoyment of a special benefit from the land by casual acts of trespass and will neither constitute factual possession nor demonstrate the requisite intention to possess. For example, where vacant land abutted a putative adverse possessor’s land, occasional tethering of the claimant’s ponies on the vacant land, and grazing them there, and occasional playing on the vacant land by her children were held not to suffice. Use and enjoyment of a special benefit and exclusive possession are not, however, necessarily mutually exclusive, for exclusive possession will usually entail use and special benefit. Use and enjoyment of a special benefit, on the other hand, will not necessarily amount to exclusive possession. There is no separate requirement that the use to which the land is put by the putative adverse possessor be inconsistent with the paper owner’s present or future intended use of the land, as suggested by Leigh v Jack. In Monash City Council v Melville, Eames J reviewed the history of the rule in Leigh v Jack and said the

following: To the limited extent that the rule still applies its effect, now, is as follows. Where the trespasser’s acts had not been inconsistent with the future planned use, not therefore manifesting the requisite intention of dispossessing the owner, one might conclude that the requisite elements for adverse possession had not been established; [l]ikewise it may more readily be concluded that the requisite elements to constitute adverse possession had not been established where the land is waste land and the possessor had not done any acts to manifest an intention to dispossess the owner. However, where the trespasser had done acts which plainly manifested an intention to dispossess the owner, and where the acts would otherwise lead to the conclusion that adverse possession had been established, the fact that the land was waste land or was set aside for some future public purpose, did not introduce any special rule which gainsaid that conclusion. It was not suggested before us that Eames J incorrectly stated the law in relation to the present limited effect of the rule in Leigh v Jack. We would therefore proceed on the basis that his Honour correctly stated the law even if it was not for the subsequent decision of the House of Lords in J A Pye (Oxford) Ltd v Graham, where Lord Browne-Wilkinson (with whom the other Law Lords agreed) said this in relation to the rule in Leigh v Jack: The suggestion that the sufficiency of the possession can depend on the intention not of the squatter but of the true owner is heretical and wrong … The highest it can be put is that, if the squatter is aware of a special purpose for which the paper owner uses or intends to use the land and the use made by the squatter [page 145]

does not conflict with that use, that may provide some support for a finding as a question of fact that the squatter had no intention to possess the land in the ordinary sense but only an intention to occupy it until needed by the paper owner. For myself I think there will be few occasions in which such an inference could be properly drawn in cases where the title owner has been physically excluded from the land. But it remains a possible, if improbable, inference in some cases. i)

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

In our opinion, the trial judge was correct to hold that the appellant’s title to the land had been extinguished by the respondent’s adverse possession. For the reasons which follow, the respondent demonstrated both sufficient acts of factual possession and a manifest

intention to exclusively possess the land for the necessary period. On a tenable view of the evidence, actual possession with requisite intent was continuous from the early 1960s until 2004. But even if the better view was that possession was broken during the period when the Abbatangelos resided in Geelong — that is, between about October 1970 and February 1975 — there was, we consider, continuous possession with requisite intent for more than 15 years from the time that they returned to Mernda. From that time, the Abbatangelos engaged in a process of reinforcing and building upon what they had previously done in relation to the land. On the basis that time began to run no later than the end of February 1975, the appellant’s title was extinguished at the end of February 1990 at the latest. In arriving at our conclusions, we have rejected a number of submissions advanced for the Council. Those submissions [include]: (1) submissions about factual possession; (2) submissions about intention to possess; (3) submissions about particular aspects of the legal principles which inform adverse possession … As intention to possess is usually inferred from acts of possession, the appellant understandably relied upon similar evidence and submissions in attacking the judge’s findings with respect to both elements. Except where necessary, we will deal with overlapping submissions and evidence in respect of one or other element on the basis that our conclusions will apply to both. Factual possession It was submitted for the Council that the respondent had not shown sufficient acts of possession to establish that she had factual possession … The answer to the question what acts of possession are sufficient to show factual possession always depends upon the particular facts and circumstances of the instant case. These include the circumstances of the putative adverse possessor. In this case, those circumstances included the fact that the respondent’s property effectively enclosed the land on three of its four sides, whilst its fourth side faced the road. It is rare for there to be something so clear as a literal unfurling of a flag or the erection of a ‘keep out’ sign. Nor is there any general requirement that structures be erected on the land, although the erection of structures may assist in establishing factual possession. Similarly, it cannot be said that grazing stock on land, of itself, will never be sufficient to establish possession. Whether it is sufficient of itself, or in combination with other matters, invites consideration of all the circumstances of the case. In this case, the respondent’s failure to change the appearance of the land, particularly in relation to the trees, did not in our opinion betoken an absence of sufficient acts of possession. It was explicable in terms of the amenity provided by the treed land, which provided shade and shelter for stock and facilitated its use and enjoyment by children and for social occasions. [page 146]

Supposing that there had been a single owner of the respondent’s property and the land, we consider it quite likely that such owner would have made the same use of the land as did the Abbatangelos.

The appellant submitted that the placing of the bathtub stock trough on the land should not be given great weight because there was no piped water connected to it. All that the Abbatangelos did was hand-fill it from time to time. In our view, that submission failed to take account of the Abbatangelos’ position. They resided on the adjacent property. The trough was positioned close to the boundary of the land, and so could be observed, and filled as required. There was no need for a piping system. The arrangements for filling the trough were rudimentary, adequate, and we think not unusual. In our opinion, the placing of the trough on the land was a circumstance which, viewed in context, considerably aided the respondent’s case. The Council also submitted that his Honour did not make a direct finding, as it was contended he was required to make, that the appellant had been dispossessed, or had discontinued possession. The criticism was unfounded. As Pye makes clear, dispossession of the paper owner is established by the putative adverse possessor going into possession of the land for the requisite period without the consent of the owner. His Honour held that the Abbatangelos had exclusive possession and control of the land without the Council’s consent for continuous period of 15 years. That was sufficient to establish factual possession. Another argument advanced for the Council was that there was no use of the land by the Abbatangelos which was inconsistent with the appellant’s rights as the paper owner. Senior counsel for the appellant conceded that inconsistency may not be strictly necessary, but maintained that there will be very few cases where adverse possession is established without inconsistent use. In our view, inconsistent use need not be proved in order to establish factual possession. What is important is whether the requisite degree of control and exclusivity was present. In this case, for the reasons we have already given, there was such control and exclusivity. Intention to possess The Council submitted that the trial judge misstated the law on intention to possess because he failed to refer in full to what Ashley J said in Bayport. In particular, the appellant criticised the trial judge for not referring to the following passage in Powell v McFarlane, which was quoted in Bayport: If his acts are open to more than one interpretation and he had not made it perfectly plain to the world at large by his actions or words that he has intended to exclude the owner as best he can, the courts will treat him as not having had the requisite animus possidendi and consequently as not having dispossessed the owner. The appellant submitted that the consequence of the alleged error was that the judge gave undue primacy to his findings about the respondent’s subjective intention and failed to give sufficient consideration to whether her acts indicated a manifest unequivocal intention to exercise exclusive control. In our opinion, the appellant’s criticisms of the trial judge’s analysis were unfounded … Contrary to the appellant’s submission, his Honour did not err in finding that ease of access through the fence on the southern boundary of the land did not detract from the nature of a fence as a sign to all who saw it not to enter. As we have said already, the fact that a person, including an employee of the Council, could have physically entered the land

[page 147]

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

boundaries. Others are internal. Some are ornate. Others are minimalist and purely functional. The nature and purpose of a fence will be affected by the nature, location and characteristics of the land and the uses to which it is put. Given that the use to which the Abbatangelos put the land over an extended period included grazing of livestock, it is entirely unsurprising that one purpose of maintaining the fences on the land was to prevent animals from straying on to the road. The existence of that purpose, however, did not prevent the maintenance of the fences [page 148]

from being included in the factual matrix from which findings could be made about factual possession and an intention to exclusively possess. In a still further submission, the Council sought to rely upon notations made by the Abbatangelos in a series of planning applications lodged between 1969 and 1979 concerning the respondent’s property. Documents which they filed depicted the land and used the acronym ‘NIT’ (‘Not in Title’) to describe it. The appellant submitted that the statements were clear acknowledgments by the respondent that the appellant, rather than she, owned the land. In our view, the notations were nothing to the point. The intention that the putative adverse possessor must have, and must manifest, is an intention to possess exclusively, not an intention to own. An acknowledgement as to who is the paper owner is not inconsistent with the requisite intent. The acronym ‘NIT’ accurately represented the title position and said nothing about who was in possession of the land and with what intention. The appellant submitted that the trial judge was bound to, but did not, find that Mrs Abbatangelo was aware of the use to which the appellant intended to put the land and so more was required to manifest an intention to possess the land adversely than was done by her. For the reasons set out at [6](h) above, the submission should be rejected. This case was not one where an inference — which Lord Browne-Wilkinson described in Pye as ‘improbable’ — could be drawn that Mrs Abbatangelo’s presumed awareness of the Council’s intended use of the land, and the lack of inconsistency between her use of the land and the Council’s intended use, justified a finding of fact that Mrs Abbatangelo had no intention to possess the land but only an intention to occupy it until needed by the Council. In relation to the trial judge’s use of Mrs Abbatangelo’s evidence about her own subjective intention, the appellant submitted that such evidence was ambiguous, inadequate and in any event self-serving. It submitted that the evidence of her intention apparent from her statement to Mr Draper should be preferred. We have already dealt with the 1992 conversation. With respect to the respondent’s evidence of her subjective intention, whilst statements of intention must be treated with caution, they may nonetheless be of use in conjunction with other circumstances. In this case, the trial judge was alive to the potentially self-serving nature of Mrs Abbatangelo’s statements of her intention and evaluated her evidence in the context of the evidence as a whole. In our opinion, he was entitled to accept Mrs Abbatangelo’s stated intention in the context of all the evidence. The appellant also relied on the Abbatangelos not having paid rates for the land. Although payment of rates may be evidence of an intention to possess, there is no

requirement that they be paid for intention to be established. As the Council was the paper owner of the land, it was not rated. In the circumstances, it was not to be expected that Mrs Abbatangelo would request the Council to issue rate notices to her. Again there is an element of confusion with recognition of ownership. It cannot tell against Mrs Abbatangelo having the requisite intention to possess the land that she did not volunteer to pay rates. Other issues relating to the principles of adverse possession The judge found that the period spent by the Abbatangelos in Geelong did not constitute an interruption to their continuous possession. The appellant challenged this finding. In our view, it was open to the judge on the evidence before him to find that the Geelong period did not interrupt the Abbatangelos’ possession. But even if such a finding was not open to the judge, in our view there was a continuous period of possession for 15 years from the time the Abbatangelos returned to Mernda in February 1975. The appellant next relied on the principle that possession of land cannot be adverse to the paper owner if done with the permission of that owner. It called in aid Mr Christian’s evidence about the appellant’s practice of allowing grazing on some Council land — even [page 149]

though, for reasons which we have described, the judge rejected its usefulness. It also called in aid evidence given by Mr Draper to which the judge did not refer. Mr Draper had said that some land owned by the appellant was fenced off by farmers who used it for grazing and that the appellant was happy for that to happen because it helped to keep the grass down. The appellant submitted that this was compelling evidence that the respondent’s use of the land for grazing was not adverse to the appellant. It also referred to evidence given by one of the respondent’s sons that the fences around the land were well maintained to keep animals from getting on to the road. It submitted that, consistent with Murnane v Findlay, the judge should have found that grazing was an equivocal act and indicated an intention to obtain a special benefit from the land rather than an intention to exclusively possess. In our view, those submissions must be rejected. The trial judge was correct to conclude that whatever tacit permission the appellant gave for farmers to graze their cattle on Council land did not apply to this small, treed and fenced-off parcel of land … In any event, grazing was far from being the only act of possession by the respondent of the land. Those acts, which extended over a lengthy period, were not engaged in as a consequence of some express or tacit permission of the appellant. All of the acts, when viewed in combination, were not the mere obtaining of a special benefit. They were sufficient to establish factual possession and an intention to exclusively possess. We observe in passing that apart from the matters to which we have already referred, the Council did not at trial or on appeal rely upon any particular conduct by it in relation to the land that told against the respondent’s claim of exclusive possession for the requisite period. Order: Appeal dismissed.

2.93 Questions 1.

Adverse possession can be very lucrative. In J A Pye (Oxford) Ltd v Graham [2003] AC 419 squatters acquired title to 57 acres of land in Berkshire with development potential, valued at £2.5 million in 2002. In Whittlesea City Council v Abbatangelo (2.92C), the value of the land had increased almost fivefold in just two years. The decision represents a significant loss of public land to Whittlesea, an outer metropolitan municipality with a surging population. In Monash City Council v Melville [2000] VSC 55 a municipality lost 428 square metres of public open space (valued at $75,000) when adjacent landowners knowingly enclosed a 20-foot strip of a council reserve with their own land. Should council land and other public land be at risk of loss through adverse possession in the same way as privately-owned land? Section 7B of the Limitation of Actions Act 1958 (Vic), which commenced in 2005, provides that the title of a council to land of which it is the registered proprietor is not affected by any period of adverse possession. Why did Whittlesea City Council not rely on s 7B?

2.

The Victorian Court of Appeal distinguished between acts amounting to adverse possession (factual intention and intention to possess), and ‘casual acts of trespass’ amounting to ‘enjoyment of a special benefit’ such as where a neighbor occasionally grazes animals on vacant land that abuts his or her own land, or where

children occasionally play there. In Bridges v Bridges [2010] NSWSC 1287, [14], Tamberlin AJ

[page 150]

said: ‘[A] use of land may amount to enjoyment of a special benefit of the land by casual, cursory or occasional acts of trespass and this may not suffice to establish factual possession nor demonstrate the requisite intention’. Is ‘special benefit’ simply a term indicating a conclusion that the use falls short of adverse possession? 3.

In Murnane v Findlay [1926] VLR 80 at 87, Cussen J said that in determining whether or not there was actual possession of the land by the claimant and actual dispossession of the documentary owner, the acts of the claimant implying possession necessary to establish a possessory title must be considered with reference to the peculiar circumstances of the case. These will include ‘the character and value of the property, the suitable and natural mode of using it, having regard to all the circumstances, and the course of conduct which the proprietor might reasonably be expected to follow with due regard to his own interests’. In South Maitland Railways Pty Ltd v Satellite Centres Aust Pty Ltd [2009] NSWSC 716, [18], Tamberlin AJ added: ‘What is sufficient in one case may be inadequate to prove it in another because it is necessary to have regard to the character and value of the property, the appropriate

way of using it and the course of conduct which a proprietor might reasonably be expected to follow’. If each case turns on its own peculiar circumstances, what assistance can be derived from previous cases in which particular uses were regarded as constituting, or not constituting, possession? 4.

In Mulcahy v Curramore Pty Ltd [1974] 3 NSWLR 464 at 475, Bowen CJ said: ‘Possession which will cause time to run under the Act is possession which is open, not secret; peaceful, not by force; and adverse, not by consent of the true owner’. In general, the adverse possessor must use the land as an owner might be expected to do: Powell v McFarlane (1977) 38 P & CR 452 at 469. Carol Rose sees the common law’s requirements for possession as amounting to a clear statement to other potential claimants of one’s intention to appropriate the property: Rose, ‘Possession as the Origin of Property’ (1985) 52 Uni of Chicago Law Review 73. Does characterising acts of possession as communication explain why enjoying ‘special benefits’ does not establish one’s claim, while fencing or enclosure of land or erection of a building is normally considered to be at least prime facie evidence of intention to exercise exclusive control over the land? See Seddon v Smith (1877) 36 LT 168, 169; George Wimpey & Co Ltd v Sohn [1967] Ch 487, 511A; Monash City Council v Melville (2000) V ConvR 54-621; [2000] VSC 55, [29].

2.94

In Seddon v Smith (1877) 36 LT 168, enclosure was said to be the

strongest possible evidence of adverse possession, but it is necessary to examine all the facts to determine whether the requisite intention has been established. In Riley v Pentilla [1974] VR 547, the fencing of land in a subdivision for use as a tennis court was not held to evidence adverse possession where the landowner who constructed it invited other landowners in the subdivision to use it. In Bayport Industries Pty Ltd v Watson [2002] VSC 206, a small area of land was enclosed by a poorly maintained fence. Ashley J was not satisfied that the claimant had factual possession of the disputed land accompanied by the requisite intention to possess, principally upon the ground that the claimant must have known that the fence had begun life as an internal fence for farming purposes quite unlike a suburban fence built upon the wrong alignment. See also Inglewood Investments Co Ltd v Baker [2003] 2 P & CR 319, where an adjacent landowner who

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erected a makeshift fence merely to pen in his own sheep was held not to have the requisite animus possidendi to establish adverse possession. In Whittlesea City Council v Abbatangelo (2.92C) at [100], the Victorian Court of Appeal said that fences can serve multiple purposes. The fact that one of the purposes was to keep livestock in does not in itself preclude the maintenance of a fence from being considered as part of the evidence of the squatter’s factual possession and intention to possess. One of the most obvious

indicators of factual possession in the urban context is having the key to the locks on a house. 2.95

To establish the requisite intention to possess, it is not necessary to

show that the squatter intended to exclude the documentary owner specifically. It is now accepted that it is sufficient to show that the squatter intended to possess the land to the exclusion of the world at large, including the documentary owner.47 In KY Enterprises Pty Ltd v Darby [2013] VSC 484 the defendant used vacant land as a driveway and erected gates with a lock to prevent access to it from the street; but the fence did not prevent access to the disputed land by the documentary title holder, the defendant’s neighbour. However the neighbour was not able to access the land because of the derelict state of buildings on his land. The defendant was held to have sufficient factual possession with the requisite intention to possess in order to establish adverse possession.

Possession amounting to a criminal offence not relevant 2.96

As we have seen above (2.57–2.62), a trespasser who takes

possession of the land may well commit a criminal offence in doing so. McPhail v Persons Unknown [1973] Ch 447; [1973] 3 All ER 393 (2.61C above) suggests that possessors in breach of the criminal law might not be able to take advantage of the Limitation Acts. This principle appears to be at odds with the general principles of adverse possession. The primacy of the Limitation Acts over criminal legislation was affirmed recently by the English

Court of Appeal in R (on the application of Best) v Chief Land Registrar and the Secretary of State for Justice [2015] EWCA Civ 17. Best had been restoring a derelict house since 1999. He commenced living in the building in breach of the criminal law as from 1 September 2012, when s 144 Legal Aid Sentencing and Punishment of Offenders Act (LASPOA) 2012 (Eng) (making squatting in a residential building a criminal offence) came into force. Best sought to register title through adverse possession in November 2012, the application being on the basis of the 10 years required by Schedule 6 paragraph 1 to the Land Registration Act 2002 (Eng). The Chief Land Registrar decided that the application would be cancelled on the basis that the effect of s 144 LASPOA prevented the claimant relying on any period of adverse possession which involved a criminal offence to establish the basis for an application for registration as the proprietor. The Court of Appeal rejected the argument on the basis that this legislation was not clear enough to repeal the relevant provisions of the Limitation Act.48 The same argument would seem to apply in Australia.

[page 152]

Adverse possession claims to part parcels adjacent to boundaries 2.97

At common law, adverse possession claims could be made to whole

parcels of land and to part parcels, such as a ‘boundary strip’ of land adjacent to the boundary of the adverse possessor’s land as conveyed. The boundaries

of land parcels registered under the Torrens statutes are described in the register by reference to Crown surveys and plans of subdivision, but are not ‘guaranteed’.49 Victoria and Western Australia allow an application for a vesting order in respect of part of a registered land parcel by an applicant who claims to have acquired it under the limitation statute. The provisions are discussed at 5.143ff. In addition, the Registrar (Vic) or Commissioner of Titles (WA) has administrative power to amend boundaries to coincide with land as actually and bona fide occupied.50 2.98

In the case of Torrens system land, all states except Victoria and

Western Australia either prohibit adverse possession claims to boundary strips, or impose significant restrictions upon them. From 9 January 2007, New South Wales allows adverse possession claims only in respect of whole parcels of land, except for a ‘residue lot’ (strip of land originally intended for use as a service lane or to prevent access to a road) which is not vested in the council: Real Property Act 1900 ss 45C, 45D(1), (2A), (2B). Where an applicant has been in adverse possession of land up to an ‘occupational boundary’ (such as a fence) that lies within the true boundary, the applicant may claim the whole parcel extending to the true boundary: s 45D(2), (6). Queensland prohibits applications to register ‘encroachments’: Land Title Act 1994 (Qld) s 98. In South Australia, the encroaching owner can apply to be registered as the owner of the boundary strip on the basis of adverse possession, but the registered owner can effectively veto the application by lodging a caveat: Real Property Act 1886 (SA) s 80F. Tasmania does not allow adverse possession claims that result in the creation or continuation of ‘sub-minimum lots’: Tas, s 138Y. The Northern Territory and the Australian

Capital Territory do not permit adverse possession claims in respect of Torrens system land: ACT, s 69; Land Title Act 2000 (NT) s 198. 2.99

The restriction on part-parcel adverse possession is relieved in New

South Wales, Queensland, South Australia and the Northern Territory by special legislation that empowers courts to provide discretionary relief in cases where a building encroaches across a title boundary.51 The court can order a transfer of the land over which an encroachment extends, grant another interest or right, or order removal of the encroachment. Western Australia also has a building encroachment provision, Property Law Act 1969 (WA) s 122, but does not restrict the acquisition of title to a boundary strip by adverse possession. In Executive Seminars Pty Ltd v Peck [2001] WASC 229, adverse possession was argued as an alternative ground for relief to s 122 although it was not established on the facts.52

[page 153]

2.100

It is not uncommon for a landowner to believe himself or herself to

be the documentary owner of a boundary strip of land actually owned by a neighbour, in circumstances where a dividing fence has been built off the title boundary. Provided that the landowner has the requisite intention to possess the boundary strip, his or her mistaken belief does not prevent the acquisition of title to the strip by adverse possession: Malter v Procopets [2000] VSCA 11; Bligh v Martin [1968] 1 WLR 804. In Sunny Corporation Pty Ltd v Elkayess Nominees Pty Ltd [2006] VSC 314, a squatter’s mistaken belief that he had a

lease was held to be irrelevant to the question of whether he had the requisite intention to possess.53 2.101

In the case of a part parcel adjoining a title boundary, especially

strong evidence of adverse possession may be required: Rimmer v Pearson (2000) 79 P & CR D21, at D22. In particular, evidence is required that the acts of possession occurred on the boundary strip and not on the surrounding land: West Bank Estates Ltd v Arthur [1967] 1 AC 665, 679; Williams v Underwood (1981) 45 P & CR 235.

Does possession of part of a lot amount to possession of the whole? 2.102

An adverse possessor may acquire title to a horizontal stratum of

land such as a subterranean cellar, even though someone else is in possession of the surface: Rains v Buxton (1880) 14 Ch D 537. In some circumstances where an adverse possessor’s acts of user have involved only part of the surface of a lot, the adverse possessor has been able to establish ‘constructive possession’ of the whole. The adverse possessor must show that he or she ‘has been dealing with the land in question as an occupying owner might have been expected to deal with it and that no-one else has done so’: Powell v McFarlane (1979) 38 P & CR 452, 470–2 (Slade LJ). In Lord Advocate v Lord Blandyre (1879) 4 App Cas 770, the claimant’s acts of ownership did not extend to the whole of the 700 acres of foreshore claimed. Lord Blackburn (at 791–2) said that acts of the claimant tending to prove possession of part may tend to prove ownership of the whole ‘provided that there is such a common

character of locality as would raise a reasonable inference that if [a party] possessed one part as owners they possessed the whole, the weight depending on the nature of the tract, what kind of possession could be had of it and what the kind of possession proved was’. The doctrine of constructive possession does not apply where the boundaries of the whole lot are undefined or disputed: Higgs v Nassauvian Ltd [1975] AC 464; JNM Pty Ltd v Adelaide Banner Pty Ltd [2011] VSCA 428.

Future interests 2.103

The general rule is that the right of action of the holder of a future

estate is deemed to accrue on the date on which the estate falls into possession.54 Thus, if A has a life estate and B has an equitable fee simple remainder, and A is dispossessed by X, B’s cause of action accrues on A’s death and B has the full limitation period from that date before the cause of action is

[page 154]

extinguished. This general rule is qualified in Victoria, Queensland and Tasmania. In those states the holder of the future estate has the full limitation period from the date upon which the cause of action of the holder of the preceding estate accrues, or six years from the date upon which the holder’s cause of action accrues, whichever is the longer period, in which to institute proceedings.55 Thus, assuming a 15-year limitation period, if A, the

life tenant, is dispossessed by X in 1997, and A dies in 2008, B, the remainderman, has until 2014 to bring action against X: that is, six years from when B’s estate became an estate in possession upon A’s death. If A is dispossessed by X in 2000 and dies in 2007, B has until 2015 to bring action: that is, 15 years from the date a cause of action accrues to A. In the three states where the qualification applies, a person against whom time has begun to run cannot avoid the consequences by creating new interests in the land by way of assurance.56

Equitable estates 2.104

As to trusts and equitable estates generally, see Chapter 4. In

considering the operation of the limitation of actions legislation on equitable interests, three situations must be distinguished. The first is where a right of action accrues to the holder of an equitable interest against the trustee. The general equitable rule was that in the case of an express trust, no lapse of time could bar the equitable right of the cestui que trust (subject of course to the equitable doctrines of laches and acquiescence). This rule has now been modified in some states, so that the trustee is now entitled to claim the benefit of any statute of limitations to the same extent as if he or she had not been a trustee, except where the trustee has been guilty of fraud, or the action is to recover trust property in his or her possession.57 The 2005 Western Australian Act does not bar a trustee from relying on the limitation period in case of fraud or breach of trust: WA, ss 27, 61. The New South Wales Law Reform Commission took the view that even a fraudulent trustee should not be forever beyond the protection of the legislation (Report of the Law Reform

Commission on the Limitation of Actions, 1967, paras 230–6). Accordingly, in New South Wales a trustee is in general entitled to claim the benefit of any limitation period (NSW, s 36), and a defrauded beneficiary has 12 years in which to bring an action to recover land after the time when he or she discovers or might with reasonable diligence have discovered a cause of action: NSW, s 47. 2.105

The second situation is where a cause of action accrues to the

trustee against the cestui que trust. Where the beneficiary is absolutely entitled and is in possession to the exclusion of the trustee, the statute may run against the trustee: Re Cussons (1904) 73 LJ Ch 296 at 298. Thus, in Bridges v Mees [1957] Ch 475, the purchaser under a contract of sale paid the full purchase price but the contract was never completed by conveyance. The purchaser went into possession against the vendor who was a bare trustee and acquired a title by adverse possession. Bridges v Mees was not cited to the Court of Appeal in Hyde v Pearce [1982] 1 All ER 1029; and it is arguable that if it had, the result in Hyde v Pearce would have favoured the purchaser.58 The third situation is where a right of action accrues to the holder of an equitable interest, or his or her trustee, against a stranger who has taken possession of land subject to a trust.

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In this case the normal limitation periods generally apply. Difficulties may arise if the legal estate of the trustee is extinguished before all equitable

interests have been barred. In this case the estate of the trustee is generally preserved so long as the right of action to recover the land of any person entitled to a beneficial interest therein either has not accrued or has not been barred.59 In most states actions for equitable relief are excluded from the operation of the provision specifying the limitation periods for actions for land, contract and other personal actions.60 These periods only apply where the courts of equity are prepared to apply them by analogy to the statute: Cohen v Cohen (1929) 42 CLR 91. Western Australia makes separate provision for limitation periods for actions for equitable relief, while preserving the equitable jurisdiction to refuse relief on grounds such as laches and acquiescence: WA, ss 27, 80.

Adverse possession by a co-owner 2.106

In the case of co-ownership the general rule is that time begins to

run when one co-owner takes possession of more than his or her share of the land, rents or profits.61 This rule qualifies the position under common law, whereby, in the absence of ouster, possession by one co-tenant was regarded as possession by all. The Australian provisions all derive from the Real Property Limitation Act 1833 s 12, which has been enacted in a number of jurisdictions. The provision is an example of ‘deemed adverse possession’, where legislative intervention sets the limitation period running even though there has been no trespass (2.118). The operation of an equivalent provision in the Bahaman legislation was considered by the Privy Council in Paradise Beach and Transportation Co Ltd v

Price-Robinson [1968] AC 1072; [1968] 1 All ER 530. In 1913 B died, devising land to certain named children (including his daughters R and U) and grandchildren, as tenants in common. During the lifetime of B, his daughters R and U had farmed the land on their father’s behalf. After his death they continued to farm it, although they did not live on the property. In the early 1920s they built a house on the land and from that date until their deaths in 1962 they were in possession of the land. In 1963 the appellants brought an action for possession against the successors in title to R and U. The appellants relied on the interest that their predecessors in title had taken under the will of B. It was shown that their predecessors in title had never taken possession of their share of the land, although they had occasionally received gifts of vegetables from it. The appellants argued that time had never started to run in favour of R and U who were rightfully in possession and committed no wrong in farming the land. It was held that the finding of the fact by the Supreme Court of the Bahamas that R and U were in possession for their own use and benefit was correct and that the respondents’ title was therefore extinguished. 2.107

In Wills v Wills [2004] 1 P & CR 37, the Privy Council considered

a similar provision under the legislation of Jamaica. On the breakdown of their marriage, a wife left her husband in sole occupation of the jointly owned marital home, and in sole receipt of the rents from another jointly owned property. She was found to have discontinued possession, or been dispossessed, for the limitation period. The husband was held to have acquired sole title to both properties by adverse possession.

[page 156]

In Re Application by Franklin [2009] VSC 496, a brother and sister were joint registered owners of a property over which the brother exercised sole rights of possession from 1959 until his death in 2009. It was held that the administrator of the brother’s estate was entitled to a vesting order under Vic, s 60, based on the deceased’s adverse possession against his sister for the full limitation period. While the deceased’s interest as joint proprietor did not survive his death, his interest acquired by adverse possession was not dependent on his interest as joint proprietor, and passed to his administrator. As to co-ownership generally, see Chapter 7.

Successive adverse possessors 2.108

The simplest case of a title to land being extinguished is where the

squatter dispossesses the owner of the fee simple estate and remains in possession for the full limitation period. In some cases the squatter may not actually occupy the land for the full period required to extinguish the interest of the previous owner. Three situations may occur: 1.

A has a fee simple estate in Blackacre. B dispossesses A and after 10 years purports to assign his or her interest to C. Can C rely on B’s period of adverse possession? See Asher v Whitlock (1865) LR 1 QB 1; 2.48C. What is C’s position before the expiration of the limitation period? Cf Tas, s 16A. While successive periods of adverse possession may be added together, there need be no formal connection between the

adverse possessors such as by formal conveyance or evidenced by other documentation.62 2.

B dispossesses A from Blackacre, but after 10 years’ adverse possession B abandons possession of the land. Does time continue to run against A?63 Note that it is a question of fact in each case whether a squatter has abandoned possession, and that the question is not conclusively answered by showing a mere break in physical possession: Nicholas v Andrew (1920) 20 SR (NSW) 178 at 184; Kierford Ridge Pty Ltd v Ward [2005] VSC 215 at [130].

3.

B dispossesses A of Blackacre, but after 10 years’ adverse possession is ousted by another adverse possessor, C. Can the periods of adverse possession of B and C be added together in order to extinguish the title of A? The generally accepted view is that they can, and in New South Wales and Western Australia this view has been given legislative recognition: NSW, s 38(2); WA, s 65(2). Who has the best title to the land after A’s title is extinguished? In Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 at 476–7, Bowen CJ in Eq said: If a person, A, is in adverse possession for a period of less than twenty years, say, ten years, and then abandons the property, he leaves no cloud on the true owner’s title, which is then restored to its pristine force, and another person, B, who later enters into adverse possession of the property, cannot add the period of A’s possession to his own so as to extinguish the title of the true owner when the period of twenty years from A’s first entry into possession is reached.64

[page 157]

When a person enters into adverse possession, and so long as he continues in possession before the expiry of the statutory period, he has title to the land in the nature of a fee simple, good against all the world except the true owner, and his title may be conveyed or devised to, or devolve upon, another person.65 Where there has been a series of persons in adverse possession by virtue of successive transmissions of the inchoate possessory title for a total period of twenty years or any extended period required by the Act, s 34 will operate to extinguish the true owner’s title. At that point of time the last successor being then in possession will acquire a title in fee simple to the land good against all the world including the true owner: Allen v Roughley (1955) 94 CLR 98 … Where there is a series of adverse possessors, not deriving title from each other, who have been in adverse possession for a continuous period of twenty years or any extended period required by the Act, s 34 will operate to extinguish the true owner’s title: Willis v Earl Howe [1893] 2 Ch 545 at pp 553, 554; Allen v Roughley (1955) 94 CLR 98; Salter v Clarke (1904) 4 SR (NSW) 280; 21 WN (NSW) 71. It is emphasised that possession must be continuous to have this effect. An abandonment by one adverse possessor followed by a break in time when the land is not in possession of some person adversely to the true owner will, as we have seen, restore the true owner’s title to its pristine force. Upon the extinguishment of the true owner’s title by successive trespassers, say A, B, C, D and E, who have been in adverse possession for the necessary period, the question arises as to the person in whom the title in fee simple exists at that time. The better view appears to be that it exists in the first of the successive trespassers, A; see Allen v Roughley (1955) 94 CLR 98 at pp 131, 132 … E, the final trespasser who is in possession at the time when the true owner’s title is extinguished, would, by virtue of his possession, have a title in fee simple good against all the world except A, B, C and D. The last statement needs qualification. If A brought proceedings to eject E, and E could prove that A had abandoned possession, then, in my view, E could successfully resist A. On the same ground, he may be able to resist B, C and D. Accordingly if the departure of A, B, C and D each took place in circumstances constituting an abandonment by each of them, E would indeed have a title in fee simple good against all the world: see Allen v Roughley (1955) 94 CLR 98 at pp 114, 115, 131 … It is, perhaps, unlikely that this would occur without a break in possession, which would restore the true owner’s title and prevent aggregation.

To determine the matter in a particular case of successive trespassers it is necessary to know whether a succeeding trespasser is possession wrongfully as against his predecessor, in which case his predecessor will retain a higher right than the successor, or whether on the other hand, the succeeding trespasser has entered immediately following an abandonment by his predecessor.

Stopping time running 2.109

Time stops running when the person having the cause of action

effectively asserts his or her title or when the squatter admits the existence of the superior title by acknowledgment or, in an appropriate case, part payment of a debt such as one secured by a mortgage. Merely realising that the land is owned by another and so cancelling a licence is not an acknowledgment of the rights of the owner: Szew To Chun Keung v Jung Kwok Wai David [1997] 1 WLR 1232.

[page 158]

The mere assertion of title in a letter from the documentary title holder to the adverse possessor is not sufficient to stop time running against the owner: Mount Carmel Investments v Peter Thurlow Ltd [1988] 3 All ER 129. A superior title may be asserted by bringing an action to recover the land or making a peaceable but effective entry upon the land. A mere formal entry upon the land (an entry without a resumption of possession) was once effective, but the position has now been changed by statute.66 Legislation also provides for the effect of an acknowledgment or part payment.67

2.110

Time will stop running if the person having the cause of action

consents to the continuance of possession. In BP Properties Ltd v Buckler (1988) 55 P & CR 337 the documentary title-holder gave the adverse possessor permission to remain on the premises. The English Court of Appeal held that this act was effective to prevent the possession being adverse, and so stopped time running. 2.111

In Ofulue v Bossert [2009] 1 AC 990; [2009] 2 WLR 749, a squatter

made a ‘without prejudice’ offer in writing to purchase the property in an attempt to settle proceedings for recovery of possession. The documentary owner refused the offer, and the proceedings lapsed. In later proceedings for recovery of the land, the documentary owner argued that the running of time had been interrupted by the commencement of the previous proceedings and by the squatter’s acknowledgement of title. The House of Lords held that when proceedings are permanently stayed, time will not be considered to have been interrupted by the commencement of those proceedings. While the squatter’s offer to purchase amounted to an acknowledgment of the documentary owner’s title, it was made only for the purpose of settling the proceedings and could not be admitted in evidence against him if no settlement resulted. See also Kierford Ridge Pty Ltd v Ward [2005] VSC 215 at [136], where it was held that an offer by the squatter to purchase the land, made in the context of an attempt to settle an adverse possession claim, did not negate the squatter’s claim to exclusive possession of the land. Compare Davidson v Elkington [2011] WASC 29, where some years before the legal action commenced, owners of contiguous lots agreed on a ‘land swap’ whereby the subject land would be incorporated into the title of the lot owner

who was encroaching on it. Although the land swap agreement was never carried out, Hall J held it represented an acknowledgment of title by the encroaching owner which was inconsistent with an intention to continue to adversely possess the land. The effect was to stop time running: at [156]– [160].

Extension of time 2.112

The legislation provides for extension of the limitation period in

certain circumstances. These include the disability of the person to whom the cause of action has accrued68 and cases in which the action is based on fraud or mistake or the cause of action is fraudulently concealed by the defendant.69 All states place an absolute limit on the extension of the limitation period that may be available to a person suffering from a disability and in New South Wales the limit applies generally.70

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The effect of effluxion of time 2.113

The modern limitation of action legislation operates to extinguish

not only the remedy but also the title of the person dispossessed of land for the requisite period of time. More recently this approach has been extended to statute-barred claims to recover goods. The negative operation of the legislation is now well accepted and certain consequences flow from this as a matter of principle. For example, the squatter will be bound by non-

possessory interests to which the land is subject, such as a restrictive covenant, easement or profit à prendre. The only rights extinguished by the running of the limitation period are those of persons who were entitled to bring an action to recover possession of the land.71

Tenancies 2.114

The general principle is that the lessor’s right to recover the land

against the lessee accrues when the lease determines by effluxion of time.72 If the lease provides for forfeiture by the lessor in the case of breach of condition by the tenant, the lessor’s failure to enforce the forfeiture will result in his or her right of action to recover land in respect of the breach of condition, being extinguished after effluxion of the limitation period. But the failure to forfeit will not prejudice the lessor’s right to recover the premises after the lease has determined by effluxion of time. For this purpose the lessor has a separate cause of action, arising at the determination of the lease, which is not barred until the limitation period has run.73 The New South Wales and Tasmanian sections provide that a right to recover land by forfeiture arises on the date the plaintiff discovers, or could with reasonable diligence have discovered, the facts creating the right of forfeiture. 2.115

Where a stranger dispossesses a tenant, time runs against the tenant

from the date of the dispossession. Time does not begin to run against the lessor until the termination of the lease, because the right of action does not accrue until that time. However, if the lessor is ‘dispossessed’ from the receipt of rent (in other words, if the tenant pays the rent to the wrong person) time

will begin to run against the lessor from the time the rent is wrongfully paid to the stranger, provided the rent is more than minimal.74 This provision is criticised by the New South Wales Law Reform Commission, Report of the Law Reform Commission on the Limitations of Actions, 1967, paras 174–176, on the ground that time runs against the landlord and in favour of the stranger receiving the rent even though the landlord has no cause of action against the stranger. In the view of the commission, time should not begin to run until the landlord becomes entitled to recover the land from the tenant by exercising the remedy of forfeiture: see now NSW, s 33. 2.116

Although adverse possession against a tenant for the limitation

period bars the tenant’s cause of action and title, the tenant’s title remains effective as against the landlord. In Fairweather v St Marylebone Property Co Ltd [1963] AC 510; [1962] 2 All ER 288, a tenant

[page 160]

held a 99-year lease that was not due to expire until 1992. The tenant’s cause of action to recover the land from a squatter was barred in 1932. In 1959 the tenant purported to surrender the balance of the lease term to the landlord, whereupon the landlord sought to recover possession of the land from the squatter. The House of Lords held by a majority that the tenant could surrender his lease to the landlord even after his title had been extinguished as against the squatter, whereupon the landlord’s cause of action against the squatter accrues.75 Even assuming that the title of the tenant was

extinguished only as against the squatter, how could the tenant, by surrendering his interest, confer on the landlord a right which he (the tenant) did not have; namely, a right to possession as against the squatter?76 The Irish Supreme Court declined to follow Fairweather in Perry v Woodfarm Homes Ltd [1975] IR 104. It would be open to an Australian court to follow suit. In Chung Ping Kwan v Lam Island Development Co Ltd [1997] AC 38 at 47, the Privy Council left open the question of whether Fairweather was correctly decided. 2.117

In Tichborne v Weir (1892) 67 LT 735 it was held that the title that

a squatter acquired under the Limitation Act was a new title, not a ‘parliamentary conveyance’ of the previous owner’s estate. Therefore, the squatter who extinguished the title of a tenant did not become liable to the landlord under the covenants of the tenant’s lease by virtue of privity of estate. This ruling was affirmed by Lord Radcliffe in Fairweather’s case.77 2.118

The limitation of actions legislation has long made special provision

for the case of periodic tenancies not in writing and tenancies at will. A tenancy at will, for the purposes of the legislation, is deemed to be determined at the expiration of one year from the commencement thereof and thus the cause of action of the person entitled to the land subject to the tenancy is deemed to have accrued at the date of its determination. Similarly, a periodic tenancy not in writing is deemed to be determined at the expiration of the first period, but if rent is received after that date the cause of action accrues on the date of the last receipt of rent.78 The overholding periodic tenant and the tenant at will are lawfully in possession with the

consent of the owner, but the statute provides for the running of time in his or her favour. 2.119

The policy questions presented by such provisions are raised by

Hayward v Challoner [1968] 1 QB 107; [1967] 3 All ER 122. Before 1938 a small plot of land was let on a half-yearly tenancy to the rector of a church for use as a rectory garden, without a lease in writing. The rector paid rent until 1942 but thereafter no rent was paid. The owners took no action as they did not wish to ask for money from the church. In 1966 the owners brought an action claiming possession of the plot. Section 9(2) of the Limitation Act 1939 (UK) provided that if there is a periodic tenancy not in writing, the tenancy shall be deemed (for the purpose of the Act of 1939) to be determined at the expiration of the first such period, and accordingly the right of action of the person entitled shall be deemed to have accrued at the date of such

[page 161]

deemed determination; but if rent is received after such deemed determination, the right of action is deemed to have accrued on the date of the last receipt of rent. The Court of Appeal held by a majority that the owner’s cause of action was barred. Russell LJ, with whom Davies LJ agreed, remarked: The generous indulgence of the plaintiffs and their predecessors in title, loyal churchmen all, having resulted in a free accretion at their expense to the lands of their church, their reward may be

in the next world; but in this jurisdiction we can only qualify them for that reward by allowing the appeal and dismissing their action.

Lord Justice Davies expressed ‘bitter regret’ at having to reach this decision, and condemned the rector’s behaviour. Further material on limitations is to be found in Chapter 5, dealing with adverse possession and the Torrens system.

1.

See also Richard Epstein, ‘Possession as the Root of Title’ (1978) 13 Georgia L Rev 1221; Carol Rose, ‘Possession as the Origin of Property’ (1985) 52 Univ of Chicago L Rev 73.

2.

The Common Law, 1881, 206–13.

3.

As to which, see 2.92C.

4.

Young v Hichens (1844) 6 QB 606.

5.

The Tubantia [1924] P 78.

6.

For an analysis of the development and application of the torts of trespass to goods, conversion, detinue and action on the case, see Dixon J in Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204. See further, Sappideen and Vines, Fleming’s The Law of Torts, 10th ed, 2011 (‘Fleming’), Ch 4; Gray et al, 3rd ed, 53–64.

7.

Palmer, 257; Trindade and P Cane, The Law of Torts in Australia, Oxford University Press, Melbourne, 1985, 139–40.

8.

Trindade and Cane, The Law of Torts in Australia, Oxford University Press, Melbourne, 1985, 139; Fleming, 86.

9.

Howard E Perry and Co v British Railway Board [1980] 1 WLR 1375 at 1382–3 per Megarry J.

10. See also Wade Sawmill Pty Ltd v Colenden Pty Ltd [2007] QCA 455. 11. This principle does not apply where the order of proceedings is reversed: that is, the first plaintiff is the bailee and the subsequent action is brought by the bailor. Compare The Winkfield [1902] P 42; [1900–3] All ER Rep 346; 2.21C. 12. The owners of the Winkfield admitted liability for losses caused as a result of the collision. The amount paid into court represented the statutory limit of their liability, calculated at the rate of £8

per ton. The Postmaster-General’s claim for the loss of registered articles, in respect of which he was responsible to the owners of the articles, was admitted by the registrar handling the claims. However, the registrar disallowed the claims of the Postmaster-General for the value of letters and parcels in respect of which no claim had been made by the owners, on the ground that the Postmaster-General was not liable over to the senders. It was this claim that was the subject of the action. 13. Tilbury, Civil Remedies, vol I, 1990, 63. 14. See Hawes, ‘Recaption of Chattels: The Use of Force Against the Person’ (2006) 12 Cant L R 253–72. 15. See also Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 4) [2008] WASC 293; N Palmer, ‘Title to Sue in Bailments: Repudiation and the Contractual Basis of Liability for Wrongs to Chattels’ (2008) 24 JCL 132. 16. See also City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477; [1962] ALR 184; and Standard Electronic Laboratories Pty Ltd v Stenner [1960] NSWR 447. 17. See also Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22; Clambake Pty Ltd v Tipperary Projects Pty Ltd [2008] WASC 293; Palmer, 342–5. 18. Palmer, 257. 19. See further, R Hickey, Property and the Law of Finders, (Hart, 2010), Ch 4; and L Aitken, ‘Abandonment of a Chattel and the Unwilling Bailee’ (2010) 84 ALJ 369. 20. J Tooher, ‘Jubilant Jamie and the Elephant Egg: Acquisition of Title by Finding’ (1998) 6 APLJ 117, 135. 21. See also Hickey, above n 19, 142–4; R Mulheron, ‘The Money in the Briefcase: Flack and Title to Sue in Conversion’ (2000) 5 Deakin LR 205. 22. Harris, ‘The Concept of Possession in English Law’ in Guest (ed), Oxford Essays in Jurisprudence, (OUP, 1961), 69–106; Tay, ‘The Concept of Possession in the Common Law: Foundations for a New Approach’ (1964) 4 MULR 476. 23. Robinson v Western Australian Museum (1977) 138 CLR 283 at 338; Re Jigrose Pty Ltd [1994] 1 Qd R 383 at 386; Keene v Carter (1994) 12 WAR 20 at 24–6; Banks v Ferrari [2000] NSWSC 874 at [98]; Moorhouse v Angus & Robinson (No 1) Pty Ltd [1981] 1 NSWLR 700; see also L Aitken, ‘The Abandonment and Recaption of Chattels’ (1994) 68 ALJ 263. 24. Harris, above n 22, 69; MacMillan, ‘The Finding Distinction’ (1996) 146 NLJ 383; Morris, ‘Lost

Abandoned or Discarded Objects — Finders Keepers?’ (1984) NLJ 1126. 25. An order of mandamus is one issued to compel a person to perform a duty which he or she has refused to perform. 26. Imperial Acts Application Act 1969 (NSW) ss 18–20; Crimes Act 1958 (Vic) s 207 and Summary Offences Act 1966 (Vic) s 9(1)(g); Criminal Code Act 1899 (Qld) ss 70, 71; Summary Offences Act 1953 (SA) s 17D; Criminal Code Compilation Act 1913 (WA) s 69; Criminal Code Act 1924 (Tas) s 79. 27. Residential Tenancies Act 1997 (Vic) s 229; Landlord and Tenant Act 1899 (NSW) s 2AA; Residential Tenancies and Rooming Accommodation Act 2008 (Qld) s 277; Residential Tenancies Act 1987 (WA) s 80; Residential Tenancies Act 1997 (ACT) s 37; Residential Tenancies Act 1995 (SA) s 95. 28. Summary Offences Act 1953 (SA) s 17D(2); Crimes Act 1958 (Vic) s 207(2); Criminal Code 1899 (Qld) s 71; Criminal Code Act 1924 (Tas) s 79(2); Criminal Code (WA) s 70; Imperial Acts Application Act 1969 (NSW) s 19. 29. See ACT, s 43 (goods only); NSW, ss 63–68A; Qld, ss 12(2), 24; SA, s 28; Tas, ss 6, 24 (and note s 16A); Vic, ss 6(2), 18; WA, s 75. 30. McCrimmon, ‘Whose Land is it Anyway? Adverse Possession and Torrens Title’ in Grinlinton, 157, 159. 31. M Dockray, ‘Why Do We Need Adverse Possession?’ [1985] Conv 27 at 272–4. 32. R Posner, Economic Analysis of Law, 6th ed, Aspen Publishers, New York, 2003, 83; see also Jourdan, 50–1. 33. Stake, ‘The Uneasy Case for Adverse Possession’ (2001) 89 Geo LJ 2419 at 2436. 34. See, for example, Sprankling ‘An Environmental Critique of Adverse Possession’ (1994) 79 Cornell L Rev 816. 35. McCrimmon, above n 28; B Edgeworth, ‘Adverse Possession and Human Rights: The Last Act in JA Pye (Oxford) v United Kingdom’ (2007) 15 Australian Property Law Journal 107, 159–60; Griggs, ‘Possessory Titles in a System of Title by Registration’ (1999) 21 Adel LR 157. 36. Law Commission and HM Land Registry, Land Registration for the Twenty-first Century: A Consultative Document LC 254, 1998, at [10.7]. 37. O’Connor, ‘The Private Taking of Land: Adverse Possession, Encroachments by Buildings, and Improvement under a Mistake’ (2006) 33(1) UWALR 31, 35–36.

38. O’Connor, above n 37, 38–41; Goodman, ‘Adverse Possession of Land — Morality and Motive’ (1970) 33 MLR 281. 39. Although the Land Registration Act 1925 had been repealed, it applied to the facts in this case which arose before the repeal. 40. For discussion of the human rights aspects of the case, see L Griggs, ‘Possession, Indefeasibility and Human Rights’ (2008) 8(2) QUTLJ 286; B Edgeworth, ‘Adverse Possession and Human Rights: The Last Act in JA Pye (Oxford) v United Kingdom’ (2007) 15 APLJ 107. 41. Edgeworth, ‘Adverse Possession, Prescription and their Reform in Australian Law’ (2007) 15 APLJ 1. 42. NSW, s 27(1), (4); and no adverse possession is possible in respect of land defined as ‘Crown land’: Crown Lands Act 1989 (NSW), s 170(3); Tas, s 10(1) and see s 10(4), (5). 43. Vic, ss 7, 32; Qld, s 6(4); WA, ss 19(2), 76; see McGellin & Fuchsbichler v Button [1973] WAR 22. 44. Cf Law Reform Committee Report, para 3.41, LRC (Tas), Report on Adverse Possession and Other Possessory Claims to Land, Report No 73, 1995, para 9.32. 45. NSW, s 28; Vic, s 9(1); Qld, s 14(1); SA, s 6; WA, s 66; Tas, s 11(1). 46. NSW, ss 29, 30; Vic, s 9(2), (3); Qld, s 14(2), (3); SA, ss 7, 8; WA, ss 67, 68(c); Tas, s 11(2), (3). 47. Ocean Estates v Pinder [1969] 2 AC 19; Bayport Industries Pty Ltd v Watson (2006) V ConvR 54709; [2002] VSC 206; Whittlesea City Council v Abbatangelo (2.92C) at [6]; Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163. 48. See Butt, ‘Adverse Possession and Criminal Trespass’ (2014) 89 ALJ 150. 49. See Weir, ‘The Uncertainty of Certain Boundaries’ (2001) 9 APLJ 27. 50. WA, ss 170, 171, 177; Transfer of Land Act 1958 (Vic) s 99. The scope of the Registrar’s powers is unclear and requires clarification: see Victorian Law Reform Commission, Review of the Property Law Act 1958, Report 20, 2010, paras 4.1–4.31. 51. Encroachment of Buildings Act 1922 (NSW); Real Property Act 1900 (NSW) Pt 14A; Property Law Act 1974 (Qld) Pt 11, Div 1; Encroachments Act 1944 (SA); Encroachment of Buildings Act (NT). 52. For further discussion on encroachment provisions, see Wallace, Weir and McCrimmon, Real Property Law in Queensland, 4th ed, (Thomson Reuters, 2015), 109–15; Butt, Land Law, 6th ed, (Thomson Reuters, 2010), 62–7; Moore, Grattan and Griggs, Bradbrook, MacCallum and Moore’s Australian Real Property Law, 6th ed, (Thomson Reuters, 2016), 826–31.

53. Although not in NSW: see 2.95. As to the use of adverse possession to adjust boundary problems, see Park and Williamson, ‘An Englishman Looks at the Torrens System: Another Look 50 Years On’ (2003) 77 ALJ 117; Parliament of Victoria Law Reform Committee, Review of the Fences Act 1968, Report, 1998, Ch 6; O’Connor, ‘An Adjudication Rule for Encroachment Disputes: Adverse Possession or Building Encroachment Statute?’ in Cooke (ed), Modern Studies in Property Law Vol 4, (Hart, 2007), 197. 54. NSW, s 31; Vic, s 10(1); Qld, s 15(1); SA, s 9; WA, s 69(1); Tas, s 12(1). 55. Vic, s 10(2); Qld, s 15(2); Tas, s 12(2). 56. Vic, s 10(3); Qld, s 15(3); Tas, s 12(5). 57. Vic, ss 11, 27; Qld, ss 16, 27; SA, ss 31, 32; Tas, ss 13(1), 24 (and see s 16A); see also Dalton v Christofis [1978] WAR 42; Re Flavelle; Moore v Flavelle [1969] 1 NSWR 361. 58. See Sills, ‘Hyde v Pearce’ (1983) NLJ 526. 59. NSW, s 37; Vic, s 11; Qld, s 16; WA, s 78; Tas, s 13(3), (4). 60. NSW, s 23; Vic, s 5(8); Qld, s 10(6)(b); Tas, s 9. 61. NSW, s 38(5); Vic, s 14(4); Qld, s 22; SA, s 20; WA, s 3(6)(d); Tas, s 16(4); Re Application by Franklin [2009] VSC 496. See N Skead, ‘Giveth With One Hand, Taketh Away With Possession?’ (2011) 19(1) APLJ 103. 62. Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315; Mount Carmel Investments v Peter Thurlow Ltd [1988] 3 All ER 129; Renaghan v Breen [2000] NIJB 174; Roy v Lagona [2010] VSC 250; Shaw v Garbutt (1996) 7 BPR 14,816; (1997) NSW ConvR 55-801; Jourdan, 103. 63. See NSW, s 38(3); Vic, s 14(2); Qld, s 19(2); Tas, s 16(2). These sections confirm the decision in Trustees, Executors and Agency Co Ltd v Short (1888) 13 App Cas 793. See generally Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315; Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 at 476–7 (quoted below). 64. Trustees Executors and Agency Co Ltd v Short (1888) 13 App Cas 793 at 798, 799; Allen v Roughley (1955) 94 CLR 98 at 114, 115, 131; cf Solling v Broughton [1893] AC 556; (1893) 14 LR (NSW) 412. 65. Asher v Whitlock (1865) LR 1 QB 1; Perry v Clissold [1907] AC 73; (1907) 4 CLR 374; Wheeler v Baldwin (1955) 94 CLR 98 at 108, 130 et seq; Allen v Roughley (1955) 94 CLR 98. 66. NSW, s 39; Vic, s 16; Qld, s 21; SA, ss 18, 19; WA, s 84; Tas, s 19; see Symes v Pitt [1952] VLR 412 at 430–3; Shaw v Garbutt (1996) 7 BPR 14,816; (1997) NSW ConvR ¶55-801.

67. NSW, s 54; Vic, ss 24, 25; Qld, ss 35–37; SA, ss 21, 42; WA, ss 46–51; Tas, ss 29–31. 68. NSW, ss 52, 53; Vic, s 23; Qld, s 29; SA, s 45; WA, ss 35–36, 42, 52; Tas, ss 26–28. 69. NSW, ss 55, 56; Vic, s 27; Qld, s 38; Tas, s 32; cf the more limited provisions in SA, s 25; WA, s 38. 70. NSW, s 51; Vic, s 23(1)(c); Qld, s 29(2)(b); SA, s 45(3); WA, ss 42(1), 52; Tas, s 26(4). 71. Re Nisbet and Potts’ Contract [1905] 1 Ch 386, 391; [1904–7] All ER Rep 865; Ashe v Hogan [1920] 1 IR 159; Jourdan, 7–10. 72. The current provisions are: NSW, s 31; Qld, s 15(1); SA, s 9; Vic, s 10(1); WA, s 69; Tas, s 12(1). 73. NSW, s 32; Qld, s 17; SA, ss 10, 11; Tas, s 14; Vic, s 12; WA, s 70. 74. Qld, s 18(3); SA, s 17; Tas, s 15(3); Vic, s 13(3); WA, s 71; Bligh v Martin [1968] 1 All ER 1157; [1968] 1 WLR 804. 75. Wade asks: Why did the principle nemo dat quod non habet not apply in this case?: Wade, ‘Landlord, Tenant and Squatter’ (1962) 78 LQR 541. 76. For criticism, see Wade; Note (1962) 78 LQR 33; Harrison, 108–9. The English Law Reform Committee in its Final Report on Limitation of Actions, Cmnd 6923, 1977, paras 3.44–3.46. 77. See further, Jackson, ‘The Legal Effect of the Passing of Time’ (1970) 7 MULR 407 at 411–16; see also Omotola, ‘The Nature of the Interest Acquired by an Adverse Possessor of Land under the Limitation Act 1939’ (1973) 37 Conv & PL 85. 78. NSW, s 34(2); Qld, s 18; SA, ss 15, 16; Tas, s 15; Vic, s 13; WA, s 72.

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The Fragmentation of Proprietary Interests in Land

CHAPTER

3

INTRODUCTION 3.1

As we have seen from Chapter 1, property refers to a bundle of rights

over things exercisable against others. The bundle of rights in an object may be held by one person or a group of persons at any given time. Moreover, the elements of the bundle may be divided up among a number of persons in a wide variety of ways. This capacity for extensive fragmentation of proprietary interests is evidenced in a number of common law doctrines.1 First, the doctrine of tenure, discussed below (see 3.3ff), enabled interests in land to be divided spatially, with different tenants having a range of entitlements tied to particular parcels of land. Second, the doctrine of estates allowed a fragmentation of interests in land on a temporal basis. These developments

were carried further in relation to land than other objects, principally because of the permanence of land, but also because of the economic, social and political importance to the social structure of feudal times. According to Pollock and Maitland: Just in so far as the idea of feudalism is perfectly realized, all that we call public law is merged in private law: jurisdiction is property, office is property, the kingship itself is property; the same word dominium has to stand now for ownership and now for lordship.2

At a later stage of historical development, the equitable doctrine of trusts, a third form of divided ownership, separating beneficial ownership from strict legal entitlement, extended the techniques of fragmentation from real property to other objects. Because the doctrines that underpinned this type of fragmentation originated in the Courts of Equity, as distinct from the common law courts, it can be seen as in the nature of a jurisdictional fragmentation of proprietary interests. 3.2

In the Australian context, one of the most persistent and perplexing

questions in the history of property law has been whether, and if so, how, to recognise the claims of Indigenous

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peoples with those of the European settlers who came to inhabit the continent. This issue poses the problem of how to distribute rights over land in a clear and comprehensive manner, or in Frank Brennan’s terms, how ‘sharing the country’ might be effectively expressed in legal doctrine.3 The

belated recognition of native title by the High Court in Mabo v Queensland (No 2)4 represents a further fundamental element in dividing rights over land in Australia. Insofar as the nature and incidents of native title derive not from common law, equity or legislation, but from a wholly different system of law, namely the customs and traditions of Indigenous Australians, native title may be described as the fourth type of fragmentation: that is, systemic fragmentation of interests in land. As Gummow J put it in 1999 in Yanner v Eaton, native title lies at the ‘intersection’ of two systems of law: it originates in a traditional system, yet is recognised by the common law.5 This chapter will examine each one of these forms of fragmentation (space, time, jurisdiction and system) separately.

FRAGMENTATION IN A SPATIAL DIMENSION: THE DOCTRINE OF TENURE 3.3

The doctrine of tenure has exerted a profound influence on the

structure of proprietary interests in land. The roots of the doctrine of tenure lie in the economic and political interstices of the feudal system. The term refers to a mode of holding land whereby one person (the ‘tenant’) holds lands from (or ‘of’) another subject to the performance of certain obligations. In English law, it can be traced to the Norman Conquest. A victorious William the Conqueror confiscated the property of the recalcitrant English landowners and then redistributed these lands not only to his Norman supporters, but also to Englishmen in return for their loyalty. These tenants who held directly from (or ‘of’) the Crown were known as ‘tenants in chief’. It

followed that only the Crown ‘owned’ land absolutely, as it alone held of no other. Landowners who were not tenants in chief, and who did not rebel against William, continued in possession of their land, held of these tenants in chief, as recognised by the Domesday survey which charted who held what land, and of whom.6 These persons’ landholdings were not the subject of a grant from William. However, in order to legitimise the notion of the Crown’s paramount lordship over land, the law adopted a fiction that presumed that all land titles were held by the King’s subjects as a result of a royal grant.7 The obligations of tenants generated complex feudal ties between the King and his tenants in chief in the form of ‘services’ and ‘incidents’. A service was an obligation on the part of the tenant owed to the landlord. For example, in return for a grant of an interest in land, a tenant in chief might agree to provide a certain number of knights to serve the King for 40 days of the year (known as ‘knight service’). In turn, the tenant in chief might grant his land or part of it to others. In this way, he became a ‘mesne lord’, meaning that he stood between the King and the tenant actually in occupation. These grants might specify different services, such as the provision of agricultural labour. This was known as ‘socage tenure’. This process of creating tenures out of tenanted land was known as ‘subinfeudation’. It led to a pyramid-like structure

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of landholding, with a tenant typically also an ‘overlord’ of a tenant whose interest had been carved out of his own by means of a grant. At the same time, these tenanted lands were subject to various ‘incidents’. Incidents were rights conferred on the lord over the tenant’s land or the tenant’s person that arose in certain circumstances, most commonly on the death of the tenant. For example, in the case of knight service on the death of a tenant in fee simple the heir of the tenant had to pay a sum of money known as ‘relief’ to the overlord before he could succeed to the land. If the heir was an infant, the overlord was entitled to manage the land during the heir’s minority and keep all rents and profits (the incident of ‘wardship’). The overlord’s consent to the marriage of the heir had to be obtained and a condition of the consent might be the payment of a large sum of money (the incident of ‘marriage’). An important incident was that of escheat: the land of the tenant by knight service would escheat to the Crown in the event either of there being no heirs, or the tenant in chief’s being convicted of a felony. In the case of socage tenure the incidents were more limited. Escheat and relief were usually the only applicable incidents.8 The complicated pyramid of feudal relationships had the King at the tip, for all land was held of him, while each person in the pyramid to whom the land had been granted owed services to the mesne lord immediately above, and was owed services by the person immediately below. Of course, each of these tenants, no less than the King, would have land that they actually possessed (known as their ‘demesne’), as well as land which they held as lord, so that tenants were often lords at the same time. By contrast, the person at the bottom of the pyramid had only rights of actual occupation of the land

and was known as the ‘tenant in demesne’. In relation to that particular piece of land, therefore, it could be said that there were a number of persons with rights: first, the tenant in demesne with possessory rights; second, a mesne lord to whom the tenant owed services; third, a tenant in chief to whom the mesne lord owed services; and finally the Crown who received services directly from the tenant in chief. It followed that the modern vocabulary of ‘ownership’ was unhelpful in explaining the complexity of this distribution of rights: no one ‘freeholder’ could claim absolute ownership of this particular parcel of land, or indeed any parcel of land within the kingdom. The exception was those lands that constituted the Crown’s demesne. It is in this way that tenure connotes fragmentation in a spatial dimension: it allowed for a number of overlapping sets of rights to subsist over one particular parcel of land. A simplified version of this fragmentation exists in the case of the contemporary tenancy: both landlord and tenant can say, ‘That is my property’, in the sense of meaning that each has rights over it — namely, one to possession, the other to rent and the benefit of associated obligations. The feudal system became increasingly complex with numerous tenurial relationships existing in respect of the same parcel. Eventually the process became cumbersome and services difficult to enforce. Thus, in 1290, the Statute of Quia Emptores was passed. The statute was important for two reasons. First, it permitted every free man to alienate his interest in the whole or part of his land without his lord’s consent. Second, it prevented further subinfeudation from taking place. If A held land as tenant in chief from the King, he could alienate the whole or part of his land to B, so that B now stood in A’s shoes. However, A could not create a tenurial relationship

between himself and B. Thus, if A alienated his entire interest in the land, B became the tenant in chief of the King. This rule only applied to grants of the land in

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fee simple and did not prevent new tenures being created by grant of a lesser estate, such as a life estate. The Statute of Quia Emptores remains law in Australia, although three states have repealed the statute and re-enacted it in simplified form.9 3.4

With the process of subinfeudation abolished, the feudal pyramid

began to shrink. In 1660 the Tenures Abolition Act abolished knight service, converting all free tenures to socage tenure. Today the doctrine of tenure has no practical significance in Australian land law. Its influence still lingers, however, in three areas. First, it is often said that no person can, in the technical sense, ‘own’ land, since all land is held of the Crown. This proposition is still formally part of Australian law. By the time Australia was settled, subinfeudation was no longer possible, and there were no overlords; thus all land is held directly of the Crown because all land titles originate in Crown grants: Mabo v Queensland (No 2) (1992) 175 CLR 1 at 80 per Deane and Gaudron JJ. Second, the modern landlord–tenant relationship bears some resemblance to the early tenurial relationship. Third, and most importantly in the Australian context, the traditional doctrine of tenure operated until Mabo to obstruct recognition of native title. Despite these vestigial marks of the

doctrine, it can be argued that it has never been apposite to the reality of land law in Australia because its fundamental features — services and incidents — were never present in the same manner as in England.

No services 3.5

The standard interpretation of the legal position in Australia was

expressed by Windeyer J in Council of the Municipality of Randwick v Rutledge (1959) 102 CLR 54: ‘The early Governors had express powers under their commissions to make grants of land. The principles of English real property law, with socage tenure as their basis, were introduced to the colony from the beginning …’ (at 71). In 3.3 above it was noted that tenurial holding was marked by obligations of services and incidents, and that in the case of socage tenure (the only form of tenure relevant to Australia), the relevant obligations were the service of agricultural labour, and the incidents of relief and escheat. If these substantive obligations ever existed in Australia, then a case could be made for the idea that there is no absolute ownership of land here; instead, grants of land to citizens would lead to a ‘holding of’ the Crown. By the end of the eighteenth century, agricultural services had been commuted to a monetary payment known as ‘quit rents’. But no such commuted payments were levied in Australia. Payments in the form of purchase annuities spread usually over 20 years were levied on the grant of parcels of land from the Crown, and they were called ‘quit rents’. But these sums represented instalments of the monetary value of the land paid by grantees, or purchase annuities which came to an end when the full purchase price was paid. They

were not in any sense representative of the value of any continuing service to be performed in relation to land as was the case in England.10 It therefore appears to be inaccurate to see them as evidencing tenurial holding of the Crown.

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No incidents 3.6

At common law, land held in fee simple would pass (or escheat) to the

feudal overlord on the occurrence of certain events. In Australia, the feudal overlord was the Crown. In the case of socage tenure, escheat occurred in two kinds of cases: first, where the tenant in fee simple was convicted of a serious criminal offence, or left the realm to avoid conviction. Second, escheat arose on the death of a tenant in fee simple intestate and without next of kin. Escheat with attainder (as the first kind of escheat was known) was abolished in England in 1870 by the Forfeiture Act, and the Australian states followed the English example. Where a tenant in fee simple dies intestate without next of kin, the Crown now takes the realty and personalty of individuals dying intestate without next of kin as bona vacantia in the majority of Australian jurisdictions.11 These provisions align the rules of land law with the law of chattels. In the case of chattels, the Crown assumed the same absolute ownership as the deceased had in cases of intestacy and no surviving next of kin. By contrast, the doctrine of escheat implies that the Crown takes back what was originally its own. The statutory basis of the bona vacantia rule,

rather than the right deriving from the nature of the fee simple itself, is therefore further evidence of the gradual dissolution of the tenurial vestiges of Australian land law. Moreover, the incident of relief has never existed in Australia. It therefore seems that any reference to landholders ‘holding of’ the Crown appears to have been overtaken by a gradual process of legal evolution, rendering the term now quite misleading.12 The High Court’s decision in Mabo casts further doubt on the relevance of the traditional doctrine of tenure in Australia: see 3.77C.13

FRAGMENTATION IN A TEMPORAL DIMENSION: THE DOCTRINE OF ESTATES Introduction 3.7

By classifying interests in land according to the conditions on which

they were granted — the tenurial services and incidents — the doctrine of tenure recognised that the sum total of rights in relation to an object could be divided in many ways, so that a number of persons could have proprietary interests in a single piece of land. This idea was conducive to the fragmentation of ownership along other lines: ‘In particular, with the evolution of the doctrine of estates, property interests came to be fragmented on the basis of time’: Western Australia v Ward (2000) 170 ALR 159 at 359 per North J. The evolution of the doctrine of estates was the foundation for the invention of the concept of future interests. It is in this

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latter development that one can see most clearly what Gray and Gray describe as ‘the fourth dimension of land’.14 3.8

Land has certain special characteristics which differentiate it from

other forms of property. Its location is permanent and it may be capable of generating income forever. Because of the nature of land and its unique place in the economic and social structure of feudal times, the early common law recognised the desirability of allowing persons to hold successive proprietary interests in land. The desired goal was accomplished through the development of the doctrine of estates. The term ‘estate’ means, for present purposes, the fullest set of rights of enjoyment of land: namely, the right of possession. In the case of the ‘estate in fee’ this was (3.12) ‘the maximum interest which a subject could have in the land’: Mabo v Queensland (No 2) (1992) 175 CLR 1 at 80 per Deane and Gaudron JJ. Estates are to be differentiated from lesser interests in land such as easements or profits à prendre. This difference was recognised by the common law in its categorisation of estates as ‘corporeal hereditaments’ — referring to the physical possession of land — and the lesser interests as ‘incorporeal hereditaments’, which were seen as more akin to rights over land. Of course, this distinction is not entirely satisfactory as estates also refer to bundles of rights over land; but the distinction serves the purpose of distinguishing the qualitatively and quantitatively different nature of the types of rights. The doctrine of estates permitted interests in land to be carved out on a

temporal basis. One person might be granted rights to present possession while allowing a person who had a right to possess the land in the future. Each would have separate bundles of rights, each of which could be disposed of separately. So, the person who had a right to possess in future could transfer his interest immediately. The emergence of the doctrine was assisted by the fact that under the feudal system of tenure it was difficult to say that an individual ‘owned’ the land. Only the sovereign ‘owned’ land; the lords and tenants lower down the feudal scale thus had to own something else. The common law developed the notion that there was a thing called the ‘estate’, quite separate from the land. Ownership of the estate entitled the owner to possession (seisin) of the land at some time, but not necessarily to immediate possession. This approach permitted the common law to create estates of different duration. The greatest estate was the fee simple estate which, in theory, could last forever, while the life estate entitled the holder to possession of the land for his lifetime. The duration of other estates, such as the fee tail (see 3.13–3.14) or leasehold interests (see 3.16–3.20), was different again. In time, all estates became alienable. Thus, the holder of the fee simple estate, for example, could dispose of an estate inter vivos or by will (when devises of real property were permitted), even where the estate would not ‘fall into possession’ until some future time (as where entitlement to possession was dependent on the death of the holder of the life estate). The holder of a life estate, too, was entitled to convey his estate: see 3.15. 3.9

The operation of the doctrine of estates may be illustrated by an

example: A, the holder of the fee simple estate in ‘Blackacre’, may wish to convey a life interest to his wife, W, followed by a fee simple estate to his son,

S. Accordingly, A conveys to ‘W for life and then to S in fee simple’. In this case, S acquires a fee simple estate immediately on execution of the conveyance, notwithstanding that his mother is alive. Despite his acquisition of the fee simple estate, S’s right to possession of ‘Blackacre’ does not arise (or, in legal terminology, ‘accrue’) until W’s death, when her life estate determines. During W’s lifetime, S is free to convey his fee

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simple estate, although he cannot confer on the purchasers the right to immediate possession of the land, since he does not have this right. The conveyance of the fee simple estate does confer on the purchasers a present right to future possession; consequently, on W’s death the purchaser becomes entitled to immediate possession of the land. Even if S predeceases W, he may devise his fee simple estate by will, and the devisee will become entitled to S’s right to future possession. 3.10

The materials in this chapter explore the refinements of the doctrine

of estates. Once the doctrine is mastered there is a tendency to ignore the fact that this is not the only way to organise a system of proprietary interests in land. The Romans, for example, did not have a doctrine of estates, but accepted only the concept of absolute ownership (dominium). They did not admit the possibility of a proprietary interest in land for a limited period of time. In order to accommodate the needs of a society which demanded that persons be permitted to use land temporarily, certain concepts were

developed, notably hiring (akin to a lease, but creating only a personal contract between the parties) and the usufruct (something like a life estate). But these were quite different from common law estates as they conferred rights of enforcement only against the person having dominium. While other legal systems adopt different techniques to achieve the flexibility provided by the doctrine of estates, the doctrine is basic to the modern law of property.

The estates — general 3.11

Estates are usually classified into freehold and less than freehold, or

leasehold interests. The distinction has its origins in the feudal system. At first, the three freehold estates — the fee simple, the fee tail and the life estate — were the only estates recognised by the courts. By contrast, leases were regarded as mere personal contracts between the landlord and tenant. They were accordingly regarded as inferior interests and classified as personalty. A freehold estate carried with it seisin and consequently the protection of the actions for the recovery of land. The holder of a leasehold estate had no such remedy, seisin being in the landlord — the freeholder. If the leaseholder were dispossessed he could not, originally, recover possession but only damages from the landlord for breach of contract. It was not until the end of the fifteenth century that the leaseholder came to be protected by the action of ejectment: see 2.55. It followed that a lease for 500 years was afforded less protection than a life estate. The formal distinction between the two categories was that estates of freehold were of uncertain duration, because freehold estates are measured ultimately in lives, which of course are

of inherently uncertain duration, while estates less than freehold last for a certain period of time, or at least for a period capable of being rendered certain.

Fee simple 3.12

The fee simple is the greatest interest in land recognised by the

common law and is the closest it comes to recognising absolute ownership. As the Full Court of the Federal Court concluded in Gumana v Northern Territory (2007) 153 FCR 349 at [83]: [A]n estate in fee simple is for almost all practical purposes the equivalent of full ownership of the land and confers the lawful right to exercise over, upon, and in respect to, the land all rights of ownership save to the extent that any such right has been abrogated, qualified or varied by statute, by the owner of the fee simple or by a predecessor in title (whether or not for the benefit of a third person).

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The fee simple therefore affords ‘the widest powers of enjoyment in respect of all the advantages to be derived from the land itself and from anything found on it’: per Gummow J in Wik v Queensland (1996) 187 CLR 1 at 176. Initially the estate continued so long as the heirs of the original tenant (the feudal word for freeholder) were still living, but by the early fourteenth century it was established that if the estate were alienated, the estate continued so long as the new freeholder had heirs. Under the modern law the estate continues indefinitely regardless of the existence of heirs. The word

‘fee’ indicates that the estate was one of inheritance, in the sense that under the old law it descended to the heir of the tenant in fee simple for the time being upon that tenant’s death. The word ‘simple’ means that under the old law the estate was capable of passing to heirs generally and was not, as in the case of the fee tail, restricted to a particular class of heirs. The modern law permits the fee simple estate to be freely disposed of inter vivos or by will.15 If the holder of the estate dies without making a will, the assets in the estate are to be sold by the administrator and distributed to the next of kin according to a statutory formula.16

Fee tail 3.13

The fee tail owed its existence to the importance of land as a form of

family wealth. Although the rights of enjoyment conferred by the fee tail resembled those incident to the fee simple estate, the rights of disposition were more limited. The estate was given to a person and then to specified descendants of that person, with the intention that it should last only while this line of specified descendants continued. In this way the grantor could ensure that the land would remain in the family forever, or at least as long as certain descendants survived. Male or female descendants might be specified as might descendants of a particular wife. Where descendants of a particular sex were specified, the interest was known as a tail male or tail female. If descendants of a particular wife were specified it was known as a special tail. All this was made possible by the statute De Donis Conditionalibus 1285 (De Donis). Before this statute was passed, a gift ‘to A and the heirs of his body’ was treated by the courts as a fee simple subject to a condition that A

had issue. Once A had a child, the condition was treated as satisfied, and for the purposes of alienation, A was in the same position as the holder of a fee simple. In other words, A could alienate the land in fee simple absolute and defeat the expectation of any children and the intention of the grantor. The statute provided that in gifts of this kind the will of the grantor should be observed and that despite any alienation by the donee, the land should descend to his issue on death and revert to the grantor on failure of the donee’s heirs. This meant that after enactment of the statute, the tenant in tail, for the time being, could alienate only an interest which lasted for his lifetime.

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3.14

In Australia, the law relating to fee tails varies greatly from state to

state. In New South Wales, Victoria, Queensland, Western Australia and the Northern Territory the estate has virtually been abolished.17 The New South Wales, Queensland and Western Australian sections go further than the Victorian one. In these states not only can fees tail no longer be created (as in Victoria), but existing interests were converted to fee simple estates. Although the enactment of these provisions makes further legislation unnecessary, New South Wales, the Northern Territory, Victoria and Queensland have repealed the statute De Donis.18

Life estate

3.15

A life estate was created when an interest in land was granted to a

person for life. It was not, of course, an estate of inheritance since it terminated on the death of the tenant. An estate pur autre vie (for the life of another) was created by an express gift (‘to B for the life of A’) or, more commonly, by the life tenant, A, conveying the interest to another person, B. In either case, B’s interest terminated when A (who was known as the cestui que vie — ‘he who lives’) died. Special difficulties arose if B died before A. Since the estate was not one of inheritance it could not be devised nor would it devolve upon an intestacy. The common law solved the problem by creating the doctrine of occupancy. If the grant to B was to B and his heirs, then on B’s death the estate pur autre vie passed to B’s heir as special occupant. B’s heir did not take simply because he was the heir but because of the special mention of heirs in the grant. His interest in the land was not liable to the payment of B’s debts. If, however, the word ‘heirs’ was not mentioned in the grant to B, B’s heir had no special claim. The first person to enter the land after B’s death became entitled to it as ‘general occupant’ for the rest of A’s life. Again, the general occupant had no liability for B’s debts.19 Today, statutory provisions have swept away the common law doctrine of occupancy. Under these provisions estates pur autre vie may be disposed of by will and, on an intestacy, form part of the assets of the deceased to be distributed among the next of kin.20

Leasehold estates 3.16

As noted in 3.9, leasehold estates are classified as less than freehold

and, in general, are distinguished from freehold estates on the basis that their

duration is certain or capable of being rendered certain. Leaseholds were initially regarded by the common law as mere personal transactions, without the protection of the actions for recovery of land, partly because they developed from attempts to evade the usury laws by giving the creditor a lease to ensure

[page 172] repayment of money lent to the freeholder (the landlord).21 The principles governing the modern landlord–tenant relationship are examined in Chapter 8. Leasehold estates are as follows. 3.17

A lease for a fixed term of years A lease for a fixed term of years is a

lease for a fixed period which expires automatically at the end of the period. Despite the phrase ‘fixed term of years’ the lease may be for any specified period such as one day or 999 years: see 8.14. 3.18

A periodic tenancy A periodic tenancy differs from a lease for a fixed

term in that it does not terminate until appropriate notice is given. Periodic tenancies may be created on a monthly or weekly basis or by reference to any other agreed period and the notice required to terminate the tenancy will vary accordingly. It is clearly not possible to state precisely the date on which a periodic tenancy will determine, since this will depend on the date on which notice is given. Nonetheless, the periodic tenancy can be accommodated within orthodox doctrine by regarding it as a tenancy for a definite term of one year (or month or week as the case may be), with a superadded provision

that it will continue for another term of the same period unless determined by notice: Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 at 50–1; 8.18. 3.19

A tenancy at will A tenancy at will, as the name implies, may be

determined at any time by either party subject, in appropriate cases, to a ‘packing-up’ period: Landale v Menzies (1909) 9 CLR 89. A tenancy at will may be created, for example, where the holder of the fee simple estate allows another person to take exclusive possession of the land without any agreement as to the duration of the occupancy or any payment of rent. A tenancy at will differs from a licence in that a tenant at will is able to maintain an action against third parties while the licensee cannot. Arguably, a tenancy at will should not be classified as a leasehold estate since it has no defined duration, although conventionally it is classified in this way. 3.20

A tenancy at sufferance The so-called tenancy at sufferance arises

where a tenant takes possession of land lawfully pursuant to a lease, but continues wrongfully in possession after termination of the lease. This occurs, for example, where a tenant for a fixed term ‘holds over’ after the expiration of the term without the landlord’s assent or dissent: Anderson v Bowles (1951) 84 CLR 310. The landlord may institute proceedings for recovery of possession of land from the tenant, but cannot maintain an action for trespass, at least until objection is made, since the tenant’s initial entry on to the land was lawful.

Creation of freehold estates — words of

limitation 3.21

At common law, the rules of conveyancing were strict and technical.

If the grantor used incorrect words to delimit the estate intended to be granted, the grant would not effect the intention. Thus, if the grantor intended to pass a fee simple estate, but used the wrong form of words, the grantee would receive only a life estate ‘by default’ and the balance of interest would revert to the grantor. The technical words used merely to define the estate conferred were known as words of limitation, while words which designated the person upon whom the estate was conferred were called words of purchase.22

[page 173]

Fee simple 3.22

Inter vivos At common law the correct expression was ‘to A and his

heirs’; no other words of limitation would suffice to create a fee simple estate. The words ‘and his heirs’ did not give the heirs any interest in the land: they were not words of purchase, but words of limitation, defining the estate obtained by A. 3.23

By will Because the courts leaned in favour of effectuating the

testator’s intention, it was not necessary to use strict words of limitation. Any words evidencing the wish to devise a fee simple estate were sufficient. Nevertheless, the onus was on the devisee to establish that this was the testator’s intention.

Fee tail 3.24

Inter vivos To create an entail the word ‘heirs’ was again vital. In

addition, words of procreation, evidencing the grantor’s intention to limit the interest to lineal descendants of the grantee, were necessary. The common form of limitation was ‘to A and the heirs’ (words of limitation) ‘of his body’ (words of procreation). However, other words of procreation, such as ‘of his flesh’ or ‘from him proceeding’ might be used. The entail could be further limited by restricting it to a particular class of descendants; for example, by reference to sex as in the limitation ‘to A and the heirs male of his body’. Alternatively, the heirs could be limited to those descended from a particular wife. This created a special tail, as in the limitation ‘to A and the heirs of his body begotten upon his wife X’. 3.25

By will It will be sufficient if the language of the will clearly

evidenced the testator’s intention to devise an entailed interest. Thus, words such as ‘to A in tail’ were sufficient to create a fee tail. No special words were necessary.

Life estate 3.26

Inter vivos A life estate was created by any words showing an

intention to do so, as a limitation ‘to A for life’. The life estate was created also by default in the case where the grantor failed in the attempt to create a fee simple or a fee tail because incorrect words of limitation were employed. Again, the life estate would result where an instrument failed to use any words of limitation at all.

3.27

By will A will (or ‘devise’) created a life estate in the beneficiary (or

‘devisee’) unless the testator demonstrated a clear intention to pass a fee simple or fee tail. However, as has been seen, it was not necessary to employ technical words of limitation to demonstrate that intention.

Statutory modifications to the common law 3.28

The common law rules have been modified by statute in all

Australian jurisdictions. In general, the reforms have displaced the common law’s presumption in favour of the life estate as the default estate by presuming that the grantor intends to dispose of the whole interest subject to contrary intention. Also, with the exception of South Australia, in recognition of the obsolete nature of this particular estate, the fee tail can no longer be created, and any attempt to do so will lead to the creation of a fee simple. In the case of inter vivos dispositions, after the

[page 174] introduction of the reforms,23 expressions such as ‘to A in fee’, ‘to A in fee simple’, ‘to A in tail’, ‘to A’, and ‘to A forever’, in addition to ‘to A and his heirs’, will pass a fee simple or the whole interest of the grantor. These provisions allow a life estate to be created by the expression of a clear intention to do so. In South Australia, the common law rules for dispositions inter vivos continue to apply. For dispositions by will, the statutory reforms adopted the common law’s

more lenient position that the testator’s intention was the guiding principle, so that a disposition without words of limitation would pass the entire estate of the testator unless a contrary intention were shown.24 When states abolished the fee tail, attempts to create a fee tail by will conferred a fee simple on the intended beneficiary.25 Words of limitation have only ever been relevant to old system land. Because the Torrens system uses particular forms for the creation and disposition of interests, and is based on the principle of registration rather than forms of words in documents, the common law rules are irrelevant.

Determinable and conditional interests General 3.29

The scheme of estates outlined earlier could be modified by the

grantor (or the testator in the case of estates devised by will) imposing limits on the duration of the estate granted by reference to the occurrence of some event which might or might not occur. The common law allowed such limits to be imposed either by way of a ‘determinable limitation’ or by the attachment of a ‘condition subsequent’ to the grant of an estate. In one sense the difference between the two was purely a matter of semantics, yet the use of one form of words rather than another could produce very significant consequences. The point may be illustrated through a case where the grantor, by a conveyance inter vivos, seeks to impose a limit on the grant of a fee simple estate. The grantor may do this by creating a determinable fee simple estate:

that is, one that continues until it is automatically terminated by the occurrence of some event specified in the grant. If it is intended that the estate should end when the land is no longer used for residential purposes, the grant would be ‘to A in fee

[page 175]

simple until Blackacre ceases to be used for residential purposes’. In this example, the fee simple estate automatically reverts to the grantor on the occurrence of the determining event. The event specified must not be one which is bound to occur at some time (such as the death of a named person) for it is an essential characteristic of a fee simple estate that it may last forever. The grantor’s interest in a determinable fee simple estate is known as a possibility of reverter since there is a possibility that the grantor will gain the fee simple estate in the future. 3.30

The grantor may also achieve the objective not by means of a

determinable fee simple estate, but by creating a fee simple estate subject to a condition subsequent (or a conditional fee simple). Such an estate is created where the grantor attaches a condition to the grant of the fee simple estate which will cause that estate to be cut short. Thus, a conveyance ‘to A in fee simple, but if Blackacre ceases to be used for residential purposes his estate shall thereupon cease’ creates in A a fee simple estate subject to a condition subsequent. If the condition subsequent is breached, the grantor or the grantor’s successor in title will have a right to ‘re-enter’ the land. If this right

of re-entry is exercised, either by physically retaking possession of the land or by obtaining a court order for possession, A’s fee simple estate will end. Until the grantor exercises the right of re-entry, A’s fee simple estate continues. This differs from the possibility of reverter retained by the grantor after the creation of a determinable fee simple estate in that the grantor’s right of reverter arises immediately on the occurrence of the determining event without the need to take any particular action. It now appears that both possibilities of reverter and rights of re-entry are alienable inter vivos or by will: see legislation cited in 3.12. The following case illustrates the significance of the distinction between determinable and conditional estates.

Effect of void contingencies 3.31C

Zapletal v Wright [1957] Tas SR 211 Supreme Court of Tasmania

Crisp J: The plaintiff and the defendant in this suit, the appellant and respondent respectively in the appeal — are registered proprietors as joint tenants of 2 roods 29 1/10 perches of land at Bellerive, subject to the incumbrances noted on the certificate of title. The plaintiff is claiming a sale of the property and division of the proceeds. The defendant was a married man, separated from his wife. Two or three years after the separation, he commenced co-habitation with the plaintiff and this continued for some 15 years until 1955 when the plaintiff left and married another. Two children were born of the union. The defendant bought the land in 1951. The learned trial judge found that the plaintiff was not a contributor to the purchase. However, the defendant agreed at the plaintiff’s request to put the title in their joint names, which he did and they were so registered. The learned trial judge found that in doing so, the defendant’s intention was to confer a gift on the plaintiff of a joint interest in the land subject to the limitation or condition shortly to be noticed. This express intention he found sufficed to rebut the implication of any resulting trust in the defendant’s favour, and in this I think he was plainly right. The defendant’s evidence, which the learned judge accepted, as to the circumstances of the gift was as follows. The plaintiff had been worrying him that she had no security

and that if he were to die his lawful wife would take all in preference to her. She therefore asked for an [page 176]

interest in the land he was purchasing. He, for his part, was worried that if he did he might lose both her and the land. As he said, ‘He knew he couldn’t trust her’, that is, to remain with him. He therefore, before completing the gift by having her registered as joint proprietor, asked her what would be the position if she left him. Her answer, according to his evidence was: ‘Don’t be silly Jim. If I ever do that I will take my name off it the next day’, or another version of the same promise was: ‘I’d sign it back to you the next day if I did leave’. In another part of his evidence he said: ‘It was given to her on her own terms, that she would stick to me and behave herself’. The learned judge regarded the transaction as a gift, subject to a condition subsequent, the term of the condition being that if she should cease to co-habit with the defendant (otherwise than by the death of either of the parties) her interest should cease. I think that it was correctly so regarded. Initially I had some doubts as to whether it was not a terminable limitation, that is, an estate during cohabitation which is to be distinguished from an estate in fee subject to determination if she should cease to co-habit. The distinction is often a fine one, but it is well established. The subject is lucidly dealt with in Professor Cheshire’s The Modern Law of Real Property (5th ed) Ch VI, s 1, where other references will be found. On this point some of the authorities are not always easy to follow, but I think that the agreement for the determination of the estate should be regarded as a condition subsequent for the following reasons. The form of the gift was an undivided moiety in fee; it was not in terms limited to an estate defined by reference to any prior event. In fact it might continue after the event in which defeasance was to take place or might become impossible or irrelevant, that is, after the defendant’s death. The form of the condition is such that it did not denote the extent of the estate but only the event in which the larger estate conferred may have been cut short. But it is better said by Preston: ‘The (determinable) limitation marks the bounds or compass of the estate, and the time of its continuance. The condition has its operation in defeating the estate before it attains the boundary or has completed the space of time described by the limitation’: Preston on Estates, vol 1, p 49; quoted by Cheshire, p 523. The distinction is important, because a condition subsequent void on a ground of illegality or because it is contra bonos mores may be ignored leaving the primary gift good but a terminable limitation void for the same reasons fails entirely. There is no law that a man may not make a valid gift to his mistress. The primary gift is therefore good. Then, what of the condition which is a distinct clause by which an estate already limited is to be defeated? The learned trial judge in analysing the intention of the parties states his conclusions thus: ‘Here the agreement between the parties showed a composite intention — first, that the plaintiff should have a beneficial interest so long as she continued to co-habit with the defendant, and second, an intention that if she should cease to co-habit, the whole beneficial interest should go to the defendant’, but with respect I think this is very like stating the same thing in two different ways, the first as a [terminable] limitation and the

second as a condition subsequent. The provision in question must, I think, be one or the other, it cannot be both. I have given my reasons for thinking it to be a condition subsequent and I think plainly its object was to bind the plaintiff to the defendant and to provide inducement for her not to leave him. In the defendant’s own words: ‘It was given to her on her own terms that she would stick to me and behave herself’, that is, in the sense of being a loyal paramour. Hence I would say that the condition was void as tending to promote immorality. It is true that the object of the gift may be regarded as a desire to make some provision for the plaintiff’s maintenance in the event of the defendant’s death when he should be no longer able to do so, and the gift may from that aspect be regarded as in the nature of ‘voluntary compensation by way of maintenance made to the (appellant) for the injury done to her by his past illicit connection’ [page 177]

(Gibson v Dickie (1815) 3 M&S 463; 105 ER 684 … and other cases on the subject of past co-habitation as a valid consideration) but it is the condition to which attention must be directed as a distinct and separable provision, and the object of the condition in this case was not to secure to the plaintiff maintenance after co-habitation ceased, but to deprive her of it in the event of her voluntary termination of an immoral state. It may thus be said to have acted in terrorem, and in this respect the matter is completely distinguishable from Gibson v Dickie and the other cases cited. In my opinion, therefore, the plaintiff took by way of gift as joint tenant in fee simple free from the condition which is void and she would be entitled to a declaration accordingly. She has not in fact asked for a declaration but for a sale. I think she is entitled to that order she seeks under ss 4 and 16 of the Partition Act 1869 (see Bray v Bray (1926) 38 CLR 542) and I would therefore uphold the appeal. [Burbury CJ and Green J delivered judgments generally agreeing with that of Crisp J.]

3.32

The reason for the rule that if a condition subsequent is void the

primary gift remains valid, but that if a terminable limitation is void the gift fails entirely is that in the latter case the contingency is seen to be so intimately a part of the estate that it cannot be severed from it. Ultimately, the difference between the two kinds of estates is both semantic and of substance. According to Gummow J in Caboche & Bond v Ramsay (1993) 119 ALR 215 at 227:

Criticism has been levelled at this doctrine on the grounds that distinctions such as this are purely semantic … However, the two cases described are logically distinct and the difference between them is well-settled and fundamental. In the [case of a gift defeasible by condition subsequent], the donor is attempting to take back something which he has given absolutely, something which is beyond his power. In the [case of a determinable limitation], the donor is merely defining the nature of what is given. It is necessary in each case to construe the instrument creating the proprietary interest in question to determine into which category the interest falls.

Phrases that have been held to create conditional interests are: ‘on condition that’, ‘but if’ and ‘provided that’. Expressions effective to create determinable interests are: ‘whilst’, ‘during’, ‘as long as’ and ‘until’.26 A gift in a will expressed to be ‘on condition that my brother has attended Alcoholics Anonymous (AA) and complied with their requirements concerning sobriety for a period of not less than two years’ was held to be a condition precedent: Hyde v Holland [2003] NSWSC 733. It was also held that a condition cannot be met by substantial compliance with its terms. Accordingly, although the intended donee had been completely sober for two years, but had not attended any AA meetings, he failed to satisfy the contingency.27 In 2010, the Victorian Law Reform Commission28 recommended enactment of a provision that removed the much-criticised distinction between conditional and determinable interests. It proposed that all conditions attached to a fee simple should give rise to conditional interests only on the basis that it would be closer to the grantor’s intention that the gift would be effective without the condition (if declared void) rather than the gift fail entirely, as it does in the case

[page 178]

of determinable interests. Also, it argued that if a condition is void for public policy, then the effect on dispositions should be the same regardless of the form of words used (at 71–2). As the decisions in Caboche & Bond v Ramsay and Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 demonstrate, the distinction continues to apply in AngloAustralian law. 3.33

In Andrews v Parker [1973] Qd R 93, the male plaintiff and the

female defendant lived together in a house owned by the plaintiff. The plaintiff transferred title to the house to the defendant. It was understood between the parties that if the defendant returned to her husband she would retransfer title to the plaintiff. The defendant and her husband began to see more and more of each other and eventually the husband moved into the house. The plaintiff left the house and took proceedings to recover title to the property. The defendant argued that the transfer from the plaintiff was made conditionally upon her continuing in immoral cohabitation with the plaintiff and that this condition was not enforceable. Stable J upheld the agreement. He did see this gift as a grant of an interest defeasible by condition subsequent, but held that the agreement between the parties was not one to bring about immoral cohabitation for cohabitation already existed. The agreement simply provided for a termination of the relationship by stipulating for a return of the property rather than to induce the defendant to continue to live apart from her husband. In addition, his Honour took the view that concepts of ‘immorality’ had changed over time. Thus, even if the agreement between the parties was based on an immoral consideration, which he doubted, ‘then the immorality was not such according to modern standards as

to deprive the plaintiff of the right to enforce it’ (at 104). Stable J did not cite Zapletal v Wright in his judgment.29

When will a condition be void? 3.34

There are five grounds upon which conditions and limitations may be

void for reasons of public policy. First, as Zapletal v Wright shows, a condition or limitation may be void on the ground of its being conducive to immoral behaviour — though what counts as immorality may change from time to time. Second, a condition or limitation may be void on the grounds of illegality, as where a condition seeks to frustrate insolvency laws: Re Machu (1882) 21 Ch D 838. Third, a condition or limitation may be void for uncertainty. A gift ‘to my daughter provided that if she at any time after my death marries a person who is not of Jewish parentage and of the Jewish faith her interest is to cease’ was held void because the meaning of ‘Jewishness’ was too vaguely defined: Clayton v Ramsden [1943] AC 321; [1943] 1 All ER 16. The House of Lords held that the term could have meant either religion or ethnicity. In Re Tuck’s Settlement Trusts [1978] Ch 49; [1978] 1 All ER 1047 and Re Tepper’s Will Trusts [1987] 1 Ch 358, gifts in similar terms were found not to be void for uncertainty. In Re Tepper’s Will Trusts the court held that extrinsic evidence could be adduced to clarify the intention of the testator. In the circumstances, the court held that the gifts were sufficiently certain. In Re Allen, dec’d [1953] Ch 810, a gift contingent on adherence to ‘the doctrine of the Church of England’ was held not to be void for uncertainty. Also, the court held that the requirement of certainty is more liberal for conditions precedent than conditions subsequent.

[page 179]

Fourth, a condition or limitation will be void if it unduly restricts the right to marry. In Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; [1961] ALR 339, a testator left ‘my residuary real and personal estate to my sons on condition that they and their wives shall at the date of my wife’s death satisfy my trustees that they each profess the Protestant faith’. (Two of the sons had already married Catholics, and the other was engaged to marry a Catholic.) A majority of the High Court (Dixon CJ and Windeyer J) held that the condition was void because it offended the public policy of preserving and maintaining marriage: ‘In an uneasy marriage, a more fruitful apple of discord could hardly be placed upon the domestic board’ (per Dixon CJ at 404). Kitto J, in a dissenting judgment, held that while ‘it may cause discord and unhappiness if [the wife] is unwilling to fulfil the condition … fulfilment of it must tend to enhance domestic concord’ (at 410). Also, the High Court rejected the reasoning of Else-Mitchell J at first instance, who held that the condition was void for uncertainty. The court unanimously held that the gift was sufficiently certain because it referred to those readily identifiable Christian churches and their various offshoots that broke with Rome at the time of the Reformation. In Ellaway v Lawson [2006] QSC 170, a condition stipulated that the applicant would not receive her bequest until she either divorced her current husband or her current husband died. Douglas J followed Ramsay v Trustees Executors and Agency Co Ltd holding that this condition was not void, stating that the standards of ordinary moral and decent persons would prevent such

conditions operating as an encouragement to divorce (at 13) (unlike the one in Ebbeck).30 3.35

Grants conditional on the grantee not remarrying have been upheld

as valid: Jordan v Holkham (1753) Amb 209; 27 ER 139; Allen v Jackson (1875) 1 Ch D 399. In light of the reasoning in Andrews v Parker (see 3.33) changing social attitudes might be likely to render these authorities doubtful. Prohibitions on marrying a member of a narrowly-defined group have been upheld: Perrin v Lyon (1807) 9 East 170; 103 ER 538 (‘a Scotchman’); Duggan v Kelly (1847) 10 Ir Eq R 295 (‘a Papist’); Jenner v Turner (1880–81) 16 Ch D 188 (‘a domestic servant’), as has a prohibition on marrying a named person: Jarvis v Duke (1681) 1 Vern 19; 23 ER 274.31 Conditions directed to prevent the abandonment of religious faith, or requiring a change of faith (as opposed to preventing marriage to a person of a different faith), have been held to be valid. In Blathwayt v Baron Cawley [1976] AC 397, the House of Lords upheld as valid an interest defeasible should the grantee ‘be or become a Roman Catholic’ (see also Ebbeck at 402 per Dixon CJ). Conditions of this nature are not unlawful under anti-discrimination legislation.32 Fifth, and finally, a condition in a grant will be void if it substantially restricts the grantee’s rights of alienation: see generally Chapter 8.

[page 180]

3.36 Questions

1.

What interests would be created by the following limitations? a.

To A in fee simple, provided that A does not marry B.

b.

To A in fee simple so long as A remains a resident of Australia.

c.

To A in fee simple on condition that he continues to use the premises as an ammunition store (assuming that such use is illegal by statute).

2.

Are the reasons given by Crisp J in Zapletal v Wright for holding the condition subsequent void convincing? Is the approach in Andrews v Parker to be preferred?

3.

Is it socially desirable to allow property holders to impose conditions or limitations relating to religious belief and marriage on the grant of an estate? Is Rich J’s reasoning in Ebbeck more convincing than that of the majority? Can Ebbeck be reconciled with Clayton v Ramsden? Do the cases above demonstrate that the ‘deference accorded the private prejudice of the propertied class has been substantial’?33 Should conditions in gifts relating to religious affiliation, whether or not linked to choice of marriage partner, be void on the grounds of public policy? Or should the antidiscrimination legislation invalidate such gifts? Conversely, is it undesirable to restrict property holders from attaching to gifts whatever conditions they see fit, leaving it to the prospective donee to exercise their free choice one way or the other? Do you agree with the statement of Lord Wilberforce in Blathwayt v Baron

Cawley that public policy should not interfere with a testator’s preferences on religious grounds ‘in relation to landed estates in which family attitudes may be strong and valued by testators, and moreover which may involve close association with one or another Church’ (at 426)? 4.

Do the reforms proposed by the Victorian Law Reform Commission in its 2010 report to conditional and determinable fees effectively address the problem of void conditions?

The doctrine of waste 3.37

Since the doctrine of estates permits successive interests in land, the

law must achieve a balance between the rights of the person presently entitled to possession of the land (the life tenant) and those of the person entitled to possession in the future (the remainderman or reversioner). If the life tenant is permitted to exploit the land without restriction, the value of the land may be drastically reduced, to the detriment of the remainderman. But if the life tenant is unduly restricted, the efficient exploitation of the community’s land resources will not be possible. The basic purpose of the common law doctrine of waste is to reconcile the conflicting interests of life tenant and remainderman.

[page 181]

3.38

There are a number of categories of waste. The liability, if any, of the

life tenant to the remainderman depended on the category into which the life tenant’s conduct could be placed. The common law categories are as follows: Ameliorating waste is conduct by the life tenant which alters the character of the land, but which enhances its value. Although such acts technically amount to waste, the court will provide no relief other than nominal damages at the suit of the remainderman. Equity in the exercise of its discretion may refuse to grant an injunction to restrain waste that is not of an injurious character or is trivial in its effect on the land. Thus, in Doherty v Allman (1878) 3 App Cas 709, the House of Lords refused to issue an injunction against a tenant who had converted dilapidated store premises into dwelling houses, thereby increasing the value of the land substantially. In Meux v Cobley [1892] 2 Ch 253 a farm was converted into a market garden; and in Hockley v Rendell (1909) 11 WALR 170 sheds were pulled down and moved to another part of the property; held in both cases; no damages because value of land increased. Permissive waste is committed where the life tenant fails to keep the property in a satisfactory state of repair, for example, by allowing the buildings on the land to become dilapidated. A life tenant is not liable for permissive waste unless the instrument creating the life estate imposes an obligation to repair upon the life tenant: Re Cartwright (1889) 41 Ch D 532. Voluntary waste is a positive act occasioning injury to the land. Examples include the life tenant demolishing a building, opening a new mine or cutting ‘timber’. Timber is defined as trees which are normally felled for

building purposes. This includes pinus radiata: Crocombe v Pine Forests of Australia Pty Ltd (2005) 219 ALR 692, but not mallee: Chapman v Strawbridge [1910] SALR 118; Re Hart [1954] SASR 1. There is one exception to this rule: Estates which are cultivated merely for the produce of saleable timber, and where the timber is cut periodically. The reason of the distinction is this, that as cutting the timber is the mode of cultivation, the timber is not to be kept as part of the inheritance, but part, so to say, of the annual fruits of the land, and in these cases the same kind of cultivation may be carried on by the tenant for life that has been carried on by the settlor on the estate and the timber so cut down periodically in due course is looked upon as the annual profits of the estate, and therefore, goes to the tenant for life [Honywood v Honywood (1874) LR 18 Eq 306 at 309 per Jessel MR].

A life tenant is liable for voluntary waste unless the instrument granting the estate specifically makes the life tenant ‘unimpeachable for waste’, or ‘without impeachment of waste’ — that is, grants a ‘special licence’ which exempts the life tenant from liability for waste: Woodhouse v Walker (1880) 5 QBD 404 at 406–7. If the instrument contains no such provision, the life tenant is said to be impeachable for waste and therefore liable for voluntary waste. Merely being impeachable for waste is not enough, however, to impose liability for permissive waste. For this to occur the life tenant must be under a specific duty to keep the premises in repair. A life tenant is also entitled to ‘estovers’: that is, timber for the purpose of repairing structures or agricultural equipment. 3.39

A life tenant unimpeachable for waste was, at common law, free to do

what he or she pleased with the land. By contrast, the doctrine of equitable

waste prevents life tenants who unconscionably exercise their legal rights to the prejudice of the remainderman. So, a life tenant who commits acts of wanton destruction may be restrained and compelled to repair the damage: Vane v Lord Barnard (1716) 2 Vern 738; 23 ER 1082, where a life tenant who, in order

[page 182]

to spite his son (the remainderman), set about stripping the castle of lead, iron, glass doors and boards. The son obtained an injunction to restrain further damage and an order requiring his father to repair the castle. It is now provided by legislation in most jurisdictions that an estate for life, without impeachment of waste, shall not confer upon the tenant for life any legal right to commit equitable waste, unless an intention to confer such right expressly appears by the instrument creating such estate.34 One effect of this legislation appears to be that legal as well as equitable remedies are available against a life tenant who commits equitable waste. 3.40

Where a life tenant commits actionable waste, the remainderman

may have a variety of remedies available, depending on the circumstances. The remainderman may have an action for damages to the reversion (to the land) or for damages for conversion in respect of objects severed from the land. In certain circumstances an action will lie against the life tenant for money had and received in respect of objects taken from the land, and in such cases, the life tenant may be ordered to provide an account of moneys

received. In addition, the remainderman may be able to obtain injunctive relief to restrain further damage and to compel repair of damage already caused to the land.

Legal future interests 3.41

The doctrine of estates involves the recognition of future interests.

Where A conveys ‘to W for life and then to S in fee simple’, W has a life estate giving her an immediate right to possession. She has an estate in possession and, subject to the doctrine of waste, may treat the land as hers. As has been seen, S is not entitled to possession during W’s lifetime; accordingly his estate does not become possessory until W’s death. During W’s lifetime S has what is known as an estate in expectancy or a future interest. Despite this terminology, S’s interest is future only in the sense that his right to possession will accrue at a future time. He has a present estate and, as noted in 3.28, that estate may be disposed of inter vivos or by will (even if S predeceases W). The future interest held by S is a marketable commodity. It follows that an estate in possession is one that carries with it an immediate right to possession; an estate in expectancy or future interest is one that confers a right to possession in the future.

Reversions and remainders 3.42

A legal future interest may be either a remainder or a reversion. A

remainder is a grant of a future interest to someone not previously entitled to an interest in the land. A reversion is created when the holder of an estate

grants a lesser estate in possession to some other person, as where the grantor does not dispose of the whole of the estate. For example, X, who has a fee simple estate in ‘Blackacre’, conveys ‘to W for life’. When W dies the fee simple estate in possession reverts to X, or, alternatively, to X’s estate, if X has died. During W’s lifetime, X has a fee simple reversion which, like S’s interest in the earlier example, is a future interest. The reason is that X, like S, must await the death of the life tenant before his or her estate falls into possession. X is known as the reversioner. 3.43

When X creates a life estate in W, whether by grant, inter vivos, or by

will, he or she may decide not to retain a reversion but to dispose of the residue of the interest to another person.

[page 183]

As indicated above, the interest taken by that person is known as a remainder. There may be more than one remainder following an estate in possession. For example, X grants ‘to W for life and after her death to Y for life, remainder in fee simple to Z’. In this example both Y and Z, during W’s lifetime, have interests in remainder and are known as ‘remaindermen’. The life estate in W is known as a particular estate because it is only a fragment of the grantor’s estate.

Vested and contingent remainders 3.44

In general, a vested interest is one to which a person is presently

entitled to possess, or one that is bound to take effect in possession at some future date. A contingent interest may or may not take effect in possession because some contingency must be met before vesting occurs. It is usually said that an interest is vested if two requirements are fulfilled: (1) the precise identity of the person who is to take the interest must be ascertained; (2) there must be no condition precedent to this interest falling into possession other than the regular determination of the prior particular estate or estates. To take a simple illustration, it is clear that in the limitation ‘to A for life, remainder to B in fee simple’, B’s remainder is vested from the outset. Not only is B’s identity ascertained, but the remainder only awaits the determination of A’s prior life estate before it falls into possession. Should B predecease A, the vested remainder in fee simple will pass to B’s personal representatives to be distributed to the beneficiaries named in the will or to the next of kin, should B die intestate. On the other hand, in the limitation ‘to A for life, remainder to B in fee simple if B attains the age of 25 years’, B’s remainder is, at the outset, contingent unless B has attained 25 years at the date the document comes into operation. B will not attain a fee simple estate in possession if he or she dies before reaching the age of 25, because the limitation specifically requires B to reach that age before becoming entitled to enjoyment of the land. In short, there is a condition precedent to B’s interest falling into possession other than the determination of A’s prior life estate. B’s fee simple estate will vest when B reaches the age of 25 years, for then there will be no contingency preventing B acquiring a possessory interest other than the determination of the prior particular estate. The fact that the

interest has vested does not make it possessory; B’s interest will not actually fall into possession until the holder of the prior life estate dies. The distinction between vested and contingent interests is important for a variety of reasons. It will be seen later, for example, that the legal remainder rules required legal contingent remainders to ‘vest’ within a certain period of time. If a contingent remainder did not vest within the time specified it failed at common law, although in modern times the remainder may be rescued by statute. Similarly, the rules against ‘remoteness of vesting’ (or the rule against perpetuities), which attempt to limit the power of individuals to tie up interests in land (and other objects) for an excessive period of time, are framed in terms of ‘vesting’: see Chapter 7. 3.45

In many cases it is not clear on the face of the instrument whether the

grantor or testator intended to create a vested or contingent interest. For example, in Permanent Trustee Co of New South Wales Ltd v D’Apice (1968) 118 CLR 105; [1968] ALR 437, the High Court was divided as to the proper interpretation of a will. The will provided for a life estate in certain land followed by a remainder ‘after the decease of the said’ life tenant to a remainderman in fee simple. The remainderman predeceased the life tenant. If the phrase preceding the remainder created a contingency requiring the remainderman to survive the life tenant, the remainder had failed since the contingency was not satisfied. On the other hand, if the phrase merely stated the obvious proposition that the remainder would not fall into possession until the death of the life tenant, no contingency was created and the remainderman’s interest was vested from

[page 184]

the outset. The majority of the court reached the conclusion that the remainder was vested. Accordingly, the fee simple estate of the remainderman fell into possession on the death of the life tenant. Since the remainderman was dead, the person entitled to the estate was the devisee under the remainderman’s will. Generally, if there is doubt, the court leans in favour of holding that it is vested. In Coventry v Smith (2004) 31 Fam LR 608; [2004] FamCA 249, the words ‘if and when he survives the distribution date’ were held to create a condition subsequent. 3.46

At one time, vested remainders could be alienated freely by deed or

will, but contingent remainders, which carried only the possibility of an estate in possession, could not be disposed of with the same freedom. A number of detailed and complex rules known as the ‘contingent remainder rules’ governed these interests. They are now largely of historical interest and will not be examined here. Legislation has now intervened to place contingent remainders in the same position as vested remainders.35

3.47 Questions Consider the following problems: 1.

W devised land to A and L during their joint lives, remainder to the survivor of A and L for her life, remainder to X and his heirs. Was the remainder to the survivor of A and L vested or contingent? Were the remainders to A and L vested or contingent?

Compare Whitby v Von Luedecke [1906] 1 Ch 783. 2.

X devised land to A, B, C, D, E, F and G ‘as joint tenants and not tenants in common, and to the survivor of them, his or her heirs or assigns forever’. It was held, despite the terms of the Wills Act 1837 s 28 (which provided that a devise should pass the whole estate of the testator unless a contrary intention appeared), that the devise was not intended to create a joint fee simple estate in the devisees. They received a joint life estate, followed by a remainder in fee simple to the survivor. Was the remainder in fee simple vested or contingent? Compare Quarm v Quarm [1892] 1 QB 184.

3.

The following limitations are contained in deeds executed by the holder of the fee simple in Blackacre. Which remainders are vested and which contingent? In the case of the contingent remainders, when will they vest? In all cases what estate, if any, does the grantor retain at the date of the execution of the deed: a.

To A for life, remainder upon A’s death to B in fee simple?

b.

To A for life, remainder to B for life, remainder to C in fee simple provided that C has married?

c.

To A (a bachelor) for life, remainder to his widow in fee simple?

d.

To A (who is married) for life, remainder to his widow in fee simple?

e.

To A and B for their joint lives, remainder to the survivor in fee simple?

f. 4.

To A for life, remainder to B for life if he survives A?

Reversions must always be vested. Why?

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FRAGMENTATION BETWEEN LEGAL AND BENEFICIAL OWNERSHIP: EQUITABLE INTERESTS IN LAND The development of the use 3.48

The Chancery was originally the secretarial department of the

Crown. The head of the Chancery was the Chancellor who served the King in a role akin to a present-day Secretary of State. One of the main functions of the Chancery was to issue writs which enabled an action to be commenced in the common law courts. Before a writ was issued it was sealed with the Great Seal of the Realm, of which the Chancellor was custodian. By the end of the thirteenth century the forms of writs which could be issued by the Chancery were circumscribed, and so too was the power of the Chancery to create new writs. This meant that in many cases no remedy was available in the common law courts. In other cases it was difficult for a prospective plaintiff to obtain justice at common law because of the limits on the jurisdiction of the courts or because the wealth of the defendant made it likely that he would bribe jurors. In these cases, suitors often petitioned the King

who retained a residual judicial power in his hands. The King’s Council, of which the Chancellor was an important member, exercised general supervision and control over the common law courts and heard special petitions of this kind. Eventually, this function of dealing with petitions was delegated to the Chancellor. To hear the petitions it was necessary to determine the facts by hearing witnesses, and in the course of doing so, the Chancery began to resemble a judicial body. In this way the Court of Chancery, over which the Chancellor presided, came into being. By the end of the fifteenth century, the judicial power of the Chancery was recognised, and after the end of the seventeenth century only lawyers were appointed to the office of Chancellor. The body of rules administered by the Court of Chancery was known as equity. For some time these rules varied from Chancellor to Chancellor, but by the end of the seventeenth century they had become more settled. One area in which the Court of Chancery assumed a vital role was the enforcement of uses, a role which gave rise to the basic distinction in English law between legal and equitable interests.36 3.49

Holdsworth (vol iv, 410) describes the use as amounting to a

‘recognition of the duty of a person to whom property has been conveyed for certain purposes to carry out those purposes’. Where X conveys ‘Blackacre’ to ‘A in fee simple to the use of B in fee simple’ X’s intention is that, while the legal estate is to vest in A, B should have the right to the beneficial enjoyment of Blackacre. However, the feudal system of landholding was too burdensome and the common law system of proprietary interests too inflexible for the many and varied interests of landowners, including the holding of land by one person for the use of another. Uses satisfied a number

of purposes at the time, and it was the Court of Chancery that eventually assumed the task of enforcing them. In doing so, it provided for a mechanism for fragmenting proprietary interests. Uses served the following purposes to become an important part of arrangements for the holding of land.37

[page 186]

Substitute for wills 3.50

At common law a tenant in fee simple could not devise the interest in

the land. By the rule of primogeniture, upon his death the land devolved upon his eldest son (or other heir) to the exclusion of any other descendants. Except by a disposition made during his lifetime, he could not provide for his other descendants after his death. Nor could he disinherit his heir, however undeserving. If the tenant in fee simple died without leaving an heir, the land would escheat to his overlord; because he was unable to dispose of the land by will, he could not avoid escheat. The use was employed to overcome all these difficulties. The tenant in fee simple conveyed his land to a friend, on the understanding that the friend would permit the grantor, and after his death, the grantor’s children (or other designated persons) to have the full benefit and enjoyment of the land. In other words, A (known as the ‘feoffor to uses’)38 conveyed the land to B (the ‘feoffee to uses’) to the use of C for life and after his death to the use of the person or persons whom A wished to benefit. (These persons were known as beneficiaries or cestuis que usent.) By

the fifteenth century it became common for land to be conveyed to a feoffee to hold to uses declared by the will of the feoffor.39

Avoidance of feudal burdens 3.51

By the device of a use, all the burdensome feudal dues could be

avoided. During his lifetime the tenant in fee simple conveyed the land to several feoffees to uses jointly, to the use of himself for life, and then to the use of his heir. Since the tenant in fee simple was not seised of the land at his death, no dues were attracted by that death. The number of feoffees to uses was never permitted to fall below two. If one feoffee to uses died, the other feoffees took his interest by way of survivorship so that his death did not attract feudal dues.

Providing for grantor’s wife 3.52

By a legal fiction, man and wife were considered to be one person at

common law. Thus, a man could not convey land to his wife, since this was regarded as an ineffectual conveyance to himself. This difficulty was overcome if the land was conveyed to a feoffee to uses to the use of the grantor’s wife.

Avoidance of the Statutes of Mortmain 3.53

The Statutes of Mortmain 1279 and 1290 prohibited the conveyance

of land to religious bodies. The statutes were passed because overlords had lost profitable dues (in the form of incidents: see 3.6) when land was

conveyed to a body which did not attain majority, die or become attainted for treason. The Statutes of Mortmain were avoided by the conveyance of land to a feoffee to uses to the use of a religious order.

Creation of new future interests 3.54

One reason for the creation of uses was a desire to avoid the strictness

of the legal contingent remainder rules. Because the common law considered seisin to be all-important,

[page 187]

a legal interest could not be created to spring up in the future. Thus, a grantor could not convey land ‘to my infant son at age 21’, for if effect were given to such a conveyance, there would be an abeyance of seisin during the period between the conveyance and the attainment by the son of his majority. However, if the land were conveyed to a feoffee to uses to the use of the son at the age of 21, the difficulty was avoided. Since the feoffee to uses took seisin of the land immediately, the common law was satisfied. The Court of Chancery gave effect to the interest which sprang into existence when the son attained 21. The interest was known as a ‘springing use’. Until the son turned 21 the Court of Chancery implied that the feoffee to uses was to hold to the use of the grantor. The beneficial interest retained by the grantor was known as a resulting use. At common law a future interest would be void if it were to take effect in possession by cutting short a prior particular estate. Again,

equity did not follow the law in this respect. In a limitation ‘to A for life, but if A marries B, to C for life’, C’s contingent remainder would be invalid at law. But if the remainder were created behind a use, the Court of Chancery would enforce it.40

Enforcement of uses 3.55

As noted above, the enforcement of uses became the province of the

Court of Chancery. This court was ideally suited to the task, for unlike the common law courts it could summon the parties to the action before it and examine them on oath. At first the court would enforce the use only against the feoffee to uses, on the basis that only his conscience was bound by the use. Later, however, the Court of Chancery decided that not only was the conscience of the feoffee to uses bound by the use, but also the conscience of his heir. Thus, on the death of the feoffee to uses the use could be enforced against the feoffee’s heir to whom the legal fee simple estate had descended. By 1466 it had been held that any person who took an interest in land with ‘notice’ of the use was also affected by it. Likewise, it later became clear that a person who had not paid for the interest in the land was also bound, whether or not he had notice of the use. Thus, the idea of a tie of conscience was gradually extended, and with it the sphere of enforceability of the use, until by the beginning of the sixteenth century the modern position, in substance, had been reached. That is, the use could be enforced against anyone in the world acquiring an interest in the land other than a bona fide purchaser of the legal estate for value without

notice of the use: Holdsworth, vol iv, 432–3. The cestui que use had three main rights. He or she was entitled to take the profits of the land, to force the feoffee to dispose of the land in accordance with his or her instructions and to require the feoffee to take all necessary proceedings to protect or recover the land. Thus, a unique position was reached. In a conveyance ‘to A and his heirs to the use of B and his heirs’, the common law courts took cognisance only of A and went no further. A was the only person who could take proceedings against persons interfering with the land. But if A attempted to act inconsistently with the dictates of his conscience, the Court of Chancery would enforce the use against him, if necessary by imprisonment. Thus B had an interest in the land recognised and enforced by the Court of Chancery. In other words, two different kinds of interests in the land could exist side by side.

[page 188]

The Statute of Uses 1535 3.56

In the sixteenth century, an attempt was made to bring to an end the

whole machinery of uses. Since the King was at the top of the feudal pyramid, he suffered most from the evasion of tenurial incidents. Although the lords suffered from a reduction in revenue when their tenants employed uses, they too could avoid the payment of feudal dues in respect of lands of which they were tenants. The King was the only person who always lost, for

only he was always lord and never tenant. The Statute of Uses was the culmination of various attempts by Henry VIII to solve this problem. 3.57

The following precis of the first section of the Statute of Uses 1535 is

drawn substantially from Holdsworth, vol iv, 461–2: Where any person or persons are, or shall be seised of any lands, tenements … or other hereditaments, to the use confidence or trust of any other person or persons or body politic these other person, persons or body politic that have the use, confidence or trust in fee simple, fee tail, for life or years, or for any estate in remainder or reverter, shall be seised of the like estate as they had in the use, confidence or trust, and the estate of the feoffees shall be in them that have the use for such estate as they formerly had in the use.

The statute operated to execute the use, so that the interest of the cestui que use, which was previously an equitable interest, was converted into a legal interest. For example, in a disposition to A and his heirs to the use of B and his heirs, before the enactment of the statute, A would have had a legal fee simple in the land and B an equitable fee simple. After 1535, the Statute of Uses executed the use, giving B the legal fee simple. A was conceived of as being seised of the land only for a moment, and thereafter being divested of his interest. 3.58

The provisions of the statute were not wide enough to execute all

uses. Thus, some equitable interests continued to exist even after its enactment: see Symson v Turner (1700) 1 Eq Cas Abr 383; 21 ER 1119; Holdsworth, vol iv, 463; vol iii, 136–49: 1.

The statute applied where one person was seised to the use of another. Where a lessee held land to the use of another the lessee was not seised, for seisin remained with the landlord. In this case the use was not

executed. Similarly, where a person was possessed of chattels to the use of another the statute did not apply. 2.

Before 1535, uses were not enforced by the Court of Chancery against corporations, for a corporation was thought to have no conscience. The Statute of Uses did not execute a use where a corporation was seised to the use of a person, although it did execute the use in the reverse case where a person was seised to the use of a corporation.

3.

The statute did not execute active uses, where the feoffee to uses had duties imposed. The evil against which the statute was directed arose only where the feoffee to uses played a mere passive role, with the cestui que use in possession of the land and apparently the owner. Thus, if land were conveyed to A and his heirs with the intent that A should collect the rents and profits and hold them to the use of B and his heirs, A received a legal fee simple and B an equitable fee simple.

4.

The statute did not execute the use where a person was seised to his own use. Because of its wording the statute only applied where a person was seised to the use of another: see Doe d Lloyd v Passingham (1827) 6 B & C 305; 108 ER 465; 3.61C.

[page 189]

5.

The statute did not execute a use upon a use. This was decided in 1557 in Tyrrel’s case (1557) 2 Dyer 155a; 73 ER 336, and later became extremely important as a legal principle. Thus, a conveyance ‘to A and

his heirs to the use of B and his heirs to the use of C and his heirs’ was ineffective to give C any interest. It was held that the second use was void at common law, the effect of the Statute of Uses being exhausted after execution of the first use. It will be seen (3.61C) that by the end of the seventeenth century the Court of Chancery had revived the second use in the form of the modern trust.

The Statute of Wills 1540 3.59

One of the purposes of the Statute of Uses was to prevent the

employment of uses for making wills. This aspect of the statute was extremely unpopular. By 1540, Henry VIII found it expedient to compromise, enacting the Statute of Wills. Under this statute a tenant of land held under socage tenure was given ‘full and free liberty, power and authority to give, dispose, will and devise, as well by his last will and testament in writing, or otherwise by an act or acts lawfully executed in his life, all his … hereditaments at his free will and pleasure’. Tenants by knight service were allowed to devise twothirds of their lands.

The development of the trust 3.60

Although the Statute of Uses did not abolish the power to create

equitable interests, or execute all uses, it did convert the most numerous classes of equitable interests into legal ones. Moreover, in Tyrrel’s case (1557) 2 Dyer 155a; 78 ER 336, the Court of Wards, with the approval of the judges of the Court of Common Pleas, decided that a use limited after a use

was invalid at law (‘to A and his heirs to the use of B and his heirs to the use of C and his heirs’). This did not mean, of course, that the Court of Chancery could not give effect to the second use as an equitable interest, but for more than 100 years after the Statute of Uses that court was reluctant to act. This was probably because the Chancellor realised that widespread creation of equitable interests could again lead to the King being deprived of his feudal revenues. The recognition and enforcement of this second use gradually took place during the seventeenth century. By 1700, as seen from Symson v Turner (1700) 1 Eq Cas Abr 383; 21 ER 119, the trust, as the second use was known, was well established. Like equitable interests before 1535, trusts did not have to comply with legal contingent remainder rules. Perhaps the major difference between the pre-1535 use and the trust of the eighteenth and nineteenth centuries was the form of words required to create the equitable interest. Another form of words capable of evading the Statute of Uses appears in the following case. 3.61C

Doe d Lloyd v Passingham (1827) 6 B & C 305; 108 ER 465 Court of King’s Bench

[Land was conveyed by lease and released to A and his heirs to the use of A and his heirs on trust for B and his heirs.] Holroyd J: Upon the first perusal of the deed in question I have no doubt that the legal estate was vested in the trustees, having always understood that an use cannot be limited [page 190]

upon an use; and although I was struck by the ingenuity of the distinction pointed out by Mr Taunton, yet upon further consideration it appears to me that this argument does not warrant it. The argument is, that as the trustees did not in the first instance take to the use of another, but of themselves, they were in by the common law, and not by the statute; that the first use was, therefore, of no effect, and the case was to be considered as if the deed had merely contained the second limitation to uses. But that is not so for although it be true that the trustees take the seisin by the common law, and not by the statute, yet they take that seisin to the use of themselves, and not to the use of another, in which case alone the use is executed by the statute. They are, therefore, seised in trust for another, and the legal estate remains in them …

3.62

According to Doe d Lloyd v Passingham, A was seised not by force of

the statute but by common law; and because the statute did not execute a use upon a use to oneself rather than to another, the trust in favour of B was effective. Eventually the form of words was contracted to ‘unto and to the use of A and his heirs on trust for B and his heirs’. The Statute of Uses has been repealed in four Australian jurisdictions — New South Wales, Queensland, the Northern Territory and Victoria41 — with consequential changes in the wording required to create trusts of land. In conjunction with the reforms in relation to words of limitation, the requisite form of words to create a trust of land has now become ‘to A in fee simple on trust for B in fee simple’, or ‘to A in trust for B’. Because the Statute of Uses continues to apply in the other jurisdictions, the original form of words (‘unto and to the use of A on trust for B’) remains necessary. Chapter 4 outlines important aspects of the modern law relating to trusts.

Equitable estates and wills 3.63C

Re Beavis; Beavis v Beavis (1906) 7 SR (NSW) 66

Supreme Court of New South Wales [The home-made will of the testator contained the following provision: I give to my daughter Sara Kate Beavis the allotment and house she now resides in for her use for her lifetime. I bequeath to her oldest son not yet born the said allotment if no son to the oldest daughter. The life estate devised to the daughter failed because she had witnessed the testator’s will. The executors commenced an action to determine whether the corpus of the allotment devised to the daughter fell into the residue of the testator’s estate and, if not, how the executors should deal with the rents and profits thereof.] Street J: In this State the harsh and technical feudal rule of law still survives, which requires that in order to support a contingent remainder there must be a preceding estate of freehold [page 191]

continuing in existence up to the happening of the contingency on which the remainder is to vest; so that if until the time of the determination of the prior estate the remainder has not become vested it will fail. This rule has not been adopted in equity when the legal estate is vested in trustees, and in such cases the legal estate of the trustees will support the contingent remainder. The ground upon which the rule was based at law was apparently that there must be a tenant of the freehold to perform services and answer all writs concerning the realty and that consequently a freehold could not be allowed to be in abeyance; and the reason apparently why the rule was never adopted in equity was that the legal objection was obviated in the case of equitable estates in as much as the trustee was the tenant of the freehold to perform services and answer writs. Sarah Kate Beavis’s life estate has failed to take effect by reason of her attestation of the will, and as she is still unmarried the remainders to her children are not vested. The devises to her and to them are in form legal devises, but Mr Thompson contended that, in as much as the Probate Act 1898 vests the whole of the real estate of the testator in his executors, to whom probate is granted, the contingent remainders to the children do not fail, but will be supported by the legal estate so taken by the executors. I am of the opinion that Mr Thompson is right in his contention. Under the Probate Act 1898, on the grant of probate of a will the real estate of a testator passes to and becomes vested in his executors as from his death. It is [an asset] in their hands for the payment of his debts: they have as complete dominion over it as over the personal estate, and a devisee, whatever the terms of the devise in his favour, can only acquire the legal estate in lands devised to him either by a conveyance from the executors or by the statutory acknowledgment which is made the equivalent of a conveyance. Why, then, should the

legal estate so acquired be inefficacious to support contingent remainders? I can see nothing, either in the rule itself or in the nature of its origin, which would prevent the statutory legal estate cast upon the executors from operating in this way, and, in my opinion, it is sufficient to support contingent remainders created by the will of a testator … I, therefore, answer this question by saying that the corpus of the land specifically devised to the plaintiff Sarah Kate Beavis does not fall into residue, but that it must be retained by the executors of the will until it is ascertained whether the remainders expectant on the determination of her life estate can take effect, and that in the events which have happened the rents and profits are in the meantime distributable as on the intestacy of the testator …

3.64

Similar legislation to that discussed in Re Beavis applies throughout

Australia. It follows from Re Beavis that the learning relating to executory devises has been superseded, since all devises create equitable interests which need not comply with the legal remainder rules.42

Reform of future interests 3.65

The operation of the common law contingent remainder rules (which

were concerned to prohibit an abeyance of seisin, and so generally struck down remainders which allowed it) meant that legal contingent remainders provided a less flexible means of creating future

[page 192]

interests in land than legal executory interests and trusts. In England during the nineteenth century reforms were introduced to mitigate the harshness of those rules culminating in the Contingent Remainders Act 1877 (UK). Tasmania, Victoria and Western Australia followed the English example.43

These provisions are still in force. New South Wales (s 16(1)) and South Australia (s 25) appear to have prevented both the natural and artificial destruction of contingent remainders by the following provision. 3.66E

Conveyancing Act 1919 (NSW)

16(1) A contingent remainder … shall be capable of taking effect notwithstanding the want of a particular estate of freehold to support it in the same manner as it would take effect if it were a contingent remainder of an equitable estate supported by an outstanding legal estate in fee simple.

The New South Wales Act (s 16(2)) adds, for good measure, that a contingent remainder lying between two estates vested in the same person shall prevent the merger of those two estates. 3.67

New South Wales (s 44(2)), Western Australia (s 39) and the

Australian Capital Territory (s 223) have enacted legislation providing that executory interests ‘may be made by direct conveyance and without the intervention of uses’. This provision appears to mean that an interest which could previously exist only as an executory interest and not as a remainder may now be created without reference to uses. Thus, a grant ‘to A in fee simple but if he marries B then to C in fee simple’ results in the creation of a valid fee simple in favour of A which shifts to C in the event of A’s marriage to B. Western Australia adds that an estate of freehold to take effect at a future time may be created by any deed by which a present estate of freehold may be created. 3.68

New South Wales has taken a step of some significance, not only for

the law of future interests, but for the creation of equitable interests in general by repealing the Statute of Uses: Imperial Acts Application Act 1969 (NSW) s 8. On one interpretation, the repeal of the statute conceivably returns New South Wales to the situation existing in England prior to 1535 insofar as s 44(2) is expressed to allow the creation of executory interests ‘without the intervention of uses’. Thus, a grant by deed in 1994 to ‘A in fee simple when he graduates in law’ is possibly void. Such an interpretation of the effect of the repeal of the Statute of Uses is an unlikely one. A more plausible one is to give s 44(2) a continued operation by interpreting it as having an effect independent of the Statute of Uses creating interests by analogy to the statute but by force and effect of the subsection itself.44 3.69

The Queensland Law Reform Commission, Report on Property Law

Reform, 1973, 21–2, recommended that future interests in land should take effect only as equitable and not legal interests. This recommendation, implemented by Qld s 30 (and NT s 30),

[page 193]

effectively abolishes legal contingent remainders and legal executory interests. A further recommendation that the Statute of Uses be repealed was also implemented: see Qld, ss 3, 7. In 2010, the Victorian Law Reform Commission45 made a similar recommendation (at 68) on the basis that ‘the abolition of legal future interests would remove a method used only by the ill

advised’. Should these far-reaching and modernising reforms be adopted in all states? 3.70

In Victoria the Imperial Acts Application Act 1980 s 5 repealed the

Statute of Uses. In addition, the Imperial Law Re-Enactment Act 1980 (Vic) s 6 inserted a new s 19A into the Property Law Act 1958. This section provides as follows: 3.71E

Property Law Act 1958 (Vic)

19A Interests in land under the Statute of Uses (1) Interests in land which under the Statute of Uses could before the commencement of this section have been created as legal interests shall after the commencement of this section be capable of being created as equitable interests. (2) Notwithstanding subsection (1) an equitable interest in land shall after the commencement of this section only be capable of being validly created in any case in which an equivalent equitable interest in property real or personal could have been validly created before such commencement. (3) In a voluntary conveyance executed after the commencement of this section, a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee. (4) Subsection (3) does not limit or affect the operation of any principle or rule of equity relating to the implication of resulting trusts.

Unlike in Queensland, legal contingent remainders may still be created in Victoria, although the Victorian Law Reform Commission in its recent report (Review of the Property Law Act 1958: Final Report, 2010, 73) recommended that they should be abolished and only exist in equity behind a trust. 3.72

The law relating to future interests as outlined above was developed

in the context of common law, or old system, title. There remains a question as to whether they apply to land held under the Torrens system. The registration provisions of that system suggest significant modification of the operation of the legal remainder rules in relation to land held under it. The following case details one aspect of the operation of the Torrens system on the contingent remainder rules. Although the case arose in South Australia, similar provisions exist in the Torrens statutes in the other states and territories.46

[page 194]

3.73C

Re Campion [1908] SALR 1 Supreme Court of South Australia

Way CJ: Although this statute [the Contingent Remainders Act 1877 (UK)] has not been adopted in South Australia practically the same result has been brought about with respect to land under the Real Property Act by provisions of that statute which doubtless had a very different primary object — that is, to simplify titles by making the Register Book a complete record of all transactions relating to the legal estate. In accomplishing this, consequences have followed which may or may not have been foreseen by the framers of the Act. The Land in question is under the Real Property Act, which directs that ‘on the death of the registered proprietor’ his estate ‘shall be transmitted to his executor or administrator,’ who is to ‘hold the land upon the trusts and for the purposes for which the same is applicable by law’ (ss 175, 180) … Nor is there, as Mr Glynn suggested, a gap in the seisin between the death of the testator and the registration of the executors’ title. His estate, as just mentioned, was ‘transmitted’ to his executors on his death, and the definition clause (s 3) says ‘“transmission” shall mean the passing of title to land in any manner other than by transfer.’ The land therefore passed to the executors immediately on the testator’s death, although section 176 requires that before dealing with it they are to be registered as proprietors. The legal estate being thus vested in the executors as trustees for the persons entitled under the Will, the other remainders are saved from destruction and one of them may yet take effect by the happening of the contingency upon which it depends.

3.74

Provisions enabling the creation of future interests under the Torrens

system are contained in each of the statutory regimes.47 The Torrens legislation in New South Wales, South Australia and Tasmania gives the Registrar-General power to create and issue new certificates of title for each future interest: NSW s 100(2); SA s 75; Tas s 33(6), (8).

3.75 Questions Discuss the effect of the following limitations: 1.

In a conveyance and in a will in 2002: a.

To A for life, remainder to such of the children of A who shall attain the age of 21 years in fee simple. A has three children, two of whom have reached 21 at his death.

b.

To A for life, remainder to such of the children of A who shall attain the age of 21 years whether before or after his death.

2.

In a conveyance in 2002: a.

To T in trust for B.

b.

To T and his heirs on trust for B and his heirs at 21.

[page 195]

c.

To T in trust for A, but if the land is sold proceeds in trust for A and B equally.

d.

Unto and to the use of A in fee simple on trust for C when he graduates in law.

3.

Give a complete and precise description of the estate or interest taken by A, B and C in each of the following limitations relating to ‘Blackacre’. You may assume that the grantor or testator had the legal fee simple estate in Blackacre and that the relevant instrument came into effect in 2002. In each answer, mention the section of any legislation directly relevant to your answer: a.

By Deed: To A for life then to A’s widow C until she remarries, remainder to A’s eldest son B.

b.

By Deed: To A in three years’ time but if he becomes a lawyer, then to B on condition that he remains an Australian citizen.

c.

By Deed: To A for life or until he marries B, then to C provided she has attained the age of 25 years. On A’s marriage to B, C is 21.

d.

By Deed: To A for life or until he marries B and one week after A’s death or marriage to B, whichever occurs first, to C provided she has attained the age of 25 years. One week after A’s marriage to B, C is 21.

e.

By Will: To A on trust for B five years after his graduation in law.

f.

By Will: To A on trust for B but if he fails to graduate in law by his 50th birthday then to C.

SYSTEMIC FRAGMENTATION OF INTERESTS IN LAND: THE COMMON LAW, TENURE AND NATIVE TITLE Introduction 3.76

One of the most decisive differences between the system of

Australian land law and its English forebear lies in the recognition of Indigenous rights. This recognition has come in two distinct forms. First, following the Woodward Commission’s recommendations in 1975, a number of jurisdictions, commencing with the Land Rights Act (Northern Territory) 1976 (Cth), enacted specific legislation authorising the grant of interests in land, typically in the form of a fee simple, to traditional owners of the land by the state.48 Second, following Mabo (No 2) (3.77C below), ‘native title’ as recognised by the common law can, in certain circumstances operate, and coexist, in the same physical location, with common law, non-indigenous proprietary rights. Native title represents a distinctive, local example of the fragmentation of proprietary interests. More particularly, it provides an example of two quite distinct systems of law operating within the same geographic, national and jurisdictional space. This co-existence

[page 196]

of legal orders has been described by Noel Pearson as ‘the recognition space’

between different systems of law. He concludes that: [F]undamentally, I proceed from the notion that native title is a ‘recognition concept’. The High Court tells us in Mabo that native title is not a common law title but is instead a title recognised by the common law. Native title is, for want of a better formulation, the recognition space between the common law and the Aboriginal law which is now afforded recognition in particular circumstances. Adopting this concept allows us to see two systems of law running in relation to land. This is a matter of fact …49

As will be evident from the readings below, an identifying feature of native title is that the source of the legal rights it describes differs from the source of law for common law rights. The precise contours of how the two systems of law intersect are still being developed given that recognition of native title was established for the first time in this country just over two decades ago by the High Court in the landmark Mabo decision. The remainder of this chapter will examine the case law that has elaborated on the nature of native title, its incidental features, and the circumstances in which it is extinguished. It will also examine, albeit briefly, the legislative framework that has been set up to regulate native title claims. 3.77C

Mabo v Queensland (No 2) (1992) 175 CLR 1 High Court of Australia

[The plaintiffs, who were Murray Islanders, commenced proceedings in the High Court in 1982, in response to the Queensland (Aboriginal and Islander Land Grants) Amendment Act 1982 establishing a system of making land grants on trust for Aboriginals and Torres Strait Islanders, which the Murray Islanders refused to accept. The action was brought as a test case to determine the legal rights of the Meriam people to land on the islands of Mer (Murray Island), Dauar and Waier in the Torres Strait, which were annexed to the state of Queensland in 1879. The Meriam people had been in occupation of the islands for generations prior to first European contact and

they continue to live in villages on the islands to this day. The plaintiffs sought declarations, inter alia, that the Meriam people were entitled to the Murray Islands ‘as owners; as possessors; as occupiers; or as persons entitled to use and enjoy the said islands’. In the present case, the decision of the High Court was based on findings of fact made by Moynihan J of the Supreme Court of Queensland. Moynihan J found, inter alia, that prior to European contact the Meriam people had lived on the islands in a subsistence economy based on gardening and fishing. Gardening played a central part in their social organisation and culture and garden land was ‘identified by reference to a named locality coupled with the name of relevant individuals if further differentiation is necessary’. Murray Islanders had a strong sense of relationship to the islands and regarded the land as theirs. Land on the islands was not the subject of public or general community ownership, but was regarded as belonging to individuals or groups.]

[page 197]

Brennan J: [Brennan J began by examining the proposition that the effect of annexation of the Murray Islands to the State of Queensland in 1879 was to vest in the Crown ownership of the land in the Murray Islands.] The theory of universal and absolute Crown ownership … On analysis, the defendant’s argument is that, when the territory of a settled colony became part of the Crown’s dominions, the law of England so far as applicable to colonial conditions became the law of the colony and, by that law, the Crown acquired the absolute beneficial ownership of all land in the territory so that the colony became the Crown’s demesne and no right or interest in any land in the territory could thereafter be possessed by any other person unless granted by the Crown. Perhaps the clearest statement of these propositions is to be found in Attorney-General v Brown ((1847) 1 Legge 312 at 316) when the Supreme Court of New South Wales rejected a challenge to the Crown’s title to and possession of the land in the Colony. Stephen CJ stated the law to be: … that the waste lands of this Colony are, and ever have been, from the time of its first settlement in 1788, in the Crown; that they are, and ever have been, from that date (in point of legal intendment), without office found, in the Sovereign’s possession; and that, as his or her property, they have been and may now be effectually granted to subjects of the Crown. It was maintained that this supposed property in the Crown was a fiction. Doubtless, in one sense, it was so. That principle, however, is universal in the law of England, and we can see no reason why it shall be said not to be equally in operation here. [I]n a newly-discovered country, settled by British subjects, the occupancy of the Crown with respect to the waste lands of that country, is no fiction. Here is a property, depending for its support on

no feudal notions or principle. But if the feudal system of tenures be, as we take it to be, part of the universal law of the parent state, on what shall it be said not to be law, in New South Wales? At the moment of its settlement the colonists brought the common law of England with them. ((1847) 1 Legge 312 at 317–18). … The proposition that, when the Crown assumed sovereignty over an Australian colony, it became the universal and absolute beneficial owner of all the land therein, invites critical examination. If the conclusion at which Stephen CJ arrived in Attorney-General v Brown be right, the interests of indigenous inhabitants in colonial land were extinguished so soon as British subjects settled in a colony, though the indigenous inhabitants had neither ceded their lands to the Crown nor suffered them to be taken as the spoils of conquest. According to the cases, the common law itself took from indigenous inhabitants any right to occupy their traditional land, exposed them to deprivation of the religious, cultural and economic sustenance which the land provides, vested the land effectively in the control of the Imperial authorities without any right to compensation and made the indigenous inhabitants intruders in their own homes and mendicants for a place to live. Judged by any civilised standard, such a law is unjust and its claim to be part of the common law to be applied in contemporary Australia must be questioned. This court must now determine whether, by the common law of this country, the rights and interests of the Meriam people of today are to be determined on the footing that their ancestors lost their traditional rights and interests in the land of the Murray Islands on 1 August 1879. In discharging its duty to declare the common law in Australia, this court is not free to adopt rules that accord with contemporary notions of justice and human rights if their adoption [page 198]

would fracture the skeleton of principle which gives the body of our law its shape and internal consistency. In the present case, the defendant’s chain of argument contains several links, each of which must be separately considered although, as we shall see, a common theme or thread runs through them. Some of these links are unchallenged. We start with the proposition that the Imperial Crown acquired sovereignty over the Murray Islands on 1 August 1879 and that the laws of Queensland (including the common law) became the law of the Murray Islands on that day — or, if it be necessary to rely on the Colonial Boundaries Act 1895, is deemed to have become the law of the Murray Islands on that day. Next, by the common law, the Crown acquired a radical or ultimate title to the Murray Islands. The plaintiffs accept these propositions but challenge the final link in the chain, namely, that the Crown also acquired absolute beneficial ownership of the land in the Murray Islands when the Crown acquired sovereignty over them … The feudal basis of the proposition of absolute Crown ownership The land law of England is based on the doctrine of tenure. In English legal theory, every parcel of land in England is held either mediately or immediately of the King who is the Lord Paramount; the term ‘tenure’ is used to signify the relationship between tenant and lord [citation omitted] not the relationship between tenant and land [citations omitted] …

It is arguable that universality of tenure is a rule depending on English history and that the rule is not reasonably applicable to the Australian colonies. The origin of the rule is to be found in a traditional belief that, at some time after the Norman Conquest, the King either owned beneficially and granted, or otherwise became the Paramount Lord of, all land in the Kingdom [citation omitted]. According to Digby’s History of the Law of Real Property ((1897), p 34) William I succeeded to all rights over land held by the AngloSaxon kings; he acquired by operation of law the land of those who had resisted his conquest and a vast quantity of land was deemed to have been forfeited or surrendered to William and regranted by him. He may have become the proprietor of all land in England so that no allodial land remained. Or it may be, as Blackstone asserts, that in England, as in France, the allodial estates were surrendered into the King’s hands and were granted back as feuds, the only difference being that in France the change ‘was effected gradually, by the consent of private persons; [the change] was done at once, all over England, by the common consent of the nation’ (Commentaries, Bk II, Ch 4, pp 50–1). But, whatever the fact, it is the fiction of royal grants that underlies the English rule. It is not surprising that the fiction that land granted by the Crown had been beneficially owned by the Crown was translated to the colonies and that Crown grants should be seen as the foundation of the doctrine of tenure which is an essential principle of our land law. It is far too late in the day to contemplate an allodial or other system of land ownership. Land in Australia which has been granted by the Crown is held on a tenure of some kind and the titles acquired under the accepted land law cannot be disturbed … By attributing to the Crown a radical title to all land within a territory over which the Crown has assumed sovereignty, the common law enabled the Crown, in exercise of its sovereign power, to grant an interest in land to be held of the Crown or to acquire land for the Crown’s demesne. The notion of radical title enabled the Crown to become Paramount Lord of all who hold a tenure granted by the Crown and to become absolute beneficial owner of unalienated land required for the Crown’s purposes. But it is not a corollary of the Crown’s acquisition of a radical title to land in an occupied territory that the Crown acquired absolute beneficial ownership of that land to the exclusion of the indigenous inhabitants. If the land were desert and uninhabited, truly a terra nullius, the Crown would take an absolute beneficial title (an allodial title) to the land for the reason given by Stephen CJ in Attorney-General v Brown [page 199]

(see (1847) 1 Legge 312 at 317–8): there would be no other proprietor. But if the land were occupied by the indigenous inhabitants and their rights and interests in the land are recognised by the common law, the radical title which is acquired with the acquisition of sovereignty cannot itself be taken to confer an absolute beneficial title to the occupied land. Nor is it necessary to the structure of our legal system to refuse recognition to the rights and interests in land of the indigenous inhabitants. The doctrine of tenure applies to every Crown grant of an interest in land, but not to rights and interests which do not owe their existence to a Crown grant. The English legal system accommodated the recognition of rights and interests derived from occupation of land in a territory over which sovereignty was acquired by conquest without the necessity of a Crown grant …

Recognition of the radical title of the Crown is quite consistent with recognition of native title to land, for the radical title, without more, is merely a logical postulate required to support the doctrine of tenure (when the Crown has exercised its sovereign power to grant an interest in land) and to support the plenary title of the Crown (when the Crown has exercised its sovereign power to appropriate to itself ownership of parcels of land within the Crown’s territory). Unless the sovereign power is exercised in one or other of those ways, there is no reason why land within the Crown’s territory should not continue to be subject to native title. It is only the fallacy of equating sovereignty and beneficial ownership of land that gives rise to the notion that native title is extinguished by the acquisition of sovereignty. If it be necessary to categorise an interest in land as proprietary in order that it survive a change in sovereignty, the interest possessed by a community that is in exclusive possession of land falls into that category. Whether or not land is owned by individual members of a community, a community which asserts and asserts effectively that none but its members has any right to occupy or use the land has an interest in the land that must be proprietary in nature: there is no other proprietor. It would be wrong, in my opinion, to point to the inalienability of land by that community and, by importing definitions of ‘property’ which require alienability under the municipal laws of our society (see, for example, National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1247–8) to deny that the indigenous people owned their land. The ownership of land within a territory in the exclusive occupation of a people must be vested in that people: land is susceptible of ownership, and there are no other owners. True it is that land in exclusive possession of an indigenous people is not, in any private law sense, alienable property for the laws and customs of an indigenous people do not generally contemplate the alienation of the people’s traditional land. But the common law has asserted that, if the Crown should acquire sovereignty over that land, the new sovereign may extinguish the indigenous people’s interest in the land and create proprietary rights in its place and it would be curious if, in place of interests that were classified as non-proprietary, proprietary rights could be created. Where a proprietary title capable of recognition by the common law is found to have been possessed by a community in occupation of a territory, there is no reason why that title should not be recognised as a burden on the Crown’s radical title when the Crown acquires sovereignty over that territory. The fact that individual members of the community, like the individual plaintiff Aboriginals in Milirrpum (1971) 17 FLR 141 at 272 enjoy only usufructuary rights that are not proprietary in nature is no impediment to the recognition of a proprietary community title. Indeed, it is not possible to admit traditional usufructuary rights without admitting a traditional proprietary community title. There may be difficulties of proof of boundaries or of membership of the community or of representatives of the community which was in exclusive possession, but those difficulties afford no reason for denying the existence of a proprietary community title capable of recognition by the common law. That being so, there is no impediment to the recognition of individual non-proprietary rights that [page 200]

are derived from the community’s laws and customs and are dependent on the

community title. A fortiori, there can be no impediment to the recognition of individual proprietary rights. Once it is accepted that indigenous inhabitants in occupation of a territory when sovereignty is acquired by the Crown are capable of enjoying — whether in community, as a group or as individuals — proprietary interests in land, the rights and interests in the land which they had theretofore enjoyed under the customs of their community are seen to be a burden on the radical title which the Crown acquires. The notion that feudal principle dictates that the land in a settled colony be taken to be a royal demesne upon the Crown’s acquisition of sovereignty is mistaken. The nature and incidents of native title Native title has its origin in and is given its content by the traditional laws acknowledged by and the traditional customs observed by the indigenous inhabitants of a territory. The nature and incidents of native title must be ascertained as a matter of fact by reference to those laws and customs. The ascertainment may present a problem of considerable difficulty … [However, some] general propositions about native title can be stated without reference to evidence. First, unless there are pre-existing laws of a territory over which the Crown acquires sovereignty which provide for the alienation of interests in land to strangers, the rights and interests which constitute a native title can be possessed only by the indigenous inhabitants and their descendants. Native title, though recognised by the common law, is not an institution of the common law and is not alienable by the common law. Its alienability is dependent on the laws from which it is derived. If alienation of a right or interest in land is a mere matter of the custom observed by the indigenous inhabitants, not provided for by law enforced by a sovereign power, there is no machinery which can enforce the rights of the alienee. The common law cannot enforce as a proprietary interest the rights of a putative alienee whose title is not created either under a law which was enforceable against the putative alienor at the time of the alienation and thereafter until the change of sovereignty or under the common law … Of course, since European settlement of Australia, many clans or groups of indigenous people have been physically separated from their traditional land and have lost their connection with it. But that is not the universal position. It is clearly not the position of the Meriam people. However, when the tide of history has washed away any real acknowledgment of traditional law and any real observance of traditional customs, the foundation of native title has disappeared. A native title which has ceased with the abandoning of laws and customs based on tradition cannot be revived for contemporary recognition. Australian law can protect the interests of members of an indigenous clan or group, whether communally or individually, only in conformity with the traditional laws and customs of the people to whom the clan or group belongs and only where members of the clan or group acknowledge those laws and observe those customs (so far as it is practicable to do so). Once traditional native title expires, the Crown’s radical title expands to a full beneficial title, for then there is no other proprietor than the Crown … It follows that a right or interest possessed as a native title cannot be acquired from an indigenous people by one who, not being a member of the indigenous people, does not acknowledge their laws and observe their customs; nor can such a right or interest be acquired by a clan, group or member of the indigenous people unless the acquisition is consistent with the laws and customs of that people. Such a right or interest can be

acquired outside those laws and customs only by the Crown … Once the Crown acquires sovereignty and the common law becomes the law of the territory, the Crown’s sovereignty over all land in the territory carries the capacity to accept a surrender of native title. The native title may be surrendered on purchase or surrendered voluntarily, whereupon the Crown’s radical title is expanded to absolute [page 201]

ownership, a plenum dominium, for there is then no other owner [citations omitted]. If native title were surrendered to the Crown in expectation of a grant of a tenure to the indigenous title holders, there may be a fiduciary duty on the Crown to exercise its discretionary power to grant a tenure in land so as to satisfy the expectation [citations omitted], but it is unnecessary to consider the existence or extent of such a fiduciary duty in this case. Here, the fact is that strangers were not allowed to settle on the Murray Islands and, even after annexation in 1879, strangers who were living on the Islands were deported. The Meriam people asserted an exclusive right to occupy the Murray Islands and, as a community, held a proprietary interest in the Islands. They have maintained their identity as a people and they observe customs which are traditionally based. There was a possible alienation of some kind of interest in two acres to the London Missionary Society prior to annexation but it is unnecessary to consider whether that land was alienated by Meriam law or whether the alienation was sanctioned by custom alone. As we shall see, native title to that land was lost to the Meriam people in any event on the grant of a lease by the Crown in 1882 or by its subsequent renewal. Second, native title, being recognised by the common law (though not as a common law tenure), may be protected by such legal or equitable remedies as are appropriate to the particular rights and interests established by the evidence, whether proprietary or personal and usufructuary in nature and whether possessed by a community, a group or an individual. The incidents of a particular native title relating to inheritance, the transmission or acquisition of rights and interests on death or marriage, the transfer of rights and interests in land and the grouping of persons to possess rights and interests in land are matters to be determined by the laws and customs of the indigenous inhabitants, provided those laws and customs are not so repugnant to natural justice, equity and good conscience that judicial sanctions under the new regime must be withheld … Third, where an indigenous people (including a clan or group), as a community, are in possession or are entitled to possession of land under a proprietary native title, their possession may be protected or their entitlement to possession may be enforced by a representative action brought on behalf of the people or by a sub-group or individual who sues to protect or enforce rights or interests which are dependent on the communal native title. Those rights and interests are, so to speak, carved out of the communal native title. A sub-group or individual asserting a native title dependent on a communal native title has a sufficient interest to sue to enforce or protect the communal title [citations omitted]. A communal native title enures for the benefit of the community as a whole and for the sub-groups and individuals within it who have particular rights and interests in the community’s lands …

The extinguishing of native title Sovereignty carries the power to create and to extinguish private rights and interests in land within the Sovereign’s territory [citations omitted]. It follows that, on a change of sovereignty, rights and interests in land that may have been indefeasible under the old regime become liable to extinction by exercise of the new sovereign power. However, the exercise of a power to extinguish native title must reveal a clear and plain intention to do so, whether the action be taken by the Legislature or by the Executive. This requirement, which flows from the seriousness of the consequences to indigenous inhabitants of extinguishing their traditional rights and interests in land, has been repeatedly emphasised by courts dealing with the extinguishing of the native title of Indian bands in North America. A clear and plain intention to extinguish native title is not revealed by a law which merely regulates the enjoyment of native title (R v Sparrow [1990] 1 SCR 1075 at 1097; (1990) 70 DLR (4th) 385 at 400) or which creates a regime of control that is consistent with the continued enjoyment of native title (United States v Santa Fe Pacific Railroad Co (1941) 314 US 339 at 353–4). [page 202]

A fortiori, a law which reserves or authorises the reservation of land from sale for the purpose of permitting indigenous inhabitants and their descendants to enjoy their native title works no extinguishment. [Brennan J held that the grant of a freehold or leasehold estate in land would extinguish native title as would the appropriation and use of land for a public purpose inconsistent with native title; for example, for roads, railways or other public works. The grant of lesser interests, such as authorities to prospect for minerals, would not bring about an extinguishment unless such an interest were inconsistent with the continued existence of native title. He held that native title had not been extinguished by the reservation of the Murray Islands from sale for the benefit of their inhabitants or by the appointment of trustees for the reserve. However, native title had been extinguished in respect of two acres of land leased to the London Missionary Society in 1882 and, subject to the determination of some subsidiary issues, in respect of land included in certain other leases.] Deane and Gaudron JJ: … The personal rights conferred by common law native title do not constitute an estate or interest in the land itself. They are extinguished by an unqualified grant of an inconsistent estate in the land by the Crown, such as a grant in fee or a lease conferring the right to exclusive possession. They can also be terminated by other inconsistent dealings with the land by the Crown, such as appropriation, dedication or reservation for an inconsistent public purpose or use, in circumstances giving rise to third party rights or assumed acquiescence. The personal rights of use and occupation conferred by common law native title are not, however, illusory. They are legal rights which are infringed if they are extinguished, against the wishes of the native title-holders,

by inconsistent grant, dedication or reservation and which, subject only to their susceptibility to being wrongfully so extinguished, are binding on the Crown and a burden on its title. Our conclusion that rights under common law native title are true legal rights which are recognised and protected by the law would, we think, have the consequence that any legislative extinguishment of those rights would constitute an expropriation of property, to the benefit of the underlying estate, for the purposes of s 51(xxxi) [of the Commonwealth Constitution]. [Toohey J agreed with Deane and Gaudron JJ that extinguishment of native title by the Crown was wrongful and gave rise to a claim to compensation.] Mason CJ and McHugh J: We agree with the reasons for judgment of Brennan J and with the declaration which he proposes. In the result, six members of the court (Dawson J dissenting) are in agreement that the common law of this country recognises a form of native title which, in the cases where it has not been extinguished, reflects the entitlement of the indigenous inhabitants, in accordance with their laws or customs, to their traditional lands and that, subject to the effect of some particular Crown leases, the land entitlement of the Murray Islanders in accordance with their laws or customs is preserved, as native title, under the law of Queensland. The main difference between those members of the court who constitute the majority is that, subject to the operation of the Racial Discrimination Act 1975 (Cth), neither of us nor Brennan J agrees with the conclusion to be drawn from the judgments of Deane, Toohey and Gaudron JJ that, at least in the absence of clear and unambiguous statutory provision to the contrary, extinguishment of native title by the Crown by inconsistent grant is wrongful and gives rise to a claim for compensatory damages. We note that the judgment of Dawson J supports the conclusion of Brennan J and ourselves on that aspect of the case since his Honour considers that native title, where it exists, is a form of permissive occupancy at the will of the Crown. We are authorised to say that the other members of the court agree with what is said in the preceding paragraph about the outcome of the case. [page 203]

The formal order to be made by the court accords with the declaration proposed by Brennan J but is cast in a form which will not give rise to any possible implication affecting the status of land which is not the subject of the declaration in para 2 of the formal order. [Dawson J dissented on the issue of native title, holding that this was simply a form of occupancy enjoyed with the permission of the Crown and that since the first settlement in 1788, the Crown had evidenced an intention in relation to the land in the colony which was inconsistent with any recognition of native title.]

3.78

Mason CJ, Brennan and McHugh JJ held that traditional title was

extinguished by an inconsistent Crown grant. Moreover, they concluded that such an extinguishment does not entitle native title holders to compensation. On this point they were joined by Dawson J to make up the majority. It might therefore be concluded that the decision represented a Pyrrhic victory for the appellants for the reason that defining native title in this way renders it a particularly fragile interest, and ultimately worthless. But the court’s determination that native title was an enforceable interest over land meant that all acts of extinguishment of native title after the enactment of the Racial Discrimination Act 1975 (Cth) were unlawful if traditional owners were treated less favourably than non-indigenous interest holders. If they were not compensated where their rights were extinguished, or they were not afforded the same procedural rights as non-native title holders were in similar circumstances, they could establish unlawful discrimination.

3.79 Questions 1.

The vast literature that has already appeared on the Mabo decision50 focuses on, among other issues, the various meanings of the following terms: radical title, absolute beneficial title, plenary title, plenum dominium, allodial title and paramount title. How are these many proprietary interests to be differentiated in terms of the rights and obligations they confer?

2.

Is native title an allodial title?

3.

Was the decision in Mabo an abuse of judicial power in that the

High Court declared new law in defiance of long settled precedent? Or is the following conclusion of Bartlett more accurate: ‘What determined the result in Mabo was neither emotive pronouncements nor early obiter dicta, but the overwhelming dictates of the jurisprudence in every other part of the common law world’?51

[page 204]

The doctrine of tenure after Mabo 3.80

The conceptual significance of the doctrine of tenure was central to

the court’s deliberations, particularly in the leading judgment of Brennan J. The subject of the continued relevance or otherwise to Australian land law of the doctrine of tenure has provoked considerable academic and judicial interest. While the High Court was of the view that the theory of tenure remained a central pillar of the land law in Australia and that it was too late in the day to rule otherwise, the majority of the court held in favour of the continued application of a modified theory of tenure. A distinction was made between the radical title acquired by the Crown on the acquisition of sovereignty, and the absolute beneficial ownership that was held to follow from the traditional doctrine of tenure. In so holding, the court overruled Attorney-General v Brown (1847) 1 Legge 312. The rejection of the doctrine of terra nullius by the court in Mabo in relation to lands in the occupation of Indigenous inhabitants made an

adoption of a modified theory of tenure inevitable. Once it was conceded that the Indigenous inhabitants were in occupation of parts of Australia and that they had rights in relation to the land to which regard could be paid, the way was open for the court to declare that the Sovereign was not the universal occupant. It followed from this conclusion that the Crown only acquired absolute beneficial ownership in respect of land which was not in the occupation of the Indigenous inhabitants at the time of acquisition of sovereignty: that is, land which truly could be described as terra nullius. Brennan J (at 47) and Deane and Gaudron JJ (at 81) went so far as to indicate that the doctrine of tenure may not have been relevant to the condition of the colony on settlement and should arguably have never been a part of the common law of Australia. This argument suggests that a principle that was essential and integral only to feudal societies had no place in a British colony in 1788, particularly when feudalism had already largely disappeared from British society. Nevertheless, all judges accepted that the doctrine of tenure was part of the ‘skeleton of principle’ of the common law, and that its continued application to Australian law could not be altered without the risk of damaging the whole legal fabric and structure. For this reason, the majority held as being beyond challenge the principle that non-indigenous title to land in Australia was essentially tenurial. However, the historical reality that the key obligations of the tenurial relationship — services and incidents — have never been present in Australia contradicts the theory, as noted above at 3.5–3.6.52 Furthermore, Mabo offers an additional reason to conclude that the doctrine of tenure is an inappropriate theoretical basis for Australian land law. To the extent that Mabo establishes that native title is a

form of landholding that operates outside the doctrine of tenure, that is, is land that is not held of the Crown, the case represents a significant point of departure from the common law doctrine of tenure which posits that all land over which the Crown has sovereignty is ultimately held of the Crown.53 Native title is therefore an example of allodial, rather than tenurial, title.

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Is native title a proprietary interest? 3.81

In Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 Blackburn J held

that even if the common law recognised some form of communal native title it was necessary for the plaintiffs, either as individuals or as representatives of particular clans, to show that their predecessors had held a recognisable proprietary interest in the land. In determining whether such an interest existed, he made the following comments ([1971] ALR 65; (1971) 17 FLR 141 at 268–73): … I think this problem has to be solved by considering the substance of proprietary interests rather than their outward indicia. I think that property, in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate. I do not say that all these rights must co-exist before there can be a proprietary interest, or deny that each of them may be subject to qualifications. But by this standard I do not think that I can characterise the relationship of the clan to the land as proprietary. It makes little sense to say that the clan has the right to use or enjoy the land. Its members have a right, and so do members of other clans, to use and enjoy the land of their own clan and other land also. The greatest extent to which it is true that the clan as such has the right to use and enjoy the clan territory is that the clan may, in a sense in which other clans may not (save with

permission or under special rules), perform ritual ceremonies on the land. That the clan has a duty to the land — to care for it — is another matter. This is not without parallels in our law, which sometimes imposes duties of such a kind on a proprietor. But this resemblance is not, or at any rate is only in a very slight degree, an indication of a proprietary interest. The clan’s right to exclude others is not apparent.

See later native title cases (3.87–3.108) on the question as to whether native title is a property right. 3.82

The Mabo decision presented many legal (and political) problems for

the Federal Government and the states. A legislative response to the Mabo decision by the Federal Government was necessary for three principal reasons, as noted by Wootten.54 They were, first, the necessity to validate titles issued after the commencement of the Racial Discrimination Act 1975 (Cth) which might have been rendered invalid by that Act; second, a requirement to make provision for permitted future development of land affected by native title; and third, the need to provide a regime for the speedy and efficient determination of issues of native title including whether or not native title existed over a parcel of land.

The Native Title Act 1993 (Cth) 3.83

It is beyond the scope of this chapter to review in detail this

legislation.55 Some brief observations will be made. First, s 10 recognises the concept of native title and s 11 provides that it cannot be extinguished contrary to the Act. A key provision of the Act defines native title. Closely following the analysis of Brennan J in Mabo, ‘native title’ is defined in s 223 as follows.

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3.84E

Native Title Act 1993 (Cth)

223 Native title Common law rights and interests (1) The expression native title or native title rights and interests means the communal, group or individual rights and interests of Aboriginal peoples or Torres Strait Islanders in relation to land or waters, where: (a) the rights and interest are possessed under the traditional laws acknowledged, and the traditional customs observed, by the Aboriginal peoples or Torres Strait Islanders; and (b) the Aboriginal peoples or Torres Strait Islanders, by those laws and customs, have a connection with the land or waters; and (c) the rights and interests are recognised by the common law of Australia. Hunting, gathering and fishing covered (2) Without limiting subsection (1), rights and interests in that subsection includes hunting, gathering, or fishing, rights and interests.

3.85

The broad purpose of the legislation is to recognise native title and

provide mechanisms to identify it. In particular, the legislation is structured to: validate all past grants which may have been invalidated as a result of Mabo and the Racial Discrimination Act 1975; provide that in future, native title cannot be extinguished except by state or Commonwealth acquisition in the same way that freehold title may be extinguished; set up a national Native Title Tribunal to determine the existence of native

title; provide for a register of native title determinations and native title claims; determine claims for compensation where native title has been extinguished by validation of past acts or by compulsory acquisition; and provide that grants of interests in land subject to native title cannot be made in the absence of agreement or determination by the Native Title Tribunal. The legislation provides for resolution of disputes by mediation and for approval of grants affecting native title to be made by members of the tribunal who will have special knowledge or skills in relation to Aboriginal or Torres Strait Islander societies, mediation of disputes or land management. The Act provides the machinery for determining native title claims. Aboriginal claimants, Commonwealth and state ministers and others affected may apply to the Federal Court of Australia for a determination of native title: s 61. Where a claim is unopposed or parties reach agreement, the Federal Court may make orders as per the agreement: Pt 4 Div 1C. Contested claims will be determined by the Federal Court: s 81. However, they may be referred to the National Native Title Tribunal for mediation: s 86B. An appeal lies from the tribunal to the Federal Court on certain matters of law: s 169. Determinations of native title are registered on the National Native Title Register: Pt 8.

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3.86

Limitations are also placed on the extent to which future legislation

or grants can affect native title: Pt 2 Div 3. Broadly, the situation is that native title holders cannot be treated less favourably than holders of other interests in land. Generally, they must agree to extinguishment, or their property must be acquired under compulsory acquisition legislation, which provides compensation: s 20. In some cases, for example the grant of mining leases, the legislation recognises the special relationship between Aboriginal people and their land by giving them a ‘right to negotiate’ before the interest is granted: Pt 2 Div 3 Subdiv P. This right does not give native title holders a right of veto over the grant. If the parties cannot agree within a specified time, they can request a determination from the tribunal or the court: ss 36, 38. Part 2 Div 2 Subdiv B of the Native Title Act 1993 (Cth) authorises states and territories to pass laws validating previous legislation and grants, provided that such laws are based on the same principles as those validating Commonwealth laws and grants. Many determinations of native title issues have now been made under the Act.

The nature and incidents of native title 3.87

As Brennan J stated in Mabo (No 2), ‘native title has its origin and is

given its content by the traditional laws acknowledged by and the customs observed by the Indigenous inhabitants of a territory. The nature and incidents of native title must be ascertained as a matter of fact by reference to those laws and customs’: (1992) 175 CLR 1 at 58. This statement forms the basis of the definition of native title in s 223(1) of the Native Title Act.

Though native title generally encompasses the kinds of usages of land typical of a hunter-gatherer society, it may nonetheless be so expansive as to amount to exclusive possession of land and full beneficial ownership, as the order in Mabo (No 2) in favour of the Meriam people demonstrates. The range of possible rights was addressed by Gummow J in Wik (1996) 187 CLR 1, who concluded (at 169) that: The content of native title, its nature and incidents, will vary from one case to another. It may comprise what are classified as personal or communal usufructuary rights involving access to the area of land in question to hunt for or gather food, or to perform traditional ceremonies … At the opposite extreme, the degree of attachment to the land may be such as to approximate that which would flow from a legal or equitable estate therein.

As Wilcox, Sackville and Merkel JJ noted in De Rose v South Australia (2003) 133 FCR 325: ‘Apart from the requirement in s 223(1)(c) that the rights and interests must be capable of recognition under the common law, s 223(1) does not impose limits on the content of traditional laws and customs’: at [200]. The many cases that have now addressed the nature and incidents of native title reflect the wide diversity of rights that native title encompasses. As the following case shows, the starting point must be the traditions and customs of Indigenous peoples. The case demonstrates the distinctiveness of native title by reference to its origins. 3.88C

Western Australia v Ward (2002) 191 ALR 1 High Court of Australia

Gleeson CJ, Gaudron, Gummow and Hayne JJ: [footnotes omitted] This litigation was instituted in the Federal Court on 2 February 1995. On that date, the Native Title

Registrar lodged with the Federal Court for decision an application under ss 13(1) and 61 of the NTA for [page 208]

‘a determination of native title’. This engaged the definition of ‘native title’ in s 223 of the NTA. The whole of the claim area fell generally within the region known as the East Kimberley, comprising land and waters in the north of the State and some adjacent land in the Territory. In total, the claim area was approximately 7,900 square kilometres. Lee J gave the following summary description of the land and waters within the State in respect of which native title was claimed. It included Crown land in or about the town of Kununurra, the Ord River irrigation area, and Lake Argyle and several freehold lots; and Crown land in the Glen Hill pastoral lease south-west of Lake Argyle. It also included Crown land and waters in the inter-tidal zones and mud flats on the eastern side of the Cambridge Gulf (‘the Gulf’) and on the north coast of the State between the Gulf and the border with the Territory. Native title As is now well recognised, the connection which Aboriginal peoples have with ‘country’ is essentially spiritual … It is a relationship which sometimes is spoken of as having to care for, and being able to ‘speak for’, country. ‘Speaking for’ country is bound up with the idea that, at least in some circumstances, others should ask for permission to enter upon country or use it or enjoy its resources, but to focus only on the requirement that others seek permission for some activities would oversimplify the nature of the connection that the phrase seeks to capture. The difficulty of expressing a relationship between a community or group of Aboriginal people and the land in terms of rights and interests is evident. Yet that is required by the NTA. The spiritual or religious is translated into the legal. This requires the fragmentation of an integrated view of the ordering of affairs into rights and interests which are considered apart from the duties and obligations which go with them. The difficulties are not reduced by the inevitable tendency to think of rights and interests in relation to the land only in terms familiar to the common lawyer. Nor are they reduced by the requirement of the NTA, now found in par (e) of s 225, for a determination by the Federal Court to state, with respect to land or waters in the determination area not covered by a ‘non-exclusive agricultural lease’ or a ‘non-exclusive pastoral lease’, whether the native title rights and interests ‘confer possession, occupation, use and enjoyment of that land or waters on the native title holders to the exclusion of all others’. The expression ‘native title’ or ‘native title rights and interests’ is elaborately defined in s 223 of the NTA … Much of the argument in the courts below, as in this Court, took as its starting point consideration of what was said in Mabo [No 2]. No doubt account may be taken of what was decided and what was said in that case when considering the meaning and effect of the NTA. This especially is so when it is recognised that pars (a) and (b) of s 223(1) plainly are based on what was said by Brennan J in Mabo [No 2]. It is, however, of the very first importance to recognise two critical points: that s 11(1) of the NTA provides that native title is not able to be extinguished contrary to the NTA and

that the claims that gave rise to the present appeals are claims made under the NTA for rights that are defined in that statute. In particular, at the time of the decision of the Full Court of the Federal Court, the applicable legislation dealt at some length and in some detail with the question whether rights of the kind that are claimed have been extinguished or suspended. Full Court authority which obliged it to disregard the statutory text in its then current form should be overruled by this Court. The consequence, as will become apparent in these reasons, is that the course taken by the litigation in the Federal Court does not provide a sufficient foundation for this Court to determine the outcome which would be reached were the provisions of the legislation given their necessary operation upon the litigation. However, as indicated, the immediately relevant elements in the definition in s 223(1) of ‘native title’ and ‘native title rights and interests’ have remained constant. Several points [page 209]

should be made here. First, the rights and interests may be communal, group or individual rights and interests. Secondly, the rights and interests consist ‘in relation to land or waters’. Thirdly, the rights and interests must have three characteristics: (a) they are rights and interests which are ‘possessed under the traditional laws acknowledged, and the traditional customs observed’, by the relevant peoples; (b) by those traditional laws and customs, the peoples ‘have a connection with’ the land or waters in question; and (c) the rights and interests must be ‘recognised by the common law of Australia’. The question in a given case whether (a) is satisfied presents a question of fact. It requires not only the identification of the laws and customs said to be traditional laws and customs, but, no less importantly, the identification of the rights and interests in relation to land or waters which are possessed under those laws or customs. These inquiries may well depend upon the same evidence as is used to establish connection of the relevant peoples with the land or waters. This is because the connection that is required by par (b) of s 223(1) is a connection with the land or waters ‘by those laws and customs’. Nevertheless, it is important to notice that there are two inquiries required by the statutory definition: in the one case for the rights and interests possessed under traditional laws and customs and, in the other, for connection with land or waters by those laws and customs. The distinction is critical for any attempt (as is made in this litigation) to treat the maintenance and protection of cultural knowledge of native title holders as a matter with which the NTA is concerned. The cultural knowledge in question may be possessed under the traditional laws acknowledged and traditional customs observed by the relevant peoples. The issue which then arises is whether, by those laws and customs, there is ‘a connection with’ the land or waters in question. Paras (a) and (b) of s 223(1) indicate that it is from the traditional laws and customs that native title rights and interests derive, not the common law. The common law is not the source of the relevant rights and interests; the role accorded to the common law by the statutory definition is that stated in

par (c) of s 223(1). This is the ‘recognition’ of rights and interests. To date, the case law does not purport to provide a comprehensive understanding of what is involved in the notion of ‘recognition’. There may be some laws and customs which meet the criteria in pars (a) and (b) of s 223(1), but which clash with the general objective of the common law of the preservation and protection of society as a whole, but the case law does not provide examples. Secondly, the statement in Mabo [No 2] that native title ‘may be protected by such legal or equitable remedies as are appropriate to the particular rights and interests established by the evidence’ is yet to be developed by decisions indicating what is involved in the notion of ‘appropriate’ remedies. In Fejo, six members of the Court referred to the determination provisions of the NTA and continued: However, the [NTA] otherwise does not deal with the ascertainment or enforcement of native title rights by curial process. It provides for the establishment of native title and recognises and protects it in the manner we have outlined. But the protection which the [NTA] gives is protection ‘in accordance with [the NTA]’ (s 10). If actual or claimed native title rights are sought to be enforced or protected by court order, the party seeking that protection must take proceedings in a court of competent jurisdiction. Thirdly, the recognition may cease where, as a matter of law, native title rights have been extinguished even though, but for that legal conclusion, on the facts native title would still [page 210]

subsist. Thus, for example, the circumstance that, perhaps by reason of the attitude adopted by the non-indigenous owner of land in fee simple, indigenous people retain connections to the land in question does not derogate from the conclusion that the grant of the fee simple extinguished the native title. That conclusion would follow from the reasoning and the decision in Fejo.

3.89 Questions 1.

Have the judgments in Mabo changed the status of native title as a proprietary interest? Do the judgments display any differences of approach to this question? Of what relevance to this question is Deane and Gaudron JJ’s conclusion (at 111) that extinguishment

of native title would attract a right to compensation under s 51(xxxi)? 2.

What is meant by the term ‘speaking for country’? How does it bear on the question of the existence of native title?

3.

How relevant is Mabo (No 2) for the interpretation of s 223(1) of the Native Title Act? Does the court take a different approach to that of the Full Court of the Federal Court? Which approach is preferable? Consider the following comment by McHugh J in Yorta Yorta v Victoria (2002) 214 CLR 422 (at [129]–[133]): However, I remain unconvinced that the construction that this Court has placed on s 223 accords with what the Parliament intended. In Yarmirr, I cited statements from the Ministers in charge of the Act when it was enacted in 1993 and when it was amended in 1997. They showed that the Parliament believed that, under the Native Title Act, the content of native title would depend on the developing common law. Thus, Senator Evans told the Senate in 1993: We are not attempting to define with precision the extent and incidence of native title. That will be a matter still for case by case determination through tribunal processes and so on. The crucial element of the common law is the fact that native title as such, as a proprietary right capable of being recognised and enjoyed, and excluding other competing forms of proprietary claim, is recognised as part of the common law of the country (emphasis added). Similarly, Senator Minchin told the Senate in 1997: I repeat that our [A]ct preserves the fact of common law; who holds native title, what it consists of, is entirely a matter for the courts of Australia. It is a common law right (emphasis added). Section 12 of the Native Title Act 1993 also made it clear that the content of native title under that Act was to be determined in accordance with the developing

common law. Section 12 has now been removed from the statute book. But its enactment in the 1993 Act shows that the Parliament intended native title to be determined by the common law principles laid down in

[page 211]

Mabo v Queensland (No 2), particularly those formulated by Brennan J in his judgment in that case. When s 223(1)(c) of the 1993 Act referred to the rights and interests ‘recognised by the common law of Australia’, it was, in my view, referring to the principles expounded by Brennan J in Mabo (No 2). But this Court has now given the concept of ‘recognition’ a narrower scope than I think the Parliament intended, and this Court’s interpretation of s 223 must now be accepted as settling the law. As a result, the majority judges in the Full Court erred when they approached the case in the manner that they did.

4.

Do you think that McHugh J’s approach is a more defensible approach to interpreting s 223(1) of the Native Title Act? In practical terms what would this mean? Would it be more sympathetic to the recognition of native title, and offer more resistance to its extinguishment?

5.

In De Rose v South Australia (No 2) (2005) 145 FCR 290 (3.106C), the Full Court of the Federal Court (Wilcox, Sackville and Merkel JJ) suggested, after referring to the similarity of the wording of s 223(1) and Brennan J’s comments in Mabo (No 2) that ‘[w]hat was said in Mabo (No 2) cannot control the interpretation of s 223(1), although it may be taken into account’ (at [30]). Is this approach at odds with Ward? Note the argument of Pearson at 3.76.

What rights does the native title ‘bundle of rights’ contain? 3.90

As noted above, the Native Title Act 1993 (Cth) s 223(2) offers the

examples of hunting, gathering and fishing as possible native title rights. A growing body of case law provides many other examples. 3.91

The territorial sea In Commonwealth v Yarmirr (2001) 208 CLR 1;

184 ALR 113 the High Court examined the question of whether native title could exist over the territorial sea and seabed in the vicinity of Croker Island (the territorial sea is the 12-nautical-mile stretch of water from the low-water mark over which Australia exercises sovereignty. It was extended from the low-water mark under the Seas and Submerged Lands Act 1973 (Cth)). A threshold matter was whether the Crown had a radical title in relation to the seabed under this water. In so far as native title could only operate as a burden on the Crown’s radical title, the Commonwealth argued that if radical title ended at the low-water mark, so too did native title. A majority of the High Court (Gleeson CJ, Gaudron, Gummow and Hayne JJ) held that the Crown did not have radical title over the territorial sea on the basis that the Crown’s common law rights, and therefore tenurial rights, terminated at the low-water mark; but the Crown did have ‘sovereign rights and interests’ over it, and that native title, not being a creature of the common law, could exist alongside such rights as long as it was not inconsistent with them, or until such time as the sovereign extinguished them. Also, the majority found that at the time of settlement, the common law right of citizens to fish in territorial waters (as established in Malcomson v O’Dea (1863) 11 ER 1155)

and the common law right to navigate through territorial waters (see Lord Fitzhardinge v Purcell [1908] 2 Ch 139) were brought to the colony and formed part of local law. To the extent that this law was inconsistent with any continued exclusive native title right to fish and navigate in territorial waters, native title was extinguished

[page 212]

from that time onwards. Of course, this is not to say that native title was extinguished for all purposes; rather, it was diminished by the inconsistent common law rights. Accordingly, the High Court held that native title continued to co-exist alongside those general common law rights. For extinguishment of native title, see 3.105–3.113. Yarmirr was applied in Gumana v Northern Territory of Australia (2007) 153 FCR 349 and Lardil Peoples v Queensland [2004] FCA 298, to recognise the existence of nonexclusive native title over areas of riverbed or seabed beyond the high-water mark. Moreover, in Gumana the Full Court held that native title rights to exclude other Indigenous persons from beyond the low-water mark were extinguished by common law right to fish and navigate in these waters (at [169]–[170]). The question of native title rights over the territorial sea again arose in Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group v Queensland (No 2) (2010) 270 ALR 564 (Akiba), where Finn J, held as follows (at [642], [650]):

I am satisfied that the Island communities have had, and do have, differential regard for the areas of their marine estates as they radiate outwards. To paraphrase Professor Scott, the nearer one is to the shore, the greater the intensity of feeling about defending one’s estate, the further from it, the easier the acceptance of comingling and of having overlapping or shared rights with neighbouring communities. This varying intensity is reflected (a) in Professor Beckett’s acceptance that the area to the horizon was, historically, a policed protected zone; (b) in the evidence I have referred to relating to the domestic use made of inner areas and the reservation of them for the community’s own purposes; (c) in the more ready allowance of permissive use of more distant areas; and (d) in the sharing of ownership in the areas where the waters of two communities meet. Even more compelling, knowledge of the boundaries of one’s estate and knowledge of the areas of shared ownership or use with others marks out where one can go as of right and where one needs permission. The laws and customs on permission and, relatedly, on ailan pasin in its marine aspects, connect Islanders directly to their own estates and, in the case of permission, constitutes an acknowledgement of what is required if another’s community’s estate is to be used in accordance with laws and customs. The observance of these laws and customs involves ‘the continuing internal and external assertion by [the claimant community] of its traditional relationship to the country defined by its laws and customs’.

3.92

Inland waters In Yanner v Eaton (1999) 201 CLR 351; 166 ALR 258

the High Court held that hunting of estuarine crocodiles with harpoons was a valid exercise of native title. Also, s 223(1)(b) refers to native title rights over ‘land or waters’ (emphasis added). In Gumana v Northern Territory (2007) 153 FCR 349, the Full Court of the Federal Court considered the effect of a grant of an estate in fee simple down to the low-water mark under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). It held that a fee simple over land between the high- and low-water mark (the inter-tidal zone) and the part of rivers, streams and estuaries affected by the ebb and flow of the tides, conferred a right of exclusive possession. It therefore prevented the Northern Territory from issuing commercial fishing licences

over such land and the water above it; and it excluded the public right to fish and navigate in such waters. This case also involved a claim of native title over the waters beyond the inter-tidal zone. In relation to this claim, the court held that the plaintiffs had established a non-exclusive native title right to fish and navigate over the land. Rights to exclude other Aboriginal groups from the land which once formed part of the bundle of the native title rights were extinguished on settlement by the common law public right to fish which all citizens, Aboriginal and non-Aboriginal, were entitled to exercise since that time.

[page 213]

3.93

Right to trade for commercial purposes In Akiba the Island communities

claimed a right to trade for commercial purposes as part of their native title rights. The claim appeared to be at odds with dicta in a number of cases that native title was ‘inalienable’: see, for example, Mabo (No 2) above: 3.77C and 3.94. The primary judge, Finn J, held that this right was a long-established element of traditional custom, and was therefore a recongisable native title right: Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group v Queensland (No 2) (2010) 270 ALR 564. This conclusion was upheld unanimously by the High Court: Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group v Commonwealth (2013) 250 CLR 209 (3.121C). 3.94

Cultural knowledge In Western Australia v Ward (2002) 191 ALR 1 at

31–2, Gleeson CJ, Gaudron, Gummow and Hayne JJ concluded as follows: The determination made by the Full Court omitted any provision such as that in par 3(j) of the determination made at trial. The majority of the Full Court took that course saying: Although the relationship of Aboriginal people to their land has a religious or spiritual dimension, we do not think that a right to maintain, protect and prevent the misuse of cultural knowledge is a right in relation to land of the kind that can be the subject of a determination of native title. In this Court, it was submitted that the Full Court erred in this respect and that this Court should restore par 3(j) of the first determination. The first difficulty in the path of that submission is the imprecision of the term ‘cultural knowledge’ and the apparent lack of any specific content given it by factual findings made at trial. In submissions, reference was made to such matters as the inappropriate viewing, hearing or reproduction of secret ceremonies, artworks, song cycles and sacred narratives. To some degree, for example respecting access to sites where artworks on rock are located, or ceremonies are performed, the traditional laws and customs which are manifested at these sites answer the requirement of connection with the land found in par (b) of the definition in s 223(1) of the NTA. However, it is apparent that what is asserted goes beyond that to something approaching an incorporeal right akin to a new species of intellectual property to be recognised by the common law under par (c) of s 223(1). The ‘recognition’ of this right would extend beyond denial or control of access to land held under native title. It would, so it appears, involve, for example, the restraint of visual or auditory reproductions of what was to be found there or took place there, or elsewhere. It is here that the second and fatal difficulty appears. In Bulun Bulun v R & T Textiles Pty Ltd [(1998) 86 FCR 244 at 256], von Doussa J observed that a fundamental principle of the Australian legal system was that the ownership of land and ownership of artistic works are separate statutory and common law institutions. That is the case, but the essential point for present purposes is the requirement of ‘connection’ in par (b) of the definition in s 223(1) of native title and native title rights and interests. The scope of the right for which recognition by the common law is sought here goes beyond the content of the definition in s 223(1). That is not to say that in other respects the general law and statute do not afford protection in various respects to matters of cultural knowledge of Aboriginal peoples or Torres Strait Islanders. Decided cases apply in this field the law respecting confidential information, copyright, and fiduciary duties …

[page 214]

3.95 Questions 1.

Why should distinctions that are central to the common law regime of property rights determine the ambit of native title rights?

2.

If native title is truly to be ‘recognised’ by the common law by reference to traditional customs, should it not recognise those customs that might be at odds with common law principles?

3.96

Other ways of protecting cultural knowledge The majority in Ward

affirmed that native title does not extend to the protection of intellectual property rights associated with the land; but they also emphasised that the law governing confidential information and copyright might afford suitable protection. In Foster v Mountford (1976) 14 ALR 71, an interlocutory injunction was granted to prevent the publication of a book containing Aboriginal tribal secrets, to which the defendant, an anthropologist, had been given access by Aboriginal elders many years earlier. The Supreme Court of the Northern Territory held that this information was given in confidence to the defendant, and on condition that it would not be divulged. The publication was held to amount to a breach of confidence. Clearly, the court’s decision established a proprietary interest in this information on the part of the Indigenous owners. Does this offer greater protection to Indigenous

Australians than native title does? What are the limits of this right for the purposes of protecting indigenous cultural knowledge? 3.97

Minerals and petroleum In Western Australia v Ward (2002) 191 ALR

1, the High Court held that the relevant legislation had extinguished any possible native title rights to minerals with the possible exception of ochre. Also, the court held that no traditional custom appeared to indicate rights over these commodities. 3.98

Is native title alienable? As Mabo made clear, native title is in general

inalienable: Brennan J at 59–60; Deane and Gaudron JJ at 88. This characteristic suggests its sui generis nature when compared with traditional property rights. There are two exceptions. First, native title may be surrendered to the Crown. It is known as the Crown’s right of pre-emption. Second, it may be acquired by a clan, group or member of an indigenous people in accordance with the laws and customs of that people. Dale v Moses [2007] FCAFC 82 concerned the alleged transmission of native title rights and interests. The primary judge stated that the reasoning in Yorta Yorta precluded transmission of native title rights and interests from one group to another as ‘the transmittee society cannot establish their continuity … to do so would involve them relying impermissibly on another society’ (at [30]). Furthermore, regardless of whether transmission had occurred in law or in fact, the appellants had not maintained a connection in fact with the alleged transmittors as the evidence did not show they formed a ‘single cognatic kin group’ (at [15], [32]–[33]). On appeal, the Full Court agreed. It considered

comments of Gleeson CJ, Gummow and Hayne JJ in Yorta Yorta concerning the transmission of native title from one group to another. It concluded that: The observations of the members of the High Court do not establish a principle of the type apparently relied on by the appellants, namely that where the traditional laws and customs of one society provide for the transmission of rights and interests in land recognised by those laws and customs, then transmission to another society can be effected and the acquisition

[page 215]

of the transferred rights in interest can ultimately be recognised as rights and interests of the transferee society for the purposes of the NTA. The primary judge was probably correct in rejecting this contention.

Consider further the question of alienability of native title in relation to Akiba v Commonwealth (at 3.121C). 3.99

Membership of claimant group In Mabo (No 2), Brennan J determined

that membership of an indigenous group ‘depends on biological descent from the Indigenous people and on mutual recognition of a particular person’s membership by that person and by the elders or other persons enjoying traditional authority among those people’ (at 70). The requirement of strict biological descent was rejected by the Full Federal Court in State of Western Australia v Ward (2000) 99 FCR 316 at 232 per Beaumont and von Doussa JJ. ‘A substantial degree of ancestral connection’ between the original native title holders and present claimants is required. In Ngalakan People v Northern Territory (2001) 112 FCR 148 O’Loughlin J found that the determining factor was whether the traditional laws acknowledged and the traditional

customs observed by the group allowed a person to identify as a member of a group. In De Rose v South Australia (2003) 133 FCR 325 the Full Court (Wilcox, Sackville and Merkel JJ) concluded (at [282]) that: One of the questions posed by s 223(1) of the NTA is whether the appellants possess rights and interests under the traditional laws and customs acknowledged and observed by them. If the traditional laws and customs of the Western Desert Bloc allowed Nguraritja to possess rights and interests in relation to land only if the Nguraritja for a particular area constituted a discrete social group or community, the appellants would doubtless have to show that they formed part of such a group or community. There was some evidence, notably in a published article by Professor Berndt, which suggested that the land-owning group in Western Desert society was an enlarged family unit, consisting of a man and his living descendants in the male line. Had this thesis been accepted by the primary Judge, there may have been a basis for holding that the traditional laws and customs of the Western Desert Bloc required those who held rights and interests in land to form a discrete social group or community, albeit of a particular kind. But his Honour rejected the Berndt thesis (at [102]), on the ground that it was inconsistent with the evidence of the Aboriginal witnesses. His Honour’s findings therefore do not support the proposition that the traditional laws and customs of the Western Desert Bloc recognised the rights and interests of Nguraritja in relation to land only if the Nguraritja for a particular area formed, or were part of, a cohesive social group or community. It follows that the primary Judge’s findings to the effect that the appellants did not constitute or were not part of a social, communal or political organisation on or near the claim area could not adversely affect their claim to a determination of native title. To the extent that his Honour thought otherwise he was, with respect, in error.

Later, in De Rose v South Australia (No 2) (2005) 145 FCR 290 (3.106C), the Full Court considered the question of group membership further. It held that a native title determination could be made in favour of individuals or small groups who held native title rights under the traditional laws and customs of a society or community of which they are part; they did not have to constitute a society or community in their own right. This approach was endorsed in Northern Territory v Alyawarr (2005) 145 FCR 442 (at [80]),

where membership was established by reference to factors such as lineal descent, non-descent based connections such as adoption or birthplace affiliation, and spouses of the previous two categories (at [94], [113]–[117]). 3.100

In Gumana v Northern Territory (2007) 153 FCR 439, the Full

Court of the Federal Court considered a contention of the Commonwealth that the spouses of native title owners

[page 216]

are not entitled to assert native title rights on the basis that they may not have a connection with the land. The court held that they did because the relevant connection was between the community and the land, so that the key question was whether a particular individual was a member of that community. The spouses were members of the community that established a ‘communal’ title to the land in accordance with s 223(1). The court further considered the nature of claimant groups (at [152]–[161]): In Alyawarr [Northern Territory v Alyawarr (2005)] 145 FCR at [79] to [86] the Full Court observed that the determinations that may be made under s 225 of the Native Title Act cover a range of possibilities which depend upon the nature of the society said to be the repository of the traditional laws and customs that give rise to the native title rights and interests claimed. The Court pointed to Sampi v Western Australia [2005] FCA 777 as an example of a case where members of the relevant society enjoyed ‘communal ownership of the native title rights and interests, albeit they are allocated intramurally to particular families and clans’: at [79]. In that case the traditional laws and customs ‘as explained in the evidence, supported a principle of communal ownership’. The Alyawarr Full Court selected De Rose v South Australia (No 2) (2005) 145 FCR 290 as an

illustration of a society constituting a cultural bloc whose members were dispersed in groups over a large arid or semi-arid area. It was pointed out at [80] that in such a case ‘an inference of communal ownership … may be difficult if not impossible to draw’. It was accepted in De Rose (No 2) 145 FCR 290 that a determination could be made in favour of individuals or small groups who held native title under the traditional laws and customs of a society or community of which they are part. As the Full Court in Alyawarr 145 FCR 442 observed, each case will depend on its own facts. The Full Court in Alyawarr then referred to several ‘multiple group’ determinations. In Ward v Western Australia (1998) 159 ALR 483 Lee J found the Miriuwung and Gajerrong groups, ‘which were territorially adjacent and shared economic and social links, could be regarded as a composite community with shared interests’: Alyawarr 145 FCR at [81]. On appeal the Full Court rejected a contention that the evidence did not show that the two groups were a single community. Although there were witnesses whose full array of rights only existed in particular estate areas, this did not preclude the existence of ‘a Miriuwung and Gajerrong community which acknowledges and observes traditional laws and customs under which members of the community enjoy differing arrays of rights within and outside their particular family or estate country’: Western Australia v Ward (2000) 99 FCR 316 at [239]. As the Full Court in Alyawarr 145 FCR 442 said (at [81]): What this says, relevant to the present case, is that a composite community of estate holding groups may comprise a community which enjoys communal ownership of the native title rights and interests albeit there may be intramural allocations between particular family or clan groups or other sub-sets of the community. The passage just quoted, and that of the Full Court in Ward 99 FCR at [239], are apposite descriptions of the evidence in the present case. Yarmirr TJ 82 FCR 533 was another multiple group case. The applicants were members of five different estate groups. Although each group asserted traditional rights in respect of discrete areas of land and sea, their members saw themselves as a single community and brought their application on that basis. Olney J made a global determination that the native title was held by the members of the several clans. In Neowarra [2003] FCA 1402 Sundberg J rejected the State’s contention that native title should be recognised on a dambun or perhaps language level, and found that the evidence identified the relevant society as the Ngarinyin, Wunambal and Worrorra

[page 217]

people. His Honour rejected the State’s dambun based submission on the ground that it would not accommodate evidence that close relatives of dambun members have rights and interests in the dambun estate. That has relevance to the present case, as appears from the final anthropological proposition at Gumana 141 FCR at [150]. Finally, by way of contrast with the multiple group determination, the Alyawarr Full Court referred to Lardil Peoples v Queensland [2004] FCA 298. There the evidence did not indicate that any of the four groups had rights or interests in the traditional territories of another group. Cooper J made a determination that each group held native title in respect of a defined area of land. What emerges from the discussion at [153] to [159] is the flexible approach adopted by the courts arising out of the flexible language of s 223(1) of the Native Title Act — whether the rights and interests found are ‘communal, group or individual’, and of s 225(a) — who are the persons holding the ‘common or group rights’. The answer will depend upon the evidence. In the present case, Selway J did not expressly say that the rights and interests he found to exist were held for the claimants on a communal basis. Nor does the Determination expressly so state, although it does in [3] speak of the persons who hold the ‘communal, group or individual rights and interests’. That, however, would seem to be but a recitation of those words in the definition of ‘native title’ in s 223(1). Nevertheless, the matters listed at [152], the findings referred to at [149], the anthropological propositions at [150], the structure and language of the Determination, and the fact that Mansfield J said the Determination was meant to reflect the reasons of Selway J, make it clear that Selway J intended the rights and interests to be held communally by the appellants, and that Mansfield J so determined. Thus, in accordance with Alyawarr 145 FCR 442, there is no occasion to enquire whether there is a connection between a clan member’s spouse and the land and waters of the claim area. The relevant question is whether there is a connection between the community as a whole and the land and waters. Clearly there is, and the Commonwealth did not contend to the contrary. Rather, as we have said, it sought to escape the clutches of Alyawarr 145 FCR 442 by treating the present case as involving a non-communal title. That attempt fails.56

In Commonwealth of Australia v Akiba on behalf of the Torres Strait Islanders

of the Regional Seas Claim Group (2012) 289 ALR 400; [2012] FCAFC 25, the Full Court of the Federal Court held that reciprocal rights held by an Indigenous group with another group (such as reciprocal rights to fish over other groups’ waters) are not native title rights, concluding (at [130]) that: Section 223(1) does not contemplate rights and interests which are, in some general or indirect way, related to land and waters, but dependent on the permission of other native title holders for their enjoyment. Such rights cannot be said to be possessed by the claimants themselves, so far as they relate to land and waters: such rights are not held by reason of the putative holders’ own connection under their laws and customs with the land and waters in question but are held mediately through a personal relationship with a native title holder who does have the requisite connection.

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3.101

Can native title evolve over time? In Mabo (No 2) the majority

emphasised that native title is not ‘frozen as at the moment of establishment of the colony’: Deane and Gaudron JJ at 110 (and see Brennan J at 59–60). It is not yet clear, however, how much change is acceptable for there to be a continuing connection to the land. In Yanner v Eaton (1999) 201 CLR 351; 166 ALR 258 at 277 Gummow J held that use of motorised craft to conduct traditional activities such as hunting and fishing was a legitimate exercise of native title rights on the basis that it was ‘an evolved, or altered form of traditional behaviour’. The Canadian authorities on the same question have tended to be conservative in their approach. For instance, in Van der Peet v R [1996] 2 SCR 507 the selling of freshly caught fish was held not to be part of the traditions and customs of the relevant indigenous group, though the

catching of those fish was. Although it was not a native title case, in Stevenson v Yasso [2006] QCA 40 the majority found that the fact Yasso was using a modern net, not made of traditional fibres, did not prevent him claiming that he was fishing under Aboriginal tradition (at [49]). Lindgren J held in Harrington-Smith on behalf of the Wongatha People v Western Australia (No 9) [2007] FCA 31 that: I have no difficulty in regarding the changes from residence in wiltjas (Aboriginal bough shelters) to residence in houses, from hunting on foot with spears to the use of motorised transport and rifles, and from the use of sharp stones to razor blades in the ceremony of male initiation, as adaptations. However, whether residence within a Claim area and hunting by an individual are probative of a standard or norm will require close attention to the reasons why the individual resides in the Claim area or hunts. The question is what to make of all the evidence concerning hunting. I think it shows that there is a connection between claimants and the land in general of a kind and degree that non-Aboriginal people do not have, but it is not necessarily probative of a law or custom. It would be necessary to consider carefully the evidence given by each individual as to where he or she hunts, and why he or she hunts there.

His Honour noted (at [953]) that: ‘Reasons why the claimants hunt are: inexpensive recreation; socialising with family and friends; passing on knowledge and skills gained from previous generations to children and grandchildren; and obtaining a supplement to supermarket food’. These reasons are not evidence of observance of traditional laws and customs. In Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group v Queensland (No 2) (2010) 270 ALR 564, Finn J held that rights to engage in commercial fishing were valid forms of native title. This decision was upheld unanimously in the High Court (Akiba on behalf of the Torres Strait Islanders of

the Regional Seas Claim Group v Commonwealth (2013) 250 CLR 209: 3.121C below).

Connection with the land 3.102

In Mabo (No 2), the majority offered various formulations

concerning the fundamental requirement of a connection with the land for the purposes of establishing native title rights. Brennan J (at 59) identified the need for a ‘traditional connection’ with the land, while Deane and Gaudron JJ emphasised ‘occupation or use’ (at 110). Toohey J appeared to adopt the more stringent requirement of ‘physical presence’ (at 188), though he accepted that a nomadic lifestyle would not be fatal to a native title claim. Later cases have not endorsed the need for physical presence or occupation.

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3.103C

Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422; 194 ALR 538; 77 ALJR 356 High Court of Australia

[In February 1994, application was made to the Native Title Registrar for a determination of native title to land and waters in northern Victoria and southern New South Wales. Several areas of land and waters were claimed; all were said to be public lands and waters. All the areas claimed lay within a more or less oval-shaped area which was said to be traditional Yorta Yorta territory. (The precise basis for fixing the boundaries of this oval-shaped area was said by the trial judge not to have been established in evidence.) Pursuant to the Native Title Act 1993 (Cth), as it stood at the relevant time, the application was accepted by the Native Title Registrar in May 1994, and in

May 1995, the matter was referred to the Federal Court for decision. The primary judge (Olney J) made a determination of native title under the Native Title Act that: Native title does not exist in relation to the areas of land and waters identified in Schedule D to Native Title Determination Application VN 94/1 accepted by the Native Title Registrar on 26 May 1994. From this determination the claimants appealed to the Full Court of the Federal Court. The Full Court, by majority (Branson and Katz JJ; Black CJ dissenting), dismissed the appeal. By special leave, the claimants appealed to the High Court.] Gleeson CJ, Gummow and Hayne JJ: Much of the argument of the present appeal was directed to the proper construction of this definition [s 223]. In particular, considerable attention was directed to what is meant by par (c) of the definition when it says that ‘the rights and interests are recognised by the common law of Australia’. Does this paragraph, as the majority of the Full Court held, [incorporate] into the statutory definition of native title the requirement that, in the case of a claimed communal title, the holders of the native title are members of an identifiable community ‘the members of whom are identified by one another as members of that community living under its laws and customs’ and that that community has continuously since the acquisition of sovereignty by the Crown been an identifiable community the members of which, under its traditional laws observed and traditional customs practised, possessed interests in the relevant land? Does it, again as the majority of the Full Court held, also incorporate into the statutory definition of native title, the notion of extinguishment — whether by a positive exercise of sovereign power appropriate to achieve that result or by reason of the native title having expired so as to allow the Crown’s radical title to expand to a full beneficial title? [After considering the way in which the plaintiffs’ argument developed through the various stages of the litigation, the judgment continued:] The inextricable link between a society and its laws and customs To speak of rights and interests possessed under an identified body of laws and customs is … to speak of rights and interests that are the creatures of the laws and customs of a particular [page 220]

society that exists as a group which acknowledges and observes those laws and customs. And if the society out of which the body of laws and customs arises ceases to exist as a group which acknowledges and observes those laws and customs, those laws and customs cease to have continued existence and vitality. Their content may be known but if there is no society which acknowledges and observes them, it ceases to be useful, even meaningful, to speak of them as a body of laws and customs acknowledged and observed, or productive of existing rights or interests, whether in relation to land or waters or otherwise. What is the position if, as is said to be the case here, the content of the laws and customs is passed on from individual to individual, despite the dispersal of the society which once acknowledged and observed them, and the descendants of those who used to acknowledge and observe these laws and customs take them up again? Are the laws and customs which those descendants acknowledge and observe ‘traditional laws’ and ‘traditional customs’ as those expressions are used in the Native Title Act, and are the rights and interests in land to which those laws and customs give rise possessed under traditional laws acknowledged and traditional customs observed? Again, it is necessary to consider the several elements of the issues that thus arise. Has the society ceased to exist? Does not the survival of knowledge of the traditional ways suggest that it has not? Or is it shown that, although there is knowledge, there has been or is no observance or acknowledgment? These may be very difficult questions to resolve. Identifying a society that can be said to continue to acknowledge and observe customs will, in many cases, be very difficult. In the end, however, because laws and customs do not exist in a vacuum, because they are socially derivative and non-autonomous, if the society (the body of persons united in and by its observance and acknowledgment of a body of law and customs) ceases to acknowledge and observe them, the questions posed earlier must be answered, no. When the society whose laws or customs existed at sovereignty ceases to exist, the rights and interests in land to which these laws and customs gave rise, cease to exist. If the content of the former laws and customs is later adopted by some new society, those laws and customs will then owe their new life to that other, later, society and they are the laws acknowledged by, and customs observed by, that later society, they are not laws and customs which can now properly be described as being the existing laws and customs of the earlier society. The rights and interests in land to which the re-adopted laws and customs give rise are rights and interests which are not rooted in pre-sovereignty traditional law and custom but in the laws and customs of the new society … for these reasons, it would be wrong to confine an inquiry about native title to an examination of the laws and customs now observed in an indigenous society, or to divorce that inquiry from an inquiry into the society in which the laws and customs in question operate. Further, for the same reasons, it would be wrong to confine the inquiry for connection between claimants and the land or waters concerned to an inquiry about the connection said to be demonstrated by the laws and customs which are shown now to be acknowledged and observed by the peoples concerned. Rather, it will be necessary to inquire about the relationship between the laws and customs now acknowledged and observed, and those that were acknowledged and observed before sovereignty, and to do so by considering whether the laws and customs can be said to be the laws and customs of the society whose laws and customs are properly described as traditional laws and customs … Against this lengthy introduction it is convenient now to turn to the specific

criticisms that the claimants made of the reasoning in the courts below and, for that purpose, to say more about the reasons both of the primary judge and of the majority in the Full Court … [page 221]

From this evidence, and accounts of earlier travels by explorers and others through the claim area during the 1820s and 1830s, the primary judge concluded that the inference that indigenous people occupied the claim area in and before 1788 was ‘compelling’. This conclusion was not challenged. As the primary judge noted, however, it left open whether the indigenous people who were found to be in occupation of the claim area in the 1830s and 1840s, as European settlement occurred, and about whom there were available records, were descended from those who had occupied the area at the time sovereignty was first asserted. At trial, two separate questions were understood as arising. First, did the claimants demonstrate that they were descended from those who were indigenous inhabitants of the claim area in 1788? Secondly, what was the nature of the entitlement which the indigenous inhabitants enjoyed in relation to their traditional lands in accordance with their laws and customs, and what was the extent of those lands? … [O]nly two [identified individuals] had been shown to be descended from persons who were indigenous inhabitants of part of the claim area in 1788. Even so, what was said to be ‘a significant number of the claimant group’ were found to be descended from one or other of these two persons. The question of adaptation and change was at the heart of the claimants’ case. But so also was the proposition that the society, whose laws and customs had adapted and changed over time, continued to exist and, on one branch of the claimants’ case, continued to occupy the claim area, or large parts of it, from before European settlement to the date of the claim. It was not disputed at trial that European settlement had brought great changes. The primary judge described the effect of European settlement in the area as having had ‘a devastating effect’ on the Aboriginal population … Having regard to the petition [to the Governor of New South Wales in 1881 by 42 Aboriginals to the effect that ‘all the land within our tribal boundaries has been taken possession of by the government and white settlers’ and seeking a grant of land] and to the absence of evidence of contemporary records to the contrary, the primary judge concluded that, by the time the petition was presented in 1881, those through whom the claimants sought to establish native title. … were no longer in possession of their tribal lands and had, by force of the circumstances in which they found themselves, ceased to observe those laws and customs based on tradition which might otherwise have provided a basis for the present native title claim; and the dispossession of the original inhabitants and their descendants has continued through to the present time. Rather, the primary judge concluded that the current beliefs and practices of the claimants constituted genuine efforts on their part ‘to revive the lost culture of their ancestors’.

The legal principles which the primary judge considered were to be applied to the facts found were principles which he correctly identified as being found in the Native Title Act’s definition of native title … The appeal to this court The Native Title Act, when read as a whole, does not seek to create some new species of right or interest in relation to land or waters which it then calls native title. Rather, the Act has as one of its main objects ‘to provide for the recognition and protection of native title’ (emphasis added), which is to say those rights and interests in relation to land or waters with which the Act deals, but which are rights and interests finding their origin in traditional law and custom, not the Act. It follows that the reference in par (c) of s 223(1) to the rights or interests being recognised by the common law of Australia cannot be understood as a form [page 222]

of drafting by incorporation, by which some pre-existing body of the common law of Australia defining the rights or interests known as native title is brought into the Act. To understand par (c) as a drafting device of that kind would be to treat native title as owing its origins to the common law when it does not. And to speak of there being common law elements for the establishment of native title is to commit the same error. It is, therefore, wrong to read par (c) of the definition of native title as requiring reference to any such body of common law, for there is none to which reference could be made. The reference to recognition by the common law serves a different purpose of which there are at least two relevant features. First, the requirement for recognition by the common law may require refusal of recognition to rights or interests which, in some way, are antithetical to fundamental tenets of the common law. No such case was said to arise in this matter and it may be put aside. Secondly, however, recognition by the common law is a requirement that emphasises the fact that there is an intersection between legal systems and that the intersection occurred at the time of sovereignty. The native title rights and interests which are the subject of the Act are those which existed at sovereignty, survived that fundamental change in legal regime, and now, by resort to the processes of the new legal order, can be enforced and protected. It is those rights and interests which are ‘recognised’ in the common law. How then, if at all, does the definition of native title take account of whether there has been some modification of or adaptation to traditional law and custom, or some interruption in the exercise of native title rights and interests? As foreshadowed at the outset of these reasons, much turns on a proper understanding of the reference in par (a) of the definition to ‘traditional’ laws acknowledged and ‘traditional’ customs observed. For the reasons given earlier, ‘traditional’ does not mean only that which is transferred by word of mouth from generation to generation, it reflects the fundamental nature of the native title rights and interests with which the Act deals as rights and interests rooted in pre-sovereignty traditional laws and customs. It may be accepted that demonstrating the content of that traditional law and custom may very well present difficult problems of

proof. But the difficulty of the forensic task which may confront claimants does not alter the requirements of the statutory provision … It is, however, important to notice that demonstrating the content of pre-sovereignty traditional laws and customs may be especially difficult in cases, like this, where it is recognised that the laws or customs now said to be acknowledged and observed are laws and customs that have been adapted in response to the impact of European settlement. In such cases, difficult questions of fact and degree may emerge, not only in assessing what, if any, significance should be attached to the fact of change or adaptation but also in deciding what it was that was changed or adapted. It is not possible to offer any single bright line test for deciding what inferences may be drawn or when they may be drawn, any more than it is possible to offer such a test for deciding what changes or adaptations are significant. Indeed, so far as the second of those issues is concerned, it would be wrong to attempt to reformulate the statutory language when it is the words of the definition to which effect must be given. What is clear, however, is that demonstrating some change to, or adaptation of, traditional law or custom or some interruption of enjoyment or exercise of native title rights or interests in the period between the Crown asserting sovereignty and the present will not necessarily be fatal to a native title claim. Yet both change, and interruption in exercise, may, in a particular case, take on considerable significance in deciding the issues presented by an application for determination of native title. The relevant criterion to be applied in deciding the significance of change to, or adaptation of, traditional law or custom is readily stated (though its application to particular facts may well be difficult). The key question is whether the law and custom can [page 223]

still be seen to be traditional law and traditional custom. Is the change or adaptation of such a kind that it can no longer be said that the rights or interests asserted are possessed under the traditional laws acknowledged and the traditional customs observed by the relevant peoples when that expression is understood in the sense earlier identified? Interruption of use or enjoyment, however, presents more difficult questions. First, the exercise of native title rights or interests may constitute powerful evidence of both the existence of those rights and their content. Evidence that at some time, since sovereignty, some of those who now assert that they have that native title have not exercised those rights, or evidence that some of those through whom those now claiming native title rights or interests contend to be entitled to them have not exercised those rights or interests, does not inevitably answer the relevant statutory questions. Those statutory questions are directed to possession of the rights or interests, not their exercise, and are directed also to the existence of a relevant connection between the claimants and the land or waters in question. Secondly, account must no doubt be taken of the fact that both pars (a) and (b) of the definition of native title are cast in the present tense. The questions thus presented are about present possession of rights or interests and present connection of claimants with the land or waters. That is not to say, however, that the continuity of the chain of possession and the continuity of the connection is irrelevant. Yet again, however, it is

important to bear steadily in mind that the rights and interests which are said now to be possessed must nonetheless be rights and interests possessed under the traditional laws acknowledged and the traditional customs observed by the peoples in question. Further, the connection which the peoples concerned have with the land or waters must be shown to be a connection by their traditional laws and customs. For the reasons given earlier, ‘traditional’ in this context must be understood to refer to the body of law and customs acknowledged and observed by the ancestors of the claimants at the time of sovereignty. For exactly the same reasons, acknowledgment and observance of those laws and customs must have continued substantially uninterrupted since sovereignty. Were that not so, the laws and customs acknowledged and observed now could not properly be described as the traditional laws and customs of the peoples concerned. That would be so because they would not have been transmitted from generation to generation of the society for which they constituted a normative system giving rise to rights and interests in land as the body of laws and customs which, for each of those generations of that society, was the body of laws and customs which in fact regulated and defined the rights and interests which those peoples had and could exercise in relation to the land or waters concerned. They would be a body of laws and customs originating in the common acceptance by or agreement of a new society of indigenous peoples to acknowledge and observe laws and customs of content similar to, perhaps even identical with, those of an earlier and different society. To return to a jurisprudential analysis, continuity in acknowledgment and observance of the normative rules in which the claimed rights and interests are said to find their foundations before sovereignty is essential because it is the normative quality of those rules which rendered the Crown’s radical title acquired at sovereignty subject to the rights and interests then existing and which now are identified as native title. In the proposition that acknowledgment and observance must have continued substantially uninterrupted, the qualification ‘substantially’ is not unimportant. It is a qualification that must be made in order to recognise that proof of continuous acknowledgment and observance, over the many years that have elapsed since sovereignty, of traditions that are oral traditions is very difficult. It is a qualification that must be made to recognise that European settlement [page 224]

has had the most profound effects on Aboriginal societies and that it is, therefore, inevitable that the structures and practices of those societies, and their members, will have undergone great change since European settlement. Nonetheless, because what must be identified is possession of rights and interests under traditional laws and customs, it is necessary to demonstrate that the normative system out of which the claimed rights and interests arise is the normative system of the society which came under a new sovereign order when the British Crown asserted sovereignty, not a normative system rooted in some other, different, society. To that end it must be shown that the society, under whose laws and customs the native title rights and interests are said to be possessed, has continued to exist throughout that period as a body united by its acknowledgment and observance of the laws and customs …

Conclusions The critical question is whether the errors of law which were made at trial bore, in any relevant way, upon the primary judge’s critical findings of fact that the evidence did not demonstrate that the claimants and their ancestors had continued to acknowledge and observe, throughout the period from the assertion of sovereignty in 1788 to the date of their claim, the traditional laws and customs in relation to land of their forebears, and that ‘before the end of the 19th century, the ancestors through whom the claimants claim title had ceased to occupy their traditional lands in accordance with their traditional laws and customs’. If those findings of fact stand unaffected by error of law, the claimants’ claim to native title fails and their appeal should be dismissed. They are findings that the forebears of the claimants had ceased to occupy their lands in accordance with traditional laws and customs and that there was no evidence that they continued to acknowledge and observe those laws and customs. Upon those findings, the claimants must fail … The appeal should be dismissed with costs. Gaudron and Kirby JJ: Although the conclusion of Olney J that history had ‘washed away any real acknowledgement of … traditional laws and any real observance of … traditional customs’ is expressed in terms which closely follow the wording of s 223(1)(a) of the Act, it is clear from its context that his Honour was not concerned with the acknowledgement of traditional laws and observance of traditional customs pursuant to which the claimant group might establish a connection with land or waters in the claim area but with laws and customs specifically relating to the utilisation or occupation of the land and waters claimed. Thus, his Honour’s conclusion was prefaced by the statement that the evidence did not ‘support a finding that the descendants of the original inhabitants … have occupied the land in the relevant sense since 1788 nor that they have continued to observe and acknowledge, throughout that period, the traditional laws and customs in relation to land of their forebears’. There are other indications that his Honour was concerned solely to identify acknowledgement of laws and observance of customs with respect to the utilisation or occupation of land. Thus, for example, his Honour observed that ‘[n]o group or individual has been shown to occupy any part of the land in the sense that the original inhabitants can be said to have occupied it’. But of greater significance is his Honour’s earlier statement that, for the native title claim of the Yorta Yorta people to succeed, ‘it must be demonstrated that the traditional connexion with the land of the ancestors of the claimant group has been substantially maintained since the time sovereignty was asserted’. What is required by ss 223(1)(a) and (b) of the Act is the acknowledgement of traditional laws and the observance of traditional customs by which particular Aboriginal or Torres Strait Islanders have a connection to the land and that they possess rights and interests in relation [page 225]

to that land under those laws and customs. There is nothing in that paragraph or any other part of the definition of ‘native title’ or ‘native title rights and interests’ which that

‘traditional connexion with the land [be] substantially maintained’. His Honour’s erroneous view that what was required was an error of law affecting the reasoning process which led to the finding that ‘the tide of history ha[d] washed away any real acknowledgement [by the Yorta Yorta people] of their traditional laws and any real observance of their traditional customs’. It may be that the error which we have identified above occurred because the appellants assumed the burden of establishing a continuing and substantial traditional connection with the land through their direct forebears, including Edward Walker and Kitty Atkinston/Cooper. However, the source of the error is immaterial. The relevant issue under ss 223(1)(a) and (b) of the Act is simply whether the Yorta Yorta people now acknowledge and observe traditional laws and customs by which they have a connection with the land and waters claimed by them … The appeal should be allowed with costs. [McHugh and Callinan JJ delivered separate judgments dismissing the appeal with costs.]

3.104 Questions 1.

The Yorta Yorta decision demonstrates many of the difficulties faced by Indigenous plaintiffs in establishing native title. The trial judge found the written European commentary more compelling than the claimants’ oral history. Did the majority impose too high a standard for Indigenous plaintiffs to meet, or is this reasonable given the wording of the Act?

2.

Do Gaudron and Kirby JJ propose a fairer test? Is their test more consistent with the language of s 233(1)? The High Court has not yet resolved the question as to whether the connection with the land needs to be physical. The majority of the High Court in Ward held that a ‘connection’ with the land or waters does not necessarily require continued use. Gleeson CJ, Gaudron, Gummow and Hayne JJ concluded that s 223(1)(b) ‘is not directed to how Aboriginal peoples use or occupy traditional land or waters’

(at 32). For a general account of the decision, see Bartlett, 2003, Ch 7. As Bartlett notes (at 80), in other jurisdictions native title, if proved to exist at the time of settlement, is presumed to continue. The onus of establishing abandonment thus shifts to the settlers. Is this a fairer rule? In Daniel v Western Australia [2003] FCA 666 Nicholson J held that the requisite connection to the land could be spiritual ‘as meaning any form of asserted connection without evidence of continuing use or physical presence’: at [422].57

[page 226]

3.105

A number of cases have now considered the question of connection

to land. For instance, the Full Court in Ward v Western Australia observed (at [243]), in the context of a claim to communal native title rights and interests: The connection can be maintained by the continued acknowledgement of traditional laws, and by the observance of traditional customs. Acknowledgement and observance may be established by evidence that traditional practices and ceremonies are maintained by the community, insofar as that is possible, off the land, and that ritual knowledge including knowledge of the Dreamings which underlie the traditional laws and customs, continue to be maintained and passed down from generation to generation. Evidence of present members of the community, which demonstrates a knowledge of the boundaries to their traditional lands, in itself provides evidence of continuing connection through adherence to their traditional laws and customs [emphasis added].

3.106C

De Rose v South Australia (No 2) (2005) 145 FCR 290 Federal Court of Australia (Full Court)

[A group of Yankunytatjara and Pitjantjatjara people claimed native title over De Rose Hill Station which is situated in the ‘Western Desert’ region of the north-west of South Australia. The second respondents, the Fullers, were holders of three pastoral leases. The traditional laws and customs relied on by the claimants were those of the Western Desert Bloc. They claimed that under these laws and customs they were Nguraritja (traditional custodians or owners) for the claim area. They said that under the laws and customs of the Western Desert Bloc they have rights and responsibilities in relation to the claim area and nearby country. One of the claimants, Peter de Rose, was born under an ironwood tree on the track of the Kalaya (emu) Tjurkurpa (Dreaming) close to the station in about 1949. At that time his mother, Katjiwala, a Pitjantjatjara woman who had grown up on De Rose Hill, and his stepfather, Snowy, were working on De Rose Hill Station. Peter believed that he had been born under an ironwood tree on the track of the Kalaya Tjukurpa. The primary judge accepted this evidence. For that reason, the Kalaya Tjukurpa had become his Tjukurpa. He lived there in a wiltja, or ‘humpy’, with his parents. He remained on the land with some brief interruptions until 1978 when he left on the death of his brother. The trial judge dismissed the claim on the basis that the claimants had abandoned their connection with the land. The claimants appealed] Wilcox, Sackville and Merkel JJ: After he left De Rose Hill Station in 1978, Peter De Rose returned from time to time in order to hunt. He did not look after any sites on the Station. Peter explained his failure to visit the Station more often, or to camp there, as a consequence of his fear of Doug and Rex Fuller. The primary Judge noted that there was some difficulty reconciling this claim with his written statement that he had returned to the Station after Bobby’s death to visit Doug. His Honour did not, however, make a finding that Peter’s explanation was untrue. Rather, he found that Peter did not have any reason to be afraid to enter the property to hunt or to carry on traditional activities. Peter De Rose also said that while at Railway Bore he became uneasy about visiting De Rose Hill Station because he was worried he might frighten the cattle. His Honour thought that this was a ‘paltry excuse’. Peter claimed that, as Nguraritja, he had responsibilities for his country. He also had an [page 227]

obligation to teach appropriate people about the places on De Rose Hill. While his Honour accepted Peter’s claim to be Nguraritja for a watercourse on the claim area, he found that Peter had given little detail as to how he performed his duties, nor had he identified anyone who had benefited from his teaching. However, it is important to note that Peter De Rose gave evidence as to the main Tjukurpa for his country and as to the role and responsibilities of Nguraritja.

The primary Judge seems to have been influenced by his view that Peter De Rose and the other appellants had not provided satisfactory reasons or excuses for their failure to discharge their responsibilities as Nguraritja or to maintain contact with the claim area. His Honour recorded, however, that the evidence of the Aboriginal witnesses contained (at [907]) a ‘persistent theme’ that they were too frightened to return to De Rose Hill Station because of the hostility displaced by the Fullers… At various points in the judgment, his Honour appears to suggest that the appellants faced a choice between traditional Aboriginal values and European values and that they chose the latter (for example at [107], [681], [896], [902]). Consistently with this approach, his Honour identified (at [896]) two main reasons why the Aboriginal people left De Rose Hill Station, both of which were said to ‘deny the presence of a continuing native title connection with the claim area’. The first reason was the opening of the community centre at Indulkana in 1968; the second was that the opportunities for work, particularly for Aboriginal stockmen, dried up … [I]t is not apparent why the appellants’ reasons for leaving the Station necessarily denies ‘the presence of a continuing native title connection with the claim area’. Movement from traditional lands in search of regular food or shelter, as the evidence in this case shows, is not a new phenomenon or one unknown to traditional laws and customs of the Western Desert Bloc. Depending on the circumstances, it may well be possible for Aboriginal people, by their traditional laws and customs, to maintain a connection with land notwithstanding that they ceased to reside there because of the influence of ‘European social and work practices’. The upshot is that, in our view, the primary Judge did not address the correct question posed by s 223(1)(b) of the NTA. His finding that Peter De Rose failed to satisfy s 223(1)(b) is therefore flawed. We think that the findings relating to the other appellants, even though their circumstances were each different, were also flawed for the same reason. [The Full Court allowed the appeal, but concluded that they would not remit the matter to the trial judge as he had since retired. Instead, they would make their own determination after consideration of further submissions: De Rose v State of South Australia (No 2) (2005) 145 FCR 290.] Wilcox, Sackville and Merkel JJ: The principal question debated by the parties and addressed in De Rose (FC) [De Rose v South Australia (2003) 133 FCR 325] was whether the primary Judge had erred in concluding that the appellants had failed to prove that they retained a connection to the claim area by traditional laws and customs acknowledged and observed by them that was sufficient to satisfy s 223(1)(b) of the NTA. (Section 223(1) of the NTA is reproduced at [28] below.) In considering that question, we identified (at [272]) four issues requiring attention, as follows: (i)

Did the primary Judge err in attributing importance to the absence of evidence of a cohesive community or group on or near the claim area? (ii) Did the primary Judge err in concluding that the appellants had failed to prove the necessary connection to the claim area for the purposes of s 223(1)(b) of the NTA?

[page 228]

(iii) If the primary Judge erred, should the Court undertake its own evaluation of the evidence relating to the question of ‘connection’? (iv) Should the judgment below be upheld on the ground that, on his Honour’s findings, the appellants failed to establish that they acknowledged traditional laws or observed traditional customs and accordingly did not satisfy s 223(1)(a) of the NTA? We reached the following conclusions on those four issues: 1.

2.

3.

The primary Judge’s finding that the appellants did not constitute or were not part of a social, communal or political organisation on or near the claim area could not adversely affect their claim to a determination of native title (at [283]). It had not been part of the appellants’ case, as ultimately presented, that they, or any persons who might be Nguraritja (someone who belongs to a place or who is a traditional owner or custodian), constituted a discrete, cohesive society or community at any given time (at [275]). The normative system on which they relied was that of the Western Desert Bloc. The evidence amply supported the proposition that, whatever the degree of acknowledgement or observance of traditional laws and customs by the appellants themselves, Western Desert society had continued to exist since sovereignty and the traditional laws and customs of that society had been acknowledged and observed substantially uninterrupted throughout that period ([274]–[280]): cf Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422 (Yorta Yorta), at [49]–[54], per Gleeson CJ, Gummow and Hayne JJ. Moreover, the primary Judge had rejected the contention that the traditional laws and customs of the Western Desert Bloc required those who held rights and interests in land to form a discrete social group or community (at [282]). The primary Judge had correctly identified the traditional laws and customs relevant to the question of ‘connection’ as those of the Western Desert Bloc. He had not, however, explicitly asked in relation to any of the appellants, as s 223(1)(b) of the NTA requires, whether by those traditional laws and customs they had retained a connection with the claim area. The correct inquiry would have required the primary Judge to ascertain the content of the traditional laws and customs, to characterise the effect of those laws and customs and then to determine whether the characterisation constituted a connection between the appellants (or any of them) and the claim area (at [310]). By failing to ask the correct question, the primary Judge had accorded undue weight to the appellants’ failure (as his Honour saw matters) to discharge their obligations as Nguraritja for the claim area (at [315]). He had not considered the effect of the failure under the traditional laws and customs of the Western Desert Bloc. Similarly, because the primary Judge did not address the question posed by s 223(1)(b) of the NTA, he had placed too much emphasis on the appellants’ lack of physical contact with the claim area after 1978 (at [316]). Consequently, his Honour’s finding that Peter De Rose and the other appellants failed to satisfy the requirements of s 223(1)(b) of the NTA was flawed (at [329]). Without the benefit of further submissions the Court was not in a position to

4.

undertake its own evaluation of the evidence relevant to the question of connection (at [330]). The primary Judge had made no express finding that the appellants had failed to satisfy s 223(1)(a) of the NTA (at [334]). On the contrary, his Honour stated (De Rose, at [561]) that some of the appellants: may well be Nguraritja under their traditional laws acknowledged and traditional customs observed, and may thereby satisfy the requirements of par 223(1)(a) of the [NTA]. [page 229]

To the extent that his Honour had made factual findings that might be construed as suggesting that the appellants had not satisfied s 233(1)(a), those findings were flawed by the errors and omissions previously identified in the judgment in De Rose (FC). As a consequence, the question of whether the appellants or some of them acknowledged the traditional laws and observed the traditional customs of the Western Desert Bloc required further consideration (at [341]) … It would read too much into s 223(1)(a) to require the claimants to show a continuing physical connection to the land. ‘Connection’ is dealt with in s 223(1)(b) and, as the High Court made clear in Ward (HC), at [64], par (b) is not directed to how Aboriginal peoples use or occupy land or water. It is directed to whether the peoples have a connection to land or water by the traditional laws acknowledged and the traditional customs observed by them. It is possible for Aboriginal peoples to acknowledge and observe traditional laws and customs throughout periods during which, for one reason or another, they have not maintained a physical connection with the claim area. Of course, the length of time during which the Aboriginal peoples have not used or occupied the land may have an important bearing on whether traditional laws and customs have been acknowledged and observed. Everything will depend on the circumstances. What sort of link, then, must be established between the rights and interests in relation to land or waters said to be possessed by a native title claimant community or group and its acknowledgement and observance of traditional laws and customs? In our view, it cannot be stated more precisely than that the community or group must show that it has acknowledged and observed those traditional laws and customs that recognise them as possessing rights and interest in relation to the claimed land or waters. Contrary to the Fullers’ submissions, s 223(1) (a) does not necessarily require claimants to establish that they have continuously discharged their responsibilities, under traditional laws and customs, to safeguard land or waters. Of course, the traditional laws and customs may provide that the holders of native title lose their rights and interests if they fail to discharge particular responsibilities. But s 223(1)(a) does not impose an independent requirement to that effect. Obviously enough, evidence that a native title claimant community or group has faithfully performed its obligations under traditional laws and customs would provide powerful support for its claim to possess native title rights and interests (assuming that the other requirements of s 223(1) are met). But evidence that members of the

community or group have not faithfully met their responsibilities, for example as Nguraritja for particular sites, will not necessarily be fatal to their claim. It must always be a matter of fact and degree as to whether the community or group has acknowledged and observed the traditional laws and customs on which it relies to establish possession of native title rights and interests. Additional matters showing acknowledgement and observance In their submissions at the further hearing, the appellants drew attention to other matters that supported their submission that the appellants in general, and Peter De Rose in particular, had acknowledged and observed the traditional laws and customs of the Western Desert Bloc that recognise the Nguraritja as possessing rights and interests in respect of the claim area. First, Peter De Rose gave detailed evidence, accepted by his Honour, that he had passed through the various ceremonial stages of life under Western Desert law and custom. The stages included tjitji (a young child permitted to be in the company of women); tjiranka (a child in early teenage years); kungkatja (the stage preceding seclusion to be undergone prior to becoming a nyiinka (‘bush boy’)); participation in the ceremony which made Peter De Rose nyiinka, the full details of which he would not divulge in the presence of women; the tjilkata [page 230]

cycle of ceremonies by which Peter De Rose became a wati (an initiated man) in his late teens; and ceremonies by which he finished being a wati pukuti (apparently a junior wati) and became a wati katarara (a transitional stage leading to complete manhood). The next stages were wati pulka (more senior initiated man) and tjilpi (an old revered man who passes on the sacred stories he has learned in his lifetime) … Secondly, the primary Judge took evidence in closed session at two sites (Wantjapila and Intalka) to the south of De Rose Hill Station. His Honour recorded (at [385]) that one of the witnesses gave evidence of the significance of each area and pointed out that, even today, death might follow if a woman were to learn the sacred men’s inma (songs) … Thirdly, the evidence showed that the appellants acknowledged and observed Western Desert Bloc restrictions on the dissemination of secret male knowledge, such as inma, to women and children. They also observed the prohibitions on women and children visiting certain men’s sites (and vice versa). Peter De Rose, for example, gave detailed evidence at Apu Maru as to the stories and songs that were restricted to men and also declined to give evidence about certain matters in the presence of women (at [273]) … Peter De Rose gave evidence, apparently accepted by the primary Judge (at [66]), that if he talked openly about certain matters in the presence of women he, too, could get into trouble and might be killed. Whiskey Tjukanka and Alec Baker also gave evidence about the consequences of contravening ‘strong law’. Fourthly, evidence was given by female Aboriginal witnesses of the practice of ‘smoking’ a newborn baby. They expressed the belief that enveloping the mother and the baby with smoke from a green wood tree will make the baby strong and will be good for

the mother’s milk (at [574]). Peter De Rose gave evidence that he had been smoked to the north of the ironwood tree where he had been born on the claim area. This was obviously an important element in his claim to be Nguraritja for the country … Fifthly, the concept of Nguraritja itself was recognised by the indigenous witnesses as central to the rights and responsibilities of people under the laws and customs of the Western Desert Bloc … Sixthly, there was evidence that the appellants observed rules relating to kinship and social organisation of the Western Desert, including the avoidance relationship that exists between a man and his waputju (father-in-law) … The observance of such rules lends support to the contention that the traditional laws and customs more directly linked with the possession of rights and interests in land were also observed. Seventhly, there was evidence that the appellants recognised and adhered to the authority of senior men. The primary Judge found (at [275]) that the tjilpi pass on to the younger wati the sacred stories that they have learned in their lifetime. Eighthly, the evidence clearly established that a number of the appellants had been taught traditional laws and customs by those who, under those laws and customs, were responsible for imparting that knowledge … Ninethly, the primary Judge found (at [903]) that the Aboriginal witnesses had not ‘lost their culture — far from it’. He gave as an obvious example their respect for the memory of a recently deceased person and the use of the word ‘kunmanara’ to refer to another person of the same name … Connection The starting point in considering whether the appellants have satisfied the requirements of s 223(1)(b) is the finding, which in our view should be made, that Peter De Rose (and probably others) has acknowledged and observed the traditional laws and customs of the Western Desert Bloc by which a person becomes Nguraritja for country. Under those laws and customs, Peter De Rose is (as the primary Judge found) Nguraritja for the claim area. As such [page 231]

he has defined rights and responsibilities for his country … The rights and responsibilities of persons who are Nguraritja, as found by the primary Judge, include: the right to live on their country, to collect food, water and other resources, to hunt and to travel where they want to go (so long as they do not offend the Tjukurpa) ([75]); the right to erect shelters on the land, to gather shrubs and bushes for medicinal purposes, to use timber to make, for example, miru (a spear-thrower) and wana (a digging stick used by women to dig for tjala (honey ant) and goannas) ([76]); the right to instruct any Anangu visitor to the land as to where he or she can go (including specifying avoidance places) and where (if at all) water and food may be obtained ([75]); the right to impose sanctions on a visitor who violates the rules, for example by hunting on the Nguraritja’s country without permission (at [75]);

the obligation to teach young people about country including the special places, water points, bush tucker, and the correct traditional ways of preparing food ([78]); the obligation to clean secret and sacred sites on the land ([104]); and the obligation to learn the Tjukurpa for country and to perform the appropriate inma and other ceremonies ([53], [382], [386], [416]) … The ‘connection’ required to satisfy s 223(1)(b) of the NTA is present.

3.107

In Jango v Northern Territory (2006) 152 FCR 150 the applicants

sought compensation from the Northern Territory Government for the extinguishment of native title rights over an area of the territory. Sackville J held that although the applicants demonstrated the continued existence of a society, the evidence did not show a consistent pattern of observance and acknowledgment of laws and customs by members of that society (at [397], [442]–[451]). His Honour found that the claimants could not show they were part of a group of Western Desert people exercising traditional laws and customs sufficiently related to those as exercised at the acquisition of sovereignty (summarised at [499]–[507]). Thus, the claim failed. Bennell v Western Australia (2006) 153 FCR 120 endorsed the view that a connection may exist regardless of a physical presence on the land; Wilcox J appears to be identifying with the need for a traditional connection for the land (at [791]). It was in this case that Wilcox J controversially ruled that native title might still exist over a region including metropolitan Perth and some smaller towns. Risk v Northern Territory of Australia [2006] FCA 404 demonstrates that where interruptions affect the presence of a claimant/s in an area and such an interruption subsequently affects the continued observance and enjoyment of traditional laws and customs, the necessary connection will not exist.

Mansfield J found the Larrakia people in the Darwin area had not observed traditional customs and laws since before European settlement of the area (at [834]). A combination of circumstances interrupted the presence of the Larrakia people in the claim area during several decades of the twentieth century, and those interruptions affected the present Larrakia people’s continued observance and enjoyment of traditional laws and customs as they existed at sovereignty. The Full Court affirmed this decision: [2007] FCAFC 46. In Northern Territory v Alyawarr (2005) 145 FCR 442, it was held that the connection is not limited to physical presence (at [92]) on the land, nor does it depend upon the precise locus within a community of native title rights and interests collectively allocated, provided that they can be regarded as held by the community as a whole (at [111]). Furthermore, where the rights and interests are held

[page 232]

communally the relevant connection is that between the community as a whole and the land the subject of the claim (at [117]). 3.108

The case of Harrington-Smith on behalf of the Wongatha People v

Western Australia (No 9) [2007] FCA 31 examined the question of the relationship between individuals and small groups of people recognising and pooling their respective claims. It was common ground that traditional laws and customs gave rise to some native title rights in many of the members of the Wongatha People as individuals or members of small groups. Here, the

subject matter of individual ownership was areas as defined by Dreaming sites and tracks, and it was the individuals’ and small groups’ connections to such areas that gave them ownership. But Lindgren J held that these rights did not give rise to native title on the part of the group as a whole to the claim area as this group claim did not originate in traditional laws and customs dating back to pre-sovereignty time (1829 in Western Australia). However, in dismissing the claims his Honour did allow (at [931]) that it may be: … conceivable that there may be individuals who could establish that they have individual rights or interests in smaller, personal ‘my country’ areas. No individual has applied for a determination of native title on that basis. The rights and interests claimed would apparently be different from the group rights and interests presently claimed. I do not propose to say anything further about that possibility, and certainly do not mean to suggest that such an application by an individual would or would not have any prospects of success.

Bennell v Western Australia (2006) 153 FCR 120 considered whether native title rights existed in relation to the claim area consisting of land and waters in and around Perth. Wilcox J applied Yorta Yorta in deciding that there was continuity of connection in favour of the Noongar people; the normative system relied upon by the applicants existed at settlement (as evidenced by detailed records of the native community structure prior to British settlement due to frequent contact made with sailors), and continued to have vitality due to the applicants’ acknowledgment and observance of some of its traditional laws and customs. Furthermore, the applicants showed the necessary connection between themselves and the whole claim area, irrespective of whether or not there are, today, members of the community who can trace their ancestry to people living in the Perth metropolitan area at sovereignty

(at [791]–[795]). This decision was overturned on appeal (Bodney v Bennell (2008) 249 ALR 300; [2008] FCAFC 63) on the ground that his Honour had not addressed the question as to whether the community had proved continuous acknowledgment and observance of customs since the time of settlement. In Worimi (aka Gary Dates) v Worimi Local Aboriginal Land Council (2010) 181 FCR 320; [2010] FCAFC 3 the court held (at [87]) that ‘connection may be mainly spiritual rather than physical; it may have evolved over time to a less specific use of all or many parts of that land; it may not involve physical access to each and every part of the land’. In Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group v Queensland (No 2) (2010) 270 ALR 564 Finn J held that a right to fish and take marine life from the Torres Strait could exist as a native title right without a right of complete control or occupancy of the relevant waters.

[page 233]

The extinguishment of native title 3.109

In Mabo, Brennan J (with whom Mason CJ and McHugh J agreed)

held at [64] that at common law native title could be extinguished without the consent of Aborigines and without the payment of compensation. However, the exercise of a power to extinguish native title must reveal a clear and plain intention to do so, whether the action be taken by the Legislature or by the Executive. This requirement, which flows from the seriousness of the consequences to indigenous inhabitants of extinguishing their traditional rights and interests in land, has been repeatedly emphasised by courts dealing with

the extinguishing of the native title of Indian bands in North America. A Crown grant which vests in the grantee an interest in land which is inconsistent with the right to enjoy a native title in respect of the same land necessarily extinguishes the native title. The extinguishing of native title does not depend on the actual intention of the Governor in Council … but on the effect which the grant has on the right to enjoy native title. If a lease be granted, the lessee acquires possession and the Crown acquires the reversion expectant on the expiry of the term. The Crown’s title is thus expanded from the mere radical title and, on the expiry of the term, becomes a plenum dominium.

In general, a ‘clear and plain intention’ to extinguish will be evidenced in three ways: first, by a legislative provision expressed to extinguish native title; second, by an inconsistent grant of an interest in land over which native title subsists inconsistent with those rights; and third, by acquisition by the Crown of native title land. The section of the judgment of Brennan J above raises the question as to whether pastoral leases issued under various legislative schemes of the states effectively extinguished native title. The High Court resolved this matter, by a narrow majority, in the next major native title case to come before it, Wik Peoples v Queensland (1996) 187 CLR 1 (3.111C below).

Grant of a freehold estate 3.110

A grant of a freehold estate will demonstrate a clear and plain

intention to extinguish native title. In Fejo v Northern Territory (1998) 195 CLR 96, the appellants argued that their native title rights survived the grant of a fee simple estate in 1882 that ultimately revested in the Crown which proceeded to grant Crown leases. The appellants, both on their own behalf, and on behalf of the Larrikia people, sought a declaration that they had native title and that the Crown, before it granted valid leases, was under an obligation imposed by the Native Title Act either to negotiate with the

traditional owners, or compulsorily acquire their native title. The High Court reasoned as follows: Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ (Kirby J agreeing): The appellants contended that the 1882 grant to Benham did not necessarily extinguish native title. It was said that if it affected native title at all, it did no more than suspend the right of the traditional owners to exercise their native title (the enjoyment of which, it was submitted, may well have continued in fact). If the grant had this effect on the right to exercise native title, it was submitted that that effect ceased when the land come once again to be held by the Crown. These contentions must be rejected. Native title is extinguished by a grant in fee simple. And it is extinguished because the rights that are given by a grant in fee simple are rights that are inconsistent with the native title holders continuing to hold any of the rights or interests

[page 234]

which make up native title. An estate in fee simple is, ‘for almost all practical purposes, the equivalent of full ownership of the land’ and confers ‘the lawful right to exercise over, upon, and in respect to, the land, every act of ownership which can enter into the imagination’. It simply does not permit of the enjoyment by any other person of any right or interest in respect of the land unless conferred by statute, by the owner of the fee simple, or by a predecessor in title … Native title to the land was not, and could not be, revived when the land came to be held again (as it was) by the Crown.

Pastoral leases and extinguishment 3.111C

Wik Peoples v Queensland (1996) 187 CLR 1 High Court of Australia

[The appellants claimed native title over land which, some years before, had been the subject of grants of pastoral leases under the Land Act 1910 (Qld) and the Land Act 1962 (Qld). In the

Federal Court, Drummond J ordered a number of questions of law to be argued as a separate issue. In essence, this issue was whether the pastoral leases in question conferred exclusive possession upon the grantees and, if so, whether the leases necessarily extinguished all incidents of Aboriginal title. Drummond J answered these questions in the affirmative. Under the terms of s 40 of the Judiciary Act 1903 (Cth), the appeal from Drummond J’s decision to the Full Federal Court was removed to the High Court.] Gummow J: The Preamble [to the Native Title Act] … recites the holding in Mabo (No 2) that: ‘native title is extinguished by valid government acts that are inconsistent with the continued existence of native title rights and interests, such as the grant of freehold or leasehold estates’. The extinguishment of existing native title readily is seen as a consequence of a grant in fee simple. That is because the fee simple, as the largest estate known to the common law, confers the widest powers of enjoyment in respect of all the advantages to be derived from the land itself and from anything found upon it. No different result may follow where what is asserted against native title is a lease for a term. In particular, subject to the constraints imposed by the law of waste, at common law the lessee ordinarily has powers of use and enjoyment with respect to certain profits or produce derived from the land. In these appeals, the fundamental issue does not concern the extinguishment of native title by grant of a fee simple or of a leasehold interest as known to the common law. Rather, it concerns the impact upon native title of statute and of sui generis interests created thereunder. The dispute is whether the grants of the Mitchellton Pastoral Leases, pursuant to the 1910 Act, and of the Holroyd River Pastoral Lease, pursuant to the 1962 Act, were, in the sense of the Preamble to the Native Title Act, valid government acts inconsistent with the continued existence of any native title rights and interests which subsisted when the grants were made. Those statutory grants were not of any freehold estate, being, indeed, grants of interests that were sui generis. English land law Traditional concepts of English land law, although radically affected in their country of origin by the Law of Property Act 1925 (UK), may still exert in this country a fascination beyond their utility in instruction for the task at hand. So much became apparent as submissions were developed on the hearing of these appeals. The task at hand involves an appreciation of the significance [page 235]

of the unique developments, not only in the common law, but also in statute, which mark the law of real property in Australia, with particular reference to Queensland. I have referred above to some of these developments. There also is the need to adjust ingrained habits of thought and understanding to what, since 1992, must be accepted as the common law of Australia. Further, those habits of thought and understanding may have lacked a broad appreciation of English common law itself. For example, there is no

particular reason to be drawn from English land law which renders it anomalous to accommodate in Australian land law notions of communal title which confer usufructuary rights. There are recognised in England rights of common which depend for their establishment upon prescription and custom. An example is the common of pasture in gross enforceable by action by one commoner on behalf of that commoner and the other commoners [citations omitted] … Nor, in a system where, subject to statute, land ownership depends upon principles derived from the English common law is there any necessary conceptual difficulty in accommodating allodial to tenurial titles … In the same period in which the existence of allodial title was denied to the colony of New South Wales by the decision in Brown, it was re-emerging elsewhere in the common law world. Quite apart from the treatment in the United States of native title, the American Revolution was followed in several of the States by legislative repudiation of the tenurial system as the ultimate root of real property title. For example, in New York the legislature abolished all feudal tenures of every description, with all their incidents, and declared that all lands within that State were allodial (Kavanaugh v Cohoes Power & Light Corp (1921) 187 NYS 216 at 236–237; Gray, The Rule Against Perpetuities (4th ed, 1942) s 23) … Statutory interpretation The particular application in Mabo [No 2] of the declaratory theory of the common law has consequences for these appeals. The Court is called upon to construe statutes enacted at times when the existing state of the law was perceived to be the opposite of that which it since has been held then to have been. Moreover, there is an incongruity in the application to the 1910 Act and the 1962 Act of the now established common law doctrine that, in certain circumstances, regard may be had to what is said by the responsible Minister in the course of the passage through the legislature of the Bill for the particular Act in question. The legislature would have proceeded in such a situation upon a false understanding of the existing law … The authorisation by the 1910 Act and the 1962 Act of activities amounting to physical inconsistency … with the continued exercise of what now are accepted as existing rights of native title would manifest, as a matter of necessary implication, the legislative intention to impair or extinguish those rights … Impairment or extinguishment would also follow if the 1910 Act or the 1962 Act prohibited acts which would be committed in the exercise of what now would be accepted to be native title. I approach the analysis of the 1910 Act and the 1962 Act upon that footing and what follows should be read accordingly. Expansion of radical title [His Honour discussed the notion of radical title acquired by the Crown on the assumption of sovereignty and continued:] Queensland submits that the grant by the Crown of a lease necessarily involves the acquisition by the Crown of the reversion which is expectant upon the expiry of the term. Accordingly, in granting the lease, the Crown exercises sovereign power in such a fashion as to assert absolute and beneficial ownership out of which the lease is carved. That absolute and beneficial ownership is, as a matter of law, inconsistent with the continued right to enjoy native title

[page 236]

in respect of the same land. It is necessary for the State to make good these propositions by their adaptation to the statutory systems for the disposition of Crown lands established by the 1910 Act and the 1962 Act. It is here, in my view, that the case for the State breaks down. [His Honour considered in detail the provisions of the 1910 and 1962 legislation and concluded:] Accordingly, I would reject the submission for the State that the scheme of the 1910 Act and the 1962 Act is such that, with respect to the grant of limited interests thereunder by the Crown, the necessary consequence is the acquisition by the Crown of a reversion expectant on the cesser of that interest, thereby generating for the Crown that full and beneficial ownership which is necessarily inconsistent with subsisting native title … Pastoral leases It is appropriate to turn to consider more closely the particular provisions of the legislation with respect to pastoral leases. The question is whether it follows upon a proper construction thereof and by reason of the steps taken thereunder by the issue of the Mitchellton Pastoral Leases and the Holroyd River Pastoral Lease, the necessary extinguishment of any subsisting native title. Attention is to be focused upon the terms of the legislation and of the instruments themselves. In that examination, the term ‘exclusive possession’ is of limited utility … [Section] 204 of the 1910 Act created its own remedy in the nature of ejectment and made it available not only to lessees but also to licensees of any land from the Crown. To reason that the use of terms such as ‘demise’ and ‘lease’ in legislative provisions with respect to pastoral leases indicates (i) the statutory creation of rights of exclusive possession and that, consequently, (ii) it follows clearly and plainly that subsisting native title is inconsistent with the enjoyment of those rights, is not to answer the question but to restate it. The term ‘lease’ may be used in a statute in a limited sense only. Thus, a lease enforceable in equity under the doctrine in Walsh v Lonsdale (1882) 21 Ch D 9 may not answer the description of ‘lease’ in a particular statute: Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 264. Statutes, such as the Landlord and Tenant (Amendment) Act 1948 (NSW), may create between parties who were landlord and tenant a relationship for the identification of which ‘no new terminology has come into existence’: Arnold v Mann (1957) 99 CLR 462 at 475. The phrase ‘statutory tenant’ then may be used to identify these rights and obligations which subsist only by virtue of the legislation and are unknown at common law [citations omitted]. [His Honour analysed the terms of the 1910 Act and the Mitchellton pastoral lease granted thereunder and concluded that the analysis supported four propositions:] First there is apparent the mixing together or combination in the statutory regime for pastoral leases and occupation licences of elements which in an analysis under the common law of leases and licences would be distinct [citation omitted]. Secondly, the terms of the 1910 Act providing for pastoral leases were apt to identify the

characteristics and incidents of that statutory interest. Thirdly, those characteristics not such as to approximate what under a lease as understood at general law may been a right to exclude as trespassers persons exercising rights attached to subsisting native title. Fourthly, the contrary conclusion, that native title holders rendered trespassers as a consequence of rights given by pastoral

were have their were

[page 237]

leases, would be at odds with the interpretation of the phrase ‘unlawful occupation’ which, as indicated earlier in these reasons, is to be given its use in s 204 of the 1910 Act. I turn to the Holroyd River Pastoral Lease [granted under the 1962 Act]. [T]he land carried approximately one beast to 60 acres. The cattle were run under open range conditions. At the time of the relevant grant in 1974, there appear to have been six sets of roughly constructed mustering yards but no other improvements upon the land. Section 14 of the 1962 Act obliged the grantees to perform conditions imposed upon them by the statute or the grant. The instrument contained conditions requiring, within five years, the sowing of at least 40.5 hectares as a ‘seed production area’ and the construction of an airstrip, 90 miles of internal fencing, one set of main yards and dip, three earth dams and a manager’s residence, with quarters for five men and a shed. There was a further condition requiring, within that period, the enclosure of the holding with a good and substantial fence. This was unwelcome to the grantees. It was not common practice on Cape York to boundary fence. Apparently as the result of an exercise of the discretion conferred upon the Minister by s 64(3) of the 1962 Act, the grantees later were relieved from compliance with this condition [citation omitted]. The airstrip was constructed and the Minister appears to have accepted that there was compliance with the requirement for dam construction. The other conditions were not complied with by the grantees. Failure to comply with conditions required by the Holroyd River Pastoral Lease rendered it liable to determination by forfeiture (ss 14(1) and 295 of the 1962 Act). Upon such determination, the land reverted to the Crown and became Crown land available for re-grant (ss 299(1), 6(1)). The person in occupation would be obliged by s 299(2) to give to the Land Commissioner peaceful possession of the land and of all improvements thereon. Liability to forfeiture might be waived by the Minister (s 297(2)). Despite some differences between the two statutory regimes and subject to one qualification, the same conclusions apply to the Holroyd River Pastoral Lease as those reached with respect to the Mitchellton Pastoral Lease. In none of these instances was there clear, plain and distinct authorisation by the relevant grant of acts necessarily inconsistent with all species of native title which might have existed. It does not appear that the statutory interests could be enjoyed only with the full abrogation of any such native title. The qualification is that the later but not the earlier grants were subject to conditions requiring improvements to the land. It may be that the enjoyment of some or all native title rights with respect to particular portions of the 2,830 square kilometres of the Holroyd River Pastoral Lease would be excluded by construction of the airstrip and dams and by compliance with other conditions. But that would present particular issues of fact

for decision. The performance of the conditions, rather than their imposition by the grant, would have brought about the relevant abrogation of native title. [Gummow J concluded that none of the grants of pastoral leases in question necessarily extinguished all incidents of native title. In separate judgments, Toohey, Gaudron and Kirby JJ agreed that neither the 1910 and 1962 Acts nor the instruments of lease extinguished native title and that the leases in question did not confer exclusive possession upon the grantees. The minority judgments of Brennan CJ, Dawson and McHugh JJ concluded, by contrast, that the leases in question were intended to confer exclusive possession upon the lessees.]

[page 238]

3.112

The result of the Wik decision was that at common law the grant of

a pastoral lease does not necessarily extinguish native title.58 It may be otherwise in the case of pastoral leases granted after the commencement of the Racial Discrimination Act 1975 (31 October 1975) and before the commencement of the Native Title Act 1993 (1 January 1994). Interests granted between those dates which at common law extinguished native title might have been invalidated as offending the Racial Discrimination Act 1975. The Native Title Act provides for the validation of certain classes of interests granted during this period. The effect of the machinery of the Act upon interests which are classified by the Act as category ‘A’ interests, and these include by the terms of s 229(3), pastoral leases, is to completely extinguish native title. A pastoral lease is defined by the terms of s 248 as a lease that: ‘(a) permits the lessee to use the land or waters covered by the lease solely or primarily for: (i) maintaining or breeding sheep, cattle or other animals; or (ii) any other pastoral purpose; or (b) contains a statement to the

effect that it is solely or primarily a pastoral lease or that it is granted solely or primarily for pastoral purposes’. The courts have had to deal with many more cases on the question of extinguishment, and have elaborated a number of principles extending and applying the ruling in Wik.

Leases conferring rights of exclusive possession 3.113

In Wilson v Anderson (2002) 190 ALR 313 the High Court

considered the effect of a pastoral lease in the Western District of New South Wales. The pastoral lease was granted under the Western Lands Act 1901 (NSW) to Ross Smith ‘in perpetuity’. Wilson later purchased the lease. The High Court examined the nature of this type of pastoral lease, and concluded that it was of a different order entirely from the leases in Wik: ‘The question in this litigation thus differs from that considered with respect to the legislation in cases such as Wik. The pastoral lease tenures there considered lack the historical and conveyancing background from which the lease in perpetuity was derived as a substitute for the old Crown grant of the determinable fee simple’ (at 343 per Gaudron, Gummow and Hayne JJ). 3.114C

Western Australia v Ward (2002) 191 ALR 1; 76 ALJR 1098 High Court of Australia

[The facts of this case are outlined above at 3.88C; footnotes omitted.] Gleeson CJ, Gaudron, Gummow and Hayne JJ: Before turning to consider the various acts attributable to the State (and then those attributable to the Territory) which were said to extinguish native title, wholly or partly, it is convenient to turn to the criterion for extinguishment of native title which was adopted by the primary judge and rejected by the Full Court.

The primary judge adopted the adverse dominion test or approach which had been suggested but not adopted in a dissenting judgment of Lambert JA of the British Columbia Court of Appeal in Delgamuukw v British Columbia. Lee J did not expressly endorse the adverse dominion test but, as Beaumont and von Doussa JJ later pointed out in the Full Court, it is apparent from his Honour’s treatment of pastoral leases and other grants to third parties [page 239]

that he had adopted the adverse dominion test. That test or approach was described by Lee J in the following terms: First, that there be a clear and plain expression of intention by parliament to bring about extinguishment in that manner; secondly, that there be an act authorised by the legislation which demonstrates the exercise of permanent adverse dominion as contemplated by the legislation; and thirdly, unless the legislation provides the extinguishment arises on the creation of the tenure inconsistent with an aboriginal right, there must be actual use made of the land by the holder of the tenure which is permanently inconsistent with the continued existence of aboriginal title or right and not merely a temporary suspension thereof. (original emphasis) His Honour applied the adverse dominion test to conclude that the claimants had native title rights and interests in respect of much of the area they claimed. He rejected the contention that some or all of those rights and interests had been extinguished. It is necessary to say something further about the adverse dominion test. Some of the parties in this Court contended that it is no more than the use of different language to express a test of extinguishment which has been, or should be, adopted in Australia as the criterion for the withdrawal by the common law of the recognition of native title spoken of in par (c) of the definition in s 223(1) of the NTA. The cases often refer to the need for those who contend that native title has been extinguished to demonstrate a ‘clear and plain intention’ to do so. That expression, however, must not be misunderstood. The subjective thought processes of those whose act is alleged to have extinguished native title are irrelevant. Nor is it relevant to consider whether, at the time of the act alleged to extinguish native title, the existence of, or the fact of exercise of, native title rights and interests were present to the minds of those whose act is alleged to have extinguished native title. It follows that referring to an ‘expression of intention’ is apt to mislead in these respects. As Wik and Fejo reveal, where, pursuant to statute, be it Commonwealth, State or Territory, there has been a grant of rights to third parties, the question is whether the rights are inconsistent with the alleged native title rights and interests. That is an objective inquiry which requires identification of and comparison between the two sets of rights. Reference to activities on land or how land has been used is relevant only to the extent that it focuses attention upon the right pursuant to which the land is used. Any particular use of land is lawful or not lawful. If lawful, the question is what is the right which the user has. If it is not lawful, the use is not relevant to the issues with which we must deal in these matters …

Further, to speak, as did the primary judge, of ‘permanent adverse dominion’ raises a question about the meaning of ‘permanent’ in this context. If it is intended to mean unlimited in time, it would follow that the grant of no interest in land less than a fee simple (such, for example, as a lease for a term of years) could extinguish native title. Yet it is plain that the rights held under at least some grants of interests in land less than a fee simple are inconsistent with the continued existence of native title rights. If, however, ‘permanent’ is used to embrace not only transactions in which interests are created which are not limited in time but also other ‘long term’ transactions, there are obvious difficulties in identifying a satisfactory criterion for distinguishing between long term and other transactions. The majority of the Full Court were right to conclude that the test proposed by Lambert JA in Delgamuukw should not be adopted. [page 240]

The third member of the Full Court (North J) took a different view about extinguishment. This proceeded from the premise that there may be ‘inconsistency between the rights and interests created by the law or act [in question] and native title but the degree of inconsistency is not sufficient to extinguish native title’ (emphasis added) … This approach to extinguishment as understood with respect to the withdrawal of recognition by the common law should not be adopted. First, it is an approach which proceeds from a false premise, that there can be degrees of inconsistency of rights, only some of which can be described as ‘total’, ‘fundamental’ or ‘absolute’. Two rights are inconsistent or they are not. If they are inconsistent, there will be extinguishment to the extent of the inconsistency; if they are not, there will not be extinguishment. Absent particular statutory provision to the contrary, questions of suspension of one set of rights in favour of another do not arise. Secondly, it is a mistake to assume that what the NTA refers to as ‘native title rights and interests’ is necessarily a single set of rights relating to land that is analogous to a fee simple. It is essential to identify and compare the two sets of rights: one deriving from traditional law and custom, the other deriving from the exercise of the new sovereign authority that came with settlement. It is true that the NTA (in par (b)(ii) of s 23G(1)) and the State Validation Act (in par (b)(ii) of s 12M(1)) speak of the ‘suspension’ of inconsistent native title rights and interests in certain circumstances. However, this statutory outcome is postulated upon an inconsistent grant of rights and interests which, apart from the NTA and the State Validation Act, would not extinguish the native title rights and interests. An example would be a post-1975 grant which, by operation of the RDA, was ineffective to extinguish native title rights and interests … On no view did a pastoral lease granted under the provisions examined so far, give the holder a right to exclusive possession of the land. There were extensive reservations permitting entry not only on behalf of the Crown but also by others in many different circumstances and for many different purposes. It is enough to notice the widest of these, reserving a right to any person ‘to enter, pass over, through, and out of any [unenclosed or enclosed but otherwise unimproved part of the land] while passing from one part of the country to another, with or without horses, stock, teams, or other conveyances, on all necessary occasions’.

Of most immediate relevance, for present purposes, is the reservation in each pastoral lease which was issued under the Land Act 1898 or previous Land Regulations and s 106(2) of the Land Act 1933 which applied to pastoral leases issued after 1934. The majority of the Full Court concluded that when that reservation ceased to apply (upon the land being, as the case required, enclosed, improved or both enclosed and improved) native title to that land was wholly extinguished. That conclusion depends upon the premise that, but for the reservation, the holder of a pastoral lease had the right to exclude Aboriginal people from the land … Unlike the legislation considered in Wik, no provision was made for the holder of a pastoral lease to bring action for removal of persons in ‘unlawful occupation’ of the land the subject of the pastoral lease. There were the successive penal provisions prohibiting unlawful or unauthorised use or occupation of Crown lands. It was not, nor could it be, submitted that these penal provisions should be understood as working an extinguishment of native title. The provisions were generally applicable to all Crown land, that is, to all waste lands of the Crown, and are not to be understood ‘as intended to apply in a way which will extinguish or diminish rights under common law native title’. That is to say, the penal provisions which operated in respect of persons found in the ‘unlawful or unauthorised use or occupation’ of Crown lands did not extend to persons exercising native title rights and interests. The exercise of native title rights and interests did not constitute an [page 241]

unlawful or unauthorised use or occupation of the land. Did the grant of a pastoral lease over Crown land prohibit the continued use or occupation of that land, in accordance with native title rights and interests, by the holders of those rights? Did it make use or occupation of the land by those persons for those purposes ‘unlawful or unauthorised’? That would be so only if a pastoral lease gave the holder the right, either absolutely, or contingently upon the taking of certain steps (enclosure, improvement or both), to exclude native title holders from the land. Pastoral leases granted under the statutes and Land Regulations in issue in these matters did not grant that right. There are several reasons why that is so. Chief among those reasons is the recognition of the fact that the exercise of native title rights and interests on Crown lands was not an unlawful or unauthorised use liable to penalty under the penal provisions of the then applicable Land Act or Land Regulations. The grant of a precarious interest in Crown land, for limited (pastoral) purposes, subject to extensive reservations and exceptions permitting entry on the land in a wide variety of circumstances and, in some circumstances, by anyone, is not to be understood as rendering unlawful what was previously a lawful use of the land by native title holders. The reservation or statutory provision in favour of Aboriginal people requires no different conclusion. Neither the reservation nor the later statutory provision is to be read as confining the circumstances in which access to the land by native title holders was to be permitted to the purpose of seeking subsistence in the accustomed manner and prohibiting access in all other circumstances. Nor is either to be read as suggesting that, despite the great generality of the other reservations in the pastoral lease, and the

limitations on the purposes to which the land may be put, the holder was granted a right, in all other circumstances, to exclude not only other citizens but also the grantor of the interest. In considering whether a lease confers the right of exclusive possession on the lessee the proper order of inquiry is first to examine what are the rights granted and only then to classify the grant. Here the rights granted were limited in the respects that have been noted. Especially were they limited in respect of the grantor of the interest. Under the early forms of lease, the Crown reserved to itself very extensive rights of entry — ‘for any purposes of public defence, safety, utility, convenience, or enjoyment, or for otherwise facilitating the improvement and settlement of our Colony’. Under the Land Act 1933, it retained power to sell, lease or otherwise dispose of any part of the lease at any time as well as power to reserve or dispose of any part of it for any of a number of purposes, including those described in the reservation of right of entry just mentioned as reserved under the earlier forms of lease. Pastoral leases granted under the early Land Regulations, the Land Act 1898 or the Land Act 1933 conferred no right of exclusive possession on the grantee. The reservation or provision in favour of Aboriginal access cannot, then, be seen as qualifying an otherwise general right to exclude. It follows that upon the happening of the contingency of enclosure or improvement contemplated by the reservation or provision, those who would enter or use the land as native title holders could continue to do so. Those who could no longer do so were those Aboriginal persons who, although within the terms of the reservation, were not native title holders. It is unnecessary to decide what constitutes enclosure or improvement. The conclusion that pastoral leases granted under the statutes and regulations of the State did not grant to the holder of a pastoral lease the right either absolutely or contingently upon the taking of certain steps to exclude native title holders from the land has significant consequences for the application of Div 2B of Pt 2 of the NTA and of Pt 2B of the State Validation Act. For the reasons given earlier, questions of extinguishment first require identification and consideration of the native title right or interest that is in issue. Beaumont [page 242]

and von Doussa JJ pointed out that there was no evidence of any traditional Aboriginal law, custom or use relating to petroleum either in the State or in the Territory. Nor, assuming ochre is not a mineral, was there any evidence of any traditional Aboriginal law, custom or use relating to any of the substances dealt with in either the Mining Act 1904 or the WA Mining Act. (No party contended that ochre fell within the relevant definitions.) In these circumstances, no question of extinguishment arises. No relevant native title right or interest was established. Even if such a right had been established then, as Beaumont and von Doussa JJ held, those rights would have been extinguished by s 117 of the Mining Act 1904 and s 9 of the Petroleum Act 1936. As has already been pointed out, by s 3 of the Western Australia Constitution Act: The entire management and control of the waste lands of the Crown in the colony of Western Australia, and of the proceeds of the sale, letting, and disposal thereof,

including all royalties, mines, and minerals, shall be vested in the legislature of that colony. (emphasis added) All minerals and petroleum, on or under Crown lands, were thus subject to legislative disposition. Reserving them to the Crown and vesting ‘property’ in them in the Crown had several consequences. First, it was no longer necessary (if it ever had been necessary) to consider questions of prerogative rights to some but not all minerals. Thenceforth, upon the subsequent alienation of land by the Crown, all minerals on or under the land would remain vested in the Crown. Secondly, the Crown could, and did, deal with minerals separately from the land and could thereafter, and did, grant separate rights to search for and recover them. But unlike the fauna legislation considered in Yanner v Eaton, the vesting of property in minerals was no mere fiction expressing the importance of the power to preserve and exploit these resources. Vesting of property and minerals was the conversion of the radical title to land which was taken at sovereignty to full dominion over the substances in question no matter whether the substances were on or under alienated or unalienated land. It will be recalled that the determination made by the Full Court included among the other interests in the determination area ‘[o]ther interests held by members of the public arising under the common law’. As the reasons of Beaumont and von Doussa JJ reveal, this provision was included in the determination to reflect the common law’s recognition of a public right to fish and navigate in the tidal waters of the coastal sea of Australia. The Ward claimants contended that the determination should not recognise the public right to fish in tidal waters as an ‘other interest’ within s 225(c) of the NTA because, so it was argued, the public right to fish is ‘not a proprietary right’. The Ward claimants further contended that the majority had erred in holding, as they did, that the public right to fish had the effect of extinguishing the exclusivity of native title rights to fish in the intertidal waters which form part of the claim area. Section 225(c), and its requirement that there be a determination of ‘the nature and extent of any other interests in relation to the determination area’, must be understood in the light of the definition of ‘interest’ contained in s 253. That definition is very wide. It extends to ‘any other right in connection with the land or waters’ in question. It follows that, contrary to the contention of the Ward claimants, the public right to fish was properly to be recognised in the determination of native title as an ‘other interest’. If the evidence otherwise established that the claimants had, under traditional law and custom, an exclusive right to fish in tidal waters, that exclusivity has been extinguished. As has been explained in the joint reasons in The Commonwealth v Yarmirr, there is a fundamental [page 243]

inconsistency between a native title right and interest said to amount to a right to occupy, use and enjoy waters to the exclusion of all others or a right to possess those waters to the exclusion of all others and public rights of navigation over and fishing in those waters. Likewise, there is a fundamental inconsistency between the public right to fish in tidal

waters and a native title right and interest said to amount to an exclusive right to fish those waters. Summary As is apparent from what has been said, the determination made by the Full Court should be set aside and the matters remitted to that Court for further consideration in accordance with the reasons of this Court. That being so, it is convenient to attempt to summarise some of the principal conclusions that we have reached. At the risk of stating the obvious, it is as well to say, however, that the summary is not intended to be any more than a general indication of what we have held. The summary is not to be read, let alone applied, as if it were a statute. The reasons must be considered as a whole. 1. 3. 5.

10.

11. 17.

19. 20. 21.

Because what is claimed in the present matters are claims made under the NTA, for rights defined in the NTA, it is that statute which governs … The NTA provides that there can be partial extinguishment or suspension of native title rights … Whether native title rights have been extinguished by a grant of rights to third parties or an assertion of rights by the executive requires comparison between the legal nature and incidents of the right granted or asserted and the native title right asserted. For that reason the term ‘operational inconsistency’ is useful, if at all, only by way of analogy. The adverse dominion approach to extinguishment is wrong, not least because it obscures the objective nature of this comparison … The grant of a pastoral lease in Western Australia extinguished the native title right to control access to, or the use to be made of, the land. The grant of a pastoral lease did not give a right of exclusive possession. Native title rights and interests, other than the right just mentioned, probably continued unaffected by the grant, but to what extent we cannot say from the present findings of fact. To the extent that rights and interests granted by a pastoral lease were not inconsistent with native title rights and interests, the rights and interests under the lease prevailed over, but did not extinguish, native title rights. Resumption of land under s 109 of the Land Act 1933 did not extinguish native title … The grant of mining leases in Western Australia would have extinguished the right to be asked permission to use or have access in relation to the whole of the area of the lease had it not been earlier extinguished by the grant of pastoral leases. Whether other native title rights and interests in relation to land were inconsistent with the rights granted under a mining lease is, for the reasons given in connection with pastoral leases, a question that cannot be answered on the findings of fact that have been made so far … The grant of a permit to occupy land under the Land Act 1898 wholly extinguished native title rights and interests. The grant of special leases under s 116 of the Land Act 1933 wholly extinguished native title rights and interests. The grant before 31 October 1975 of leases of reserved land under s 32 of the Land Act 1933 wholly extinguished native title rights and interests. Grants after

[page 244]

31 October 1975, to persons other than the Crown or a ‘statutory authority’, were previous exclusive possession acts and, where still in force on 23 December 1996, were ‘relevant acts’ within the definition in the State Validation Act and therefore wholly extinguished native title rights and interests … 24. The successive grants of pastoral leases over what is now the Territory claim area were inconsistent with the continued existence of the native title right to be asked permission to use or have access to the land. They were not, however, necessarily inconsistent with the continued existence of all native title rights and interests. They were non-exclusive pastoral leases and Pt 3C of the Territory Validation Act was engaged. [Kirby J broadly agreed; McHugh and Callinan JJ dissented.]

3.115

The test for extinguishment offered by the primary judge, Lee J —

‘permanent adverse dominion’ — was decisively rejected by the High Court. In the course of elaborating this criterion, Lee J rejected the idea that native title could be described as a ‘bundle of rights’. Rather, it was a ‘communal right to land’. In consequence, the common law did not recognise a concept of ‘partial extinguishment’ of native title by the several ‘extinguishment’ of one or more components of the bundle of rights. It follows that there cannot be a determination under the Act that native title exists, but that some, or all, ‘native title rights’ have been extinguished’ (1998) 159 CLR 483 at 508. In rejecting this formula, the High Court dismissed many of the findings that Lee J made in favour of the Aboriginal claimants. One direct consequence of the High Court’s formulation of the ‘inconsistency of incidents’ test is that the various elements of native title can be extinguished piece by piece from the ‘bundle’. The majority in Ward expressly adopted the characterisation of

native title as a ‘bundle of rights’ (at [95]). It follows that native title can be partially extinguished. This is also recognised under the NTA: s 23A(1). 3.116

Northern Territory of Australia v Alyawarr (2005) 145 FCR 442

considered whether a native title right of permanent settlement is inconsistent with a pastoral leaseholder’s rights. The court held that although the right to ‘live’ on the land can be interpreted as a right to live permanently on the land without any conflict with pastoral lessees’ rights, an existing settlement will not preclude a pastoralist from exercising the right to require its removal in the event that it conflicts with a proposed exercise by the pastoralist of a right under the lease (at [131], [133]). Applying WA v Ward, the court also found that partial extinguishment of native title by pastoral leases will not leave in place a qualified right to exclude persons other than the relevant pastoral lessees and their invitees or other statutory entrants, and that the primary judge erred in finding that such a right existed (at [148]).59 De Rose v South Australia (No 2) (2005) 145 FCR 290 (3.106C) also concerned the question of extinguishment of native title over parts of the claim area. The court concluded that native title rights and interests had been extinguished over those parts of the claim area where improvements had been constructed in accordance with the terms of the leases. The improvements included any house, shed or other

[page 245]

building, airstrip, constructed dam and any other constructed stock watering

point on the claim area. Non-exclusive native title existed over the claim area, except for locations where the improvements were located. In Brown (on behalf of the Ngarla People) v State of Western Australia (No 2) (2010) 268 ALR 149; [2010] FCA 498, Bennett J concluded that a mining lease had extinguished native title on the developed areas of the land, but not on the undeveloped areas of the land, relying on comments in De Rose to the effect that activities undertaken pursuant to a lease are relevant to the question of extinguishment.

3.117 Questions 1.

Is Lee J’s test for extinguishment — ‘permanent adverse dominion’ — a more meaningful and accurate measure of identifying a clear and plain intention to extinguish native title than the High Court’s ‘inconsistency of incidents’ test? Which is more in line with the test for extinguishment articulated in Wik? Which is the fairer test?

2.

How can the grant by the Crown of a temporary set of rights manifest a ‘clear and plain intention’ to extinguish, rather than suspend, native title rights?

Leases containing reservations in favour of Indigenous inhabitants 3.118

In Griffiths v Northern Territory (2006) 165 FCR 300; [2006] FCA

903, a pastoral lease contained a reservation in favour of the ‘Aboriginal Inhabitants of the State and their descendants to full and free right of ingress egress and regress into upon and over the said lands and every part thereof and in and to the springs and natural surface water thereon and to make and erect such wurlies and other dwellings as the said Aboriginal Natives have been heretofore accustomed to make and erect and to take and use for food birds and animals ferae naturae in such manner as they would have been entitled to do if this lease had not been made’ (at [624]). In deciding the extent of extinguishment, Weinberg J held that native title is extinguished to the extent that the grant of a pastoral lease involves granting rights inconsistent with native title rights (the ‘inconsistency of incidents’ test: [631]). However, ‘inconsistency will not be readily inferred if the grant contains qualifications or reservations that preserve the entitlement of Indigenous people to continue to carry out their traditional activities on the land’ (at [632]). Sackville J considered the effects of a reservation in a pastoral lease in Jango v Northern Territory (2006) 152 FCR 150. His Honour discussed the effects of a pastoral lease with a reservation in favour of Aboriginal people. In terms of general principle, it was held — with the applicants agreeing — that rights inconsistent with the lease would be extinguished. However, the applicants argued that certain rights were not inconsistent in light of the reservation included in the lease (at [542]). In particular, although they accepted that any native title rights to control exclusively the use of or access to the relevant area would have been extinguished by the grant of the pastoral leases, they argued that Ward should be interpreted as such that a pastoral lease extinguishes only

an absolute native title right to control the use of or access to land, as distinct from a right to control access by other Aboriginal persons in accordance with traditional laws and customs (at [566]). Sackville J agreed that there was authority to support this (at [567]–[571]).

[page 246]

3.119

In Alyawarr v Northern Territory (2004) 207 ALR 539, the court

examined the effect of a reservation in favour of Aborigines contained in a non-exclusive pastoral lease granted over the claim area. Mansfield J held that native title rights to control access to the claim area and to make decisions about its use were not, of themselves, inconsistent with the rights of a pastoral lessee to make decisions about the land for pastoral purposes; thus, they were extinguished only to the extent that they were inconsistent with the rights of the pastoral lessee to make decisions about those matters (at [197]). On appeal (Northern Territory v Alyawarr (2005) 145 FCR 442), the court held (at [129]) that in analysing the effect of a reservation: [T]he underlying issue in relation to this right is the scope of inconsistency between the historic pastoral leaseholders’ rights and the applicants’ native title rights and interests. The content of the reservations is incidental. They do not define the limits of native title rights and interests in relation to the land. They may however be taken into account in determining the scope of the pastoral leaseholder’s rights in assessing the extent of their inconsistency with the asserted native title rights and interests.

The court overturned Mansfield J’s decision, holding that ‘the right to control access cannot be sustained where there is no right to exclusive

occupation against the whole world. The underlying rationale for that conclusion is that particular native title rights and interests cannot survive partial extinguishment in a qualified form different from the particular native title right or interest that existed at sovereignty’ (at [148]).

Statute 3.120

As is clear from Mabo, a statutory provision that demonstrates a

‘clear and plain intention to extinguish’ native title will be effective to bring native title to an end. Also, both Mabo and Wik demonstrate that statutory provisions that regulate the use of land, such as the Crown Lands legislation, will not necessarily extinguish native title. The relevant test is inconsistency of rights. Does a statute regulating the use of chattels, and vesting ownership of those chattels in the Crown, demonstrate a clear and plain intention to extinguish native title? In Yanner v Eaton (1999) 166 ALR 258 Yanner was charged under the Fauna Protection Act 1952 (Qld) for killing two crocodiles without a permit. Crocodiles were a protected species under the Act. The appellant defended his actions on the basis that he had a native title right to hunt these animals. The High Court accepted the finding of the primary judge that it was a traditional custom of his clan to hunt crocodiles in this way. Also, by majority, the court held that though the statute declared that the State of Queensland had property in protected fauna, this assertion of rights did not confer full beneficial ownership of the state’s fauna. A statute directed to regulating an activity, even if expressed in terms that regulation is to proceed through ownership, does not necessarily demonstrate a clear and plain intention to extinguish native title. In the course of their joint

judgment, the majority (Gleeson CJ, Gaudron, Kirby and Hayne JJ) concluded (at ALR 269): The critical contention of the respondent was that the Fauna Act created a legal regime that was inconsistent with native title holders in Queensland (and, in particular, the group of which the appellant is a member) continuing to hold one of the rights and interests (the right and interest in hunting and fishing) that made up the native title the Magistrate found to exist. That inconsistency was said to lie in the creation of property rights in the Crown that were inconsistent with the continued existence of native title rights and interests. It is unnecessary to decide whether the creation of property rights of the kind that the

[page 247]

respondent contended had been created by the Fauna Act would be inconsistent with the continuation of native title rights. It is sufficient to say that regulating the way in which rights and interests may be exercised is not inconsistent with their continued existence …

In light of the reasoning of the majority, how would the relevant statutory provisions need to be expressed in order to render the state’s rights inconsistent with those of the native title holders? 3.121C Akiba obh of Torres Strait Regional Seas Claim Group v Commonwealth of Australia (2013) 250 CLR 209 High Court of Australia [The appellants were residents of a number of islands in the Torres Strait. They claimed native title on the basis that the right to fish and trade their catch was part of their traditional law and custom and that the relevant Commonwealth and state legislation spanning 130 years governing commercial fishing, commencing with the Fisheries Act 1887 (Qld) and culminating in the Fisheries Management Act 1991 (Cth), was regulatory only and did not show a prohibitory

intention to extinguish native title. The primary judge, Finn J, held: (i) that native title in the form of fishing and related rights (including the commercial right to trade the fish caught) did exist in relation to the claimed zone; and (ii) that the legislation was regulatory only, and so had not extinguished native title. In particular, he held that the fisheries legislation as a whole was ‘not directed at the underlying rights of the native title-holders’ (at [859]). Rather, the legislation was best understood as imposing on native title-holders a set of ‘controls’ which were required ‘if they were to enjoy their native title rights’ (at [850], [859]). The Commonwealth appealed to the Full Court. By majority (Keane CJ and Dowsett J, Mansfield J dissenting), the Full Court held that the statutory regimes had the effect of extinguishing the native title right to take fish for commercial purposes.] French CJ and Crennan J: ‘Extinguishment’ in relation to native title refers to extinguishment or cessation of rights. Such extinguishment of rights in whole or in part is not a logical consequence of a legislative constraint upon their exercise for a particular purpose, unless the legislation, properly construed, has that effect. To that proposition may be added the general principle that a statute ought not to be construed as extinguishing common law property rights unless no other construction is reasonably open. Neither logic nor construction in this case required a conclusion that the conditional prohibitions imposed by successive fisheries legislation in the determination area were directed to the existence of a common law native title right to access and take marine resources for commercial purposes. In any event, nothing in the character of a conditional prohibition on taking fish for commercial purposes requires that it be construed as extinguishing such a right. The existence of the distinction between the exercise of a native title right for a particular purpose or in a particular way, and the subsistence of that right, is relevant to the construction of statutes said to effect the extinguishment of native title rights. Put shortly, when a statute purporting to affect the exercise of a native title right or interest for a particular purpose or in a particular way can be construed as doing no more than that, and not as extinguishing an underlying right, or an incident thereof, it should be so construed. That approach derives support from frequently repeated observations in this Court about the construction of statutes said to extinguish native title rights and interests. [page 248]

The early approach of this Court in Mabo v Queensland (No 1) and Mabo v Queensland (No 2) to determine whether native title rights or interests had been extinguished by legislative or executive action focused upon the intention to be imputed to the legislature or the executive. For both legislative and executive action, a plain and clear intention to extinguish native title was required. Imputed legislative intention is, and always was, a matter of the construction of the statute.

The identification of a statute’s purpose may aid in its construction. That identification may be done by reference to the apparent legal effect and operation of the statute, express statements of its objectives and extrinsic materials identifying the mischief to which it is directed. However, purposive construction to ascertain whether a statute extinguishes native title rights or interests is not without difficulty where the statute was enacted prior to this Court’s decision in Mabo (No 2) that the common law could recognise native title. The difficulty was described by Gummow J in Wik Peoples v Queensland. The Court in that case was, as his Honour pointed out, construing statutes ‘enacted at times when the existing state of the law was perceived to be the opposite of that which it since has been held then to have been.’ That reality affected the application of the purposive approach to construction. The Court therefore focused on inconsistency as the criterion for extinguishment. In the case of competing rights — native title rights and interests on the one hand and statutory rights on the other — the question was: ‘whether the respective incidents thereof are such that the existing right cannot be exercised without abrogating the statutory right. If it cannot, then by necessary implication, the statute extinguishes the existing right.’ His Honour observed that that notion of inconsistency included the effect of a statutory prohibition of the activity in question. The pre-eminence of inconsistency as the criterion of extinguishment of native title rights by the grant of rights by the Crown or pursuant to statutory authority was reiterated by the plurality in Western Australia v Ward. In so saying, their Honours emphasised the need to identify and compare the two sets of rights. In so doing, they distinguished between activities on land and the right pursuant to which the land is used. Their Honours went on to reject the proposition that there could be degrees of inconsistency between rights or, absent statutory powers, suspension of one set of rights in favour of another and said: ‘Two rights are inconsistent or they are not. If they are inconsistent, there will be extinguishment to the extent of the inconsistency; if they are not, there will not be extinguishment.’ The State of Queensland relied upon that observation in its written submissions. While this case is concerned with inconsistency, it is not concerned with inconsistency of rights. The question in this case is whether successive statutory regimes were inconsistent with the recognition by the common law of an asserted native title right. The State of Queensland characterised the successive colonial, State and Commonwealth fisheries laws as inconsistent with a right to take fish or aquatic life for commercial purposes. The asserted inconsistency turned, critically, upon the general application of the statutory prohibitions against taking fish and aquatic life for such purposes, absent a licence. Extinguishment was said to flow from a comparison of the statutory regime and the rights claimed. The Commonwealth identified an inconsistency arising ‘because of the limited and defined creation of statutory rights to fish for commercial purposes which did not allow for the continued enjoyment of native title rights … to fish for those purposes.’ The submissions as to inconsistency made by the Commonwealth and the State of Queensland ought not to be accepted. The premise upon which they rest is the characterisation of the exercise, for a particular purpose, of a general native title right as the exercise of a lesser right defined by reference to that purpose. That characterisation is not a logical necessity.

[page 249]

Nor is it necessary for coherence in the law. Its rejection is consistent with the maintenance of a proper distinction between proprietary or usufructuary rights and their exercise in particular ways or for particular purposes. The appeal on the first two grounds should be allowed. Hayne, Kiefel and Bell JJ: In this case, partial extinguishment of native title was said to have been effected by the making of legislation prohibiting taking, without a licence issued under the relevant Act, fish or other aquatic life for sale or trade. Section 226 of the NTA provides that ‘the making … of any legislation’ was one species of an act affecting native title. Accordingly, in considering questions about extinguishment said to have been effected by the making of legislation prohibiting commercial fishing without a licence, regard must be had to s 227 of the NTA, which provides that: ‘An act affects native title if it extinguishes the native title rights and interests or if it is otherwise wholly or partly inconsistent with their continued existence, enjoyment or exercise.’ The NTA postulates that there may be partial extinguishment of native title rights and interests. So, for example, s 23A(1) of the NTA speaks of the provisions of Div 2B of Pt 2 of the NTA providing that certain acts ‘attributable to the Commonwealth that were done on or before 23 December 1996 will have completely or partially extinguished native title’. And that postulate of the NTA is wholly consistent with the conclusion reached by the plurality in Ward that native title rights and interests may properly be seen as a bundle of rights, the separate components of which may be extinguished separately. As the plurality said in Ward, ‘it is a mistake to assume that what the NTA refers to as “native title rights and interests” is necessarily a single set of rights relating to land [or waters] that is analogous to a fee simple’. The relevant native title rights and interests were determined [by Finn J] to be ‘the rights to access, to remain in and to use the native title areas’ and … ‘the right to access resources and to take for any purpose resources in the native title areas’. These are the rights and interests which are at stake. As was also noted … by the plurality in Ward, while it is often said that a ‘clear and plain intention’ to extinguish native title must be demonstrated, it is important that this expression not be misunderstood. The relevant question is one of inconsistency, and that is an objective inquiry. The ‘subjective thought processes of those whose act is alleged to have extinguished native title are irrelevant’. Hence, as the NTA acknowledges in s 211, and as was held in Yanner, ‘[r]egulating particular aspects of the usufructuary relationship with traditional land does not sever the connection of the Aboriginal peoples concerned with the land (whether or not prohibiting the exercise of that relationship altogether might, or might to some extent)’. Likewise, regulating particular aspects of the usufructuary relationship with traditional waters does not sever the connection of the Torres Strait Islanders concerned with those waters (whether or not prohibiting the exercise of that relationship altogether might, or might to some extent). Not only does regulation of a native title right to take resources from land or waters not sever the connection of the peoples concerned with that land or those waters, regulation of the native title right is not inconsistent with the continued existence of that right. Indeed, as was pointed out in Yanner, ‘regulating the way in which a right may be

exercised presupposes that the right exists’. Of course, regulation may shade into prohibition, and the line between the two may be difficult to discern. But the central point made in Yanner, and reflected in each of Wik, Fejo, Yarmirr and Ward, is that a statutory prohibition on taking resources from land or waters without a licence does not conclusively establish extinguishment of native title rights and interests of the kind found to exist in this case: ‘the rights to access, to remain in and to use the native title areas’, and ‘the right to access resources and to take for any purpose resources in the native title areas’. [page 250]

In this case, the majority in the Full Court identified the starting point for consideration of extinguishment as ‘whether the activity which constitutes the relevant incident of native title is consistent with competent legislation relating to that activity’ (emphasis added). The essential premise for the analysis that followed was that the relevant ‘activity’ was to be identified as ‘taking fish and other aquatic life for sale or trade’ and that the activity identified in this way was an ‘incident of native title’. That premise is flawed. The relevant native title right that was found to exist was a right to access and to take resources from the identified waters for any purpose. It was wrong to single out taking those resources for sale or trade as an ‘incident’ of the right that had been identified. The purpose which the holder of that right may have had for exercising the right on a particular occasion was not an incident of the right; it was simply a circumstance attending its exercise. Focusing upon the activity described as ‘taking fish and other aquatic life for sale or trade’, rather than focusing upon the relevant native title right, was apt to, and in this case did, lead to error. That shift of focus, from right to activity, led to error in this case by inferentially reframing the question determinative of extinguishment as being whether the statutory prohibition against fishing for a particular purpose without a licence was inconsistent with the continued existence of a native title right to fish for that purpose. But the relevant native title right that was found in this case was a right to take resources for any purpose. No distinct or separate native title right to take fish for sale or trade was found. The prohibition of taking fish for sale or trade without a licence regulated the exercise of the native title right by prohibiting its exercise for some, but not all, purposes without a licence. It did not extinguish the right to any extent. The Full Court’s focus upon a particular activity was not consistent with the plurality’s observation in Ward that reference to activity ‘is relevant only to the extent that it focuses attention upon the right’. The focus upon the activity led to the majority framing the relevant question as being whether the identified activity was ‘consistent with competent legislation relating to that activity’. But extinguishment of native title rights and interests is not to be determined by asking whether the federal or State legislature has asserted control, or dominion, over a particular activity, and then concluding that the relevant native title right no longer includes the right to pursue that form of activity. To pursue an inquiry of that kind would be apt to revive some variation of the adverse dominion test for extinguishment rejected by this Court in Ward. The enactment of legislation controlling some activity which may be undertaken in exercise of a native title right or interest

presents a question about extinguishment. The extinguishment question is to be answered by deciding whether the legislation is inconsistent with the relevant native title right or interest; it is not determined by observing only that there is legislation which governs or affects the exercise of the right. The orders proposed by French CJ and Crennan J should be made.

3.122 Questions 1.

What is the test for determining whether legislation extinguishes native title in the absence of an express declaration that it does so?

2.

In what circumstances does legislation requiring the grant of a licence for the exercise of rights to fish commercially not extinguish pre-existing native title?

[page 251]

3.

In what circumstances would extinguishment occur?

4.

How does the distinction between the exercise of rights, and ‘underlying’ native title right square with the notion of native title as a ‘bundle of rights’? Does the notion of an ‘underlying’ right make it more difficult to establish extinguishment?60

3.123

In Karpany v Dietman (2013) 252 CLR 507, the State of South

Australia argued that the Fisheries Act 1971 (SA) had extinguished native title by prohibiting the catching of fish without a licence. Two Narrunga men were prosecuted for taking undersize abalone in breach of the Act. The Full

Federal Court by majority held that native title had been extinguished. Following Yanner v Eaton, a unanimous High Court held that the prohibitions amounted to regulation of their native title, rather than extinguishment: ‘Read as a whole, the FA 1971 (and s 29 in particular [which provided that “a person shall not take fish unless he hold a fishing licence”]) regulated rather than prohibited fishing in the waters governed by that Act’ (at [27]). The court specifically read the Act in a way that could allow it and native title rights to co-exist. It emphasised the absence of any clear abrogation of native title rights in the legislation, and found that mechanisms set up by the Act ‘could be administered consistently with the continuing exercise of native title rights’ (at [31]). As in Akiba, the approach of the court was to find extinguishment only if this was a necessary implication of the legislation. 3.124C

Western Australia v Brown (2014) 306 ALR 168 High Court of Australia

French CJ, Hayne, Kiefel, Gageler and Keane JJ: In 1964, the State of Western Australia made an agreement with some joint venturers about the development and exploitation of iron ore deposits at Mount Goldsworthy. The agreement was approved by s 4(1) of the Iron Ore (Mount Goldsworthy) Agreement Act 1964 (WA) and it is convenient to refer to it as ‘the State Agreement’. The State Agreement obliged the State to grant, and the State did grant, to the joint venturers mineral leases for iron ore (in a form provided by the agreement). Two leases are relevant to this matter. Each was for a term which expired in 1986, with the right to renew from time to time for further periods each of 21 years. Each has been renewed and is still in force. The parties to this litigation agree that, subject to the question of extinguishment, the Ngarla People hold native title to the land which is subject to the two mineral leases. The parties agree that the relevant native title rights and interests are non-exclusive rights (a) to access and camp on the land; (b) to take flora, fauna, fish, water and other traditional resources (excluding minerals) from the land; (c) to engage in ritual and ceremony on the land; and (d) to care for, maintain and protect from physical harm particular sites and areas of significance to the native title holders. Did the grant of the mineral leases extinguish those native title rights and

interests in relation to the land subject to the mineral leases? This Court’s decision in Western Australia v Ward requires that the question be answered ‘No’. The rights granted under the mineral leases are not inconsistent with the claimed native title rights and interests. [page 252]

[A]s Fejo v Northern Territory made clear, a right of exclusive possession affords the holder the right to ‘use the land as he or she sees fit and [to] exclude any and everyone from access to the land’ (emphasis added). The grant of a right to exclude any and everyone from access to the land for any reason or no reason is inconsistent with the continued existence not only of any right in any person other than the grantee to gain access to the land but also of any right which depends upon access to the land. The determination of whether two or more rights are inconsistent is also an objective inquiry. The question of inconsistency of rights can always be decided at the time of the grant of the allegedly inconsistent rights. And it must be decided by reference to the nature and content of the rights as they stood at the time of the grant. At that time, were the rights as granted inconsistent with the relevant native title rights and interests? As these reasons will later demonstrate, to the extent to which the decision in De Rose (No 2) countenances a notion of contingent extinguishment (contingent on the later performance of some act in exercise of the ‘potentially inconsistent’ rights granted), it is wrong and should not be followed. In the present case, then, the question of inconsistency is to be determined at the time of the grant of the relevant mineral leases. What the joint venturers did or did not do in exercise of the rights granted under the mineral leases is important only to the extent to which it directs attention to the nature and content of the rights which were granted. [T]he State (supported by the joint venturers) submitted that the mineral leases granted the joint venturers exclusive possession of the land the subject of the instruments. Three points may be made about ML 235 which apply equally to ML 249. First, like any mineral lease granted under the Mining Act 1904, ML 235 was described as a kind of lease: a ‘mineral lease’. The instrument used the term ‘demise’. It granted and demised identified land as well as mines, veins, seams, lodes and deposits of a mineral in, on or under that land. As with the mining leases considered in Ward, the rights and obligations of the joint venturers are not to be determined by fastening upon the use of the words ‘lease’ or ‘demise’, or by noticing that there was a demise of land as well as mines. As Toohey J said in Wik Peoples v Queensland, ‘[a] closer examination is required’. It is necessary to identify the rights which are actually conferred upon the joint venturers. And that leads to the second point to be noticed. The grant was expressed to be ‘for the purposes but upon and subject to the terms, covenants and conditions set out in the [State] Agreement’. The joint venturers were required to use the land ‘bona fide exclusively for the purposes of the [State] Agreement’. Read as a whole, in the context provided by the State Agreement, the instrument provided for a ‘mineral lease’ of the kind understood by the common law and described in Newcrest Mining (WA) Ltd v The Commonwealth. That is, the instrument gave the joint venturers liberty to go into and

under the land, during the currency of the mineral lease, and to get and take away the iron ore that they found there. This being the nature of the right granted to the joint venturers, the third point to be made is that neither the instrument itself nor the State Agreement provided expressly that the joint venturers were not only to have possession of the land which was the subject of the mineral lease for the purposes which have been described but also to have the right to exclude any and everyone from that land for any reason or no reason at all. On the contrary, as already noted, the State Agreement provided expressly that the jointventurers must allow not only the State but also third parties to have access over the land the subject of the mineral lease, provided that the access did not ‘unduly prejudice or interfere with’ the joint venturers’ operations. This express provision precludes construing the leases as impliedly providing a right of exclusive possession. It follows that neither ML 235 nor ML 249 gave the joint venturers a right of the kind identified in Fejo: the unqualified right to exclude any and everyone from access to the land, [page 253]

for any reason or no reason. The joint venturers could prevent anyone else from using the land for mining purposes and could use any part of the land for the extraction of iron ore or for any of the associated purposes described in the State Agreement (such as building a town, roads and railway). It may be accepted that the grant of these rights would be inconsistent with a native title right of the kind which was at issue in Ward: a native title right to control access to land (for any purpose or no purpose). But no right of that kind was in issue in this case. Neither instrument gave the joint venturers the right to exclusive possession of the land. The first branch of the State’s argument must be rejected. The alternative arguments advanced by the State depended, directly or indirectly, on the proposition that extinguishment could be demonstrated by showing that native title rights could clash with rights under the mineral leases in the sense that the rights could not be exercised simultaneously in the one place. That is, the State’s alternative arguments were founded in the observation that a native title holder could not hunt over land being excavated to recover iron ore or over land on which there stood one of the houses in the town. And because the mineral leases gave the joint venturers the right to mine anywhere on the land and the right to build many and very large improvements anywhere on the land, the State submitted that the rights granted by the leases were wholly inconsistent with the claimed native title rights and interests at the time of the grant of the mineral leases, or at least became so when the joint venturers exercised their rights. It follows from what has already been said in these reasons that these arguments must be rejected. It is as well, however, to examine further the flawed premises upon which the arguments depend … The decisions in both Wik and Ward established that the grant of rights to use land for particular purposes (whether pastoral, mining or other purposes), if not accompanied by the grant of a right to exclude any and everyone from the land for any reason or no reason, is not necessarily inconsistent with, and does not necessarily extinguish, native

title rights such as rights to camp, hunt and gather, conduct ceremonies on land and care for land. As the State rightly pointed out, both Wik and Ward were decided before the native title rights claimed had been determined. But neither case could have been determined as it was if, as the State submitted, the grant of rights to perform acts or erect structures on land was necessarily inconsistent with the native title rights and interests claimed in this case. And contrary to the submissions made by the State, observing that the Mount Goldsworthy iron ore project was very large, requiring a large mine and extensive associated facilities, founds no tenable legal distinction between this case and the earlier decisions of this Court. Rather, it is necessary to ask whether the existence of the rights granted to the joint venturers necessarily implied that the claimed native title rights and interests could no longer exist. For the reasons which have been given, the mineral leases in issue in this case did not give the joint venturers a right of exclusive possession. In this respect, the mineral leases were no different from the pastoral leases considered in Wik, the mining leases considered in Ward or the Argyle mining lease also considered in Ward. The mineral leases did not give the joint venturers the right to exclude any and everyone from any and all parts of the land for any reason or no reason. The joint venturers were given more limited rights: to carry out mining and associated works anywhere on the land without interference by others. Those more limited rights were not, and are not, inconsistent with the coexistence of the claimed native title rights and interests over the land. (No party submitted that any distinction should be drawn between the several native title rights and interests that were claimed.) That the rights were not inconsistent can readily be demonstrated by considering the position which would have obtained on the day following the grant of the first of the mineral leases. On that day, the [page 254]

native title holders could have exercised all of the rights that now are claimed anywhere on the land without any breach of any right which had been granted to the joint venturers. That being so, there was not then, and is not now, any inconsistency between the rights granted to the joint venturers and the claimed native title rights and interests. The State’s larger alternative submission (that the grant of rights to mine and build improvements anywhere on the land was wholly inconsistent with the claimed native title rights and interests) should be rejected. There remains for consideration the State’s narrower alternative submission that the claimed native title rights and interests were extinguished when the joint venturers exercised their rights to develop and construct mines, a town and associated works. It is convenient to refer to this submission as asserting extinguishment by development. The submission that there could be (and in this case was) extinguishment of native title by the exercise of rights granted by or under statute should be rejected. As has already been explained, the submission is directly contrary to the principles established and applied in both Wik and Ward and postulates a test for inconsistency which turns upon the manner of exercise of one of the allegedly competing rights rather than upon the right’s nature and content. As Brennan CJ said in Wik, that would deny the law’s capacity to determine the priority of rights over or in respect of the same piece of land. No less

importantly, as Brennan CJ also pointed out, ‘[t]o postulate extinguishment of native title as dependent on the exercise of the private right of the lessee (rather than on the creation or existence of the private right) would produce situations of uncertainty, perhaps of conflict’ (emphasis added). The decision of the Full Court of the Federal Court in De Rose (No 2) … proceeded from a misunderstanding of what was decided in Ward. It assumed, wrongly, that the principles applied in Ward permit the deferral of consideration of extinguishment until the manner of exercise of the allegedly inconsistent and extinguishing rights is known. So to proceed would be to return to and adopt the argument about practical inconsistency advanced but rejected in Wik. De Rose (No 2) was not, and this is not, a case in which the ‘operation of a grant of rights [was] subjected to conditions precedent or subsequent’. That is, De Rose (No 2) was not, and this is not, a case in which the rights were ‘incapable of identification in law without the performance of a further act or the taking of some further step beyond that otherwise said to constitute the grant’. To understand the grant of a right as being subject to a ‘condition precedent’ that consists in the granted right being exercised is to fall into confusion. The decision in De Rose (No 2) assumed, again wrongly, that the permitted construction of an improvement on land held under a ‘lease’ which did not give a right of exclusive possession necessarily affected the existence of native title rights and interests rather than the manner of their exercise. That is, the decision treated extinguishment as determined by the manner of exercise of the allegedly inconsistent right rather than, as it must be, by the nature and content of the two rights which are said to be inconsistent. As the State rightly pointed out, the mineral leases gave the joint venturers the right to mine anywhere on the land and the right to build improvements anywhere on the land. But the mineral leases did not provide that the joint venturers must use the whole of the land for mining or associated works. Had the mineral leases provided that the whole of the land must be used in a way which would not permit any use of the land by native title holders, it may have been open to construe the mineral leases as providing for the joint venturers to exclude any and everyone from the whole of the land for any reason or no reason. But, as has been explained, that is not what these mineral leases provided. In the end, then, the State’s narrower alternative argument reduces to the practical observation that two persons cannot occupy the one place. When the joint venturers built a [page 255]

house in the town, native title holders could not (for example) hunt and gather on the land which that house occupied. And the rights which the joint venturers had, and exercised, took and continue to take priority over the rights and interests of the native title holders for so long as the joint venturers enjoy and exercise those rights. Any competition between the exercise of the two rights must be resolved in favour of the rights granted by statute. But when the joint venturers cease to exercise their rights (or their rights come to an end) the native title rights and interests remain, unaffected. For these reasons, the State’s appeal must be dismissed with costs.

3.125 Questions 1.

Given the extent of the lessees’ rights in this case, why did they not have exclusive possession?

2.

Would it have been possible under the terms of the lease for the lessees to extinguish all native title over the land?

3.

Does this case establish that native title can be suspended?

4.

Is it more favourable for the prospects of native title than De Rose (No 2) or Ward?

3.126C

State of Queensland v Congoo (2015) 320 ALR 1 High Court of Australia

French CJ and Keane J: In September 2001, the Bar-Barrum People lodged an application in the Federal Court for a determination of native title over an area of land in the Atherton Tableland in the State of Queensland, part of which had been used by the Commonwealth during World War II as an artillery range and a live fire manoeuvre range for the training of infantry and armoured units. The Commonwealth took possession of the land and used it pursuant to a series of orders, made between 1943 and 1945, under reg 54 of the National Security (General) Regulations (‘the National Security Regulations’). That regulation was made pursuant to s 5 of the National Security Act 1939 (Cth) (‘the NSA’). The Commonwealth relinquished possession of the land in August 1945. Questions arose in the Federal Court proceedings about whether the orders had the effect of extinguishing the native title rights and interests of the Bar-Barrum People … The question in the Special Case relevant to this appeal was Question 3: ‘Did the act of the Commonwealth in: (a) making the Military Orders wholly extinguish all native title rights and interests that then subsisted on the special case land, and, if not, (b) being in physical occupation of at least some of the special case land pursuant to the Military Orders wholly extinguish all native title rights and interests that then subsisted on the special case land or that part of the special case land that had been physically occupied?’ The Full Court of the Federal Court by majority (North and Jagot JJ, Logan J dissenting) answered both limbs of Question 3 in the negative. The State of Queensland appeals to

this Court by special leave granted on 4 September 2014. For the reasons that follow the appeal should be dismissed. It was agreed in the Special Case that, subject to the extinguishing effect of the military orders, the Bar-Barrum People would hold at least non-exclusive native title rights and [page 256]

interests over the Special Case land. Those rights would include rights of access, to be present and move about, travel over, camp and live temporarily on the land as part of camping, and for that purpose to build temporary shelters. Absent extinguishment they would also have a non-exclusive right to hunt, fish and gather on the land and waters of the area for personal, domestic and non- commercial communal purposes … The people could use the land in a variety of ways. They could not possess it to the exclusion of others. Regulation 54 of the National Security Regulations, as it stood in November 1943, provided, inter alia: (1) If it appears to the Minister of State for the Army to be necessary or expedient so to do in the interests of the public safety, the defence of the Commonwealth or the efficient prosecution of the war or for maintaining supplies and services essential to the life of the community, he may, on behalf of the Commonwealth, take possession of any land, and may give such directions as appear to him to be necessary or expedient in connexion with the taking of possession of the land. (2) While any land is in the possession of the Commonwealth in pursuance of a direction given under this regulation, the land may, notwithstanding any restriction imposed on the use thereof (whether by law or otherwise), be used by, or under the authority of, that Minister for such purpose, and in such manner, as he thinks expedient in the interests of the public safety or the defence of the Commonwealth, or for maintaining supplies and services essential to the life of the community; and that Minister, so far as appears to him to be necessary or expedient in connexion with the taking of possession or use of the land in pursuance of this sub-regulation— (a) may do, or authorize persons so using the land to do, in relation to the land, anything which any person having an unencumbered interest in fee simple in the land would be entitled to do by virtue of that interest; and (b) may by order provide for prohibiting or restricting the exercise of rights of way over the land, and of other rights relating thereto which are enjoyed by any person, whether by virtue of an interest in land or otherwise. It was held in Mabo v Queensland (No 2) that a clear and plain intention is necessary to effect extinguishment whether directly by legislation or by executive act or grant pursuant to legislative authority. Where the alleged extinguishing act or grant is done by the executive pursuant to legislative authority, the necessary intention to authorise such an

act must be attributable to the legislature. The high threshold of attributed legislative intention flows from the seriousness of the consequences of extinguishment for indigenous inhabitants. So a law which merely regulates the enjoyment of native title or creates a regime of control consistent with its continued enjoyment does not, on that account only, reveal an intention to extinguish or impair native title rights and interests. Where legislation empowers the Crown to dedicate land for a public purpose the question whether the power reflects a clear and plain intention that native title affected by its exercise would be extinguished may sometimes be a question of fact, sometimes a question of law and sometimes a mixed question of fact and law. Where the exercise of the power does not involve the grant of an interest in land or the reservation or dedication of land inconsistently with the right to continued enjoyment of native title by the indigenous inhabitants, native title survives and is legally enforceable. [page 257]

The clear and plain intention standard for extinguishment formulated in Mabo (No 2) is an important normative principle informing the selection of the criterion for determining whether a legislative or executive act should be taken by the common law to have extinguished native title. That standard has not been displaced by any subsequent decision of this Court. The settled criterion for its satisfaction, which has been established in the case of the grant of rights over land or waters pursuant to a statute, as explained in Western Australia v Ward, is inconsistency between the rights granted and the propounded native title rights and interests. Application of that criterion involves ‘an objective inquiry which requires identification of and comparison between the two sets of rights’. An analogous criterion is applicable where legislation or a legislative instrument affecting the use of land or waters is concerned. The question of extinguishment is able to be answered by determining whether or not the provisions of the legislation or legislative instrument were inconsistent with the continuing recognition by the common law of the particular native title holders’ rights and interests. Where a grant of an estate in fee simple or a lease in perpetuity conferring a right of exclusive possession is concerned, inconsistency is readily demonstrable. Where a right or power is conferred for a statutory purpose and is to be exercised for that purpose, inconsistency is not demonstrated by the fact that the repository of the right or the power may use it to prevent the native title holders from exercising or enjoying their rights. The enquiry as to inconsistency begins with the construction of the statute, an exercise which is properly informed by its purpose. In this case the limiting negative purpose to which reference has been made earlier is important to the construction of the NSA, reg 54 and the military orders. The comparison between the statutory rights and powers created and exercisable over the Bar-Barrum People’s land, with their asserted native title rights and interests, follows upon the constructional exercise. That process is not to be confused with the normative question, answered by way of conclusion from the consideration of inconsistency, namely whether the statute discloses a clear and plain intention to extinguish native title. In the case of the claimed extinguishment of native title, the settled approach to determining extinguishment by operation of legislation or a legislative instrument,

reflected in earlier decisions of this Court, was restated in the joint judgment of Hayne, Kiefel and Bell JJ in Akiba v The Commonwealth: ‘This Court held in Western Australia v The Commonwealth (Native Title Act Case) that, at common law, native title rights and interests can be extinguished by “a valid exercise of sovereign power inconsistent with the continued enjoyment or unimpaired enjoyment of native title”.’ The normative force of the clear and plain intention standard is reflected in the inconsistency criterion. So much appears from Yanner v Eaton, in which the plurality said that the ‘extinguishment of such rights must, by conventional theory, be clearly established’. That criterion is not satisfied merely by the identification of restrictions or controls placed on the use of the land by statute or executive act done pursuant to statutory authority. Queensland submitted that the Commonwealth had a right of exclusive possession inconsistent with the continued existence of native title rights and interests. That approach lifts the statutory conferment of ‘possession’ out of its context, disconnects it from its statutory purpose, and thereby misconceives its legal effect. The possession granted to the Commonwealth, and the powers conferred as an incident of that possession, authorised the preclusion of native title holders for a time, or from time to time, from entering onto the land or waters. It may be taken to have impaired their enjoyment of their native title. However, where the law, as in this case, imposes a control regime which has a limiting purpose of not disturbing subsisting rights and interests, and where that purpose limits the scope of the rights granted and the powers conferred by the law, the impairment [page 258]

cannot be said to be inconsistent with the subsistence of native title rights and interests. It cannot support the conclusion that there was a ‘clear and plain legislative intention’ to extinguish native title. In this case the position is clear. The military orders authorised, although they did not mandate, the preclusion, for their duration, of the exercise of the native title rights and interests of the Bar-Barrum People. The powers which they conferred were not unconfined. They could not support a finding of inconsistency between the statutory scheme and the native title rights and interests of the Bar-Barrum People which would lead to the conclusion that their rights or interests were extinguished. [Gageler J concurred. He concluded that ‘the existence of that prohibition [on the exercise of the rights of current landowners] was logically consistent with (indeed it was premised on) the continued existence of the rights the exercise of which was temporarily prohibited’ (at [166]). Hayne J: The conclusion that native title rights and interests were not extinguished by the reg 54 orders is legally flawed. It takes as its premise a legal proposition for which there is no support: that native title rights and interests are extinguished only if an intention to extinguish is discernible in the reg 54 orders and the provisions pursuant to which they were made. That premise, and the conclusion which is drawn from it, are both contrary to the accepted doctrine established and unfailingly applied in this Court in a succession of cases decided over more than 20 years. And no party made any submission suggesting

that any of those cases was not rightly decided. These reasons will show that the conclusion reached by the majority in the Full Court, and urged by the Bar-Barrum people and the Commonwealth, can be reached only by applying tests for the extinguishment of native title rights and interests which this Court has expressly rejected. The statement of ‘intention’ or ‘purpose’ is also logically flawed. It is no more than an unfounded assertion that there was no extinguishment of native title rights and interests because those rights and interests were not extinguished. Even if it is accepted as a premise that native title rights and interests are extinguished only if an intention to extinguish is discernible in the reg 54 orders and the provisions pursuant to which they were made, to state that there was an ‘intention’ or a ‘purpose’ to preserve all rights and interests (including native title rights and interests) leads to circular reasoning. Assuming or asserting as a second premise that there was an ‘intention’ or ‘purpose’ to preserve all rights and interests (then recognised or not) assumes the answer to the question that must be answered. It assumes the answer by conflating two separate inquiries. The first is an inquiry about the effect of the reg 54 orders and the provisions which authorised their making. That inquiry is answered by concluding that the Commonwealth took exclusive possession of the land for only a limited but uncertain time. The second, and separate, inquiry to make is about the effect of that taking on native title rights and interests. Assuming or asserting that there was an ‘intention’ or ‘purpose’ of preserving all rights and interests (then recognised or not) leads to circular reasoning. And those problems would be compounded if the statement about ‘intention’ or ‘purpose’ were to be understood as inviting attention to what the Parliament, the Executive or the Commonwealth as a polity “wanted” to achieve. Any inquiry of that kind would be anachronistic. Native title rights and interests were not recognised in the 1940s … An important part of the ratio decidendi of Ward is the rejection of tests of extinguishment other than the inconsistency of rights test which had been established in earlier decisions of this Court. Three particular forms of other test were specifically rejected: (a) the adverse dominion test suggested in Delgamuukw v British Columbia, (b) a test dependent upon so-called ‘permanent’ adverse dominion, and (c) a test dependent upon degrees of inconsistency. [page 259]

No party submitted that any of these tests could or should be applied. Yet the repeated reference in this case to the temporary nature of the rights taken by the Commonwealth and the temporary nature of the circumstances which permitted that step can be explained only as seeking to revive one or other of the tests that were expressly rejected in Ward. As has already been explained, the rights which the Commonwealth took for itself over the land were rights of exclusive possession. The temporal duration of those rights was not certain. But the rights were no different in kind or duration from those a tenant would have under a lease granted for the term of the life of another. And it was not, and could not be, disputed that a lease of that kind would extinguish native title. Yet a constant thread, running through both the reasoning of the majority in the Full Court and the arguments advanced on behalf of the Bar-Barrum people and the Commonwealth, was

that the Commonwealth took possession of the land for a limited time and could do that only because circumstances which would not continue permanently were found then to exist. It followed, according to this thread, that the native title rights and interests could not have been, and were not, extinguished, because the rights which the Commonwealth had asserted over the land were not permanent and were occasioned by extraordinary circumstances. The premise for that argument can only be that native title rights and interests cannot be extinguished without some exercise of adverse dominion over the land (perhaps some exercise of permanent adverse dominion) or cannot be extinguished unless the rights which are taken ‘totally replace’ or ‘fully eclipse’ the claimed native title rights and interests. And, as already explained, those tests were rejected in Ward. None of them is now to be reintroduced into the law in Australia by taking it as an unstated premise for argument. The question of extinguishment is to be decided according to established principles. That the Commonwealth took exclusive possession for a limited but uncertain time does not deny that the rights which were taken were inconsistent with the native title rights and interests described earlier in these reasons. And because the Commonwealth’s rights over the land were inconsistent with those native title rights and interests, the native title rights and interests were extinguished. The fact that the Commonwealth ceased asserting exclusive possession of the land on or about 31 August 1945 did not revive those native title rights and interests. As cases like Fejo demonstrate, cessation of inconsistent rights does not revive native title rights and interests. [Kiefel and Bell JJ concurred].

3.127

Given that French CJ, Keane and Gageler JJ found that native title

had not been extinguished, and that the other three judges (it was a six judge court) Hayne, Kiefel and Bell JJ each wrote separate judgments concluding that native title had been extinguished, s 23(2) of the Judiciary Act 1903 (Cth) applies. It provides that where the court splits evenly the decision of the Full Court of the Federal Court stands. The Full Court had decided (2– 1) that native title was not extinguished. Also, given that all judges in the High Court rejected the reasoning of the majority of the Full Federal Court, it is not straightforward to identify the ratio decidendi in this case. Perhaps it might be stated as follows, given that 5 of the 9 judges were in agreement on this point: ‘[T]he reg 54 orders were insufficient to extinguish native title because they demonstrated no clear and plain intention on the part of the legislature to extinguish native title, but rather expressed an intention to prevent the exercise of native title rights over the relevant land for the duration of the war.’

[page 260]

3.128 Questions 1.

Do the judgments of French CJ, Keane and Gageler JJ retain the distinction from Akiba between ‘exercise rights’ and ‘underlying’ rights? How does this distinction bear on their conclusion in this case?

How can the rights in reg 54, not amount to ‘inconsistency’ with 2.

all native title rights?

3.

Is Hayne J correct in concluding that focus on the temporary nature of rights granted to the Minister represents attempts ‘to revive one or other of the tests that were expressly rejected in Ward’?

4.

Is this decision binding authority on future courts? Is the result consistent with the previous three decisions?61

5.

Is the formulation of the ratio decidendi above accurate, or does the case provide no clear ratio for other courts?

1.

In this chapter the following Acts are referred to by the abbreviation of the state or territory enacting them: Civil Law (Property) Act 2006 (ACT); Conveyancing Act 1919 (NSW); Law of Property Act (NT); Property Law Act 1974 (Qld); Law of Property Act 1936 (SA); Conveyancing and Law of Property Act 1884 (Tas); Property Law Act 1958 (Vic); Property Law Act 1969 (WA).

2.

Pollock and Maitland, The History of English Law, 2nd ed, Cambridge University Press, Cambridge, 1923, 230.

3.

Brennan, Sharing the Country, Penguin, Ringwood, Vic, 1991.

4.

(1992) 175 CLR 1.

5.

Yanner v Eaton (1999) 210 CLR 351 at [76].

6.

McNeil, Common Law Aboriginal Title, 1989, 84.

7.

Mabo v Queensland (No 2) (1992) 175 CLR 1, Brennan J at 47–8; Toohey J at 212.

8.

For a general overview of the wide range of incidents and services, see Megarry and Wade, 14–22. The pronoun ‘he’ is used in the historical sections of this chapter to denote property rights that were ascribed almost universally to males in feudal times.

9.

Imperial Acts Application Act 1969 (NSW) s 36; Law of Property Act (NT) s 21; Qld, s 21;

Imperial Acts Application Act 1980 (Vic) s 5 (repealing Quia Emptores) and Imperial Law ReEnactment Act 1980 (Vic) inserting s 18A Property Law Act 1958. Quia Emptores is not in force in the Australian Capital Territory: Law Reform (Abolitions and Repeals) Act 1996. 10. Historical Records of Australia, Pt 1, Vol VII, 193; Vol X, 599; Vol XI, 87; and Vol XII, 390. See also, Edgeworth, ‘Tenure, Allodialism and Indigenous Rights at Common Law: English, United States and Australian Land Law Compared After Mabo v Queensland ’ (1994) 23 Anglo-American Law Review 397 at 413–15; 426–8; Gray et al, 82–7. 11. For the relevant statutory provisions, see Administration and Probate Act 1929 (ACT) s 49 and Sch 6; Succession Act 2006 (NSW) s 136; Trustee Act 1925 (NSW) s 100; Succession Act 1981 (Qld) Sch 2; Administration and Probate Act 1919 (SA) s 72G(e); Administration and Probate Act 1958 (Vic) s 55; Escheat (Procedure) Act 1940 (WA); Administration Act 1903 (WA) s 14(1); Administration and Probate Act 1935 (Tas) s 45; see also Re Stone (1936) 36 SR (NSW) 308. 12. For a similar line of argument, see Butt, 86; Moore, Grattan and Griggs, 46. 13. See also S Hepburn, ‘Feudal Tenure and Native Title: Revising an Enduring Fiction’ (2005) 27 Syd LR 49; U Secher, ‘The Doctrine of Tenure in Australia Post-Mabo: Replacing the “Feudal Fiction” with the “Mere Radical Title Fiction” — Part 1’ (2006) 13 APLJ 107 and ‘Part 2’ (2006) 13 APLJ 140. 14. Gray and Gray, 56. 15. For disposition by will, see Wills Act 1968 (ACT) s 7(2) and Administration and Probate Act 1929 (ACT) s 45; Succession Act 2006 (NSW) ss 3, 4; Succession Act 1981 (Qld); Wills Act 1936 (SA) s 4 and Administration and Probate Act 1919 (SA) ss 46, 49, 72C; Wills Act 2008 (Tas) ss 4, 6 and Administration and Probate Act 1935 (Tas) s 44; Wills Act 1997 (Vic) s 4 and Administration and Probate Act 1958 (Vic) ss 5, 13, 38, 52; Wills Act 1970 (WA) s 6 and Administration Act 1903 (WA) ss 3, 10, 13; Wills Act (NT) s 6 and Administration and Probate Act (NT) s 62. 16. See Administration and Probate Act 1929 (ACT) s 45; Succession Act 2006 (NSW) Ch 4; Law of Property Act (NT) s 62; Succession Act 1981 (Qld) Pt III; Administration and Probate Act 1919 (SA) Pt IIIA; Administration and Probate Act 1935 (Tas) Pt V; Administration and Probate Act 1958 (Vic) Pt I Div 6; Administration Act 1903 (WA) Pt II. 17. NSW, ss 19 (commenced 1 July 1920), 19A (1 January 1971); Vic, s 249 (1 January 1886); Qld, s 22 (1 December 1975); WA, s 23 (1 August 1969); NT, s 22 (1 December 2000).

18. Imperial Acts Application Act 1969 (NSW) s 8; NT, s 221 Sch 4; Qld, s 3 Sch 6; Imperial Acts Application Act 1980 (Vic) s 5. In Tasmania, a fee tail can no longer be created in land under the Torrens system: Land Titles Act 1980 (Tas) s 113 (from 8 December 1886). In South Australia the estate theoretically may continue to exist. In states where a fee tail can still exist, provision is made for the barring of the entail by the tenant in tail: Vic, ss 250, 251; Estates Tail Act 1881 (SA) (adopting the English Fines and Recoveries Act 1833). 19. Moore, Grattan and Griggs, 62; Butt, 148–9. 20. For wills, see fn 15 above. For intestacy, see provisions listed in fn 16 above. 21. Pollock and Maitland, History of English Law, 2nd ed, 1959, Bk II, 118. 22. For a further account, see Butt, 127–36; Moore, Grattan and Griggs, 65–70. 23. The dates of the reforms and the relevant provisions are: NSW ss 19(1), 47(1), (2) after 1 July 1920; Qld s 29(1) after 4 December 1952, and for attempted fee tails, s 22 after 1 December 1975; Tas s 61(2) after 18 September 1874, and for attempted fee tails, s 65 after 1 January 1884; WA ss 23(1), 37(1), (2) after 1 August 1969; NT s 29. Victoria staged the introduction of these reforms: from 1 January 1886 to 31 January 1905, expressions used to create a fee tail would create a fee simple (s 249). From 31 January 1905 to 31 December 1918, in addition to the correct words of limitation ‘to A and his heirs’, ‘to A in fee’, ‘to A in fee simple’ would pass a fee simple (s 60(6)). After 31 December 1918, through s 60(1) words expressing no contrary intention such as ‘to A’, ‘to A forever’ etc would create a fee simple. In the Australian Capital Territory, NSW s 47 (formerly adopted by ACT s 3) has now been repealed by Statute Law Amendment Act 2001 No 2 (ACT) Sch 3 Pt 3.9, for the express reason that ‘freehold estates do not exist in the ACT’. It appears that Qld ss 22 and 29(1), WA ss 23(1), 37(1), (2) do not cover cases of attempts to create fee tails by incorrect words of limitation, in which case the common law applies to create a life estate. On this point, see Moore, Grattan and Griggs, at 67. 24. ACT: Wills Act 1968 s 27; NSW: Succession Act 2006 s 38 (after 1 January 1840); NT: Wills Act s 37; Qld: Succession Act 1981 s 33K (after 1 January 1840); SA: Wills Act 1936 s 31 (after 1 January 1838); Vic: Wills Act 1997 s 42 (after 1851); WA: Wills Act 1970 s 26(e) (after 4 July 1839); Tas: Wills Act 2008 s 52(1) (after 1 April 1841). 25. NSW, s 19(1) (after 1 July 1920); NT, s 22; Qld, s 22 (after 1 December 1975); Vic, s 249 (from 1 January 1886); WA, s 23(1) (after 1 August 1969). 26. See Butt, 135. In Cram Foundation v Corbett-Jones [2006] NSWSC 495, the court accepted the distinction made between determinable and conditional estates (at [56]–[57]).

27. For a discussion of this case, see (2003) 77 ALJ 645. 28. Victorian Law Reform Commission, Review of the Property Law Act 1958: Final Report, 2010. 29. The distinction between conditional and determinable interests is also important for the purposes of the legal remainder rules (see 3.41ff), and for the requirement of free alienability: see Chapter 7. For other examples see Carkeek v Tate-Jones [1971] VR 691; Cavalier v Cavalier (1971) 19 FLR 199. 30. Ramsay v Trustees, Executors and Agency Co Ltd (1948) 77 CLR 321 concerned a gift of income from a fund to a husband during marriage, with the capital to be paid to the husband only in the event of his wife predeceasing him, or divorce. Though not a conditional gift, the court examined whether it encouraged behaviour that was contrary to public policy. The majority held that it would not have that effect on ‘ordinary moral and decent persons’ (at 331 per Starke J). 31. For a literary example, see George Eliot, Middlemarch. 32. See, for example, Racial Discrimination Act 1975 (Cth) s 8(2); Sex Discrimination Act 1984 (Cth) s 55. In Kay v South Eastern Sydney Area Health Service [2003] NSWSC 292, a gift to hospital for treatment of ‘white babies’ was held not to be in breach of the Racial Discrimination Act. See generally, Butt, ‘Testamentary Conditions in Restraint of Religion’ (1977) 8 Syd LR 400; Lyall, ‘Human Rights and Conditional Limitations’ (1987) 22 Irish Jurist 250. 33. Gray and Gray, 230. For a general discussion of the relevant policies and case law, see Grattan, ‘Revisiting Restraints on Alienation: Public and Private Dimensions’ (2015) 41 Mon UL Rev 67. 34. ACT, s 207; NSW, s 9; Qld, s 25; SA, s 12; Vic, s 133; WA, s 17. Cf Tasmania and the Northern Territory: common law. 35. By will: Wills Act 1968 (ACT) s 7(2); Succession Act (NSW) ss 3, 4; Wills Act (NT) s 6; Succession Act 1981 (Qld) s 8; Wills Act 1936 (SA) s 4 and SA, ss 7, 10(a); Wills Act 2008 (Tas) ss 4, 6; Wills Act 1958 (Vic) s 4; Wills Act 1970 (WA) s 6. By deed: ACT, s 255; NSW, s 50(1); NT, s 31; Qld, s 31; SA, s 10(a); Tas, s 80(1); Vic, s 19(1)(a). For the most comprehensive Australian treatment of the subject, see Butt, Ch 11. 36. See Holdsworth, vol iv, 407ff; see also Plucknett, A Concise History of the Common Law, 5th ed, 1956, 575–602. 37. See generally Fratcher, ‘Uses of Uses’ (1969) 34 Missouri LR 39. 38. The term ‘feoffor’ comes from the noun ‘feoffment’ meaning a conveyance in fee simple of land by livery of seisin. Livery of seisin was the ceremonial transfer of the land whereby the grantor handed

to the grantee a sod of earth. 39. Holdsworth, vol iv, 420. 40. Holdsworth, vol vii, 81–92. 41. Imperial Acts Application Act 1969 (NSW) s 8; Imperial Acts Application Act 1980 (Vic) s 5; Qld, ss 3, 7, Sch 6, Pt 1; NT, s 6. See also 3.78. 42. Administration and Probate Act 1929 (ACT) s 39; Administration and Probate Act (ACT) s 52; Probate and Administration Act 1898 (NSW) s 44; Succession Act 1981 (Qld) s 45; Administration and Probate Act 1919 (SA) ss 45, 46; Administration and Probate Act 1935 (Tas) s 4; Administration and Probate Act 1958 (Vic) s 13; Administration Act 1903 (WA) s 8. The approach in Re Beavis has been accepted in In the Will of Malin [1912] VLR 259; Re Robson [1916] 1 Ch 116; Barrett v Barrett (1918) 18 SR (NSW) 637. 43. Tas, ss 80(2), 81; Vic, ss 191, 192; WA, s 26(1), (2). 44. See Butt, 171. 45. Victorian Law Reform Commission, Review of the Property Law Act 1958: Final Report, 2010. 46. See, for instance, NSW s 96. 47. Land Titles Act 1925 (ACT) s 79; NSW, s 100(2); Land Title Act (NT) s 111; Transfer of Land Act 1958 (Vic) s 19; Land Title Act 1994 (Qld) s 55; Real Property Act 1886 (SA) s 111; Transfer of Land Act 1893 (WA) s 84; Conveyancing and Law of Property Act 1884 (Tas) ss 62, 80. 48. See also, Aboriginal Land Rights Act 1983 (NSW). For analysis of this legislation, see in particular McRae et al, Ch 5. 49. Pearson, ‘The Concept of Native Title at Common Law’ in Yunupingu (ed), Our Land is Our Life: Land Rights — Past, Present and Future, University of Queensland Press, 1997, 154. 50. For discussion of the Mabo decision and reaction to the decision, see McRae, Nettheim et al 280– 93; O’Connor, ‘Mabo v Queensland’ (1992) 18 Mon LR 251; Stephenson and Ratnapala (eds), Mabo: A Judicial Revolution, 1993; Bartlett, ‘Native Title: From Pragmatism To Equality Before The Law’ (1995) 20 MULR 282; also see generally (1993) 16 UNSWLJ (No 2); (1993) 15 Syd LR (No 2); (2002–3) 9 JCULR (‘Special Issue: Native Title — A Decade after Mabo’). 51. Bartlett, The Mabo Decision, 1993, x–xii. For a critical response to the judgment see, for example, Howard, ‘The Mabo Case’ (1993) Adelaide Review 8; Moens, ‘Mabo and Political Policy-Making by the High Court’ in Stephenson and Ratnapala (eds), Mabo: A Judicial Revolution, 1993.

52. See also L Godden, ‘Wik: Feudalism, Capitalism and the State. A Revision of Land Law in Australia’ (1997) 5 APLJ 162. 53. See generally, Edgeworth, ‘Tenure, Allodialism and Indigenous Rights at Common Law: English, United States and Australian Land Law Compared After Mabo v Queensland’ (1994) 23 AngloAmerican Law Review 397. For critical analyses of the inappropriateness of the doctrine of tenure, see further S Hepburn, ‘Feudal Tenure and Native Title: Revising an Enduring Fiction’ (2005) 27 Syd LR 49; U Secher, ‘The Doctrine of Tenure in Australia Post-Mabo: Replacing the “Feudal Fiction” with the “Mere Radical Title Fiction” — Part 1’ (2006) 13 APLJ 107; and ‘Part 2’ (2006) 13 APLJ 140. 54. Wootten, ‘Mabo: Issues and Challenges’ (1994) 1 Judicial Review, Selected Conference Papers, Judicial Commission of New South Wales, Sydney, 303–65; and McRae, Nettheim et al, 247–52. 55. The Native Title Act 1993 is considered in greater detail in McRae, Nettheim et al, Ch 6; Bartlett, Native Title in Australia, 2nd ed, 2004; P Butt, 986–1028; M Perry and S Lloyd, Australian Native Title Law, Lawbook Co, Sydney, 2003; Gray et al, 167–80. 56. The decision was appealed to the High Court on the separate question of the plaintiffs’ rights under the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth): Northern Territory v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24. For a discussion of the case, see S Brennan, ‘Statutory Interpretation and Indigenous Property Rights’ (2010) 21 PLR 239. 57. For a critique of the ‘overparticularity’ required by the court, see S Young, The Trouble with Tradition: Native Title and Cultural Change, Federation Press, Sydney, 2008; and more generally, P G McHugh, Aboriginal Title: The Modern Jurisprudence of Tribal Land Rights, Oxford University Press, Oxford, 2011, 123–33. 58. See further, ‘Forum Wik: The Aftermath and Implications’ (1997) 20(2) UNSWLJ 487; Bartlett, ‘Racism and the Constitutional Protection of Native Title in Australia: The 1995 High Court Decision’ (1995) 25 UWALR 127. 59. See also King v Northern Territory [2007] FCA 944 where the court held that to the extent that the grant of a pastoral lease involves granting rights inconsistent with native title rights (rights to live and camp might involve the erection of shelters and other structures) those rights are extinguished (at [120]). Note this case also considers the effect of pastoral improvements at [125]– [144]. 60. See further, Brennan, ‘The Significance of the Akiba Torres Strait Regional Sea Claim Case’ in Brennan et al, Native Title from Mabo to Akiba: A Vehicle for Change and Empowerment?

(Federation Press, 2015), 29–43. 61. For further discussion, see Edgeworth, ‘Extinguishment of Native Title: Recent High Court Decisions’ (2016) 8 ILB 28–34.

[page 261]

The Acquisition of Property Rights and Equitable Property

CHAPTER

4

INTRODUCTION 4.1

As was noted in the previous chapter, the emergence of the equitable

doctrines relating to property rights, particularly the trust of land, reflected an entire jurisdictional fragmentation of property rights to the extent that different court jurisdictions provided different mechanisms for the creation and transfer of property rights. Alongside common law rights over land, equity superimposed its own regime of property rights. This chapter examines the law relating to the acquisition and transfer of interests in property, focusing particularly on the equitable rules and principles by means of which ‘equitable property’ is created.1 The common law rules will be examined

briefly, but primarily to demonstrate how equity has come to supplement them. In some instances, it is only possible to understand the equitable rules by reference to the common law rules, as in the case of imperfect gifts. The detailed common law and statutory rules for acquiring land by possession, and to a lesser extent, chattels, have been covered in Chapter 2. The detailed statutory frameworks based on registration of title will be examined in detail in Chapter 5. 4.2

In the case of acquisition and transfer, the most usual way of acquiring

an interest in property is as the result of a consensual transaction with the previous owner; for example, a sale or a gift. Dispositions by will may also be regarded as consensual transactions, since although people rarely choose to die, the effect of a will is to provide for the distribution of the deceased person’s property to nominated beneficiaries. A person may also obtain an interest in property under a trust established for his or her benefit by the owner of the property. While interests in property usually pass as the result of consensual transactions, it is also possible for property to pass from one person to another independently of the consent of the property owner. For example, this occurs when a person with an interest in property dies intestate (without making a will), goes bankrupt, or has the property taken in execution of a court judgment. This chapter will also look at the rules governing the competition between inconsistent rights over the same item of property. Complicated rules determine the priority of claims to property

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in cases where a person with proprietary rights purports to transfer the same rights to two or more persons or where inconsistent proprietary rights are claimed by two or more persons. However, it is not possible to determine questions of priority until the nature of the acquisition and transfer of those rights is resolved. 4.3

A proprietary interest may be acquired otherwise than by succession to

an interest held by another. An example is original acquisition of a property interest which occurs where a person acquires an interest in an object by creating that object. Another example is where a person acquires an interest in property by taking possession of it: see Chapter 2. The discussion below sets out the various ways in which an interest in property can be acquired.

ACQUISITION THROUGH TAKING POSSESSION Land and goods 4.4

Property may be acquired simply by taking possession of it. Moreover,

as discussed in Chapter 2, the principle of relativity of titles means that however defective the title of a possessor, it will be protected against the title of a person with a lesser right to possess. As to the possession of goods, see 2.5–2.46. For the various requirements to establish legal possession of land, see 2.47–2.71.

Chattels – wild animals 4.5

At common law, a person could not have property in a wild animal. It

was only when a person took possession of the animal that he or she could seek the protection of the legal system against third parties. Why did the law provide a remedy in these circumstances? There is much ancient and venerable law dealing with the question of when a wild animal is reduced to the ‘possession’ of a captor. A wild fox is not caught without wounding, circumventing or ensnaring it ‘so as to deprive them of their natural liberty’: Pierson v Post (1805) 3 Caines 175 (Supreme Court of New York) per Tomkins J. A whale is ‘occupied’ by its hunters when it is harpooned, and remains so even if the harpoon becomes detached as long as rope from the harpoon so impedes the whale’s movement that it can be easily recaptured: Littledale v Scaith (1788) 1 Taunt 244; 127 ER 826; Hogarth v Jackson (1827) 2 C & P 595; 173 ER 1080. A fish is possessed by a fisherman when it is within the enclosed net, but not before: Young v Hichens (1844) 6 QB 606; 115 ER 228. Oysters, being ferae naturae (wild animals) cannot be stolen at common law, though statute may make this an offence: Ex parte Emerson (1898) 15 WN (NSW) 101. The proprietary interest of a beekeeper is established when bees are hived; but it is lost when the bees escape to neighbouring land: Kearry v Pattinson [1939] 1 KB 471; [1939] 1 All ER 65. In R v Gadd [1911] QWN 31 it was held that a person has title to bees if he or she has hived them, is able to pursue them and is not a trespasser on the land where they have swarmed. An escaping racing pigeon remains the property of the owner as long as they retain an animus revertendi (an intention

to return to their keeper): Hamps v Derby [1948] 2 KB 311; [1948] 2 All ER 474. In Fitzgerald v Firbank [1877] 2 Ch 96; [1895–99] All ER Rep 445 (CA) it was held that the owner of land has property in the body of a wild animal which dies upon it. The court held that a right to go on someone’s land to fish (a profit à prendre) includes a

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right to keep the fish once caught. In some Australian jurisdictions, legislation gives title in native fauna to the Crown in certain situations.2

MANUFACTURE OR CREATION OF OBJECTS 4.6

An original interest may be acquired in property otherwise than by

succession to an interest held by another. The most basic way to acquire the original proprietary interest in an object is to manufacture or create it oneself. If goods owned by A are changed by B’s manufacturing process into an entirely different object so that the original goods can no longer be identified (for example, as where wheat is converted into bread), the new object is owned by B. This principle has even been applied to things not normally capable of being the object of a proprietary interest: see Doodeward v Spence (1908) 6 CLR 406; 15 ALR 105; 1.40. Will the expenditure of time, money and effort on the creation of a thing always result in the creation of a

proprietary interest in that thing? See Chapter 1, esp Victoria Park v Taylor (1937) 58 CLR 479; 1.46C.

PATENTS, COPYRIGHT AND TRADEMARKS 4.7

The common law recognised patents, copyright and trademarks in

certain circumstances. However, the protection accorded by the common law was very limited, and statutory intervention has been necessary. The Commonwealth has provided a statutory code regulating patents, copyrights and trademarks, pursuant to s 51(xviii) of the Constitution. Proprietary interests falling into these categories are now acquired pursuant to the appropriate legislation.3

CONSENSUAL TRANSACTIONS WITH PROPRIETARY INTERESTS — LEGAL AND EQUITABLE 4.8

This section of Chapter 4 discusses the formalities required for an

effective sale, gift or creation of a trust of an interest in real or personal property and the effect of failure to comply with these formalities.

Sale 4.9

The most usual method of acquiring an interest in property is by

purchase of the property from the previous owner. The sale transaction lies at the very heart of an economic system based on private property. For title to pass effectively at law, certain formalities are often required. Even where the statutory formalities are absent, equitable doctrine may determine that the purchaser has acquired an equitable interest in the property.

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Goods 4.10

In the case of the sale of goods the law has been codified by

legislation. Australian legislation is based on the original codification contained in the Sale of Goods Act 1893 (UK).4 A study of the law of sale of goods requires an analysis of the statutory provisions and of the complexities introduced by almost a century of judicial interpretation, a task which will not be attempted in this book.5 When chattels are sold, the vendor and purchaser often make an agreement as to when title to the property will pass. In the simple case of the sale of a particular chattel, for example, purchase of a chattel over the counter in a shop, legal title to the chattel usually passes when the contract for sale is made. In the absence of agreement between the vendor and purchaser as to when legal title will pass, Australian sale of goods legislation contains complex rules to regulate passing of title.6 These rules will not be discussed in detail.

Formal requirements for the contract for sale of goods 4.11

Until comparatively recently, all states had formal requirements for

contracts for the sale of goods worth $20 or more. Section 4 of the Sale of Goods Act 1895 (WA) is typical. It provides as follows: 4.12E

sale of goods Act 1895 (WA)

4 Contract for sale of $20 and upwards (1) A contract for the sale of any goods of the value of $20 or upwards shall not be enforceable by action unless the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract be made and signed by the party to be charged or his agent in that behalf … (3) There is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which recognises a pre-existing contract of sale whether there be an acceptance in performance of the contract or not.

4.13

Similar provision is made by the Sale of Goods Act 1896 (Tas) s 8

($50). The provision has been repealed in the sale of goods legislation in other Australian jurisdictions with the result that no formal requirements are now necessary to transfer the legal title in the chattels. In contracts for the sale of goods where the obligation to make payment is deferred, the provisions of the National Credit Code may apply. Under s 3 of the Code, credit is provided

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if, under a contract, payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred. Under s 5, the Code applies in the following circumstances: (1) the debtor is a natural person or a strata corporation; (2) the credit is provided or intended to be provided wholly or predominantly for various purposes, including for personal, domestic or household purposes; (3) a charge is or may be made for providing the credit; and (4) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. Under s 6(1), the Code does not apply to short term credit, where the total credit period does not exceed 62 days, the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit, and the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the Code applied to the contract) equal to the amount payable if the annual percentage rate were 24 per cent per annum. For further discussion about the National Credit Code, see 11.5–11.8.

Land — legal and equitable interests 4.14

The preliminaries accompanying the sale of a fee simple interest in

land are usually far more elaborate than those accompanying the sale of goods. The complexity is partly due to the greater variety of possible interests in land, and partly due to the fact that land is usually more valuable than goods. Unlike the situation with simple contracts for the sale of goods, in the case of the sale of a fee simple interest in land there is almost invariably a time lapse between the making of the contract and the passing of legal title by

the vendor to the purchaser by conveyance or registered transfer. (Such a time lapse is less likely to occur in relation to the transfer of other interests.) (A conveyance is the document used to ‘convey’ legal title. The expressions ‘conveyance’ and ‘convey’ are usually used in the context of general law land. A transfer is the document which on registration passes legal title to Torrens system land.) The time lag between contract of sale and settlement, when the vendor conveys or transfers legal title to the purchaser, allows the vendor to make arrangements to vacate possession, and the purchaser to investigate title and arrange finance for the purchase. 4.15

As will be seen below in 4.27ff, both contracts for the sale of land

and conveyances or transfers must satisfy certain formal requirements. A study of the law regulating the sale of land requires an understanding of the statutory schemes of landholding in Australia (the deeds registration and Torrens systems are discussed in Chapter 5) and also of the detailed rules and procedures concerning the sale of land. Apart from a discussion of formalities, detailed treatment of the sale transaction and the contract of sale is left to other sources. This omission is based on convenience rather than logic, since the contract for sale of interests in land as well as of personal property can legitimately be regarded as within the purview of the law of property.

The sale transaction — real property 4.16

When examining legal and equitable doctrines that relate to real

property, it is important to be aware of the context in which transactions for

the sale of real property take place and the various ways in which those doctrines accommodate and support real property transactions. The law of property is as much about how law facilitates transactions as it is about how the law resolves disputes that arise in relation to property. Set out below is a general outline of the different stages of a transaction for the sale of real property, the issues that are relevant to each stage and how the contents of this chapter fit within the transactional aspects.

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Broadly speaking, a sale transaction can be divided into three stages: precontract, contract and settlement. (a) The pre-contract stage 4.17

Before the contract is signed, a key issue is what, if any, information

must be disclosed by the vendor to potential purchasers and what are the legal consequences of disclosing incorrect or misleading information. In all states and territories around Australia, legislation requires vendors to provide certain information and is designed to redress the information balance between the vendor and the purchaser. For example, s 32 of the Sale of Land Act 1962 (Vic) provides that the vendor must provide a vendor’s statement to the purchase prior to signing the contract for the sale of land. The vendor’s statement is required to disclose information in relation to defects in title and defects in quality (eg, mortgages, covenants, easements, zoning and rates, taxes and other outgoings that affect the land). Subject to certain exceptions,

the vendor’s failure to comply with the relevant requirements will entitle the purchaser to rescind the contract at any time before the purchaser accepts title and becomes entitled to possession or to the receipt of rents and profits (s 32K). 4.18

In addition, legal consequences may arise under the relevant statutory

provisions such as s 18 of the Australian Consumer Law (contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth)) if the vendor has engaged in misleading or deceptive conduct in connection to the sale of property. In Byers v Dorotea (1986) 69 ALR 715, Pincus J held that an entire agreement clause — a clause that excludes liability for statements or representations made before the contract was signed — was effective to exclude or limit liability arising for misrepresentations under the general law; however, it was ineffective to exclude liability for misleading or deceptive conduct. (b) The contract stage 4.19

There are many issues that arise during the contract stage; namely,

the stage that begins when the contract is signed and ends on settlement, when all of the purchase money is paid over, title is conveyed or transferred to the purchaser and the purchaser becomes entitled to possession of the land (subject to the rights of any parties that might have possession such as lessees). This stage may also be referred to as the executory stage as the contract remains to be fully performed by the parties. 4.20

As noted above, in the case of a sale of a fee simple interest in land,

there is invariably a time lapse between the signing of the contract and the passing of legal title so that the vendor can vacate the property, the purchaser can arrange finance and all of the necessary arrangements can be made for the sale to be settled or completed between the parties. 4.21

A threshold issue is what formal requirements must be satisfied to

ensure that the contract is valid and enforceable. The commentary beginning in 4.27 below examines the formal requirements for the passing of a legal interest in land and for contracts for the sale of land. The commentary in 4.38 below examines the equitable doctrine of part performance, which operates as an exception to the formal requirements. 4.22

A related issue is the required content of contracts for the sale of

land, including the disclosure obligations on the part of vendors. Traditionally, the standard contracts for the

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sale of land have entitled the purchaser to request information from the vendor — known as requisitions on title — within an agreed period of time after the date of the contract. The practice of serving requisitions on title arose under the general law system to enable the purchaser to make enquiries of the vendor to determine whether there were any defects in title and to obtain other information relating to the property. However, the practice has become somewhat obsolete in the context of the Torrens system, where purchasers are able to undertake a search of the register and have access to

much of the information that requisitions have traditionally been designed to disclose, and the practice has now been abolished in many jurisdictions around Australia. In the place of requisitions, vendor warranties now appear in the standard contracts for the sale of land. 4.23

A critical question during the contract stage is whether, and in what

circumstances, the purchaser will enjoy a proprietary right in respect of the property and before legal title is conveyed or transferred to him or her. The commentary beginning in 4.50 below examines equitable interests arising out of enforceable contracts. In addition to outlining the traditional doctrine of conversion, the commentary considers the effect of a ‘time of the essence’ clause in the sale contract and what happens if the purchaser fails to complete on the nominated date, as occurred in the High Court case of Tanwar Enterprises Pty Ltd v Cauchi (4.57C). 4.24

From the purchaser’s perspective, a particularly important question

that arises during the contract period is how risk of loss to the property is allocated between the vendor and the purchaser. The commentary beginning in 4.62 examines the question of who bears the risk of loss to the property before settlement and the impact of insurance. 4.25

An equally important question for the purchaser is how priority

disputes — namely, disputes between parties with competing interests — should be resolved. This is discussed in the commentary beginning in 4.173. (c) The settlement stage 4.26

On settlement, the purchaser pays the purchase price in full (net of

any deposit that has already been paid) and the vendor conveys (in the case of general law land) or transfers (in the case of Torrens land) the legal title to the purchaser. Chapter 5 examines the basis on which interests in land are conveyed or transferred, including the operation of the Torrens system of title registration.

Formal requirements for the passing of a legal interest in land 4.27

Formal requirements for transferring the legal interest in land differ

depending on whether the land is held under the general law (otherwise known as ‘old system’ title) or Torrens title. Under Torrens title registration of a duly executed transfer is required to transfer the legal interest in land. These requirements will be examined in detail in Chapter 5. In the case of old system land, which is fast disappearing, and only exists in any numbers in New South Wales, Victoria, Western Australia and Tasmania, the general rule is that all conveyances or dispositions of legal interests in land (other than by will) must be made by deed. The Victorian legislation, for example, provides as follows (ss 51, 52, 54 of the Property Law Act 1958):

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4.28E

Property Law Act 1958 (Vic)

51 (1) All lands and all interests therein shall lie in grant and shall be incapable of being conveyed by livery or livery and seisin, or by feoffment, or by bargain and sale; and a conveyance of an interest in land may operate to pass the possession

(2) 52 (1)

(2)

54 (1) (2)

or right to possession thereof, without actual entry, but subject to all prior rights thereto. … All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed. [Section 18(1) defines ‘conveyance’ to include a mortgage, charge, lease, assent, vesting declaration, disclaimer, release, surrender, extinguishment and every other assurance of property or of an interest therein by any instrument except a will.] This section shall not apply to— (a) assents by a personal representative; (b) disclaimers made in accordance with the provisions of any law relating to bankruptcy or insolvency or not required to be evidenced in writing; (c) surrenders by operation of law, including surrenders which may, by law, be effected without writing; (d) leases or tenancies or other assurances not required by law to be made in writing; (e) receipts not required by law to be under seal; (f) vesting orders of the Court or other competent authority; (g) conveyances taking effect by operation of law. … Nothing in the foregoing provisions of this Division shall affect the creation by parol of leases taking effect in possession for a term not exceeding three years (whether or not the lessee is given power to extend the term) at the best rent which can be reasonably obtained without taking a fine.

Similar, if not identical, provisions appear in all other states.7 4.29

At common law a deed was a document which was signed, sealed and

delivered. The formalities for a valid deed to transfer an interest in land are now regulated by legislation.8 All states except Tasmania have legislated to modify the sealing requirements: see First National Securities Ltd v Jones [1978] Ch 109; [1978] 2 All ER 221. Delivery requires some conduct by the person executing the deed which indicates an intention to be bound by its

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terms. Often this is evidenced by the grantor passing possession of the deed to the grantee, but delivery may occur even if the grantor retains possession of the document. It appears that a provision to the effect that delivery is no longer required refers only to formal acts of delivery and confirms the rule that ‘no particular technical form of words or acts is necessary to render an instrument the deed of the party [executing] it’: see Xenos v Wickham (1867) LR 2 HL 296 at 312 per Blackburn J; Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310 at 352–61. In 400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302, the respondent executed an agreement to lease, which was expressed to be ‘Executed as a deed’, and returned the document to the appellants for execution. Before all of the appellants had executed the document, the respondent withdrew its offer to lease, arguing that no binding and concluded agreement had come into existence. The Queensland Court of Appeal held that although the document was a deed and had been physically sent to the appellants by the respondent, the circumstances indicated that the parties had intended that no legal obligations would arise until all of the parties were bound as the negotiations had been expressly ‘subject to a mutually agreed legal document by both parties’. Accordingly, the deed had not been delivered by, and had therefore not become binding on, the respondent prior to the withdrawal of the offer. By contrast, see In Roma Pty Ltd v Adams [2012] QCA 347, where the Queensland Court of Appeal found that the execution of a deed by one party was intended to constitute delivery and was therefore binding on the party even though the document had not been physically delivered to the other party.

A deed may be delivered ‘in escrow’, in which case it will only take effect when a specified condition is satisfied. Once a deed is delivered in escrow it cannot be recalled by the person executing it, although if the condition on which the deed is to operate is not performed it will never take effect. For a discussion of delivery in escrow, see Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310 at 352–61; and see also Rose v Rose (1986) 7 NSWLR 679; Fisher v Westpac Banking Corporation (1993) 43 FCR 385 at 390. Even a document which bears the words ‘signed, sealed and delivered’ will not be a deed if there is not sufficient indication that it was intended to be a deed or if it otherwise does not comply with the substantial requirements for a deed: see Rose v Commissioner of Stamps (1979) 22 SASR 84; McKinlay v Dodds [1984] ANZ ConvR 617; and Manton v Parabolic [1985] 2 NSWLR 361. In the Australian Capital Territory, New South Wales, South Australia and Western Australia a deed must be ‘attested by at least one witness not a party to the deed’: ACT, s 219(1)(b); NSW, s 38(1); SA, s 41(2); WA, s 9(1) (b). In Mostyn v Mostyn (1989) 16 NSWLR 635 it was held that this required the signature of each person executing the deed to be witnessed by an independent person who was not a party to the deed. Thus, a deed signed by several persons, in which the signatures of all parties except one were witnessed by one of the other parties to the deed, was not validly executed. 4.30

The provisions requiring use of a deed to convey a legal interest in

land pre-dated the introduction of the Torrens system and therefore applied originally only to land under the general law. However, except in New South Wales, they appear to apply to land under the Torrens system. In practice, however, the significance of this is limited by the fact that the Torrens

legislation in force in all Australian states provides that documents which are registered take effect as if they were deeds. As will be seen in Chapter 5, unregistered instruments affecting Torrens system land take effect as equitable interests only, regardless of the formality with which they are executed.

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Formal requirements for contracts for the sale of land 4.31

The formal requirements for the making of a contract for the sale of

an interest in land are contained in legislation derived from s 4 of the Statute of Frauds 1677 (UK). The typical provision is contained in the Property Law Act 1974 (Qld) s 59 which provides as follows: 4.32E

Property Law Act 1974 (Qld)

59 No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged or by some person by the party lawfully authorised.9

4.33

Section 4 of the original Statute of Frauds remains in force in

Western Australia, as amended by the Law Reform (Statute of Frauds) Act 1962. 4.34

Victoria, alone of the states, specifically requires any agent signing the

agreement to be authorised in writing to do so: Instruments Act 1958 (Vic) s 126. In all jurisdictions, if property is sold at auction, the auctioneer has authority to sign a memorandum on behalf of either the vendor or the purchaser (subject to any requirement that the agent must be authorised to do so in writing) but this authority can only be exercised as part of the sale transaction, and not at a later time: Wright v Madden [1992] 1 Qd R 343. It may sometimes be necessary to decide whether the contract is for the sale of an interest in land (in which case these provisions will apply) or for the sale of goods on land, in which case different formalities requirements may be relevant. 4.35

In Mills v Stokman (1967) 116 CLR 61; 41 ALJR 16, the issue for

decision was whether Mills, the owner of an area of land which was partly general law land and partly under the Torrens system, could prevent Stockman from entering her land and taking away slate. The slate was dross from earlier quarrying operations which had originally been regarded as worthless but subsequently became commercially valuable. The heap of slate covered two acres of the land to an average height of 30 feet. In 1955 Mills’ predecessor in title had made a written agreement purporting to sell the slate to W. In 1960, W made a written agreement with Stokman selling him the slate and appointing him his agent to enter on the land and remove it. In 1961 Mills disputed Stokman’s right to remove the slate, and later she and Stokman made a written agreement under which Stokman agreed to employ Mills’ husband to assist in the selection and loading of the slate and to pay Mills £1 for each load, in respect of which the husband assisted. Later, Mills refused to allow Stokman to continue removing the slate.

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The High Court held that the agreement between W and Mills’ predecessor in title was not a contract for the sale of goods, but created an equitable profit à prendre. This was because the slate had either never been severed from the land, or had been abandoned after severance for such a period that it was to be regarded as part of the land. In relation to the area of land under the general law, Mills was bound by this profit, because she had purchased with notice of its existence. Hence, Mills could not prevent Stokman from removing the slate under the agency arrangement with W. In relation to the Torrens system land, Mills took free of the equitable profit because she had registered her interest. 4.36

In Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 18

NSWLR 577, it was held that the effect of an agreement between investors and a company, under which pine seedlings would be planted, cultivated and harvested when mature, was to create a profit à prendre. Powell J (at 590) held that the distinction between the grant of a profit à prendre and a contract for the sale of trees: … is to be found in the intention of the parties: is it the intention that the trees may be, or are to be, felled and removed within a reasonably short period of time — in which case the arrangement is one of sale — or is it intended that the trees shall be retained for a considerable period of time while they grow to maturity — in which case the arrangement is one involving the grant of a profit à prendre.

4.37

What relevance does this distinction have to the formal requirements

for contracts and dispositions of interests? In Ashgrove Pty Ltd v Deputy Commissioner of Taxation (1994) 53 FCR 452; 124 ALR 315, it was held, on the authority of Marshall v Green (1875) 1 CPD 35, that a contract relating to the sale of trees was a contract for the sale of goods, rather than a profit à prendre, for the reason that it gave a right to cut down trees immediately, and not a right to enjoy further benefit from their growth upon the land.

The equitable doctrine of part performance 4.38

Despite the requirement of signed writing for contracts for the sale of

land, contracts that fail to meet the requirements may nonetheless lead to the parties being bound in equity under the doctrine of part performance. The following cases demonstrate the scope of its operation. 4.39C

Mason v Clarke [1955] AC 778; [1955] 1 All ER 914 House of Lords

[The appellant company, Shepton Mallet Transport Ltd, owned a certain agricultural estate. The respondent, Clarke, was a yearly tenant of a portion of the estate. The lease specifically reserved to the company the right to hunt for game on the estate. The company orally agreed with the appellant Mason that he should have the right to kill and take rabbits on the estate. Clarke prevented Mason from exercising his rights under the oral agreement with the company. Both Mason and the company commenced proceedings against Clarke, seeking injunctions to restrain further interference and damages for trespass. Croom-Johnson J gave judgment for the plaintiffs (ie the company and Mason), but his order was reversed by the Court of Appeal.]

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Lord Morton of Henryton: [His Lordship decided that the company was entitled to an

injunction. He proceeded:] I now turn to the position of Mr Mason. It is clearly established by oral evidence that, on 11 October 1950, an oral agreement was entered into between the company, acting by its duly authorised agents, and Mr Mason, whereby it was agreed that, in consideration of £100, Mr Mason should have the right to kill and take rabbits on the Hothorpe Estate for a year from 11 October 1950. That right was, of course, a profit à prendre. The £100 was paid on the same day. It is also clearly established by oral evidence that, on 14 October, in exercise of his right under the agreement, Mr Mason went on the Hothorpe Estate and set snares thereon for the purpose of catching rabbits, and returned next day with two men, employed and paid by him, to take rabbits. It is also beyond dispute that the respondent interfered with Mr Mason’s exercise of his rights under the agreement by the acts already described by my noble and learned friend on the Woolsack, and thereby caused damage to Mr Mason. A profit à prendre is an interest in land, and no legal estate therein can be created or conveyed except by deed: Law of Property Act 1925, s 52. At the time when the respondent did the acts of which complaint is made, there had been no grant by deed of the profit a prendre to Mr Mason, but prima facie he had the benefit of an oral agreement for the grant thereof, and he had entered into possession thereof in the only possible way, viz by exercising his rights thereunder. It is said on behalf of the respondent, first, that the agreement was so tainted with fraud that it was ineffectual to confer any enforceable rights; secondly, that the agreement, on its true construction, did not confer any right to lay snares in the open fields let to the respondent, and thirdly, that, at the time when the respondent did the acts in question, Mr Mason’s agreement with the company was unenforceable by action, because there was no memorandum or note thereof in writing sufficient to satisfy s 40 of the Law of Property Act 1925. My Lords, the first two of these arguments have already been fully dealt with in the speech from the Woolsack and I desire to add nothing in regard to them. As to the third argument, I am inclined to agree that there was no sufficient memorandum until 30 December 1950, but it is unnecessary to examine the relevant documents in detail, because I am quite satisfied that the acts of Mr Mason, already described, were a part performance of the oral agreement of 11 October 1950. Mr Mason set snares, took rabbits and paid helpers, and, in my view, the work done and the expense incurred were exclusively referable to the oral agreement. Accordingly, at the relevant time Mr Mason had a contract, specifically enforceable against the company, for the grant of a profit a prendre and had entered into possession thereof. In these circumstances, he was clearly entitled to bring an action for trespass against the respondent … [Viscount Simonds, Lord Oaksey, Lord Reid and Lord Keith of Avonholm delivered judgments agreeing with Lord Morton on this point.]

4.40 Questions

Was the interest obtained by Mason as a result of his acts of part performance an equitable interest or a legal interest? If his interest was equitable, why was he entitled to damages for trespass? In Moreland Timber Co Pty Ltd v Reid [1946] VLR 237 the Full Court held that because the profit arose from an agreement and was not granted in the form of a deed, it was equitable only, and for that reason could not attract the common law remedy of damages.

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4.41

There is considerable authority concerning the equitable doctrine of

part performance, the leading case being Maddison v Alderson (1883) 8 App Cas 467. In McBride v Sandland (1918) 25 CLR 69 at 77–9, Isaacs and Rich JJ stated the essentials of the doctrine in the course of resolving a bitter dispute between a father and daughter involving an alleged oral contract of sale. 4.42C

McBride v Sandland (1918) 25 CLR 69 High Court of Australia

Isaacs and Rich JJ: In Maddison v Alderson Lord Selborne LC, in a passage now classical, stated the result of the authorities to be that in a suit founded on part performance of a parol contract relating to land the defendant is really charged ‘upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the statute) upon the contract itself’. It is clear from what the learned Lord Chancellor says, that in such a case the court is not asked to give a better remedy in aid of a legal right, based on the contract, but is called upon to enforce an equity (independent of the statute, as Story observes — Equity Jurisprudence, p 754) which has arisen by force of circumstances

subsequent to the contract itself, namely, by acts of part performance sufficient to attract the equitable jurisdiction of the court. Lord O’Hagan, in the same case, pursues the principle further by pointing out that the proper course in such proceeding is that of ‘seeking to establish primarily such a performance as must necessarily imply the existence of the contract, and then proceeding to ascertain its terms’, and that the court below had erred in reversing that order. No harm can arise from reversing that order as a matter of convenience in taking evidence, provided the necessary elements of part performance are borne in mind and properly applied to the circumstances when the facts come under consideration. But if the terms of the oral bargain are first ascertained and then the alleged acts of part performance are judged of merely by their consistency with and applicability to that bargain, grievous error may result. Much of the argument of the respondent ran upon that erroneous line, and to some extent the judgment under appeal is affected by it. It will conduce to precision in dealing with the voluminous and complicated circumstances detailed in the evidence to state, so far as material to the present case, certain elements of part performance essential to raise the equity: 1.

2. 3.

The act relied on must unequivocally and in its own nature be referable to ‘some such agreement as that alleged’. That is, it must be such as could be done with no other view than to perform such an agreement. By ‘some such agreement as that alleged’ is meant some contract of the general nature of that alleged. The proved circumstances in which the ‘act’ was done must be considered in order to judge whether it refers unequivocally to such an agreement as is alleged. Expressions are found in some cases which, if literally read, are to the effect that mere possession by a stranger is sufficient to let in parol evidence of any contract alleged. Those cases were prior to Maddison v Alderson, and the expressions if literally read appear to be too wide, because, so read, they would conflict with the requirement that the act must unequivocally refer to some such contract as is alleged, and because bare possession does not necessarily connote trespass or, alternatively, a contract at all; indeed, [page 274]

4.

5.

some contracts would not justify the act done. Possession may be the result of mere permission. But if the circumstances under which the possession was given are proved then the court may judge whether the act indicates permission or contract, and, if contract, its general character. For instance, in Frame v Dawson (1807) 14 Ves Jun 386 at 388; 33 ER 569 at 568–70, the expression ‘some agreement’ is used, we think, in contra-distinction to the specific terms of the agreement, and not in the most general sense of any agreement whatever. It must have been in fact done by the party relying on it on the faith of the agreement, and further the other party must have permitted it to be done on that footing. Otherwise there would not be ‘fraud’ in refusing to carry out the agreement, and fraud, that is moral turpitude, is the ground of jurisdiction. It must be done by a party to the agreement. These requirements must be satisfied

6. 7.

4.43

before the actual terms of the alleged agreement are allowed to be deposed to. Further, when those terms are established, it still remains to be shown: That there was a completed agreement. That the act was done under the terms of that agreement by force of that agreement.10

In Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169; [1962] 3

All ER 593, an oral agreement for a tenancy was entered into between the company and Mrs Anderson. The Court of Appeal decided that the agreement was for a lease for the joint lives of Mrs Anderson and her invalid son and the life of the survivor. Pursuant to the agreement, Mrs Anderson entered into possession of a flat and paid rent. She was also given a rent book of the sort supplied to weekly tenants. The company gave Mrs Anderson a notice to quit appropriate to a weekly tenancy, and brought an action for possession. Mrs Anderson resisted the claim, relying upon the oral agreement for a lease. The Court of Appeal ruled in favour of Mrs Anderson. On the question of part performance, Willmer LJ made the following observations (at QB 181–2; All ER 599): Where the question is whether there was an agreement for a tenancy, I cannot imagine any better evidence of part performance than the fact of the tenant going into actual occupation. It is said, however, that the act of the tenant in going into occupation was equivocal, in that it might be referable to any kind of tenancy agreement. I do not understand, however, that part performance must necessarily be referable to the agreement, and only the particular agreement, relied on. I cite from Anson’s Law of Contract (21st ed, 1959) … ‘The acts of performance relied upon must of themselves suggest the existence of a contract such as it is desired to prove, although they need not establish the exact terms of that contract’. As I understand it, if there is evidence of such part performance, that is sufficient to warrant the admission of oral evidence to prove what the exact terms of the contract were. I have no doubt that the evidence in the present case proved sufficient part performance within that principle. It follows that, notwithstanding the absence of any

memorandum in writing, there was here sufficient proof of an agreement enforceable in equity on the basis of the principle established by Walsh v Lonsdale.

[page 275]

4.44

In Australia, in the light of cases such as McBride v Sandland (1918)

25 CLR 69 (4.42C) and Cooney v Burns (1922) 30 CLR 216, the courts have maintained a more restrictive approach and have not endorsed the approach of the House of Lords in Steadman v Steadman [1976] AC 536, where the majority of the judges held that the acts of part performance must, on the balance of probabilities, point to the existence of some such contract as alleged. The issue was discussed in ANZ Banking Group Ltd v Widin (1990) 26 FCR 21; 102 ALR 289, where Hill J commented as follows (at FCR 35ff; ALR 303ff): In McBride v Sandland Isaacs and Rich JJ (at 78) made it clear that the contract to which the acts of part performance must unequivocally be referable meant ‘some contract of the general nature of that alleged’. Knox CJ in Cooney v Burns thought that by the agreement was meant ‘some agreement for the disposition of some estate or interest in the land in question’ (at 222). However, in the United Kingdom a more liberal view was taken in Kingswood Estate Co Ltd v Anderson and Wakeham v MacKenzie [1968] 1 WAR 1175 and ultimately by the House of Lords in Steadman v Steadman [1976] AC 536 … [In Regent v Millett] on appeal to the High Court (reported at (1976) 133 CLR 679; 10 ALR 496) the court was unanimously of the view that part performance was made out. None of the judges found it necessary to consider the questions raised by Steadman. Gibbs J, with whose judgment Stephen, Mason, Jacobs and Murphy JJ agreed, said (CLR at 683; ALR at 499) that the Earl of Selborne’s test in Maddison v Alderson at 479: … has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of

that alleged: see McBride v Sandland (1918) 25 CLR 69 at 78. It may be said immediately that if the reasoning of their Lordships in the recent case of Steadman v Steadman is accepted, the appellants’ arguments must fail. However, it is unnecessary for the present decision to consider the questions that are raised by that case. Subsequently Holland J in Ogilvie v Ryan [1976] 2 NSWLR 504, a case where the proper test to be applied affected the outcome, took the view that he should follow the approach of Glass JA in Millet v Regent and not apply the more liberal approach in Steadman. As to the implications possible to be drawn from Steadman, see Gareth Jones & William Goodhart, Specific Performance, Butterworths, 1986, 103–6. The liberal approach in Steadman has not been adopted in other States of Australia. Fullagar J in Thwaites v Ryan [1984] VR 65 expressed doubt as to at least part of the formulation but was of the view that the conduct in question did not enable him to say ‘… for Ryan to have done all this, I really think there must have been a contract’ (at 87). In Riley v Osborne [1986] VR 193 Kaye J accepted the test of Fullagar J in Thwaites v Ryan at 76 expressed in the following terms: In respect of each act of alleged part performance that was actually done, was it on the balance of probabilities unequivocally referable to some act between the actor and the deceased, that is to say, was it such that, on the probabilities, it must have been done with a view to performing such a contract?

4.45

Subsequently the Full Court of the Supreme Court of Victoria, in

McMahon v Ambrose [1987] VR 817 expressed the view that the court was bound by the orthodox interpretation of Maddison v Alderson adopted by the High Court in McBride v Sandland and Cooney v Burns: see too in Victoria, Butler v Craine [1986] VR 274 at 282 (per Marks J), and in Western Australia in Trifid Pty Ltd v Ratto [1985] WAR 19 at 37. Brennan J in Waltons

[page 276]

Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432; 76 ALR 513 restated the test of part performance consistently with the orthodox view. His Honour made no reference to Steadman … However, even on the orthodox view it seems to me that the bank should succeed. Although the acts of part performance relied upon by the bank resulted in the bankrupt recovering a sum of money, the bank does not rely merely on the payment of money. Here, the bank obtained an indemnity agreement, took a mortgage in blank and took an authority to complete it (albeit the last two were deficient in that the title particulars were not completed). It then endorsed or accepted a bill or bills by virtue of which it became liable to holders thereof for the face value of those bills. It went onto the market and sold those bills at a discount, crediting the proceeds to the bankrupt’s account. The acts of the bank, seen in this context, lead to the conclusion that they are unequivocally and in their own nature referable to a contract of the general nature of that alleged by the bank; namely, that there was an oral agreement between the bank and the bankrupt that the bankrupt would grant a mortgage to the bank over the Bellevue Hill property to secure to the bank its right of indemnity. In rendering itself liable on the bills, the bank altered its position on the faith of the oral agreement. It would be a fraud in the bankrupt to set up the legal invalidity of the oral contract on the faith of which he induced the bank to act and expend its money. While the bank does not seek to rest its case on estoppel, the discussion of the principles upon which the present law of estoppel is based by some of the members of the High Court in Commonwealth v Verwayen (1990) 95 ALR 321; 64 ALJR 540 lends further support to the view that the doctrine of part performance should be applied in the present case in favour of the appellant. It would be unconscionable to permit the bankrupt or the trustee claiming through him to rely upon the legal invalidity of the contract on the faith of which the bankrupt induced the bank to become liable on the bills.

4.46

In Arambasic v Veza (No 4) (2014) 17 BPR 33,101; [2014] NSWSC

1109, Sackville AJA observed that the principle in Regent v Millett that the acts of part performance must be unequivocally and in their own nature referable to a contract of the general nature of that alleged ‘has not proved

easy to apply to particular fact situations and, indeed, it has been said that the “whole law of part performance is established by judicial authority, and discerning underlying principle is an obscure process”: Khoury v Khouri [2006] NSWCA 184; 66 NSWLR 241 at [90] per Bryson JA.’ 4.47

In Bayside Developments Pty Ltd v Copperart Pty Ltd (1974) 11 SR

(WA) 316, it was held that a landlord’s acceptance of a reduced rent for the first six months of a lease from a tenant who had gone into possession of the premises, amounted to part performance on the part of the landlord. Is this consistent with the principle in McBride v Sandland (1918) 25 CLR 69? 4.48

In Ogilvie v Ryan [1976] 2 NSWLR 504 at 520–5 (see 4.117C),

Holland J felt constrained, in view of the approach of the Court of Appeal in Millett v Regent, to apply a strict test of part performance to a case where the defendant to an executor’s action for possession of land claimed that she had orally agreed with the testator that, in return for her looking after him, he would allow her to live in the house for as long as she wished. Holland J held that her acts in changing residence and providing unpaid services for the man were not unequivocally referable to or indicative of a promise to grant her an interest in land. Her acts were consistent with a voluntary association maintained through love and affection, perhaps

[page 277]

coupled with an expectation of a testamentary disposition in her favour. In the result, however, Holland J was able to find in the defendant’s favour on

other grounds. What difficulties may family members face in establishing that acts they performed for the benefit of the other party were ‘unequivocally referable’ to the existence of a contract relating to the transfer of an interest in land? Do you think the court would have taken the same view on part performance if the defendant had been a man who had promised to care for a woman until she died, in return for receiving an interest in her house? 4.49

One particularly important example of the application of the part

performance doctrine to the law of property is the mortgage by deposit of title deeds. It is a common practice for a lender of money to take, by way of security, physical possession of the borrower’s title deeds to real property. Equity views this transaction as effective to create a mortgage: Russel v Russel (1783) 1 Bro CC 269. The deposit of the title deeds is regarded as evidence of an agreement to enter into a mortgage. Moreover, the deposit of the deeds is considered to be part performance by both parties sufficient to take the oral agreement outside the Statute of Frauds. The mortgage by deposit of title deeds has received statutory recognition in Queensland and the Northern Territory.11 In Theodore v Mistford (2005) 219 ALR 296 the High Court held that deposit of title documents would constitute part performance of an oral agreement to grant a mortgage, even if the deposit were made by a third party (at [30]–[36]). Other examples of part performance are, in the case of a lease, improvements to the property by the lessor at the request of the lessee: Rawlinson v Ames [1925] Ch 96; in the case of a contract to sell land, either (i) payment of the purchase price and making improvements: Pejovic v Malinic (1959) 60 SR (NSW) 184; 76 WN (NSW) 744; or (ii) the taking of possession of land: Regent v Millett (1976) 133 CLR 689. Mere payment of

purchase money is insufficient: Britain v Rossiter (1879) 11 QBD 123, as is the making of an application for planning permission: New Hart Builders Ltd v Brindley [1975] Ch 342.

Equitable interests arising out of enforceable contracts (a) The doctrine of conversion 4.50

Bunny Industries v FSW Enterprises Pty Ltd [1982] Qd R 712, below,

examines the effect of a transaction in which the parties have made an enforceable contract for the sale of an interest in land but have not yet transferred the legal title. 4.51

It is important to note that the requirements for enforceable contracts

for the sale of land fall short of the documentary requirements for the creation of legal interests. It follows that if contracts are to create proprietary interests they must do so on the basis of doctrines that do not emanate from the common law. As we shall see in Bunny Industries, below, equitable principles establish that a contract may create an equitable interest in land that parallels the legal title. It should also be noted that where an equitable interest comes into existence,

[page 278]

the former totality of rights contained in the legal title is fractured. As Lord

Browne-Wilkinson emphasised in Westdeutsche Landesbank v Islington LBC [1996] AC 669 (at 705): A person solely entitled to the full beneficial ownership of money or property, both at law and in equity, does not enjoy an equitable interest in that property. The legal title carries with it all the rights. Unless and until there is a separation of the legal and equitable estates, there is no separate equitable title.

4.52C

Bunny Industries Ltd v FSW Enterprises Pty Ltd [1982] Qd R 712 Supreme Court of Queensland (Full Court)

[The plaintiff contracted to purchase land from the first defendant. Later, the first defendant contracted to sell land to X, the second defendant, and then executed a transfer of land to X, who, on registration of the transfer, acquired legal title to the land. The plaintiff sought a declaration that the first defendant held the proceeds of sale on trust for the plaintiff, and an order for payment of the proceeds.] Connolly J: … [P]roperly understood the [defendants’] demurrer is to so much of the statement of claim as alleges that from the date of the contract the first defendant held the land upon trust for the plaintiff and in contracting to sell to the second defendants and in conveying the land to them acted in breach of trust. The second proposition obviously depends upon the first and if the first is to succeed, we must evaluate afresh a great mass of authority at the highest levels. In 1872 during the argument of Shaw v Foster (1872) LR 5 HL 321, Sir George Jessel, then Solicitor-General, described the principle that from the time when the contract for the purchase of an estate has been entered into, the vendor is a trustee of the estate for the purchaser as one of the best established rules of Equity. The authorities he cited went back to Green v Smith (1738) 1 Atk 573; [26 ER 360]. In that case Lord Hardwicke laid down a series of rules all of which depend upon the proposition that agreements to be performed are often considered as performed. One of them was that the vendor of the estate is, from the time of his contract, considered as a trustee for the purchaser, and the vendee, as to the money, a trustee for the vendor … In Haque v Haque (No 2) (1965) 114 CLR 98 at 124 Kitto J described the position of a testator who had contracted to sell certain realty in the following language: But by the operation of well-known equitable principles the making of the contract had to an extent transferred the beneficial ownership to the purchaser. The deceased was not a mere trustee for the purchaser, but his position was something between that of a mere trustee and a mortgagee. He could exercise for his own benefit such

rights with regard to the land as were consistent with the contractual rights of the purchaser until payment of the purchase money in full, and until that event he had a lien or charge for the unpaid purchase money: see Lysaght v Edwards (1876) 2 Ch D 499, at 506. Sir George Jessel MR (ibid) would have described him as being in a position analogous to (though not identical with) that of a mortgagee, one point of similarity being that if the contract should be validly cancelled for non-payment of the purchase money the land would become his absolute property once more. Accordingly for some purposes he was in the position of a trustee, though for some he was not … A fuller exposition of the matter appears in the judgment of Sir Thomas Plumer MR in Wall v Bright (1820) [page 279]

1 Jac & W 494 [37 ER 456]. The vendor is ‘in progress towards’ trusteeship; and the incidents of trusteeship exist only if and so far as a Court of Equity would in all circumstances of the case grant specific performance of the contract: Howard v Miller [1915] AC 318, at 326; Central Trust and Safe Deposit Company v Snider [1916] 1 AC 266, at 272. The principles may be summed up for present purposes as follows: 1.

2. 3.

4.

5.

On the execution of the contract the vendor becomes a trustee for the purchaser. He is not however a bare trustee for he has a personal and substantial interest to the extent of the unpaid purchase moneys. He is ‘in progress towards’ bare trusteeship and finally becomes such when the whole of the purchase moneys are paid and he is bound to convey: Wall v Bright 1 Jac & W 494; 37 ER 456 per Sir Thomas Plumer MR. The purchaser may devise, alienate and charge his equitable interest so that it is plainly not a mere right in contract. The extent of the equitable interest is measured by the amount of the purchase moneys paid. Thus to the extent of the payments the purchaser acquires a lien exactly as if the vendor had given a mortgage to secure them: Rose v Watson (1864) 10 HLC 672 per Lord Cranworth at 684. Where there is a clear and undisputed contract, the Court will not permit the vendor to transfer the legal estate to a third person and the reason for this was explained by Turner LJ in Hadley v London Bank of Scotland 3 De GJ & S 63 at 70; 46 ER 562 at 564 as being because in equity the property was transferred to the purchaser. The incidents of trusteeship exist only if and so far as a Court of Equity would in all the circumstances of the case grant specific performance of the contract.

For the last proposition, Kitto J cited two decisions of the Privy Council. In Howard v Miller [1915] AC 318 Lord Parker of Waddington said, at 326: It is sometimes said that under a contract for the sale of an interest in land the vendor becomes a trustee for the purchaser of the interest contracted to be sold subject to a lien for the purchase-money; but however useful such a statement may

be as illustrating a general principle of equity, it is only true if and so far as a Court of Equity would under all the circumstances of the case grant specific performance of in contract. The interest conferred by the agreement in question was an interest commensurate with the relief which equity would give by way of specific performance … And in Central Trust and Safe Deposit Company v Snider [1916] 1 AC 266 at 272 the same noble Lord spoke of the tacit assumption that the contract would in a Court of Equity be enforced specifically and went on: If for some reason equity would not enforce specific performance, or if the right to specific performance has been lost by the subsequent conduct of the party in whose favour specific performance might originally have been granted, the vendor or covenantor either never was, or has ceased to be, a trustee in any sense at all. Against this background I turn to the arguments advanced in support of the demurrer by the first defendant. The first proposition is that, if the contract results in the first defendant being in the position of a trustee for the plaintiff, the content of the trust is exactly defined [page 280]

by the nature of the relief by way of specific performance available to the plaintiff. This proposition is plainly correct. Then it is said that the plaintiff can never obtain a decree for specific performance which would direct the first defendant to pay over the proceeds of its sale to the second defendants. Now it is right to say that the statement of claim amongst other relief seeks a decree for specific performance of the agreement of February 16, 1981. As it is no longer possible for the first defendant to convey the land, it may be assumed that no such decree could presently be made. See the treatment of this topic in Spry on Equitable Remedies (2nd ed, 1980) at pp 117–22 and especially at pp 120–1 citing Seawell v Webster (1859) 29 LJ Ch 71 at 73 per Kindersley VC. It is however clear that the question whether the first defendant was guilty of a breach of trust and is accountable to his cestui que trust must be tested as at the time of the breach of trust which is charged. As at that time the plaintiff had an enforceable contract. For the purposes of the demurrer its readiness, willingness and ability to perform are to be accepted and it must also be accepted that the first defendant had wrongly repudiated the contract. The plaintiff was entitled to a decree for specific performance and equity would have intervened to prevent the first defendant conveying the land in breach of the contract and the registration of the transfer. The decree for specific performance would of course have involved payment by the plaintiff to the first defendant of the balance of the purchase moneys. In my view it is perfectly plain that when the first defendant entered into the second contract of sale and indeed when he completed that contract he was in a relevant sense a trustee of the estate for the plaintiff and it seems equally plain to me that he must account for the plaintiff for his dealing with the trust estate in breach of trust. It is really impossible to deny to the first defendant the character of a trustee having

regard to the decision in Lysaght v Edwards (1876) 2 Ch D 499 where Sir George Jessel MR held that a devise of trust estates carried real estate contracted to be sold, the sale not having been completed at the time of the death of the vendor. The Master of the Rolls after examining authorities to which I have already referred said at 510: It must therefore be considered to be established that the vendor is a constructive trustee for the purchaser of the estate from the moment the contract is entered into. It is true that the unpaid vendor is not a bare trustee. Sir Thomas Plumer’s graphic description of him as being in progress towards it, recognises that he has rights of his own. But in relation to the purchaser’s contractual right to have the estate conveyed to him on completion he is a trustee. Finally it was said that if the vendor in these circumstances is a trustee so as to enable the purchaser to trace the estate into the moneys into which it has been converted, that situation arises only upon payment of the balance purchase moneys or tender of completion. In this connection reliance was placed upon a decision to which I have already referred Rose v Watson. In that case Lord Cranworth at 684 referred to the vendor being trustee for the purchaser ‘to the extent to which he (the purchaser) had paid the purchase money’. Similarly Lord Westbury LC at 678 said of an executory contract in the sense that the ownership of the estate was transferred subject to the payment of the purchase money, that every portion of the purchase money paid in pursuance of that contract is a part performance and execution of the contract, and, to the extent of the purchase moneys so paid does, in equity, finally transfer to the purchaser the ownership of the corresponding portion of the estate. These observations must be understood in the light of the facts which were that the purchaser had rescinded for misrepresentation after paying instalments. The vendor having been made bankrupt the purchaser was held to be entitled to enforce his lien and the Lord Chancellor at 681 said of the appellants, who had taken a mortgage after the contract was made, that there was conveyed to them only that which [page 281]

the vendor was entitled to under the contract. In other words, their Lordships were concerned to identify not merely the existence of a constructive trust but the extent or value to which it would be enforced against a subsequent mortgagee of the trust estate. Reference was made to the judgment of Mason J in Chang v Registrar of Titles (1976) 137 CLR 177 at 185. That case is far removed from the present. The purchaser had sought a vesting order under the Trustee Act. The vendor was not before the Court and while the purchaser had paid the balance of purchase moneys to solicitors named in the contract it was not known whether those solicitors were holding the moneys for the account of the vendor nor whether the purchaser had assumed liability under an existing mortgage to the exclusion of the vendor’s liability. His Honour said that it is accepted that the availability of the remedy of specific performance is essential to the existence of the constructive trust which arises from a contract of sale. But even if the remedy of specific performance be seen to be available, it obviously does not follow that the purchaser is entitled to the equivalent of conveyance without demonstrating, in properly

constituted proceedings that he has performed or tendered performance of his own obligations. In my judgment therefore on the facts assumed to be proved for the purposes of the demurrer, the first defendant must be regarded as having dealt with this land in breach of trust and as being therefore accountable to the plaintiff for his dealings with it. This view accords with the decision of Walton J in Lake v Bayliss [1974] 1 WLR 1073. There is really nothing remarkable about such a conclusion. Once it is understood that the plaintiff on its part must be debited with the balance of purchase moneys the same result is reached in equity as at law. It follows that in my judgment the demurrer should be overruled. [Andrews SPJ and Thomas J agreed with Connolly J.]

4.53

In Bunny Industries Ltd v FSW Enterprises Pty Ltd [1982] Qd R 712,

the Supreme Court of Queensland applied the well-known principle of Lysaght v Edwards (1876) 2 Ch D 499, that a specifically enforceable contract of sale confers an equitable interest on the purchaser of the land. The equitable doctrine of conversion, as it is known, is based on the principle that equity deems as done that which ought to be done and therefore regards the contract as having been effectively implemented. However, equity will only take this view where the contract is enforceable and there is no bar to the award of equitable remedies to enforce the agreement. As Bunny Industries demonstrates, the principle in Lysaght v Edwards applies to both general law and Torrens system land: see Barry v Heider (1914) 19 CLR 197; 21 ALR 93; 5.163C. In the Bunny Industries case it was not possible for the court to make an order for specific performance against the first defendant because the land had already been transferred to the second defendant. However, Connolly J held that it was sufficient to show that an order for specific performance would have been available to the plaintiff at the time when the first defendant entered into the contract with the second defendant. Because

the defendant could be treated as a trustee for the property for the plaintiff, the defendant was required to account for the dealing with the trust property in breach of trust.12 The principle applies not merely to

[page 282]

contracts for the sale of the fee simple estate in land, but also to enforceable agreements for the grant of a lease (as is demonstrated by the leading case of Walsh v Lonsdale (1882) 21 Ch D 9; 4.68C), an easement, or any other legal proprietary interest in land. It is important to note that the equitable principle applied in Bunny Industries Ltd v FSW Enterprises Pty Ltd [1982] Qd R 712 applies only where there is an enforceable contract for the sale of an interest in land. The formalities for a contract of sale of land have been discussed above: see 4.31. 4.54

Bunny Industries referred to the principle that an unpaid vendor

retains an equitable lien over the land for the balance of purchase money. This lien survives conveyance of the legal interest to the purchaser. In Queensland, Land Title Act 1994 s 191 abolishes the unpaid vendor’s lien. 4.55

An equitable interest resulting from a transaction for value arises not

by way of transfer, but ‘by activation in Equity of the conscience of the receiver of the valuable consideration. A trust is created; there is not a transfer or assignment’: see Acorn Computers v MCS Microcomputer Systems Pty Ltd (1984) 6 FCR 277 at 281–2; 57 ALR 389 at 393 per Smithers J. The progressive stages of the transaction reflect a gradual acquisition by the

purchaser of the entire equitable interest so that by the time the full purchase price is paid by the purchaser, the vendor is simply a bare trustee of the land: Lloyds Bank plc v Carrick [1996] 4 All ER 630. Although equity characterises the vendor in a specifically enforceable contract as a constructive trustee, with the purchaser of the land as beneficiary, not all the features of the trusteebeneficiary relationship apply: Chang v Registrar of Titles (1976) 137 CLR 177 at 184 per Mason J; at 190 per Jacobs J. 4.56

The doctrinal basis for recognising an equitable interest, as stated in

Lysaght v Edwards and other cases, was questioned by the High Court in the case extracted below. 4.57C

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; 201 ALR 359 High Court of Australia

[Three contracts for the sale of adjoining parcels of land stipulated that the date for completion was 28 February 2000, later extended to August 2000. Completion did not occur on the later date. On 20 August 2000 the vendors issued notices of termination of each contract. Later, however, the parties agreed, in deeds dated 5 June 2001, to a new completion date of Monday 25 June 2001. This date was a compromise. The vendors had wished to give two weeks from the date of the deeds, the purchaser seeking four weeks. Settlement was agreed to take place at the Office of State Revenue. Time was expressed to be of the essence. A representative of the mortgagees, Mr Cormack, attended the settlement meeting but

[page 283]

advised that his clients were unable to proceed at that time because of a holdup in processing the international money transfers arranged to fund the purchase. He promised that the funds would be available on the next day, as turned out to be the case. On the morning of the 26th, Tanwar’s

solicitor informed the vendors’ solicitor of this fact and that settlement could proceed. However, the vendors had already given instructions to terminate the contracts and on the afternoon of 26 June, notices of termination were issued. Tanwar sought an order for specific performance of the contracts. One of the appellant’s arguments was that it had equitable interests in the land and that it was entitled to relief against forfeiture of those interests.] Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ (footnotes omitted): But what, if any, was the interest in the land enjoyed by Tanwar as purchaser? … [T]he answers are to be supplied only by a patient examination of several fundamentals, the understanding of which by equity courts has changed across time. One commences by identifying the ‘interest’ of a purchaser in the land the subject of an uncompleted contract. In Lysaght v Edwards, Sir George Jessel MR described the position of the vendor at the moment of entry into a contract of sale as ‘something between’ a bare trustee for the purchaser and a mortgagee who in equity is entitled to possession of the land and a charge upon it for the purchase money; in particular, the vendor had the right in equity to say to the purchaser ‘[e]ither pay me the purchase-money, or lose the estate’. This way of looking at the relationship in equity between vendor and purchaser before completion appeared also in the works of eminent writers of the period in which the Master of the Rolls spoke. Later, Kitto J and Brennan J preferred to treat what was said in Lysaght as indicating that ‘to an extent’ the purchaser acquired the beneficial ownership upon entry into the contract. This analogical reasoning in turn suggested (i) the purchaser had before completion an equitable estate in the land which would be protected against loss consequent upon termination of the contract by the principles developed in equity for relief against forfeiture and (ii) in the same way as failure to redeem a mortgage upon the covenanted date for repayment did not destroy the equity of redemption without the proper exercise of a power of sale or a foreclosure suit in equity, failure to complete the contract on the due date did not bar the intervention of equity to order specific performance. But what, on this way of looking at the matter, was the significance of a contractual stipulation specifying a date for completion as essential? The treatment by the English equity judges of this subject developed in the course of the nineteenth century, as Justice Lindgren has detailed in his extra-judicial writing on the subject. While Lord Thurlow would have pushed the mortgage analogy to the extreme that a time stipulation in equity could never be essential unless there was something in the nature of the subject-matter of the contract, such as its fluctuating or depreciating value, to give it that quality, his view was doubted by Lord Eldon in Seton v Slade and rejected by Sir Lloyd Kenyon MR in Mackreth v Marlar. If the express contractual stipulation fixing time as an essential matter was not to be disregarded, how did that attitude stand with the analogy drawn from the relief against forfeiture cases? The answer given by Pomeroy, with reference to In re Dagenham (Thames) Dock Co; Ex parte Hulse, was that equity would relieve the purchaser from the operation of an essential time stipulation, ‘and from the forfeiture’, if the provision was inserted as a penalty to secure completion of the contract at the purchaser’s risk of loss of the equitable interest in the land under the executory contract. That reasoning, together with the authority of Dagenham, was relied upon in the majority judgments in Legione. What the Court of Appeal in Chancery decided in

Dagenham, and on what facts and grounds, is not fully apparent from the abbreviated report. But it must be remembered that in Dagenham there had been forfeiture of a payment of half the purchase [page 284]

price, so that it was not surprising that the forfeiture was treated as penal. It should be added that, in Dagenham, as in Stern and other instalment contract cases, there would have existed an equitable lien securing for the purchaser the payments so made. It has been held in this Court that the lien may be enforceable even though there may be a good defence to a claim to specific performance of the contract. It is the payment and retention of the moneys, not the availability of specific performance, which is critical. But there remains the question, unnecessary to decide here, whether the lien of the purchaser necessarily is lost upon termination of the contract for breach by the purchaser of an essential time stipulation. At all events, the analogies drawn over a century ago in Lysaght with the trust and the mortgage are no longer accepted. Jacobs J observed in Chang v Registrar of Titles that: [W]here there are rights outstanding on both sides, the description of the vendor as a trustee tends to conceal the essentially contractual relationship which, rather than the relationship of trustee and beneficiary, governs the rights and duties of the respective parties. Subsequently, in Kern Corporation Ltd v Walter Reid Trading Pty Ltd, Deane J said: [I]t is both inaccurate and misleading to speak of the unpaid vendor under an uncompleted contract as a trustee for the purchaser. In Stern, Gaudron J points out, consistently with authority in this Court, that the ‘interest’ of the purchaser is commensurate with the availability of specific performance. That availability is the very question in issue where there has been a termination by the vendor for failure to complete as required by the essential stipulation. Reliance upon the ‘interest’ therefore does not assist; it is bedevilled by circularity. There is the further point subsequently made by Lord Hoffmann in Union Eagle concerning the adaptation here of the principles respecting penalty and forfeiture, even allowing the existence of a pre-completion equitable interest in the land. His Lordship distinguished the well established jurisdiction in equity to relieve against forfeiture of part-payments and amounts in excess of a ‘reasonable deposit’, matters not involved in Tanwar’s appeal to this Court. He then proceeded: ‘But the right to rescind the contract, though it involves termination of the purchaser’s equitable interest, stands upon a rather different footing. Its purpose is, upon breach of an essential term, to restore to the vendor his freedom to deal with his land as he pleases. In a rising market, such a right may be valuable but volatile. Their Lordships think that in such circumstances a vendor should be able to know with reasonable certainty whether he may resell the land or not.’ The five ‘subsidiary questions’ stated by Mason and Deane JJ in Legione, and set out above, reflect the treatment by Lord Wilberforce in Shiloh Spinners Ltd v Harding (a lease

case) of the ‘appropriate’ considerations guiding the exercise of equity’s jurisdiction to relieve against forfeiture for breach of covenants added by way of security for the production of a stated result. His Lordship said: ‘The word “appropriate” involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.’ However, the end sought to be protected, on the analysis by Mason and Deane JJ in Legione, was the interest of the purchaser in the land. That ‘interest’, being for its existence dependent upon the administration of the very remedy in issue, does not suffice. Perhaps aware of the difficulty involved, Mason and Deane JJ went on in Legione, as later did Deane and Dawson JJ in Stern, to say there was much to commend what they said was a competing [page 285]

view of Sir Frederick Jordan. In Ch V of his Chapters on Equity in New South Wales, and in the course of dealing with equitable assignments for valuable consideration, and the transfer of the equitable title to the assignee, Sir Frederick Jordan said: ‘This result is to be ascribed to the maxim that equity considers that done which ought to be done; and the principle is effective only in so far as the Court of Equity would, in all the circumstances of the case, grant specific performance of the agreement’. He added, somewhat obscurely, in a footnote: ‘Specific performance in this sense means not merely specific performance in the primary sense of the enforcing of an executory contract by compelling the execution of an assurance to complete it, but also the protection by injunction or otherwise of rights acquired under a contract which defines the rights of the parties’ (emphasis added). In the New South Wales Court of Appeal, doubt since has been cast upon the support for any such general principle by the authorities cited by Sir Frederick Jordan, beginning with Tailby v Official Receiver. It is sufficient for present purposes to observe that, where the issue, as in Tanwar’s appeal, concerns alleged unconscientious reliance by vendors upon their contractual right to terminate, it does not assist to found the equity of the purchaser upon the protection of rights to injunctive relief acquired under a contract the termination of which has taken place. Whilst the contracts here were on foot, breach thereof by the vendors would have been restrained. But there was no relevant breach of contract by the vendors, and the contracts were terminated in exercise of a contractual right to do so. [Kirby and Callinan JJ delivered concurring judgments.]

4.58

In Jaswil Properties Pty Ltd (atf Jaswil Units Trust) v Barrak

Corporation Pt Ltd [2015] NSWSC 391, the vendor served a notice of

termination following a breach of an essential time stipulation by the purchaser, who had prepared the transfer for the vendor to sign in an incorrect form. Bergin CJ granted the purchaser an extension of time within which to complete the contract on the basis that the conduct of the vendor, by failing to turn its mind to the proper execution of the transfer, had contributed to the breach of the essential time stipulation by the purchaser and it would have been unconscientious to allow the vendor to rely on its legal rights to terminate the contract. Citing the statement by the High Court in Tanwar that ‘where accident and mistake are not involved it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation’ to show that it is ‘against conscience’ for the vendor to rely upon the termination of the contract, Bergin CJ noted the reference to this as a ‘newly distinct head’ of equitable relief in J D Heydon, M J Leeming and P G Turner (eds), Meagher Gummow and Lehane’s Equity Doctrines and Remedies, 5th ed (LexisNexis, 2015) at [18-340].

4.59 Questions 1.

Can the characterisation of the interest of the purchaser of land in Bunny Industries be reconciled with the analysis of the High Court in Tanwar v Cauchi? Is there a difference of emphasis, or of substance? Is there a practical difference between the different approaches? Does one tend to favour the position of the purchaser over another? Should purchasers be given extra protection in these

circumstances?

[page 286]

2.

Was the result in Tanwar fair? What does the High Court mean by referring to analyses of the purchaser’s interest as ‘bedevilled by circularity’?

3.

Is it possible to say, after Tanwar, that a purchaser under a specifically enforceable contract for the sale of land has an equitable interest in the land, or does he or she have an equity instead of an equitable interest? Or is it that if the contract is specifically enforceable an equitable interest arises, but in cases such as Tanwar where the purchaser is in breach and the vendor has terminated the contract, that no interest arises that can be the subject of a relief against forfeiture claim? In Circuit Finance Australia Ltd v Panella (2012) 16 BPR 30,347 Pembroke J held that ‘[a]n argument that a purchaser has an equitable interest in land will be bedevilled by uncertainty unless it is appreciated that the “interest” is only that which is commensurate with the availability of specific performance’ (at [21]).

4.60

Despite the vulnerability of the purchaser’s interest under an

uncompleted contract of sale as outlined in Tanwar, courts in Australia have continued to recognise the proprietary nature of the interest in circumstances

involving specifically enforceable contracts. In Fuentes v Bondi Beachside Pty Ltd [2016] NSWSC 531, White J rejected an argument that a purchaser under an uncompleted contract for the sale of land does not have in equity a proprietary interest in the property, stating that ‘[a]lthough it is true that the High Court of Australia has said that the description of the vendor as trustee tends to conceal the essentially contractual relationship which governs the rights and duties of the parties, it has never before been doubted that a purchaser under a specifically enforceable contract has an equitable interest in the property commensurate with the right to equitable relief, albeit that the relationship between vendor and purchaser is not properly characterised as one of trustee and beneficiary prior to payment of the purchase price’ (at [25]). The argument had been advanced in reliance on the decision of the United Kingdom Supreme Court in Scott v Southern Pacific Mortgages Ltd [2015] AC 385; [2015] 1 All ER 277; [2014] UKSC 52. Although the decision in Scott could be confined to its facts, which involved complex issues concerning sale and leaseback transactions, proprietary estoppel and statutory interpretation, the decision has attracted criticism for appearing to hold that the rights of a purchaser under a contract for the sale of land can only be personal in nature and not proprietary. 4.61

In another recent Australian decision, Golden Mile Property

Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd [2015] NSWCA 100, Emmett JA summarised the conventional position as follows (at [99]– [100]): Until it is known whether the contract will be performed, the vendor is not in the position of a constructive trustee, although the vendor may be described as a trustee sub modo [a trustee that is

subject to a condition or qualification]. That is to say, the vendor under an unconditional contract may be regarded as a trustee, conditionally upon nothing happening to prevent performance of the contract. The vendor may be regarded unconditionally as a trustee for the purchaser when the contract is performed by the purchaser by the payment of the purchase price. When title is made out and the purchaser has paid the purchase

[page 287]

price under a contract in respect of which the remedy of specific performance is available, the vendor becomes a constructive trustee of the property sold [citing Chang v The Registrar of Titles]. However, the use of the language of trust to describe the respective positions of the vendor and purchaser has fallen out of favour. Where there are rights outstanding on both sides of a contract for the sale of land, the description of the vendor as a trustee tends to conceal the essentially contractual relationship that governs the rights and duties of the respective parties. While, in some sense, the equitable estate in the land passes to the purchaser, the vendor has a right to payment of the purchase price and has a charge or lien on that estate as security for payment of the purchase price, together with the right to retain possession of the land until the price is paid. The purchase must either pay the purchase price or lose the equitable interest acquired on making the contract [citing Tanwar Enterprise Pty Ltd v Cauchi].

(b) Risk of loss 4.62

In Lysaght v Edwards (1876) 2 Ch D 499 at 507, Jessel MR

commented that the effect of the purchaser obtaining an equitable interest under an enforceable contract of sale was that: If anything happens to the estate between the time of sale and the time of completion of the purchase it is at the risk of the purchaser. If it is a house that is sold, and the house is burnt down, the purchaser loses the house. He must insure it himself if he wants to provide against such an accident.

In Ziel Nominees Pty Ltd v VACC Insurance Co Ltd (1975) 180 CLR 173; 7 ALR 667; 50 ALJR 106, the High Court of Australia held that the purchaser of property damaged by fire after the making of the contract was not entitled to the benefit of an insurance policy taken out by the vendor. At the time of settlement, the vendor had assigned the benefit of the insurance policy to the purchaser and authorised the insurance company to pay to the purchaser the money to which the vendor was entitled under the policy. The High Court held that because the vendor had received the purchase price of the property he no longer had any insurable interest in it and was not entitled to any indemnity for damage. Thus, the vendor no longer had any right under the policy to assign to the purchaser. The purchaser was left in the unfortunate situation of having to pay the full purchase price yet having no claim against the insurance company. What steps should a purchaser take to protect himself or herself against damage to or destruction of the property after entering into a contract for the purchase of an interest in land? 4.63

Some states have now legislated to provide some protection to

purchasers whose property is damaged or destroyed after the contract is made but prior to settlement. In New South Wales, the Conveyancing Act 1919 (NSW) ss 66J–66O implemented the recommendations of the New South Wales Law Reform Commission contained in its report, Passing of Risk Between Vendor and Purchaser of Land, LRC 40, 1984. The amendments provide, inter alia, that the risk of damage to land should not pass to the purchaser until the transaction is completed or until the time stipulated by the parties. The parties may not stipulate a time before the purchaser takes or

is entitled to possession, whichever occurs first. Where land is substantially damaged after the making of a contract for the sale of the land and before the

[page 288]

passing of the risk to the purchaser, the purchaser may serve a notice on the vendor rescinding the contract. In cases where the purchaser wishes to proceed with the contract, the purchase price is to be reduced to such amount as is just and equitable. The legislation may be excluded by agreement between the parties, except in relation to the sale of a dwelling house. For a case applying the New South Wales legislation, see Lukies v Ripley (1994) 6 BPR 13,471. 4.64

By contrast, the Sale of Land Act 1962 (Vic) ss 34–36 retain the

common law rule that the risk passes to the purchaser on the making of a contract, but modifies its effect. In the case of a contract for the sale of a dwelling house, if the dwelling house is so destroyed or damaged as to be unfit for habitation, the purchaser may rescind the contract. Any insurance policy maintained by the vendor on land which is the subject of a contract enures for the benefit of the purchaser as well as the vendor, thus abrogating the principle in Ziel Nominees Pty Ltd v VACC Insurance Co Ltd (1975) 180 CLR 173; 50 ALJR 106; 7 ALR 667. If land is destroyed or severely damaged, the vendor may restore the damage, and if restoration occurs prior to the time the purchaser becomes entitled to possession, the purchaser cannot rely on the provisions mentioned above. Similar provision is made in

Queensland: ss 63, 64. Both Queensland and Tasmania have legislation based on an English Act of 1774 (14 Geo III c 78, s 83), which requires the insurer of buildings damaged by fire, on the request of ‘any person interested’ to lay out the money towards ‘rebuilding, reinstating or repairing’: Qld, s 58; Tas, s 90E. However, such provision appears to be ineffective to protect a purchaser where there is no money payable to the vendor under the policy, because the vendor has been paid by the purchaser and has suffered no loss: see Hirst v New Zealand Insurance Co Ltd [1981] VR 571. Finally, the Insurance Contracts Act 1984 (Cth) s 50 deals with the problem of damage occurring after a contract of sale, by providing that the purchaser is deemed to be insured under the vendor’s contract of insurance. For a discussion of the law in this area, and of the interaction between the state and Commonwealth legislation, see Coldbeck, ‘Passing the Insurance Risk in Conveyancing’ (1987) 61 Law Inst J 422. Do the provisions discussed above make it unnecessary for purchasers to insure after entering into contracts? 4.65

The principle of Lysaght v Edwards has been applied in many cases.

It has been held that a vendor in possession of land after a contract of sale is obliged to take reasonable care of the property. In Clarke v Ramuz [1891] 2 QB 456; [1891–94] All ER Rep 502, a vendor was held liable for damage caused to the land by a trespasser removing a large quantity of surface soil between the date of the contract of sale and the conveyance. In Earl of Egmont v Smith (1877) 6 Ch D 469, Jessel MR decided that if, after the contract of sale, a lease of the premises expires, the vendor awaiting completion is under a duty to re-let the premises after consulting purchasers

to ascertain their wishes. On the other hand, the vendor awaiting completion is not a bare trustee without any beneficial interest in the land. The vendor is entitled to remain in possession until the transaction is finally settled and until that time may retain all rents and profits from the land. Moreover, as Jessel MR pointed out in Lysaght v Edwards, the vendor retains an equitable lien over the land until the purchase price is paid: and see Re HamiltonSnowball’s Conveyance [1959] Ch 308; [1958] 2 All ER 319. In Shephard v Corindi Blueberry Growers Pty Ltd (1994) 6 BPR 13,672, the purchasers had paid a substantial part of the purchase price, taken possession of the land and made improvements to it. At a later stage, the vendor had created a fixed and a floating charge in favour of one of the defendants. After the vendor went into receivership, the purchasers sought specific performance of their contract. Young J, in the Supreme Court

[page 289]

of New South Wales, suggested that a trust relationship may arise before the whole of the purchase money is paid. By the time the charge was created the purchasers were entitled to specific performance, subject to payment of the balance of purchase money, adjustments and possibly interest. 4.66

V and P enter into a contract of sale. Completion of the sale depends

upon obtaining approval by the local council of the proposed subdivision. Approval is not expected for six to eight weeks. Pending completion V proposes to mortgage the land. P seeks an interlocutory injunction to restrain

V. In Shanahan v Fitzgerald [1982] 2 NSWLR 513, McLelland J held that no term preventing the vendor from mortgaging the land could be implied into the contract, unless the circumstances were such that this would put it beyond the defendant’s power to complete the contract, or to show that it was the defendant’s intention in mortgaging the land not to complete the contract. (c) Agreements to create or transfer a property right 4.67

The case below is authority for the proposition that an enforceable

agreement to create or transfer a property right will be recognised in equity even if the legal requirements are not satisfied. In Walsh v Lonsdale, the parties entered into a written agreement for the grant of a lease, but no deed was executed in respect of the lease. 4.68C

Walsh v Lonsdale (1882) 21 Ch D 9 Court of Appeal

[By an agreement made in May 1879, the defendant, Lonsdale, agreed to grant to the plaintiff, Walsh, a lease of a weaving shed and certain other buildings and machinery for a term of seven years from the time when the defendant put the shed in working order. If the plaintiff, Walsh, provided his own steam power for the running of the machinery (which he did from July 1880) the rent was to be £1 10s per loom, with the plaintiff being obliged to run at least 300 looms during the first year and 540 looms thereafter. The lease was to be prepared by the defendant’s solicitors and approved by the plaintiff’s solicitors and was to contain the usual covenants found in leases of a similar nature, but particularly the covenants contained in a lease of certain other premises, to the extent that those covenants could be made applicable to this lease. The other lease contained a covenant that rent should be paid yearly in advance and, further, that one year’s rent should always be due and payable in advance on demand, in addition to the proportion (if

any) of the yearly rent due and unpaid for the period previous to the demand. The plaintiff entered into possession on 1 July 1879 and paid rent quarterly, but not in advance, until 1 January 1882. In 1881 the plaintiff worked 560 looms. On 13 March 1882 the defendant served the plaintiff with the following notice: I hereby demand immediate payment of £1013 14s, being as to £840 part thereof one whole year’s rent in advance from this day of the mill and premises you now occupy as my tenant, and as to £165 14s part thereof, the balance of the rent of such mill and premises from the 1st day of January last up to this day, and as to £8, the remainder thereof, for insurance paid by me …

[page 290]

On 15 March the defendant put in a distress for rent [distress is a landlord’s right, now largely abolished, to sell tenant’s goods to cover arrears of rent]. The plaintiff thereupon commenced this action claiming damages from the defendant for improperly distraining, an injunction to restrain the defendant from selling under the distress and from continuing in possession of the distrained chattels and specific performance of the agreement for a lease. The plaintiff moved for a preliminary injunction before trial. Fry J in substance ruled adversely to the plaintiff, ordering the defendant to withdraw from possession under distress only if the plaintiff paid the amount claimed into court. The plaintiff appealed.] Jessel MR: It is not necessary on the present occasion to decide finally what the rights of the parties are. If the court sees that there is a fair question to be decided it will take security so that the party who ultimately succeeds may be in the right position. The question is one of some nicety. There is an agreement for a lease under which possession has been given. Now since the Judicature Act the possession is held under the agreement. There are not two estates as there were formerly, one estate at common law by reason of the payment of the rent from year to year, and an estate in equity under the agreement. There is only one court, and the equity rules prevail in it. The tenant holds under an agreement for a lease. He holds, therefore, under the same terms in equity as if a lease had been granted, it being a case in which both parties admit that relief is capable of being given by specific performance. That being so, he cannot complain of the exercise by the landlord of the same rights as the landlord would have had if a lease had been granted. On the other hand, he is protected in the same way as if a lease had been granted; he cannot be turned out by six months’ notice as a tenant from year to year. He has a right to say: ‘I have a lease in equity, and you can only re-enter if I have committed such a breach of covenant as would, if a lease had been granted, have entitled you to re-

enter according to the terms of a proper proviso for re-entry’. That being so, it appears to me that being a lessee in equity he cannot complain of the exercise of the right of distress merely because the actual parchment has not been signed and sealed. The next question is, how ought the lease to be drawn? And that is a question of some nicety. I do not wish now finally to decide it, and on an application of this kind it is not necessary to do so, but I think the court is bound to say what its present opinion is, because that is material on the question of what ought to be done until the trial. The whole difficulty arises from a single clause. Instead of taking the trouble to state in detail what covenants the lease was to contain they have adopted this short form … [His Lordship examined the terms of the agreement and concluded that the formal lease should provide for a minimum rent of £810 to be paid in advance. This figure represented the minimum number of looms to be run (540) at £110s per loom. Thus, he varied the terms of Fry J’s order by requiring the plaintiff to pay into court only £810.] Cotton LJ: I am of the same opinion. The question as to whether the defendant was right in putting in this distress must depend upon questions which have to be decided at the hearing of the cause, and the only question we have now to consider is what is right to be done between the parties for the purpose of keeping things in statu quo, and preserving their rights until the questions between them can be decided. This landlord has put in a distress. He is right if the lease under which the tenant must be taken to be holding this land or premises would give him rent beforehand. This is not the time for finally deciding whether he is entitled to any and to what rent payable beforehand, but the question before us is whether we are now at once to deprive the landlord of any security which he has in his hands for the payment of his rent? In my opinion we ought not. Of course, [page 291]

before allowing the landlord to retain the security given by the distress we must be satisfied that there is a prima facie case in his favour, and in my opinion there is. It would be wrong for us absolutely to decide now how this lease should be framed, for there are many matters which would require consideration, one clause may depend on another, and the question how one clause is to be dealt with may affect the other provisions in the lease. But it is my present opinion that there ought to be reserved as deadrent a rent which will correspond to the minimum number of looms which the plaintiff is to run in any particular year, and after the first year it is to be always 540. If, then, there is to be deadrent, the provision in the lease of 1 May that the rent thereby reserved shall be beforehand rent can be made applicable to the present tenancy by making it apply to the dead or fixed rent of £810 a year, leaving the payment of the remaining sum, if any, which is to be paid by the tenant to be enforced by the landlord under the covenants when it is ascertained how many looms the tenant has run. In my opinion, therefore, there is at least such a prima facie case in favour of the defendant that we ought not to deprive him of the security which the distress gives him

without the plaintiff paying into court that which will be a sufficient security for the defendant if he is right in his contention, reducing the amount to £810 as the Master of the Rolls has already said. Lindley LJ: I also think that the rights of the parties in this case turn upon the lease as it ought to be framed in pursuance of the contract into which these parties have entered. I do not agree with the contention of Mr Cozens-Hardy and Mr Collins that, according to the true construction of the agreement, the whole of the rent would depend simply upon covenant, and be an unascertained sum till the end of the year; in other words I think, as at present advised, that the lease should be so worded that there would be a minimum rent reserved. If so the provisions in the lease of 1 May which relate to the payment of rent in advance and the power of distress accordingly would be let in so far as regards the minimum rent. I think Mr Justice Fry has inserted too large a sum in his order, because he has treated the whole rent as payable in advance. I do not think that correct; but to the extent of the minimum rent, which comes to £810, it appears to me we ought not to compel the landlord to withdraw unless on the terms of the tenant paying the money into court, and of course the proper form of lease will be settled hereafter if the action goes on in the regular course.

4.69 Questions 1.

What interest did the plaintiff have after the agreement for a lease had been signed?

2.

4.70

What is the principle upon which his interest was based?13

Statements of the principle in Walsh v Lonsdale sometimes seem to

suggest that an agreement for a lease is as good as a formal lease. However, there are important differences in the effect of an agreement for a lease and a formal lease. Some may be derived from basic principle. For example, since a Walsh v Lonsdale interest is merely equitable, its sphere

[page 292]

of enforceability is narrower than that of a legal lease. In particular, the holder of a Walsh v Lonsdale interest is liable to be defeated by a bona fide purchaser of the legal estate for value without notice. In practice, an equitable lessee is not likely to be defeated because his or her possession of the premises will give notice of his or her interest to the subsequent purchaser: see Hunt v Luck [1902] 1 Ch 438; [1900–3] All ER Rep 295; 4.190. The interest of a tenant in possession is often an exception to the indefeasible title of a registered proprietor of land under the Torrens system. Chan v Cresdon Pty Ltd (1989) 168 CLR 242; 64 ALJR 111; 89 ALR 522 provides a further illustration of the significance of the distinction between an equitable and a legal lease. In that case, Cresdon made an agreement in writing to lease land to Sarcourt. The agreement provided that the parties would execute a lease in the form annexed to the agreement. Chan was named as a guarantor of Sarcourt’s obligations ‘under this lease’. The lease was executed, but not registered under the Real Property Act 1861 (Qld). Thus, it could not take effect as a legal lease. On default by Sarcourt in the payment of rent, Cresdon took proceedings against Chan to enforce the guarantee. The High Court held that Chan was not liable, because the guarantee operated only in respect of obligations incurred ‘under this lease’. Only the contemplated lease at law would satisfy this description. The effect of the agreement, which was specifically enforceable, was to create an equitable lease between the lessor and lessee on the same terms as those of the unregistered lease. In addition, under Property Law Act 1974 (Qld) s 129(1), on entry into possession and payment of rent Sarcourt acquired a tenancy at will terminable at one month’s notice. However, neither the

obligations imposed by the equitable lease nor those imposed under the statutory provision came within the language of the guarantee.14 The High Court in Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 214 ALR 392 held that ‘a binding promise for the delivery of a certificate of title by way of security is a contract to create an equitable mortgage and, if specifically enforceable, creates an interest in the relevant land’ (at [64]). 4.71

Perhaps the most significant limit to the effectiveness of an interest

based on the principle of Walsh v Lonsdale is that it requires the assistance of a court able and willing to decree specific performance. Thus, where the court hearing the claim lacks equitable jurisdiction, it is unable to enforce an agreement for a lease by the grant of positive relief. In Foster v Reeves [1892] 2 QB 255, the defendant agreed in writing to take a lease of a house from the plaintiff for a term (so the Court of Appeal held) in excess of three years. The defendant entered into possession, but soon gave the plaintiff notice of his intention to deliver up possession at the expiration of the first year. The plaintiff tendered a formal lease which the defendant refused to execute. The plaintiff then instituted proceedings in the County Court (which lacked equitable jurisdiction) to recover one quarter’s rent in respect of the period after the defendant had delivered up possession. The County Court judge considered that, since the High Court would be prepared to decree specific performance of the agreement, he was bound to treat the defendant as a tenant, and therefore he decided in favour of the plaintiff. The Court of Appeal, however, ruled that the County Court judge had to treat the matter on the basis of the parties’ common law rights — he ‘was in the same position as a judge of a common law court in the old days before the passing of the

Judicature Acts’. Therefore, he could not determine their rights on the assumption that a decree of specific performance would be granted: cf Moore v Dimond [1929] SASR 274 (reversed, but not on this ground, in Moore

[page 293]

v Dimond (1929) 43 CLR 105; 3 ALJ 354). The Court of Appeal did retreat somewhat from Foster v Reeves in Cornish v Brook Green Laundry Ltd [1959] 1 QB 394; [1959] 1 All ER 373. It was held in that case that the County Court could determine whether the relationship of landlord and tenant existed between the parties under an agreement for a lease if that was necessary for a disposition of the issue before the court, provided the court was not asked to enforce the agreement. The retreat was carried further in Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169; [1962] 3 All ER 593, where the effect of the County Courts Act 1959 s 74 (in substance reproducing certain provisions of the Judicature Act 1873) was held to be that a defendant to a claim for possession of premises in the County Court could rely upon a Walsh v Lonsdale interest as an equitable defence to the claim. This was so even though the County Court had no jurisdiction to entertain a counterclaim by the tenant for specific performance of the agreement for a lease.15 4.72

The approach of the English courts has been accepted and perhaps

extended in New South Wales by the Law Reform (Law and Equity) Act 1972 (NSW), introduced to implement the New South Wales Law Reform

Commission’s Report on Law and Equity, 1971. Section 5 re-enacts the fundamental provision previously contained in s 64 of the Supreme Court Act 1970 (NSW): 4.73E

Law Reform (Law and Equity) Act 1972 (NSW)

5 Rules of equity to prevail. In all matters in which there was immediately before the commencement of this Act or is any conflict or variance between the rules of equity and the rules of common law relating to the same matter, the rules of equity shall prevail.

This provision has a counterpart in each state.16 Section 6 of the Law Reform (Law and Equity) Act 1972 (NSW) provides as follows: 4.74E

Law Reform (Law and Equity) Act 1972 (NSW)

6 Defence in inferior court Every inferior court shall in every proceeding before it give such and the like effect to every ground of defence, equitable or legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act 1970.

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4.75

Section 6 applies to all inferior courts regardless of whether they have

jurisdiction in equity. The object of the section is to avoid ‘[c]ircuity, delay and expense’ in cases where, for example, the landlord sues for possession in a District Court or Court of Petty Sessions and the tenant wishes to rely on an

informal lease: see Report on Law and Equity, 1971, para 23. The effect of the provision appears to be to confirm the approach in Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169; [1962] 3 All ER 593; see Yahl v Bridgport Customs Pty Ltd [1984] ACLD 630. Limitations on the application of the Walsh v Lonsdale principle have also become less important because most states have now conferred a jurisdiction to grant specific performance on intermediate courts, though this may be subject to specified monetary limits.17 4.76

A court may have power to award specific performance of an

agreement for a lease, yet decline to do so. In such a case, of course, the agreement for a lease will not give rise to an equitable interest and the court will deal with the matter according to the legal rights and duties of the parties. The court may decline to enforce the agreement specifically because, for example, the tenant has entered pursuant to the agreement but has breached one of its terms: Swain v Ayres (1888) 21 QBD 289 (tenant in breach of obligation to keep the premises in repair); Marshall v Snowy River Council (1994) 6 BPR 13,548 (tenant in breach of various obligations). In Cornish v Brook Green Laundry Ltd [1959] 1 QB 394; [1959] 1 All ER 373, the Court of Appeal refused to recognise a Walsh v Lonsdale interest where the agreement for a lease required the tenant to carry out prescribed repairs before the formal lease was to be granted and the tenant had failed to do so. Again, in Warmington v Miller [1973] QB 877; [1973] 2 All ER 372, the Court of Appeal refused to grant specific performance of an oral sublease at the suit of the subtenant, on the ground that the subletting was in breach of the head lease, which prohibited subletting without consent. The court

declined to order the landlord (the tenant under the head lease) to perform an act he could not lawfully complete and which would expose him to proceedings for forfeiture of his lease. The court also refused to make a declaration that the subtenant was lawfully in possession of the premises under the oral agreement. Stamp LJ pointed out that the subtenant’s equitable interest arose only if he were entitled to specific performance of the agreement. Since he had no such entitlement, he could not claim a declaration and was left to his remedy at law; namely, damages for the repudiation by the landlord of his agreement to grant a lease.18 4.77

In cases involving agreements to grant proprietary interests, equitable

relief is only available where a legal remedy is inadequate. Generally, it is assumed that legal damages are an inadequate remedy for breaches of contract for the sale of an interest in land: Adderley v Dixon (1824) 1 Sim & St 607. Are damages inadequate in the case of a breach of contract for the sale of personalty? Can the reasoning in Walsh v Lonsdale apply to a contract for the sale of personalty? In Dougan v Ley (1946) 71 CLR 142; 20 ALJ 37, the High Court unanimously dismissed an appeal against the award decree of specific performance of a contract to sell a

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taxi-cab, with registration plates and licence to operate, to the respondent. The court held that the remedy of damages was inadequate ‘because of the limited number of vehicles registered and licensed as taxi-cabs, because of the

extent to which the price represents the value of the licence, and because of the essentiality to the purchasers’ calling of the chattel and the licence attached thereto’: at CLR 151; ALJ 38 per Dixon J. 4.78

In McMahon v Ambrose [1987] VR 816, R leased premises to

Ambrose for three years. Ambrose orally agreed to assign the lease to McMahon, and McMahon took possession of the premises. Ambrose failed to pay rent under the head lease. R forfeited the head lease and took proceedings against Ambrose to recover arrears of rent for the period prior to termination of the lease. Ambrose issued a third party notice against McMahon, claiming indemnity from McMahon in respect of any amount recovered by R against him pursuant to s 77(1)(c) of the Property Law Act 1958 (Vic). This section provides that in a deed of assignment of the residue of the term of a lease, a covenant is implied to the effect that the assignee will pay the rent and indemnify the assignor from all proceedings and claims on account of any omission to pay rent. Because the assignment of the lease was oral, McMahon was not liable at law to indemnify Ambrose. However, Ambrose argued that he was entitled to equitable damages in lieu of specific performance because there was a valid equitable assignment of the lease. At the time when Ambrose commenced proceedings against McMahon, the head lease had been terminated by R. The Full Court of the Supreme Court of Victoria (Murray and Marks JJ; McGarvie J dissenting) held that it could not grant specific performance of the agreement to assign, because the lease had ended by the time the proceedings against M commenced. Thus, the court could not grant equitable damages in lieu of specific performance. Even if the court could order specific performance of a lease which had expired, or

damages in lieu, it should not do so, because at the time the third party notice was issued, Ambrose was not ready, willing and able to perform the contract. Do you agree with this reasoning? Why could the court not have ordered specific performance of the contract to assign, solely to enable Ambrose to recover the indemnity from McMahon? Could it not have been argued that such an order was necessary to do justice between the parties? See case note by Tooher (1990) 16 Mon LR 122.

Gifts 4.79

Walsh v Lonsdale (1882) 12 Ch D 9 (see 4.68C) illustrates that courts

of equity are prepared to give effect to a contract for the sale of land or other property, provided that the contract is specifically enforceable. Even before equitable relief is actually granted, equity deems as done that which ought to be done, treating the purchaser as the owner of the interest being sold, notwithstanding the absence of the legal requirements for transfer of ownership. The position is quite different in the case of gifts. If one person (the donor) purports to make a gift to another (the donee), but fails to take the steps necessary to transfer to the donee legal title to the subject matter of the gift, the general rule is that equity declines to provide a remedy in favour of the donee. This general rule is an illustration of the application of two equitable maxims that are helpful, provided they are not regarded as universally valid. The first is that equity does not assist a volunteer; the second is the maxim that equity will not perfect an imperfect gift. As the materials in this section show, the first maxim does not prevent a volunteer

enforcing a validly established trust under which he or she is a beneficiary. Thus, if the donor (or settlor) declares himself or herself to be a trustee of certain property for a named beneficiary and the appropriate formalities are satisfied, the latter is able to enforce the

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trust notwithstanding the absence of consideration provided by him or her. Yet if the donor attempts to make a gift of certain property by transferring the legal title to the donee, but fails to take the necessary steps to transfer title, equity refuses to assist the donee by treating the imperfect gift as a declaration of trust: Jones v Lock (1865) 1 Ch App 25. 4.80

In many cases, the application of these principles is straightforward.

If the donor has a legal interest in the subject matter of the gift he or she must comply with the legal requirements for transfer of title to the property. For example, a donor who has a legal title to chattels must deliver possession of them to the donee, or, alternatively, execute a deed of gift: see 4.85C. If the donor fails to do so, equity will not assist the donee to complete the incomplete gift. Similarly, in the case of land under the general law, the donor must execute a conveyance in favour of the donee, failing which the gift is ineffective in equity as well as at law: Macedo v Stroud [1922] 2 AC 30. If the donor has an equitable interest in the property, the donor must satisfy the requirements laid down by equity for the transfer of the interest; in general, equity is satisfied with a clear manifestation of an intention to

transfer the equitable interest to the donee or to a trustee for the donee (Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 514; 4.97), although certain formal requirements may apply: see 4.93. In some cases the situation is more complex. It is said that equity will not perfect an imperfect gift, but it is necessary to determine what is meant by ‘imperfect’ in this context. Gifts of chattels and of general law land, as indicated above, cause little difficulty. However, in certain situations the legal requirements for the transfer of title to the subject matter of the gift involve several steps. The donor may have performed some, but not all, of the necessary steps at the time when the question arises as to whether equity regards the gift as complete. In certain circumstances, a court of equity may be prepared to recognise the gift as complete, even before legal title has passed from the donor to the donee or to a trustee for the donee. In such a case, the result is that the donor retains the legal interest in the property until the necessary legal steps for transfer of title are completed, but holds that legal title in trust for the donee. This, of course, represents a modification of the maxim that equity will not assist a volunteer. 4.81

The leading case in this area is Milroy v Lord (1862) 4 De GF & J

264 at 274; 45 ER 1185 at 1189–90, in which Turner LJ of the Court of Appeal in Chancery expounded the law in these terms: I take the law of this court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settlor must have done everything, which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the person for whom he intends to provide, and the provision will then be effectual,

and it will be equally effectual if he transfers the property to a trustee for the purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this court, be resorted to, for there is no equity in this court to perfect an imperfect gift. The cases I think go further to this extent, that if this settlement is intended to be effectuated by one of the modes to which I have referred, the court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.

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Turner LJ expressed the equitable principle as one requiring the donor to do everything ‘necessary to be done’ to transfer title in light of the nature of the property. This test was meaningful when applied to the facts of Milroy v Lord. In that case, the donor intended to establish a trust of shares for the benefit of his niece. He executed a deed poll, setting out the terms of the trust, but never executed a document transferring the shares to the trustee. According to the memorandum of association of the company in which the donor held the shares, the shares were transferable upon registration of a transfer executed by the donor. Because the donor had not even taken the first step of executing the transfer, the gift of the shares to the trustee was incomplete and no assistance could be derived from equity. This was the case despite the fact that the ‘trustee’ held a power of attorney from the donor under which he could have executed a transfer of the shares to himself. Although the gift of the shares was incomplete, the gift of dividends which had been paid to the donor’s niece or expended on other shares on her behalf

was complete, since in respect of those dividends everything ‘necessary’ had been done to complete the gift. 4.82

The principle in Milroy v Lord was further refined in Re Rose [1952]

Ch 499; [1952] 1 All ER 1217, which also involved company shares transferable by registration of a transfer. The donor executed documents in the appropriate form, transferring the shares to his wife in one case, and to his wife and the company secretary on certain trusts in the other. The donor handed the transfers to the company secretary, as agent for the wife, and the transfers were lodged for registration. The donor having died, the question concerned the date at which the gift of the shares became complete, this being necessary in order to determine whether the shares were dutiable as part of the donor’s estate. It was argued by the Crown that the gifts of the shares were not complete until registration of the transfers. If this were so, the shares formed part of the dutiable estate of the donor. The Crown contended that, as the donor had intended the dispositions to operate by way of transfer of the shares, it followed that equity could not treat them as declarations of trust. Accordingly, estate duty was payable in respect of the shares. This argument was rejected by the Court of Appeal on the ground that, since the donor had done everything necessary to transfer the gift, the beneficial interest in the shares passed at the time the transfers were executed and handed to the transferees. Lord Evershed distinguished the decision in Milroy v Lord as turning upon the fact that there the donor had not done all that lay in his power to transfer the shares. In the circumstances of Re Rose, however, the donor had done all that lay in his power to transfer title to his shares, and accordingly, an equitable interest in the shares had passed to the

donee, even before registration. Lord Evershed (at Ch 510–11; All ER 1222– 3) reasoned as follows: Those last few sentences [from Milroy v Lord] form the gist of the Crown’s argument and on it is founded the broad, general proposition that if a document is expressed as and on the face of it intended to operate as a transfer, it cannot in any respect take effect by way of trust — so far I understand the argument to go. In my judgment, that statement is too broad and involves too great a simplification of the problem; and is not warranted by authority. I agree that if a man purporting to transfer property executes documents which are not apt to effect that purpose, the court cannot then extract from those documents some quite different transaction and say that they were intended merely to operate as a declaration of trust, which ex facie they were not; but if a document is apt and proper to transfer the property — is in truth the appropriate way in which the property must be transferred — then it does not seem to me to follow from the statement of Turner LJ that, as a result, either during some limited period or otherwise, a trust may not arise for the purpose of

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giving effect to the transfer. The simplest case will, perhaps, provide an illustration. If a man executes a document transferring all his equitable interest, say, in shares, that document operating, and intended to operate, as a transfer, will give rise to and take effect as a trust; for the assignor will then be a trustee of the legal estate in the shares for the person in whose favour he has made an assignment of his beneficial interest. And, for my part, I do not think that the case of Milroy v Lord is an authority which compels this court to hold that in this case — where, in the terms of Turner LJ’s judgment, the settlor did everything which, according to the nature of the property comprised in the settlement was necessary to be done by him in order to transfer the property — the result necessarily negatives the conclusion that, pending registration, the settlor was a trustee of the legal interest for the transferee …

It should be noted that in Re Rose the shares were in a family company, of which the donor was a governing director. According to the articles of

association of the company, the directors could refuse, in their absolute discretion, to register a share transfer. Despite the fact that the donor had some control, at least, over registration of the transfer, the Court of Appeal took the view that an equitable interest had passed to the donee before registration. A fortiori, in a case where a donor of company shares with no control over registration executes the relevant documents and hands them to a donee, the donor thereafter holds the shares upon trust for that donee. 4.83

Re Rose illustrates that, in certain cases, an equitable interest in the

subject matter of a gift may pass to a donee before legal title passes. Thus, it demonstrates that the maxim ‘equity will not assist a volunteer’ requires considerable qualification. The legal rules for the transfer of particular property may require several steps. It may be that: (a) some acts can only be done by the donor (for example, execution of a document); (b) some can be done by either the donor or the donee (for example, lodgment of documents for registration); and (c) others can only be done by a third party (for example, registration of a document). Equity may regard the gift as complete after (a) or (b) even though (c) has not occurred. In Milroy v Lord, while the donor had expressed his intention to make a gift (execution of the deed poll), no action within categories (a), (b) or (c) had been taken to effect the gift. In comparison, the donor in Re Rose had completed (a) and (b) but not (c). However, the stress laid in Re Rose on the fact that the donor had done all that was necessary for him to do suggests that the gift may have been regarded as complete even if only (a) had been done. Australian case law does not entirely resolve this uncertainty. In Anning v Anning (1907) 4 CLR 1049, the donor attempted to assign various types of property by deed. Most of

these were capable of transfer at law. The High Court had to consider whether those items which were not effectually transferred by the deed, were assigned in equity. The three members of the High Court each took a different view. Griffith CJ said that a gift would be complete in equity if category (a) acts had been done; Higgins J said that it was necessary for both (a) and (b) to be done; while Isaacs J held that all three types of action had to be completed. In other words, Isaacs J thought that where the legal title was assignable, the gift could not be complete in equity before it was complete at law. In the more recent High Court decision of Corin v Patton (1990) 164 CLR 540; 92 ALR 1; 64 ALJR 256 (4.85C), Mason CJ, McHugh J and Deane JJ supported the approach taken by Griffith CJ. This approach has been given statutory approval in the Property Law Act 1974 (Qld) s 200.19

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4.84

The application of these principles to land under the Torrens system

is discussed in Corin v Patton (1990) 169 CLR 540; 92 ALR 1; 64 ALJR 256; 4.85C. The application of these principles to gifts of choses in action is extremely complex and is not discussed in detail in this book.20 It has been held that giving a person authority to withdraw money from an account does not constitute a gift of the chose in action constituted by the debt which the bank owes the customer: see Noonan v Martin (1987) 10 NSWLR 402. As to the creation of joint bank accounts, see Russell v Scott (1936) 55 CLR 440; [1936] ALR 375; 10 ALJ 211; Public Trustee v Gray-Masters [1977] VR 154; cf Palmer v Bank of New South Wales (1975) 50 ALJR 320; 7 ALR 671.

Land 4.85C

Corin v Patton (1990) 169 CLR 540; 92 ALR 1; 64 ALJR 256 High Court of Australia

[The respondent, Patton, and his deceased wife were joint registered proprietors of land under the Real Property Act 1900 (NSW). When a joint tenant dies, the remaining joint tenants become entitled to the property by virtue of the principle of survivorship: see 6.2E. However, a joint tenancy may be severed (converted into a tenancy in common) if a joint tenant effectively disposes of his or her interest in the property prior to death. Mrs Patton, who was terminally ill, wished to sever the joint tenancy between herself and her husband, presumably to ensure that her children obtained an interest in the property. She executed a transfer of her interest in the land to her brother, Corin. At the same time, a deed of trust was executed under which Corin agreed to hold the property on trust for Mrs Patton, or as she directed, or in accordance with any order of the court. The transfer of the property and the deed of the trust were handed to Mrs Patton’s solicitor. The land was subject to an unregistered mortgage to the State Bank of New South Wales, which held the duplicate certificate of title. Mrs Patton did not take steps to have the duplicate certificate of title produced so that the transfer could be registered. She died shortly after execution of the transfer and the deed of trust. The issue for decision by the High Court was whether she had effectively disposed of her interest in the land prior to her death, thus severing the joint tenancy and defeating her husband’s right of survivorship.] Mason CJ and McHugh J: [Mason CJ and McHugh J examined the authorities relating to severance of joint tenancies: see Williams v Hensman (1861) 1 J & H 546; 70 ER 862; Lyons v Lyons [1967] VR 169; In the Marriage of Pertsoulis (1980) 6 Fam LR 39; McNab v Earle [1981] 2 NSWLR 673; Freed v Taffel [1984] 2 NSWLR 322; Patzak v Lytton [1984] WAR 353; Wright v Gibbons (1949) 78 CLR 313. They held that a joint tenancy could be severed in one of three ways. These were: (i) an effective disposition of a joint tenant’s legal or equitable interest in the property; (ii) mutual agreement between the joint tenants; or (iii) a course of dealing sufficient to show that the interests of all joint tenants were mutually treated as [page 300]

constituting a tenancy in common. Contrary to the view of the English Court of Appeal in

Burgess v Rawnsley (1975) Ch 429 the High Court held that a unilateral declaration or acts by one joint tenant showing an intention to sever the joint tenancy was ineffective.] … Accordingly, it is necessary in this case for the appellants to demonstrate that Mrs Patton effectively alienated the property in equity. Although this may involve questions of whether or not Mrs Patton could have withdrawn from the transactions, the issue is primarily whether or not the property was alienated. Mr Bennett contended that the rules for determining whether there has been an effective transfer should be relaxed in a case, such as the present, where the purpose of asking the question is to determine whether or not a joint tenancy has been severed. But such an approach cannot be reconciled with principle and would be productive of great uncertainty. Once it is accepted that a transfer is required, it is the general rules relating to transfers of land which must be applied. This particular case involved a voluntary transaction. In this respect we agree with Hope JA that the consent or agreement of Mr Corin to act as trustee did not constitute valuable consideration, and in any event it was not seriously suggested otherwise. Indeed, in the famous case of Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185, in very similar circumstances, the consent or agreement of the transferee to act as trustee was not regarded as constituting valuable consideration. The long line of earlier authority concerning voluntary conveyances and transfers culminated in the judgments in 81 (1862) 4 De GF & J 264 at 274; 45 ER 1185 at 1189–90. [The judgment set out the principles in Milroy v Lord appearing in 4.72 above:] … Two propositions emerged from the observations of Turner LJ in Milroy v Lord. First, the donor must have done everything necessary to be done, according to the nature of the property, in order to transfer the property and render the gift binding. Secondly, if the gift was intended to have been effectuated by one means, the court will not give effect to it by another means. However, as the later cases were to reveal, there was an element of uncertainty in the first proposition. Did it require that the donor must have done himself all that was necessary to be done in order to transfer the property or did he only have to do all that was necessary to be done by him in order to achieve that result? [Mason CJ and McHugh J then discussed Anning v Anning (1907) 4 CLR 1049:] … [In that case] each member of the Court had a different understanding of the principle to be applied. Griffith CJ said (at 1057): I think that the words ‘necessary to be done’, as used by Turner LJ in Milroy v Lord, mean necessary to be done by the donor … If, however, anything remains to be done by the donor, in the absence of which the donee cannot establish his title to the property as against a third person, the gift is imperfect, and in the absence of consideration the Court will not aid the donee as against the donor. But, if all that remains to be done can be done by the donee himself, so that he does not need the assistance of the Court, the gift is, I think, complete. Isaacs J took a stricter view of the matter. His Honour said (at 1069): If the legal title is assignable at law it must be so assigned or equity will not enforce

the gift. If for any reason, whether want of a deed by the assignor, or a specifically [page 301]

prescribed method of transfer, or registration, or statutory notice, the transfer of the legal title is incomplete when the law permits it to be complete, equity regards the gift as still imperfect and will not enforce it. In such a case, the fact that the assignor has done all that he can be required to do is not applicable. Higgins J (at 1081–1082) appeared to adopt an intermediate position. His Honour stated that the word ‘necessary’ refers to the nature of the property, not to any obligation upon the donor, and went on to say (at 1082): What the Courts look at is what the donor might have done. This point has been put so fully in the judgment of Mr Justice Isaacs that I need not deal with it further. Despite the reference to the judgment of Isaacs J, it seems that Higgins J would have been prepared to recognise in equity a gift which the donor could have done no more to perfect, for example, a gift incomplete simply because the transfer, lodged for registration, remained unregistered, the donor having done all that he could do. Isaacs J would not have recognised such a gift because the transfer of the legal title was incomplete. Isaacs J’s approach gave full effect to the related maxims ‘equity will not assist a volunteer’ and ‘equity will not perfect an imperfect gift’. Moreover, this approach was entirely consistent with the statutory provisions regulating the transfer of title to Torrens System land. These provisions provide that an instrument shall not be effectual to pass an estate or interest in land until registration: see Barry v Heider (1914) 19 CLR 197. That is not to say that the approaches taken by Griffith CJ and Higgins J were inconsistent with the two maxims and the statutory provisions. We shall discuss this aspect of the judgments in Anning v Anning later. In Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555, the donor executed in favour of his housekeeper a voluntary transfer of an estate in remainder expectant on his death of Torrens System land. He handed the executed transfer to a Mr Fuller who was a friend of both the donor and the housekeeper. The trial judge found that Mr Fuller had held the transfer as the donor’s agent at the time of the donor’s death. The transfer made no mention of a mortgage to which the land was subject, since the donor apparently wished his housekeeper to take the property free from the mortgage. After the death of the donor, Mr Fuller handed the transfer to the donee’s solicitors who inserted particulars of the mortgage and sought to register the transfer. The mortgagee at all times held the certificate of title. The Court, Latham CJ dissenting, held that there had been no gift of any interest in the land and that the transfer was void and of no effect … Brunker did not answer the questions presented by the judgments in Anning v Anning. Although the judgment of Dixon J is consistent with the view of Isaacs J that no interest in land passes by way of gift prior to the registration of a transfer, the right recognised by Latham CJ accords with the approach taken by Griffith CJ.

Once it is recognised that Dixon J’s formulation no longer represents a correct statement of the law in this area, it becomes necessary to consider the authority and force of the three judgments in Anning v Anning. The view of Higgins J, to the extent that it differs from that of Isaacs J, has not found support in the later cases. Moreover, the difficulties which would be presented by an inquiry into what was within the power of the donor to achieve in a particular case constitute a sufficient reason for discarding his Honour’s view. The stricter approach of Isaacs J is consistent with the historic attitude of equity in developing rules applicable to intended gifts where no means of effecting a transfer at law were available: see William Brandt’s Sons & Co v Dunlop Rubber Co [1905] AC 454, per Lord Macnaghten, at 461–2. There is also perhaps a conceptual difficulty in accepting, [page 302]

in accordance with the broader view, that a donor has done everything necessary to be done by him to complete a legal transfer in a case where the donor could in fact have procured a legal transfer, for example by seeing to registration personally. And, as we have already noted, Isaacs J’s view conforms to the notion, underpinned by the two equitable maxims, that equity will not assist a volunteer to perfect a title which is incomplete. Equity’s refusal may be justified on the footing that the donor should be at liberty to recall his gift at any time before it is complete. Although Griffith CJ did not expressly advert in Anning v Anning to the maxim that equity will not assist a volunteer (cf Isaacs J at 1063), the divergent approaches adopted by Griffith CJ and Isaacs J in that case may be taken to imply different understandings of the maxim. Isaacs J considered that equity would pay no regard at all to voluntary transactions which were insufficient to create proprietary or contractual rights at law. Thus, equity would not heed the volunteer’s plea for recognition of his interest. On the other hand, Griffith CJ must be taken to have regarded the maxim as an injunction against equity making its remedies available to perfect an imperfect gift. On this footing the recognition of the volunteer’s interest did not amount to the provision of assistance in violation of the maxim. Of course it would be a mistake to set too much store by the maxim. Like other maxims of equity, it is not a specific rule or principle of law. It is a summary statement of a broad theme which underlies equitable concepts and principles. Its precise scope is necessarily ill-defined and somewhat uncertain. It is subject to certain clearly established exceptions such as the rule in Strong v Bird (1874) LR 18 Eq 315 and the doctrine of equitable estoppel, where an equity arises in favour of an intended donee from the conduct of the donor after the making of the voluntary promise of the donor: see Olsson v Dyson (1969) 120 CLR 365 at 378–9. These exceptions have no bearing on the present case except in so far as they demonstrate that the maxim does not enunciate an inflexible or universal rule. What is of importance is that this and the related maxim that equity will not perfect an imperfect gift are primarily associated with the rule that a voluntary covenant is not enforceable in equity, a rule which itself has become the subject of critical scrutiny in some of its applications: see Macnair, ‘Equity and Volunteers’ (1988) 8 Legal Studies

172. Thus, a volunteer who is the object of an intended trust will only succeed if the trust has been completely constituted. This means, so it is said, that the trust must be constituted by a present declaration of trust or by a transfer by the settlor of the legal title to the intended trustee. And that brings us back to the statement of principle by Turner LJ in Milroy v Lord. But there is a distinction between the enforcement of a voluntary covenant to create a trust and the enforcement of a transfer by way of intended gift when the donor has done all that was within his power to vest title to the property in trustees for the donee or in the donee. In the first case, equity will not compel specific performance of the voluntary covenants, there being no completely constituted trust; in the second case, as the transaction is complete as far as the donor is concerned, no question of withholding specific performance can arise and equity will hold the donor to the completed transaction on the footing that title has been divested [citations omitted]. … The point is, as Page Wood V-C noted in Donaldson v Donaldson (1854) Kay 711 at 718; 69 ER 303 at 306, that where there is an imperfect gift ‘which requires some other act to complete it on the part of the assignor or donor, the Court will not interfere to require anything else to be done by him’ [emphasis added]. These specific statements, which necessarily circumscribe the area of operation of the equitable maxims, were apt to apply to those situations in which legal title passed not on the delivery of an executed conveyance or transfer of property but subsequently on registration of [page 303]

a transfer, as is the case with stocks and shares in companies. The statements are equally apt to apply to the transfer of estates in land under the Torrens System. The rationale for refusing to complete an incomplete gift is that a donor should not be compelled to make a gift, the decision to give being a personal one for the donor to make. However, that rationale cannot justify continued refusal to recognise any interest in the donee after the point when the donor has done all that is necessary to be done on his part to complete the gift, especially when the instrument of transfer has been delivered to the donee. Just as a manifestation of intention plus sufficient acts of delivery are enough to complete a gift of chattels at common law, so should the doing of all necessary acts by the donor be sufficient to complete a gift in equity. The need for compliance with subsequent procedures such as registration, procedures which the donee is able to satisfy, should not permit the donor to resile from the gift. Once the transaction is complete so far as the donor is concerned, he has no locus poenitentiae [opportunity to change one’s mind]. Viewed in this light, Griffith CJ’s approach has the advantage that it gives effect to the clear intention and actions of the donor rather than insisting upon strict compliance with legal forms. It is a reflection of the maxim ‘equity looks to the intent rather than the form’. By avoiding unnecessarily rigid adherence to the general rule and endeavouring to give effect to the donor’s intention, the law avoids unjust and arbitrary results: see Zines, ‘Equitable Assignments: When Will Equity Assist a Volunteer?’ (1965) 38 Australian Law Journal 337. In any event there is stronger support in the later cases for the view of Griffith CJ than

that of Isaacs J. That support is found in the judgment of Latham CJ in Brunker, those of Dixon CJ and Windeyer J in Norman, the joint judgment in Cope v Keene, and the judgment of the Court in Taylor. Furthermore, the view of Griffith CJ is supported by the decision of the English Court of Appeal in Re Rose [1952] Ch 499 at 510–11. Accordingly, we conclude it is desirable to state that the principle is that, if an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognise the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity. ‘Necessary’ used in this sense means necessary to effect a transfer. From the viewpoint of the intending donor, the question is whether what he has done is sufficient to enable the legal transfer to be effected without further action on his part. Although Griffith CJ did not explicitly say so, his proposition implicitly recognises that the donee acquires an equitable estate or interest in the subject matter of the gift once the transaction is complete so far as the donor is concerned. So much was acknowledged by the English Court of Appeal in Re Rose [1952] Ch 499 … The course of reasoning pursued by Evershed MR and Jenkins LJ within the framework of the statement of principle [in Re Rose] by Turner LJ in Milroy v Lord bears a marked similarity to the reasoning of Dixon J in Brunker which was, of course, directed to establishing the conditions on which a statutory right might be exercised. However, if we accept that In re Rose correctly states the consequences of the approach taken by Griffith CJ in Anning v Anning, there remains the problem of accommodating that approach to the injunction contained in s 41 of the Real Property Act to the effect that, until registration, an instrument of transfer shall be ineffectual to pass an estate or interest in the land. Although that injunction applies to equitable as well as legal estates, it ‘does not touch whatever rights are behind’ the instrument, as Isaacs J pointed out in Barry v Heider (1914) 19 CLR 197, 216; see also Chan v Cresdon Pty Ltd (1989) 64 ALJR 111 at 117; 89 ALR 522 at 531–2. Where a donor, with the intention of making a gift, delivers to the donee an instrument of transfer in registrable form with the certificate of title so as to enable him to obtain registration, an equity arises, not from the transfer itself, but from the execution and delivery of the transfer and the delivery of [page 304]

the certificate of title in such circumstances as will enable the donee to procure the vesting of the legal title in himself. Accordingly, s 41 does not prevent the passing of an equitable estate to the donee under a completed transaction. The question is then whether Mrs Patton did all that it was necessary for her to do in order to effect a transfer. Two obstacles are suggested to completion of the gift. First, the certificate of title remained throughout with the mortgagee and Mrs Patton took no steps to arrange for its production for the purposes of registration. Secondly, it is not clear whether or not Mr Smallwood held the executed transfer on Mrs Patton’s instructions or those of Mr Corin. [Mason CJ and McHugh J held that the gift could not be regarded as complete in equity because

Mrs Patton had not arranged for production of the duplicate certificate and Corin could not compel its production. This made it unnecessary to consider who had control of the transfer after its execution. The transfer to Corin could not be perfected by treating the instrument of transfer as a declaration of trust. Deane, Brennan and Toohey JJ also held that Mrs Patton’s acts had not severed the joint tenancy. However, they differed as to (a) the meaning of the ‘everything necessary to be done’ test; and (b) the applicability of this principle to land under the Torrens system. Although Brennan J’s judgment is not entirely clear on the point, it appears to support Isaacs J’s approach in Anning v Anning. However, Toohey J took the view that a donee in possession of a transfer of Torrens system land may present it for registration without the concurrence of the donor. If the donee persuaded the Registrar to dispense with production of the duplicate certificate of title, the donee could acquire the legal interest in the land. In the view of Toohey J, the fact that the donee did not obtain possession of the duplicate certificate of title did not prevent the donee from attempting to obtain registration. However, presumably failure on the part of the donor to produce the duplicate certificate or of the Registrar to dispense with production would prevent the donee acquiring any interest in the property.] Deane J: In these circumstances, even if the transfer had been registered and effective as an assignment of Mrs Patton’s legal interest, Mr Corin would himself have enjoyed no beneficial interest. That being so, there is simply no basis upon which equity could intervene, upon the failure of the transfer as such an assignment, to confer upon Mr Corin a beneficial interest in the subject property which it was the agreement and the intention of the parties to the transaction that he should never have. Indeed, to impose a trust relationship under which Mrs Patton, the intended beneficiary, was trustee and Mr Corin, the intended trustee, was the beneficiary would be to stand the intended relationship between Mrs Patton and Mr Corin on its head and thereby confound, rather than do, equity …

4.86 Questions 1.

Is Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555; [1937] ALR 349 still authority after Corin v Patton? Does Australian law still support the view of Dixon J (as he then was) that a donee of Torrens system land can, at the best, only acquire a statutory right to register?

2.

According to Mason CJ and McHugh J, when will a gift of Torrens system land be regarded as complete in equity? Why was it not complete in this case? Does Deane J’s requirement that the ‘vesting of legal title be within the control of the

[page 305]

donee and beyond the recall or intervention of the donor’ add anything to the approach taken by Mason CJ and McHugh J? For a more recent example of the failure to perfect a gift of property in circumstances where the donor had not given instructions to his solicitor to lodge the transfer for registration and had not produced the certificate of title to enable this to be done, see Public Trustee (Qld) (as Litigation Guardian for ADF) v Ban (No 2) [2012] QSC 97. 3.

Why did Deane J hold that a court with equitable jurisdiction would not have provided a remedy to Corin, even if he had acquired possession of the transfer and the duplicate certificate of title? Would it have been a ‘charade’ to hold that Mrs Patton held as trustee for Mr Corin, who in turn held as trustee for Mrs Patton, if the effect of the transaction had been to sever the joint tenancy?

4.

Is the ‘everything necessary to be done’ test objective or subjective?

5.

Given that Corin was one of the executors of Mrs Patton’s will,

could the principle in Strong v Bird (1874) LR 18 Eq 315; [1874– 80] All ER Rep 230 have been applied to perfect the gift to Corin? 21

Could Mrs Patton have perfected a gift to her brother by

declaring a trust in his favour of her interest, and evidencing it in writing?

4.87

Compare Corin v Patton with Re Ward; Gillet v Ward [1968] WAR

33, where the donor, before his death, instructed his solicitor to transfer various pieces of land to his son. Both the donor and the donee executed the transfer and the donor gave his solicitors an authority to his bank to deliver his certificate of title to the solicitors so that the transfer could be registered. The donor instructed his solicitors to pay gift and stamp duty on the transfer and to register the document. On being informed of the amount of duty payable, the donor gave instructions that the donee should pay the duty. The donee agreed to pay the duty but could not afford to do so immediately. The donor died before duty was paid and before the transfer was registered. It was held that the solicitors were acting for both the donor and the donee. As from the date the donee agreed to pay the duty on the transfer, the solicitors were holding the transfer and the authority to the bank to hand over the certificate of title on behalf of the donee. Accordingly, the gift to the donee was ‘complete’ and the donee had the right to present the transfer to the titles office for registration. In Costin v Costin (1997) NSW ConvR ¶55-811, the Court of Appeal held that a gift from a father to a son was incomplete where the father, as only one of the co-owners (his other son was the other coowner), had signed the transfer and instructed his solicitors who held the title

to produce the duplicate certificate of title to permit registration. The solicitors’ refusal to produce the certificate without the agreement of the other co-owner rendered the gift imperfect. In Minister, Aboriginal Land Rights Act 1983 v Aboriginal Corporation of the National Aboriginal Conference [1992] ACL Rep 355; [1992] NSWSC 34, the court held that a transfer which was not stamped did not give rise to an equitable interest. Section 246 of the Real Property Act 1886 (SA) provides as follows.

[page 306]

4.88E

Real Property Law Act 1886 (SA)

246 Every instrument signed by a registered proprietor, or by any person claiming through or under a registered proprietor, purporting to pass an estate or interest in land … shall, until registered, be deemed to confer upon the person intended to take under such instrument, or any person claiming through or under him, a right or claim to the registration of such estate or interest [cf Land Title Act 1994 (Qld) s 183].

4.89

Would the application of this provision have led to a different result

in Corin v Patton? In New South Wales, see now s 97 of the Real Property Act 1900 (NSW) which provides that a joint tenancy may be severed unilaterally by the registration of a transfer by the joint tenant to himself or herself without production of the certificate of title. The Northern Territory, Queensland and Tasmania have similar provisions: see 6.56. These provisions would have made it unnecessary for Mrs Patton to involve her brother to effect a severance. Also, see 4.91–4.105 for the possibility of unilateral severance by declaration of trust. In Corin v Patton, Mason CJ and

McHugh J acknowledged that it is possible to sever by declaration of trust, but that the court will not construe a failed gift as a declaration of trust: (1990) 169 CLR 540 at 561; 92 ALR 115; 64 ALJR 256 at 264. For the position respecting imperfect gifts in general in Queensland, see Property Law Act 1974 (Qld) s 200. 4.90

Even when a gift is incomplete, a donee who acts in reliance upon the

gift, for example, by the expenditure of money with the encouragement or acquiescence of the donor, may receive an interest in the property by operation of the doctrine of estoppel or constructive trust: see 4.107ff.

Express trusts 4.91

Instead of selling or making a gift of property, the holder of a legal or

equitable interest may create a trust of that property for the benefit of third parties. Trusts take many different forms and have many functions. Trusts are created to implement commercial transactions; for tax avoidance purposes; to enable property to be held for the benefit of charities; in the context of superannuation arrangements; and in order to effectuate dispositions in the nature of gifts. Trusts are also frequently created by will, to enable the testator or testatrix to carry out his or her wishes relating to the disposition of assets: for a more detailed discussion of the modern uses of trusts, see Ford and Lee, [1010]; Davies, ‘The Variety of Express Trusts’ (1986) 11 U Tas LR 209. One of the principal virtues of trusts is that by separating the legal and equitable title to assets they enable flexibility to be maintained in the disposition of equitable interests while ensuring proper management of assets.

Where property is held by a living person, a trust may be created by declaration or by settlement. Under the first method, the person seeking to establish the trust retains the legal or equitable interest in the property, but declares that it is held on trust for the beneficiaries. The declaration has the effect of passing an equitable interest to the beneficiaries. In some cases, the court may be able to infer an intention to create a trust from the conduct of the trustee. Alternatively, the holder of a legal or equitable interest in property may transfer the interest to a third party (the trustee) with a direction that the interest is to be held on trust for beneficiaries. Where property is transferred to a trustee for beneficiaries who are volunteers,

[page 307]

a settlor (the person who settles the property) who has a legal interest in the property must satisfy the requirements for passing the legal interest to the trustee. If the settlor does not succeed in passing the legal or equitable interest to the trustee, the trust will not be validly constituted. (Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 is an example of such a failure.) 4.92

In earlier times, the subject matter of express trusts was almost

invariably land. Indeed, at one time the great bulk of the landed estates in England were subject to a kind of trust known as the strict settlement, which was designed to keep the land within the family unit. In modern times, in Australia, the subject matter of the trust is much more likely to be some other form of wealth, very often shares in public or private companies. The form of

the trust deed is usually dictated by the desire of the settlor (the creator of the trust) to minimise the impact of income taxation and duties and other imposts on his or her family. The desire to avoid taxation has produced a constant battle of wits between legislators endeavouring to close loopholes and practitioners striving to find new tax avoidance devices.

Formal requirements 4.93

All states have legislation, which has its origins in ss 3, 7, 8 and 9 of

the English Statute of Frauds, imposing formal requirements for the creation and assignment of equitable interests. The Victorian legislation provides as follows (Vic, ss 53–55):22 4.94E

Property Law Act 1958 (Vic)

53 (1) Subject to the provisions hereinafter contained with respect to the creation of interest [sic] in land by parol — (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; (c) a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by his will. (2) This section shall not affect the creation or operation of resulting, implied or constructive trusts.23 54 (1) All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, shall have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only. (2) …

[page 308] 55

Nothing in the last two preceding sections shall — (a) invalidate dispositions by will; or (b) affect any interest validly created before the commencement of the Property Law Act 1928; or (c) affect the right to acquire an interest in land by virtue of taking possession; or (d) affect the operation of the law relating to part performance.

4.95C

Wratten v Hunter [1978] 2 NSWLR 367 Supreme Court of New South Wales

[Ambrose Blanch transferred land to his son, Bertram, shortly before he died. On the day of the funeral, Bertram said to his sisters and brothers: ‘I promise to live in the house and care for the home and property for us all’. He made the statement while holding the family bible. The plaintiffs, a sister and brother-in-law of the defendant, claimed an interest in the property. The preliminary point in these proceedings concerned the effect of the Conveyancing Act 1919 (NSW) s 23C(1)(b).] Needham J: For the defendant, it is submitted that s 23C(1)(b) plainly applies, that provision reading as follows: Subject to the provisions of this Act with respect to the creation of interests in land by parol — … (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; … Section 23C(2) provides that the section ‘does not affect the creation or operation of resulting, implied, on constructive trusts’. The plaintiffs submit that the principle of such cases as Rochefoucauld v Boustead [1897] 1 Ch 196 applies just as effectively to a situation such as the present as to the particular types of situation concerned in those cases. There is no doubt, as the plaintiffs submit, that the principle is well established that the Statute of Frauds cannot be used so as to cloak a fraud. Accordingly, in cases where the Court holds that it would be a fraud for the defendant to set up the statute, so as to prevent evidence of a beneficial interest being proved in the plaintiff, the principle is applied and the evidence is admitted to prove the beneficial interest. Mr McLaughlin has taken me through a number of cases settling and illustrating this

principle, and has submitted that there is no distinction in principle between the principles settled by those cases and the case where a person who is the owner of land, obtained without reference to any beneficial interest in another, voluntarily declares a trust of that land; and, thereafter, either he, or a person claiming under him, seeks to rely upon the statute so as to defeat the claim of the person or persons in whose favour he made the oral declaration. However, in my opinion, the principle of Rochefoucauld v Boustead [1897] 1 Ch 196 does not apply in such a case. The principle of that case is, I think, adequately set out by Lindley LJ (delivering the judgment of the Court of Appeal constituted by himself, Lord Halsbury LC [page 309]

and AL Smith LJ) who said [1897] 1 Ch 196, at p 206: ‘It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself.’ I could add that the principle applies also where land is conveyed to a person as a mortgagee by absolute conveyance, and he subsequently seeks to rely upon the absolute conveyance so as to deny the equity of redemption of the mortgagor. Many of the different types of case were referred to by Hope J, in Last v Rosenfeld [1972] 2 NSWLR 923. His Honour there applied the principle of Rochefoucauld v Boustead [1897] 1 Ch 196, but recognised that that principle did not apply to a voluntary oral declaration of trust by a person who obtained the full beneficial interest in land, untrammelled by any consideration of trust, or of beneficial interest in any other person. For example, Hope J said [1972] 2 NSWLR 923, at p 928: ‘Whilst equity did not prevent the Statute of Frauds applying in those cases where a person had made an oral declaration of trust in respect of land already held by the declaror, it did, at any rate in some cases, give relief, notwithstanding the terms of the statute, in those cases where a person acquired property on terms that he would hold as trustee for the person transferring to him’. Having considered a number of cases, his Honour said [1972] 2 NSWLR 923, at p 930: ‘All the above cases are, of course, cases where the person against whom it is sought to enforce a trust had acquired property upon terms that he should hold as trustee; they were not cases where a person holding property, after his acquisition of it, constituted himself as trustee’. Again his Honour said [1972] 2 NSWLR 923, at pp 932, 933: ‘Although courts of equity would thus not permit the statute to be made an instrument of fraud, “By this it cannot be meant that equity will relieve against a public statute of general policy in cases admitted to fall within it”: Maddison v Alderson (1883) 8 App Cas 467, at p 474. Thus it has never been doubted that the Statute of Frauds applies to a mere voluntary declaration of trust by a person who at all material times was the owner of the relevant property: Organ v Sandwell [1921] VLR 622, at p 630’…

There are other statements with similar effect in other cases to which I was referred, and the textbooks to which I was referred also recognise the application of the statute to cases such as this. For example in Jacobs on Trusts, 4th ed, par 708, p 83 the authors say: ‘Equity did not object to reliance upon the Statute where it was relied on by a declarant who had purported to declare himself trustee of land he already held, by oral statement not made for value. But equity does consider it a fraud for a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land as his own’. The latter statement will be recognised as emanating from Rochefoucauld v Boustead (at p 196). Similarly, Meagher, Gummow & Lehane in Equity — Doctrines and Remedies, par 1223, at pp 307, 308 say: ‘On the other hand the cases on s 7 (which is the predecessor or antecedent of s 23c(1)(b)) directly counter its provisions and appear authority for the proposition that the Statute may not be pleaded by the party holding the land against a claim that he only acquired the land upon trust for the claimant. These decisions turn upon the fact that but for the conveyee’s acceptance of the trust the conveyor would never have transferred the land to him; they do not go so far as to waive the statute where A, having acquired land independently, later ineffectively declares himself trustee for a volunteer’. [page 310]

Mr McLaughlin has suggested that these statements are based upon no authority, and that I am free to equate the present case with the type of case dealt with in Rochefoucauld v Boustead (at p 196). However, it seems to me that the statute itself is ample authority for its application to such a case; and the cases which have declined to permit the statute to be relied upon have produced a principle that, in certain circumstances, the statute is inapplicable. It seems to me that, unless there is some decision binding on me that in the case of a voluntary oral declaration of trust by a person who is the owner of the whole beneficial interest in land the declaration is unaffected by the statute, it is my duty to apply the statute in accordance with its terms. During argument, I asked Mr McLaughlin to indicate what, in his submission, would be the ambit of s 23c(1)(b), if a case such as the present was not within it. Mr McLaughlin did point to some doubts expressed by a court as to the full and proper interpretation of the paragraph, but was unable, I think, to indicate any area of application of s 23c(1)(b), if it did not apply in the present case. In any event it seems to me that the statement of the Full Court of Victoria in Organ v Sandwell [1921] VLR 622, at p 630 is sufficient authority for me to apply to the circumstances of this case. For those reasons, I think the plaintiffs would not succeed in the proceedings over the defence of s 23c(1)(b) of the Conveyancing Act. It is not necessary for me to consider whether the facts of the case would take it into the provisions of s 23c(1)(a). Accordingly, I think I should dismiss the summons with costs. Exhibits may be returned.

4.96 Questions If the property had been transferred to Bertram on the basis that he would hold the property on trust for his brothers and sisters, would the result have been the same?

4.97

A person who has an equitable interest (for example, a beneficiary

under a trust) may wish to assign that interest to another person. The assignment of subsisting equitable interests (as opposed to the creation of new equitable interests) may be achieved in several ways. In Comptroller of Stamps v Howard-Smith (1936) 54 CLR 614 at 621–2, Dixon J, in a frequently-cited passage, dealt with the voluntary disposition of equitable interests: A voluntary disposition of an equitable interest may take one of at least three forms. It may consist of an expression or indication of intention on the part of the donor that he shall hold the equitable interest vested in him upon trust for the persons intended to benefit. In that case he retains the title to the equitable interest, but constitutes himself trustee thereof, and, by his declaration, imposes upon himself an obligation to hold it for the benefit of others, namely, the donees. In the second place, the disposition may consist of a sufficient expression of an immediate intention to make over to the persons intended to benefit the equitable interest vested in the donor, or some less interest carved out of it. In that case communication to the trustee or person in whom the legal title to the property is vested is not required in order effectually to assign the equitable property. Notice to the trustee may be important to bind him to respect the assignment and in order to preserve priorities. But it is not a condition

[page 311]

precedent to the operation of the expression of intention as an assignment. Nor does it appear necessary that the intention to pass the equitable property shall be communicated to the assignee. What is necessary is that there shall be an expression of intention then and there to set over the equitable interest, and, perhaps, it should be communicated to someone who does not receive the communication under confidence or in the capacity only of an agent for the donor. In the third place, the intending donor for whom property is held upon trust may give to his trustee a direction requiring him thenceforth to hold the property upon trust for the intended donee. A beneficiary who is sui juris and entitled to an equitable interest corresponding to the full legal interest in property vested in his trustee may require the transfer to him of the legal estate or interest. He may then transfer the legal interest upon trust for others. Without going through these steps he may simply direct the existing trustee to hold the trust property upon trust for the new beneficiaries. He cannot without the trustee’s consent impose upon him new active duties. But he may substitute a new object, at any rate in the case of any passive trust. Accordingly, a voluntary disposition of an equitable interest may be effected by the communication to the trustee of a direction, intended to be binding on him thenceforward to hold the trust property upon trust for the donee.

In addition, the holder of an equitable estate may contract for valuable consideration to assign the equitable interest to another person. 4.98

Many difficulties arise in interpreting the legislation extracted in

4.94E above. Some of these arose, but were not satisfactorily resolved by the High Court, in Adamson v Hayes (1973) 130 CLR 276; 47 ALJR 201; [1972–73] ALR 1224. The case arose out of the mineral boom of the late 1960s and early 1970s. In December 1970, the appellant, Adamson, and the respondents, Hayes and Freebairn, were the registered holders under the Mining Act 1904 (WA) of a number of mineral claims relating to deposits of mineral sands on Crown lands. (The Act has since been repealed: see Mining Act 1978 (WA).) Some claims were registered in the name of Adamson and

certain of his relatives. Others were registered in the names of Hayes and Freebairn. In fact, all the registered claims were held by the appellants and respondents as trustees. The beneficiaries of those trusts varied in relation to each claim, but both the appellants and respondents had interests in virtually all the claims in differing proportions. In December 1970, an agreement was reached in oral discussions between the two syndicates for the establishment of a ‘partnership’. The oral agreement, as found by the trial judge, Burt J (see [1972] WAR 116), provided, inter alia, that: (1) as between the two syndicates, the 22 mineral claims should be held in the proportion of 56 per cent for the appellants and 44 per cent for the respondents; (2) the appellants should grant to the nominee of the respondents an option to acquire a 50 per cent share of the 22 claims on specified terms. The respondents purported to exercise the option on behalf of the nominee and tendered the option consideration of $60,000. This was refused and the respondents commenced an action claiming specific performance of the agreement. The appellants resisted the claim on two grounds. First, they argued that the mineral claims were ‘land’ as defined by the Property Law Act 1969 (WA) and therefore the oral agreement was void or unenforceable under s 34 of the Act, which is in substantially the same terms as the Property Law Act 1958 (Vic) s 53, set out above. Second, they argued that the agreement was one for the sale of an interest in land of which there was no note or memorandum as required by s 4 of the Statute of Frauds, which was still in force in Western Australia.

[page 312]

4.99

The court held (Barwick CJ dissenting) that the mineral claims

conferred on the holders ‘interests in land’ within s 34, despite a declaration in s 273 of the Mining Act that every mining tenement should be deemed in law to be a ‘chattel interest’. This conclusion followed from the definition of ‘land’ in s 7 of the Property Law Act 1969, which included ‘any strata or seam of minerals or substances in or under any land and the right to work and get the minerals and substances’. The definition in s 7, specifically including the rights conferred by a mineral claim, was held to override the provisions of s 273 of the earlier Act. However, s 273 did prevent the appellants relying on s 4 of the Statute of Frauds, which required contracts for the sale of interests in land to be evidenced in writing: see 4.31. In the absence of a specific definition of ‘land’ in the Statute of Frauds, s 273 indicated that a mining tenement was not to be regarded as ‘land’ for the purposes of that statute. The court went on to hold that s 34 applied to the agreement of December 1970, rendering it unenforceable. It is difficult to establish a ratio in this case as the reasoning in the judgments varied. Three judges (Menzies, Stephen and Gibbs JJ) took the view that the agreement was caught by s 34(1)(b). From the time when the mining claims were first pegged out, the claimants did not hold the claims entirely for themselves. Most, if not all, of the claims were held for other persons as well, and thus the claims were subject to trusts. The effect of the pooling agreement was to substitute new trusts for old. The fact that new trusts were accepted under the agreement involved new declarations by the claimants to replace existing trusts, and this required compliance with s 34(1)(b). If, before the pooling agreement, some claims were held by the claimants on their own behalf, the pooling agreement in

relation to these clearly involved a declaration of trust. Two judges (Stephen and Walsh JJ) held that the agreement could be characterised as a disposition of equitable interests already in existence and thus would come within s 34(1) (a). They rejected (as did Gibbs J) the contrary interpretation of s 34(1)(a) of Menzies J that the provision related only to the creation of legal interests on the ground that if it were to apply to equitable interests, subss (b) and (c) would be redundant. Beyond these conclusions, it is difficult to find common ground. For Stephen J, even if the pooling agreement did not involve a declaration of trust in relation to each claim, it did amount to a disposition of equitable interests by the former beneficiaries to the new beneficiaries, and thus came within s 34(1)(c). By contrast, Gibbs J did not think that there was a disposition of a subsisting equitable interest within s 34(1)(c), because the equitable interests to be disposed of did not exist until the agreement created them and therefore they were not ‘subsisting interests’. Walsh J did not consider the effect of s 34(1)(b) or (c). Gibbs J added his opinion that the agreement to grant the option could not be described as a declaration of trust within s 34(1)(b). However, as the option was effective to create an equitable interest in the claim, it was caught by s 34(1)(a). 4.100

Gibbs J, obiter, also rejected a suggestion of Menzies J that s 34(1)

(c) applied only to the disposition of equitable interests in land. On this point, the opinion of Gibbs J seems clearly correct in the light of Grey v Inland Revenue Commissioners [1960] AC 1; [1959] 3 All ER 603. In that case, the House of Lords decided that s 53(1)(c) of the Law of Property Act 1925 (Eng) applied to a disposition of the beneficial interest in shares, notwithstanding that the old s 9 of the Statute of Frauds, on which s 53(1)(c)

is based, covered only ‘grants and assignments’ of interests in land. Their Lordships considered s 53(1)(c) not to be a mere consolidating enactment, but an amending section with substantive effect. Later English cases have accepted this interpretation, although in Vandervell v Inland Revenue Commissioners [1967] 2 AC 291; [1967] 1 All ER 1, the scope of s 53(1)(c) was somewhat narrowed. The House of Lords held there that, although the section applied to a disposition solely of the

[page 313]

equitable interest in the shares, it did not apply to a transaction which enabled the one person to receive both the legal and equitable interest in the shares, albeit from different sources (at AC 311; All ER 7 per Lord Upjohn): [T]he object of the section, as was the object of the old Statute of Frauds, is to prevent hidden oral transactions in equitable interests in fraud of those truly entitled, and making it difficult, if not impossible, for the trustees to ascertain who are in truth his beneficiaries. But when the beneficial owner owns the whole beneficial estate and is in a position to give directions to his bare trustee with regard to the legal as well as the equitable estate there can be no possible ground for invoking the section where the beneficial owner wants to deal with the legal estate as well as the equitable estate.

4.101

Some of the problems of the legislation are addressed by the

following questions: 1.

Does s 53(1)(a) apply only to the creation of legal interests in land? In Adamson v Hayes (1973) 130 CLR 276; 47 ALJR 201; [1972–3] ALR 1224; 4.98ff, Menzies J thought that it did, while Gibbs, Stephen and

Walsh JJ appear to have rejected this view. If Menzies J is correct, how does this provision interact with s 52, which requires conveyances or dispositions of legal interests in land to be made by deed?: see 4.28E. If s 53(1)(a) applies to the creation and disposition of equitable interests in land, what purpose is served by the inclusion of s 53(1)(b) and (c)? 2.

Does s 53(1)(a) apply to contracts for the sale of an interest in land, which have the effect of creating equitable interests under the principle in Lysaght v Edwards (1876) 2 Ch D 499? See Baloglow v Konstantinidis (2001) 11 BPR 20,721, discussed in 4.104C.

3.

Section 53(1)(b) appears to require written evidence of a declaration of a trust of land, rather than that the declaration be made in writing. By contrast, s 53(1)(a) appears to require that creation or disposal of an interest in land (which possibly includes an equitable interest) be in writing. Thus, there is an apparent conflict between these provisions. In addition, s 53(1) (c) seems to require the actual disposition of an equitable interest to be in writing.

4.

What is meant by the distinction between a ‘declaration of trust’ in s 53(1)(b) and a ‘disposition of an equitable interest or trust subsisting at the time of the disposition’ in s 53(1)(c)? In the case where A, the holder of a legal fee simple estate in Blackacre, declares herself trustee of Blackacre for B, the disposition comes within the terms of s 53(1)(b) rather than within s 53(1)(c). If A, the holder of an equitable interest in Blackacre, declares himself trustee of his equitable interest for B, it appears that this also comes within s 53(1)(b) rather than s 53(1)(c). See Grey v Inland Revenue Commissioners [1958] Ch 375 at 380 per Upjohn

J. This view was also implicitly accepted by Morris LJ in the Court of Appeal [1958] Ch 690 at 720. The House of Lords did not discuss this issue: [1960] AC 1; [1959] 3 All ER 603. 5.

Despite the reference to ‘interests in land’ at the beginning of the section, it appears that s 53(1)(c) applies to dispositions of equitable interest in all forms of property. In Adamson v Hayes (1973) 130 CLR 276; 47 ALJR 201; [1972–3] ALR 1224, Menzies J suggested that it was confined to land, but this view was rejected by Gibbs J: see 4.98ff. Thus, the disposition of an existing equitable interest in, for example, shares, must be in writing: see Grey v Inland Revenue Commissioners [1960] AC 1; [1959] 3 All ER 603.

6.

It has long been established that the legislation does not exclude evidence of a trust where to do so would be to enable the defendant to use the legislation as an instrument of fraud: Davies v Otty (1865) 35 Beav 208; 55 ER 875.

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4.102 Questions Consider the following problems: 1.

T holds shares in trust for B1. B1 orally directs T to hold the shares in trust for B2. Is the oral direction to T effective? In Grey v Inland Revenue Commissioners [1960] AC 1; [1959] 3 All ER 603,

it was held that this amounted to a disposition of an equitable interest within s 53(1)(c), which was thus required to be in writing. 2.

T holds shares in trust for B1. B1 orally directs T to transfer the shares to B2, the intention (not expressed in writing) being that B2 should have both the legal and beneficial title. T transfers the shares to B2. Does the beneficial interest in the shares pass to B2? In Vandervell v Inland Revenue Commissioners [1967] 2 AC 291; [1967] 1 All ER 1, it was held that it did, because s 53(1)(c) did not apply in this situation.

3.

H and W jointly hold the fee simple estate in land. H agrees in writing, on behalf of himself and W, to sell the land to P. W has authorised H, but not in writing, to act on her behalf. H and W refuse to complete the agreement and P seeks specific performance. H and W resist the claim on the basis of WA, s 34(1)(a) which is equivalent to s 53(1)(a) of the Property Law Act 1958 (Vic) (see 4.94E) and requires that an agent who disposes of an interest in land must be authorised to do so in writing. The formal requirements for the sale of an interest in land contained in the Statute of Frauds s 4 (see 4.31) have been satisfied as the agreement itself is in writing, even though W has not authorised H in writing to enter the agreement on her behalf. Is the agreement enforceable in these circumstances?

4.103

Section 23C(1)(b), the NSW equivalent of s 53(1)(a) (Vic), did not

apply to a transaction which purports to create and declare a trust; in this instance, the requirements of s 23C(1)(a) must be met: Re JS and GP (2006) 35 Fam LR 88. In Monte v Buongiorno [1978] WAR 49, it was held that s 34(1)(a), the WA equivalent of s 53(1)(a) (Vic), did not apply to an agreement to sell land, but only to a document such as a transfer or conveyance. Hence, it was sufficient for the agreement to satisfy the requirements of Statute of Frauds s 4. The Full Court of the Supreme Court of Western Australia in Marist Bros Community Inc v Shire of Harvey (1995) 14 WAR 69 affirmed this result.24 It appears that s 34(1)(b) is the governing subsection in relation to declarations of trusts relating to land. Such declarations must be evidenced, but need not be made in writing. In Secretary, Department of Social Security v James (1990) 95 ALR 615, Lee J held (at 622) that if para (b) was not to be ‘either an odd exception or otiose’ it had to be interpreted as requiring different formalities for declarations of trust from other dealings with equitable interests: that is, the declaration must be ‘manifested and proved’ by writing rather than ‘in writing’. He held that this allowed documents to be read together, but did not allow oral evidence to form part of the proof. The question of the relationship between the requirements governing contracts for the sale of land, and those pertaining to the disposal of equitable interests, was considered in the following case.

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4.104C

Baloglow v Konstantinidis (2001) 11 BPR 20,721

New South Wales Court of Appeal [Solicitors for the appellant and respondent entered into negotiations for the sale of the appellant’s partnership assets, which included parcels of land, to the respondent. The heads of agreement were drafted by the respondent’s solicitor in the presence of the appellant’s solicitor who agreed to terms. Amendments to the draft were later sent by fax to the appellant’s solicitor. One issue for the court to consider was whether the retainer of the appellant’s solicitor, not being in writing, failed to meet the requirements of s 23C(1) of the Conveyancing Act.] Giles JA: The second question is whether the agreement is unenforceable on Statute of Frauds grounds. Section 54A of the Conveyancing Act 1919 applies if Mr Konstantinidis brought his proceedings ‘upon … a contract for the sale or other disposition of land or any interest in land’. If it applies it requires that the agreement upon which the proceedings are brought or some note or memorandum thereof is ‘in writing and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged’… It is necessary that Mr Xenos was authorised by Mr Baloglow to sign a note or memorandum of the agreement made with Mr Konstantinidis. He was authorised to make the agreement made on 28 July 1999, and the authority to make it carried with it authority to sign a record of it … Section 23C of the Conveyancing Act relevantly applies if by the agreement made on 28 July 1999 Mr Baloglow (i) purported to create or dispose of an interest in land or (ii) purported to dispose of an equitable interest subsisting at the time of the disposition (s 23C(1)(a) and (c)). The application is excluded if this was by the creation or operation of a resulting, implied or constructive trust (s 23C(2)). If s 23C applies it requires that there be writing signed by Mr Baloglow or by his agent ‘thereunto lawfully authorised in writing’. There was no evidence that Mr Xenos was authorised in writing. If s 23C applies, the purported creation or disposition of an interest in land or the purported disposition of an equitable interest subsisting at the time of the disposition was ineffective. As earlier indicated, the agreement was upon particular steps to be taken. Mr Baloglow agreed to transfer to Mr Konstantinidis shares and interests in real property and debts owed to him and to cause others to transfer to Mr Konstantinidis shares and an interest in real property, all legal interests. Mr Baloglow and Mr Konstantinidis agreed to cause Carlisle to transfer to them in equal shares the debt owed by Larripalm, again a legal interest. Arguably, Mr Baloglow agreed to transfer to Mr Konstantinidis an equitable interest in 4 Denison Street, Manly (see paragraph A3(b) in the six sheets), since that property was in the name of Mr Konstantinidis and it must have been included on the basis that Mr Konstantinidis held it on trust for himself and Mr Baloglow. It is a little odd that the one item of partnership property was dealt with in this way — why not, for example, include Mr Baloglow’s interest in Mr Konstantinidis’ shares in the companies on the basis that Mr Konstantinidis held them also on trust for himself and Mr Baloglow? But this underlines that the agreement was upon particular steps to be taken. The contract did not itself purport to transfer any property. There would be a settlement at the time of payment of the $1,050,000. Appropriate instruments of transfer would be

prepared, executed, delivered and registered. This was not express, but in my view was necessarily implied from the nature of the property and the sum of money involved, aided by the existing poor relationship between the parties. As at 28 July 1999 each of Mr Baloglow [page 316]

and Mr Konstantinidis was contractually bound to make or cause the transfers, no more. I will state at the outset the application of s 23C which seems to me to be correct, namely — (i)

so far as land was the subject of a step, the only interest in land created within s 23C(1)(a) was any equitable interest arising because equity would specifically enforce the contract, and s 23C(1)(a) does not apply to such an interest; (ii) again so far as land was the subject of a step, there was agreement to dispose of an interest in land, with the disposition to come when the agreement was performed, but no interest in land was disposed of within s 23C(1)(a); and (iii) so far as an equitable interest subsisting at the time was the subject of a step, arguably Mr Baloglow’s equitable interest in 4 Denison Street, Manly, again there was agreement to dispose of that interest, with the disposition to come when the agreement was performed, but the interest was not disposed of within s 23C(1)(c). If this analysis be correct, it permits a harmonious relationship between s 54A of the Conveyancing Act and s 23C. The former arises at the stage of agreement to create or dispose of an interest in land. It has its own requirement of writing, less stringent than the requirement in s 23C in that a note or memorandum of the agreement is sufficient and the signing agent need not be authorised in writing. The latter arises at the stage of performance of an agreement or where there is no prior agreement, and in keeping with the importance attached to property rights has a more stringent requirement of writing in that the creative or dispositive instrument itself must be in writing and the signing agent must be authorised in writing. Section 54A excepts the operation of the law relating to part performance, material to an executory agreement, while s 23C excepts the operation of the law relating to trusts, material to property rights. Section 23C is in a Part of the Conveyancing Act dealing with property and a Division of that Part dealing with assurances, and otherwise concentrates on property rights, see s 23C(1)(b) dealing with declarations of trust and 23C(1)(c) dealing with disposition of subsisting equitable interests. There is no encouragement in its language to make it apply to executory agreements under which property rights are to be created or disposed of when the agreement is performed. [Giles JA then examined the judgments of the High Court in Adamson v Hayes and concluded that they were consistent with the above analysis of s 23C(1):] The agreement disposed of an existing equitable interest if the parties agreed immediately to hold their beneficial interests for different persons from before. Agreement only to do so at a future time did not dispose of an existing equitable interest … It has been held that the interest created by a declaration of trust of land is not an

interest in land within s 23C(1) (a), see Secretary, Department of Social Security v James (1990) 85 ALR 615 at 621–2; Hagan v Waterhouse (1991) 34 NSWLR 308 at 385–6. The reasons for that do not readily transpose to the present situation, but it shows that the nature of what in other contexts would be regarded as an interest in land bears upon whether it is an interest in land within s 23C(1)(a). What is the nature of the interest created under an executory contract for sale for land? If the contract is susceptible of specific performance the purchaser is said to have an equitable interest. But it is an interest of a special nature. To repeat the words from Commissioner of Taxes (Queensland) v Camphin at 133, it is ‘measured by what a court of equity would decree in an action for specific performance’. If specific performance will not be decreed, there is no equitable interest (Brown v Heffer (1996) 116 CLR 344 at 351) … There is a difficulty in regarding the equitable rights of the purchaser under an executory contract for sale of land as an equitable interest within s 23C(1)(a). The very existence [page 317]

of the equitable interest depends on equity enforcing or perhaps otherwise protecting the purchaser’s contractual rights. How can equity enforce or otherwise protect the contractual rights if, by force of the provision, the interest to which equity thereby gives life must be stillborn? At the least, the circularity should give pause before bringing executory contracts for sale of land within s 23C(1)(a). The same basis for the equitable interest underlies the suggestion that the rights are not caught by s 23(1)(a) because created by operation of law, and also the suggestion that the rights are not caught because created by the operation of a constructive trust. In England the Court of Appeal has now endorsed the approach that the equitable interest created under a specifically enforceable agreement to assign an interest in property is created by the operation of an implied or constructive trust, see Neville v Wilson (1997) Ch 144 at 155–8, although treating the interest as a trust interest is open to the criticisms fully developed in Waters, The Constructive Trust, Ch II. The more fundamental issue is whether the equitable rights are an equitable interest for the purposes of s 23C(1)(a) at all. For that one returns to the distinction between an agreement to assure property in the future and the future assurance, a distinction of significance to disposal of an interest in land and disposal of a subsisting equitable interest as well as creation of an equitable interest in land. The purchaser under the agreement to assure can sue at law for damages for breach of contract although the contract is not in writing (subject to s 54A where it applies), because s 23C ‘is essentially directed to creation of interests in land’ and ‘is not directed to agreements as such’ (Abjornsen v Urban Newspapers Ltd (1989) WAR 191 at 200 per Kennedy J). When property rights are involved, s 23C applies at the time of assurance. It may be that property rights arise without an assurance, because the purchaser pays the purchase price and the vendor holds the property as bare trustee for the purchaser. In that situation there will be no requirement of writing because s 23C(2) will have effect. If writing is not necessary, why should it be necessary for the prior stage when the purchaser has the lesser rights, of the special nature earlier described?

It would be odd if s 23C were given an application such that it should. The preferable reason for concluding that it should not, in my view, is that s 23C does not apply at all — whether as to creation or as to disposal of an interest — if there is no more than an agreement to assure property in the future. Save by the equitable protection, there is neither creation nor disposal of an interest, and the purchaser’s equitable rights are not an equitable interest for the purposes of s 23C(1)(a) or 23C(1)(c). It follows that there can not be the creation of an interest in land within s 23C(1)(a), and that it is not necessary to debate whether there is a carving out of an interest so that there can be a disposal of an interest in land or of an equitable interest, because there can not be the disposal of an interest in land or of an equitable interest. It will always come down to the agreement, hence the differences in view in Adamson v Hayes, but in my opinion if there is no more than an agreement to assure property s 23C is not attracted. It follows that the contract is not unenforceable because not in writing and signed by Mr Baloglow or his agent lawfully authorised in writing. So far as Mr Baloglow agreed to transfer or cause the children to transfer their interests in 58 Whistler Street, Manly to Mr Konstantinidis, there was not the creation or disposition of an interest in land or the disposition of an existing equitable interest within s 23C(1)(a) or s 23C(1)(c). There was not a declaration of trust respecting any of the land. In my opinion, the appeal should be dismissed with costs. [Mason P agreed with Giles JA; Priestley JA agreed with the result, but following Neville v Wilson (1997) Ch 144, held that the constructive trust arising from a contract of sale of land is not subject to the requirements of s 23C(1) by virtue of s 23C(2).]

[page 318]

4.105 Questions 1.

Which of the different reasons offered by Giles JA and Priestley JA are more convincing?

2.

Does this case resolve some of the difficulties of interpretation of s 23C evident in Adamson v Hayes? For a case distinguishing Adamson v Hayes, applying Baloglow v Konstantinidis and discussing whether an agreement to declare a trust falls within s

23C and the interplay between s 54A and s 23C, see Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184. 3.

Is it reasonable to presume that the legislature intended to make s 54A and s 23C apply to very different types of transactions?

4.106

In 2010, the Victorian Law Reform Commission25 recommended

enactment of provisions that would address the problems flowing from Adamson v Hayes. The Commission made the following comments about the current provision (Vic, s 53(1)): Section 53(1) and corresponding provisions in other jurisdictions have caused significant problems in interpretation, due to overlaps, ambiguities and inconsistencies … In order to eliminate [them] … section 53 should be amended as follows: (a) Section 53(1)(a) should be amended to provide that no legal or equitable interest in land can be created or disposed of except by writing by the person creating or disposing of the interest or by the person’s agent. (b) Section 53(1)(b) should be amended to provide that a declaration of trust respecting any land or a trust consisting partly of land and partly of land and personal property must be in writing and signed by the person disposing of the land or by the person’s agent. (c) Section 53(1)(c) should be repealed, so that no written formalities are required for personal property except as required by s 134 and other legislation [that is, choses in action and analogous rights].

The Commission went on to recommend that agents of persons disposing of interests in land must be lawfully authorised in writing (at 32–8). Do these recommendations adequately address the various problems of interpretation outlined above? How would the proposed s 53(1)(a) be reconciled with the current s 52(1) (requiring conveyances of land to be by deed)?

EQUITABLE DOCTRINES: RESULTING TRUSTS, CONSTRUCTIVE TRUSTS AND ESTOPPEL 4.107

This section of Chapter 4 examines how equitable doctrines govern

certain types of acquisition of proprietary interests, including situations where a person may be held to have acquired an equitable interest in property, even where the legal title holder may not have intended this to occur.

[page 319]

Resulting trusts 4.108

In some situations equity presumes that a person with legal title

holds that property on a ‘resulting trust’ for another person. A presumption of resulting trust arises where a person purchases real or personal property and arranges for title to the property to be transferred to another person, who provides no consideration: Little v Little (1988) 15 NSWLR 42. Under this form of resulting trust (known as a purchase money resulting trust), it is presumed that the transferee holds on trust for the person providing the purchase money. The presumption of resulting trust may be rebutted by evidence that the purchaser intended to make a gift to the transferee. In a situation where the purchase money is provided by the transferee’s husband or male fiancé (Wirth v Wirth (1956) 98 CLR 228), or where the purchaser is the father or mother of the transferee (Dullow v Dullow (1985) 3 NSWLR

531), a contrary presumption — the presumption of advancement — applies, and the transferee is presumed to take beneficial title. Again, this presumption may be rebutted by evidence that the provider of the purchase money intended to retain beneficial title. The presumption of advancement does not apply where a woman purchases property in the name of her husband or intended husband, or a man purchases property in the name of his de facto wife. Until recently in Australia, it was inapplicable to the situation where a mother transferred property to a child.26 In certain situations, a presumption of advancement may arise in favour of a stepchild: see Olivieri v Olivieri (1993) 38 NSWLR 665.27 A similar principle applies where more than one person contributes to the purchase price of property but legal title is not taken in the names of all the purchasers. In such circumstances, the legal title holder is presumed to hold the property on trust for the purchasers in the proportions which reflect their contributions to the purchase price (but not contributions to incidental costs or disbursements: see Little v Little (1988) 15 NSWLR 42). Again, the presumption of advancement may apply where both a husband and wife, or parents and children, contribute to the purchase price of property, with legal title being taken in the name of one or some of them. 4.109C Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278 High Court he Australia [The appellants were appointed as trustees of the bankrupt estate of John Daniel Cummins. The largest creditor was the Australian Taxation Office which had earlier instituted proceedings to

recover $955,672.92. Before lodging tax returns on 14 February 2000, Mr Cummins had not lodged an income tax return since about 1955. The High Court noted that ‘during the whole of the period in which he had practised as a barrister, Mr Cummins had paid no income tax’. The trustees argued, inter alia, that one of the assets in Mr Cummins’ estate was a half share in the matrimonial home, the presumption of a resulting trust having been rebutted by an express intention that the parties held the property as joint tenants. The

[page 320]

home had been purchased by Mr Cummins and his wife making unequal contributions. The primary judge, Sackville J, held in favour of the trustees, concluding that the presumption had been rebutted ((2003) 134 FCR 449). An appeal to the Full Court of the Federal Court by Mrs Cummins was successful. The Full Court (Carr and Lander JJ; Tamberlin J dissenting) set aside the final orders made by Sackville J and ordered that the application by the trustees be dismissed. The trustees appealed.] Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ: The Hunters Hill property had been purchased in 1970 and the title was taken by Mr and Mrs Cummins as joint tenants. They were registered as proprietors on 10 August 1970. The solicitors acting for the purchasers were Messrs J P Grogan and Co. The property so acquired was then vacant land. A dwelling was erected on it shortly thereafter which served as their matrimonial home. Sackville J found that Mrs Cummins had contributed 65.8 per cent of the purchase price of $31,000; in the Full Court, further allowance was made in Mrs Cummins’ favour for the whole of the deposit she provided, raising her contribution to 76.3 per cent. In the second judgment, Sackville J held that any presumption of resulting trust in shares proportionate to the respective contributions of Mr and Mrs Cummins had been rebutted, and that in 1970 they had shared the intention to acquire the Hunters Hill property as joint tenants, legally and beneficially. It was the disposition in favour of Mrs Cummins, made in August 1987 by severance of that joint beneficial interest of Mr Cummins, which s 121 of the [Bankruptcy Act 1966 (Cth)] rendered an ineffective subtraction from his bankrupt estate. The disposition being void against the Trustees by operation of s 121, the upshot would be that the joint tenancy was severed by the bankruptcy of Mr Cummins. Given the conclusion by the majority of the Full Court that the case for the Trustees under s 121 failed, it was unnecessary for their Honours to go on to consider the resulting trust issue. However, they did so and differed from Sackville J, holding that the presumption of a resulting trust to reflect the contributions to the purchase price in 1970 had not been rebutted. In this Court, the first respondent supports that conclusion and the Trustees challenge it. The contract and transfer in respect of the interest of Mr Cummins as joint tenant in the Hunters Hill property were executed on the same day, 26 August 1987. A valuation had been obtained by Mr Harris on account of Mr and Mrs Cummins for the stated purpose of ‘stamp duty assessment’,

and the five bedroom residence was valued at $410,500. The price was stated in the contract and transfer to be one-half of this sum, namely $205,250, and the transfer included an acknowledgment by Mr Cummins that he had received that consideration. It was, however, common ground before Sackville J that Mrs Cummins did not pay the purchase price or any part of it. She did pay ad valorem stamp duty on the contract and provided the $300 for payment of the valuer’s fee. The transfer was registered and Mrs Cummins thereby became registered proprietor of an estate in fee simple in the Hunters Hill property. The Hunters Hill property was sold after the bankruptcy and by agreement between the parties. The share of the net proceeds of sale for which Mrs Cummins was obliged by the orders of Sackville J to account to the Trustees was $1,064,417.82 with accrued interest. The generally accepted principles in this field, affirmed for Australia by Calverley v Green, were expressed as follows in that case by Gibbs CJ [(1984) 155 CLR 242 at 246– 47]: [I]f two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money. [page 321]

Further, the presumption of advancement of a wife by the husband has not been matched by a presumption of advancement of the husband by the wife. The ‘presumption of advancement’, where it applies, means that the equitable interest is at home with the legal title, because there is no reason for assuming that any trust has arisen. The subjectmatter of the August transactions with respect to the Hunters Hill property was identified in the transfer as ‘all that the [sic] interest of the Transferor as joint tenant of and in the land above described’. The following remarks by Professor Butt in his work, Land Law [4th ed, 2001, p 222 (footnote omitted)], are in point: Strictly speaking, joint tenants do not have proportionate shares in the land. However, a joint tenant is regarded as having a potential share in the land commensurate with that of the other joint tenants. Where there are two joint tenants, that potential share is one-half; where there are three joint tenants, it is one-third; and so on. This potential share the joint tenant can deal with unilaterally during his or her lifetime. Hence the significance of the valuation which was obtained and the identification in the transfer of a consideration of $205,250, being one-half of the valuation. What was there to conclude in August 1987 that the face of the register did not represent the full state of the ownership of the Hunters Hill property, and that the ownership as joint tenants was at odds with, and subjected to, the beneficial ownership established by trust law? No part of the purchase price of $205,250 was paid by Mrs Cummins and the August 1987 transfer was voluntary, as explained earlier in these reasons. However, Mrs Cummins did pay the

ad valorem stamp duty on the contract and the valuer’s fee. There is force in the submission for the Trustees that it is unlikely these steps would have been taken by Mrs Cummins and that the August transaction with respect to the Hunters Hill property would have been cast in the way that it was had she believed that she already held approximately a two-thirds beneficial interest. At all events, these matters suggest that in August 1987 the parties were proceeding on the conventional basis that the equitable estate was at home with the registered estate of joint tenancy. There is no necessary inconsistency between this conventional basis as to the nature of the ownership being dealt with in August 1987 and the later conventional basis on which the litigation was conducted, namely that the consideration stipulated was not paid and that the property interest, ascertained as just described, was being dealt with on a voluntary basis. It is important for a consideration of the issues concerning the operation, if any, of the principles respecting resulting trusts that the registered title was that of joint tenants rather than tenants in common. The severance effected in August 1987 had the effect of putting to an end the incident of survivorship. What then was the ‘transaction’ to which attention must be directed in determining whether, subsequent admissions or conventional assumptions or arrangements apart, the registered title to the Hunters Hill property acquired by Mr and Mrs Cummins was not at variance with an equitable title? The Hunters Hill property, at the time of their registration as joint proprietors on 10 August 1970, was vacant land. The purchase moneys were contributed, as explained earlier in these reasons, in the proportions 76.3 per cent (Mrs Cummins) and 23.7 per cent (Mr Cummins). A mortgage over the Hunters Hill property executed by Mr and Mrs Cummins in favour of the Commonwealth Savings Bank of Australia on 16 July 1971 secured an advance to them jointly of $8,000 on a covenant that they would erect and complete within six months of that date a dwelling house at a cost of not less than $33,500. The tax return by Mrs Cummins for the year ended 30 June 1971 but lodged by her tax agent in 1972 showed the Hunters Hill property as her place of residence. [page 322]

The ‘transaction’ to which attention must be directed, in the sense given in Charles Marshall respecting the principles of resulting trusts, is a composite of the purchase of the Hunters Hill property followed by construction of a dwelling house occupied as the matrimonial home for many years preceding the August transactions. The relevant facts bearing upon, and helping to explain, the nature of the joint title taken on registration on 10 August 1970 include the other elements in that composite. To fix merely upon the unequal proportions in which the purchase moneys were provided for the calculation of the beneficial interests in the improved property which was dealt with subsequently in August 1987 would produce a distorted and artificial result, at odds with practical and economic realities. Looked at in this way, this is not a case which requires consideration of the authorities where an equitable lien or charge secures expenditure on improvements made but no beneficial interest in the land is conferred. Calverley v Green concerned the beneficial ownership of an improved property acquired as joint tenants by a man and a woman who had lived together for about 10 years as husband and wife. The decision of this Court was that the presumption that they held the registered title in trust for

themselves in shares proportionate to their contributions was not rebutted by the circumstances of the case. Mason and Brennan JJ [(1984) 155 CLR 242 at 259] referred to the statement by Lord Upjohn in Pettitt v Pettitt that, where spouses contribute to the acquisition of a property then, in the absence of contrary evidence, it is to be taken that they intended to be joint beneficial owners. Their Honours said that Lord Upjohn’s remarks reflected the notion that both spouses may contribute to the purchase of assets through their marriage ‘as they often do nowadays’ and that they would wish those assets to be enjoyed together for their joint lives and by the survivor when they were separated by death. However, Mason and Brennan JJ considered such an inference to be appropriate only between parties to a lifetime relationship, being the exclusive union for life undertaken by both spouses to a valid marriage, though defeasible and oftentimes defeated [at 259]. It is unnecessary for the purposes of the present case to express any concluded view as to the perception by Mason and Brennan JJ of the particular and exclusive significance to be attached to the status of marriage in this field of legal, particularly equitable, discourse. It is enough to note that, as Dixon CJ observed 50 years ago in Wirth v Wirth, in this field, as elsewhere, rigidity is not a characteristic of doctrines of equity. The present case concerns the traditional matrimonial relationship … Here, the following view expressed in the present edition of Professor Scott’s work [The Law of Trusts, 4th ed, 1989, vol 5, §454 at 239] respecting beneficial ownership of the matrimonial home should be accepted: It is often a purely accidental circumstance whether money of the husband or of the wife is actually used to pay the purchase price to the vendor, where both are contributing by money or labor to the various expenses of the household. It is often a matter of chance whether the family expenses are incurred and discharged or services are rendered in the maintenance of the home before or after the purchase. To that may be added the statement in the same work [vol 5, §443 at 197–8]: Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them (footnote omitted). That reasoning applies with added force in the present case where the title was taken in the joint names of the spouses. There is no occasion for equity to fasten upon the registered [page 323]

interest held by the joint tenants a trust obligation representing differently proportionate interests as tenants in common. The subsistence of the matrimonial relationship, as Mason and Brennan JJ emphasised in Calverley v Green, supports the choice of joint tenancy with the prospect of survivorship. That answers one of the two concerns of equity, indicated by Deane J in Corin v Patton, which founds a presumed intention in

favour of tenancy in common. The range of financial considerations and accidental circumstances in the matrimonial relationship referred to by Professor Scott answers the second concern of equity, namely the disproportion between quantum of beneficial ownership and contribution to the acquisition of the matrimonial home. In the present litigation, the case for the disinclination of equity to intervene through the doctrines of resulting trusts to displace the incidents of the registered title as joint tenants of the Hunters Hill property is strengthened by further regard to the particular circumstances. Solicitors acted for Mr and Mrs Cummins on the purchase in 1970. The conveyance was not uneventful. The contract was dated 14 April 1970 and was settled on 27 July 1970, but only after the issue by the solicitors for the vendor on 10 July of a notice to complete. It is unrealistic to suggest that the solicitor for the purchasers, Mr and Mrs Cummins, did not at any point advise his clients on the significance of taking title as joint tenants rather than as tenants in common. Secondly, use of the valuation obtained in 1987 to fix what was shown as the purchase price for the acquisition by Mrs Cummins of the interest of her husband is consistent, as already indicated, with the conventional basis of their dealings which treated the matrimonial home as beneficially owned equally. Finally, there is the question of the funding of the building operations which were necessary for the use of the previously vacant land as the matrimonial home. Reference is made earlier in these reasons to the treatment of the purchase of the unimproved land and the subsequent building operations as the one transaction for the purpose of considering the principles respecting resulting trusts. Since October 1967, Mr and Mrs Cummins had owned as joint tenants a property at 12A Ferdinand Street, Hunters Hill. This was sold in December 1971. The proceeds of that sale were paid on 22 December 1971 into a bank account styled ‘John Daniel Cummins and Mrs Mary Elizabeth Cummins Fully Drawn Loan Account’. Sackville J held that in these circumstances it appeared likely that the net proceeds of sale of the Ferdinand Street property had been paid to Mr and Mrs Cummins jointly. While there was no finding to this effect by the primary judge, there is force in the submission in this Court by counsel for the Trustees that the likely source of funds for the building operations were, first, the joint borrowing of $8,000 on the mortgage to the Commonwealth Savings Bank of Australia, supplemented after December 1971 by the joint proceeds of the sale of the other property. Sackville J correctly concluded in the second judgment that the subject of the disposition in 1987 was that which appeared on the transfer, namely the interest of Mr Cummins as joint tenant of the Hunters Hill property, without any displacement to allow for a beneficial tenancy in common in shares, of which the larger was that of Mrs Cummins. Conclusion and orders The result is that the Trustees have succeeded in this Court on the grounds dealing both with s 121 of the Act and the beneficial ownership of the Hunters Hill property. The appeal should be allowed with costs. The orders of the Full Court should be set aside and in place thereof the appeal to that Court should be dismissed with costs. These orders will have the effect of reinstating the orders made by Sackville J on 24 October 2003.

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4.110

In Buffrey v Buffrey (2007) 12 BPR 23,619, legal title to an

investment property was vested in the parties as joint tenants. Palmer J held that the presumption of a resulting trust had not been rebutted, and the presumption of advancement had, where the plaintiff (the husband) provided most of the purchase money for the property, the small balance being made up by mortgage for which he and his wife (the defendant) were jointly liable. Also, in income tax returns the parties declared that they jointly owned the home, while rental income from the property was used to pay off the mortgage. Following Calverley v Green (1984) 155 CLR 242 at 246 and Shephard v Cartwright [1955] AC 431 at 455, his Honour held that the presumption is not rebutted lightly. Despite the declarations in the tax returns of factors that indicated equal ownership, the following indicated that the presumption should stand: the bank insisted on the husband and wife being co-mortgagors as a condition of advancing the loan moneys; it was an investment property; the parties arranged their financial affairs separately; and the plaintiff did not know that his accountant had arranged the tax returns in the way that he did. The presumption of advancement was rebutted by the fact that the plaintiff’s purchase of the property was made with substantial damages he received after suffering a severe injury at work. The purchase was for his own benefit as representing his own superannuation fund, while his wife had her own fund. 4.111

In addition to the purchase money resulting trust, in certain

situations a presumption of resulting trust (or in relevant cases, a presumption of advancement) may arise where one person voluntarily transfers certain types of property to another person. In the case of a voluntary transfer of Torrens system land (but not a voluntary conveyance of general law land), a presumption of resulting trust arises in South Australia and Tasmania. For a discussion of the situation existing in the various states, see House v Caffyn [1922] VLR 711. It appears that a presumption of resulting trust also arises where a person pays money into a bank account in the name of a volunteer or transfers shares to a volunteer, but not in the case of a voluntary transfer of chattels: see Ford and Lee, [21100]. English courts have tended to blur the distinction between resulting and constructive trusts: see especially Gissing v Gissing [1971] AC 886; [1970] All ER 780 at AC 896; All ER 782 (Lord Reid), at AC 901; All ER 786 (Viscount Dilhorne) and at AC 905; All ER 790 (Lord Diplock). This tendency is not evident in Australia. 4.112

The orthodox principles relating to resulting trusts are inadequate to

deal with many property disputes arising between family members. Such principles only take account of direct contributions to purchase money made at the time the asset was acquired. In Calverley v Green (1984) 155 CLR 242; 56 ALR 483; 59 ALJR 111, it was held that the presumption applied where a person assumed liability under a mortgage taken out to finance acquisition of the property. Thus, if A pays the deposit on the purchase and A and B are joint mortgagors (and their relationship is not one which attracts the presumption of advancement), B will be presumed to have an interest in the property to the extent of half the mortgage loan: see also on this point, Ingram v Ingram [1941] VLR 95. However, subsequent contributions to

mortgage payments by a person who is not a joint mortgagor of the property probably do not give rise to the presumption of resulting trust (or alternatively the presumption of advancement): see Gaudron J in Baumgartner v Baumgartner (1987) 164 CLR 137 at 156; 76 ALR 75 at 89; 62 ALJR 29 at 37; 4.123C. Since the vast majority of family home purchases are financed by mortgage, the restriction of the presumption of resulting trust to direct contributions to the purchase price of property limits its usefulness as a means of recognising contributions to the resources of the family. In many families, a spouse or de facto partner

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pays for renovations or improvements to property, contributes to household expenses or takes responsibility for unpaid work in the home but does not contribute directly to the purchase price of assets in which the other partner acquires legal title. The failure of equity to take account of the value of housework and child- rearing has had a particularly harsh impact on women, whose contributions to the household economy may consist mainly of unpaid work in the home. In Siemenowski v Sellers [2009] NSWCA 245, it was held that where father and son were joint tenants at law, but contributed respectively 13 per cent and 87 per cent of the purchase price, the presumption of advancement applied so as to entitle the son to the whole beneficial interest. 4.113

In the years following World War II, English courts began to

recognise the inadequacy of the equitable principles relating to resulting trusts as a guide to the resolution of family property disputes. At that time, courts were primarily concerned with the resolution of disputes occurring after divorce, though at a later stage they were required to consider conflicts involving de facto partners. The English Court of Appeal in the early 1950s began a line of authority supporting the view that s 17 of the Married Women’s Property Act 1882 gave the court a discretion to vary established proprietary rights between husband and wife if it were just to do so: Jones v Maynard [1951] Ch 572; [1951] 1 All ER 802; Rimmer v Rimmer [1953] 1 QB 63; [1952] 1 All ER 863. This legislation created a summary jurisdiction to hear and determine property disputes between husband and wife and empowered the court to make such order as it saw fit. Similar legislation is still in force in certain Australian jurisdictions.28 Lord Denning was the main proponent of this ‘palm-tree justice’ approach, as it was often called. The high-water mark of the doctrine was reached with his observations in Hine v Hine [1962] 3 All ER 345 at 347, where he argued that: … the jurisdiction of the court over family assets under s 17 is entirely discretionary. Its discretion transcends all rights, legal and equitable, and enables the court to make such order as it sees fit. This means that … the court is entitled to make such order as appears to be fair and just in all the circumstances of the case.

4.114

For a time it appeared that the Australian courts would accept the

English approach: Wood v Wood [1956] VLR 478; Blair v Blair [1956] Tas SR 146. However, in Wirth v Wirth (1956) 98 CLR 228, the High Court firmly rejected ‘palm-tree justice’ and held that the effect of the Queensland equivalent to s 17 was strictly limited. The proprietary rights of husband and

wife were to be ascertained in accordance with strict rules of property law, including the traditional presumptions of equity. The approach of Wirth v Wirth was ultimately followed by the House of Lords in two cases: Pettitt v Pettitt [1970] AC 777; [1969] 2 All ER 385 and Gissing v Gissing [1971] AC 886; [1970] 2 All ER 780. Statutory reform in the area of family law has now conferred on courts wide powers to vary the property rights of partners in intimate relationships: see below 4.136–4.139.

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Constructive trusts Common intention constructive trusts 4.115

It has been seen that an express trust may be created by settlement

or declaration of trust or by will. A person who obtains an interest under a trust created inter vivos (during the life of the person creating the trust) or by will, acquires an interest in property as the result of a consensual transaction. However, in certain situations, a person may acquire an equitable interest in the property of another person, even where this result was not intended by the parties. For example, an equitable interest in property may arise under the principle in Walsh v Lonsdale (1882) 21 Ch D 9 (4.68C) or where a donor has done ‘everything necessary to be done’ to effectuate a gift. Although these situations have been considered earlier in this chapter, arguably they should be treated as examples of an original acquisition of an interest in property. In the situations described above, the equitable interest arises under a

constructive trust. There are a number of other circumstances in which equity will impose a constructive trust, in order to prevent the person with the legal interest in that property from behaving unconscionably. Such an equitable interest is said to arise under a constructive trust. The examples we have chosen of situations where a constructive trust will be imposed concern informal family arrangements, or disputes arising on the determination of a de facto relationship. In some of these cases, the holder of the legal interest may have originally intended to make a gift or testamentary disposition in property or to transfer an interest in property in return for a contribution made by the other party. In other cases, he or she may never have adverted to this possibility. In the former situation, the imposition of a constructive trust may ‘fill the gap’ between the principles relating to gifts and the principles relating to sales. There are several other situations in which constructive trusts may be imposed, which are not discussed in detail in this book.29 4.116

As an alternative to the view that s 17 of the Married Women’s

Property Act 1882 (UK) gave the court a broad discretion to reallocate property, the English Court of Appeal held that a constructive trust could be imposed, independently of the parties’ intention, whenever it was necessary to achieve a fair distribution of property between spouses or de facto partners: see, for example, Eves v Eves [1975] 1 WLR 1338; [1975] 3 All ER 768; Cooke v Head [1972] 1 WLR 518; [1972] 2 All ER 38; Heseltine v Heseltine [1971] 1 WLR 342; [1971] All ER 752. The Court of Appeal’s approach attracted criticism on the ground that it was inconsistent with established doctrine, including the majority view in Gissing v Gissing, and provided no sensible guidance to the courts. Ultimately, in Burns v Burns [1984] Ch 317;

[1984] 1 All ER 244, the Court of Appeal resiled from this approach and affirmed unanimously that the court does not have power to do what is fair and reasonable in all the circumstances but that, in the words of May LJ, ‘the resolution of these disputes must depend on the ascertainment according to normal principles of the respective property rights between the man and the woman’: at Ch 334; All ER 255. However, as will be seen in Ogilvie v Ryan [1976] 2 NSWLR 504, below, the judgment of Lord Diplock in Gissing v Gissing [1971] AC 886 was later found to provide the basis for the imposition of a constructive trust based on ‘the common intention’ of the parties.

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4.117C

Ogilvie v Ryan [1976] 2 NSWLR 504 Supreme Court of New South Wales

[James Ogilvie was the managing director of a company which owned a theatre and two cottages behind the theatre. After his wife’s death in 1955, Ogilvie went to live with Mrs Ryan and her mother in one of the cottages, which Mrs Ryan had rented for about 16 years. In 1962 Mrs Ryan’s mother died. At that time, Ogilvie was 75 years old and Mrs Ryan 55 years old. Ogilvie remained in the cottage, paying board to Mrs Ryan. The judge found that their relationship was one of ‘very close terms of friendship and affection’ and that Mrs Ryan looked after Ogilvie ‘as well as any devoted wife might have done’. In 1969 the company contracted to sell the theatre and the cottages. Ogilvie told Mrs Ryan that she would have to leave the cottage and she replied that she would try to find another house. Ogilvie proposed instead that he should buy a house and that she should live in it with him and look after him for the rest of his life. Mrs Ryan gave evidence that Ogilvie told her that if she looked after him the house would be hers as long as she lived and that she agreed to these terms. In 1970 Ogilvie purchased a house, and he and Mrs

Ryan lived there until his death in 1972. Ogilvie’s will did not mention Mrs Ryan. Ogilvie’s executor commenced these proceedings to recover possession of the house from Mrs Ryan.] Holland J: The question then is whether the law will give effect to the deceased’s promise. The defendant relied firstly on a submission that, on the facts proved, a constructive trust arose; that is to say, that the deceased in his lifetime, and his executor after his death, became bound in equity to hold the legal title to the subject property upon trust to permit the defendant during her life to occupy the same rent free for so long as she desired. It was submitted that a court of equity would hold that such a constructive trust arose because of the following elements in the facts: (1) The evidence proved expressly a common intention, before the property was acquired, that the defendant was to have a beneficial interest in it, and that the property was acquired by the deceased for the purpose of giving effect to their common intention. (2) The defendant was induced to alter her position and undertake a course of conduct greatly beneficial to the deceased upon the faith of his assurance that their common intention would be carried out: that is to say, instead of finding another home for herself in which she would have been the householder, as she was at Little Barber Street, she agreed to allow the deceased to find another home for them on condition that, though she would not be the householder, she could live there for the rest of her life, and, in return, she undertook to be his housekeeper, instead of his landlady, and his nurse, and care for him as long as he lived without remuneration. (3) It would be a fraud on the defendant for the deceased or his executor now to assert his legal title to the property in order to defeat the promised beneficial interest with a view to which the legal title was acquired, after having had the full benefit of her performance of the obligations which she undertook so that she might earn and maintain her right to that interest. The sufficiency of these elements for a constructive trust was said to have been established by a number of cases to which it is necessary to refer … The question how ambulatory are these principles seems to me to arise squarely in the present case, because I think that the cases to which I have been referred could be placed in categories into which, so it could be suggested, the present case would not fit. One category could be said to be cases where the constructive trustee obtained his legal title from the cestui que trust, and obtained it only by having agreed that the cestui que trust would have a beneficial interest in the property, Bannister v Bannister and Last v Rosenfeld would be in [page 328]

this category. Binions v Evans could be regarded as an extension of this category to a case where the constructive trustee, whilst not obtaining his legal title from the cestui que trust, obtained it from the transferor to him on terms that he would recognise a beneficial interest in the cestui que trust by which the transferor was bound. In this category the basis of the constructive trust could be the fraud in asserting the legal title to defeat the beneficial interest on the basis of which it was obtained. Another category could be cases in which, although the constructive trustee had not

obtained his legal title from the cestui que trust, or on terms that he would recognise the interest of the cestui que trust, he had acquired the property in his own name, and, having so acquired it, had its value increased by means of direct or indirect financial contributions or work and labour provided by the cestui que trust on a common understanding, express, implied or imputed, that the cestui que trust would have a beneficial interest in the property. Cooke v Head, Hussey v Palmer, Doohan v Nelson, Fraser v Gough and Eves v Eves could all be said to belong to this category, and it could be said also that the basis of the trust is the prevention of the fraud of using the legal title to retain benefits gained only because of the common understanding, yet defeat the beneficial interest for which the benefits were given. Now it could be said that the present case will not fit into either of the above categories, because the deceased did not acquire the subject property from the defendant, or another, on terms that she should have a beneficial interest; and, although it was their common intention and the deceased held out to her that she would have a beneficial interest, it was not upon the basis of any financial or other contribution by her towards the acquisition of the property or the enhancement of its value, the basis being the performance by her of acts unrelated to the property itself. The only point of difference that I can see between the second category of cases and the present case is in the nature of the benefits the deceased was to have from his arrangement with the defendant. The arrangement was made before the deceased acquired the property as in, for example, Cooke v Head and Eves v Eves. The arrangement itself expressed a common intention that the deceased would find a home for them both to live in in which the defendant would have a beneficial interest, namely, the right to live there rent free during her life or as long as she pleased, on condition that she left Little Barber Street and did not find another home of her own, as she had proposed, but come to live with and care for the deceased until he died. Both parties then set their course on the basis of that arrangement and, for her part, she fully performed it. Except for her having agreed to the abovementioned condition, he may not have bought the house, but might have gone to live with her in the home she was proposing to find for herself. She certainly would not have agreed to his buying the home, and she coming there to live with and care for him but for his agreement that she should be entitled to live in it rent free for life. If the condition had been that she would contribute financially towards the purchase price or would provide finance or labour to improve the property itself, there would, I think, have been no doubt that the case fell into the second category, and a constructive trust would have arisen. Why should it not arise if, by their arrangement and common intention, the benefits to be taken by the deceased were of a different character? The fraud on the defendant of using the legal title to defeat her interest, after the benefits have been taken and she has earned her interest in the property in accordance with the arrangement, is just as great as it is in the case where the benefits were directed towards the acquisition or enhancement of the value of the property. In my opinion, the most satisfactory explanation of equitable principles underlying the second category of cases is that an appropriate constructive trust will be declared in equity to defeat a species of fraud, namely, that in which a defendant seeks to make an unconscionable use of his legal title by asserting it to defeat a beneficial interest in the property which he

[page 329]

(or, as in this case, the testator for whom he is executor) has agreed to or promised; or which it was the common intention of the parties that the plaintiff should have, in return for benefits to be provided by, and in fact obtained from, the plaintiff in connection with their joint use or occupation of the property. The common ingredient of both categories is an unconscientious use of the legal title. It may be suggested as, perhaps, Lord Denning may have had in mind in his statement of the principle in Hussey v Palmer that the basis of the constructive trust found in the second category of cases is the prevention of unjust enrichment; but I would respectfully prefer the view of Lord Reid in Pettitt v Pettitt [1970] AC 777 at 795, that the doctrine of unjust enrichment, whilst applicable to money claims, is not necessarily appropriate where the claim is to a beneficial interest in the subject property. In my opinion, the facts proved establish a constructive trust of the beneficial interest promised to the defendant, and the defendant is entitled to have this court declare that trust in appropriate terms, and to rely upon it as a defence to the plaintiff’s claim for possession based upon his legal title. It was not contended that the plaintiff, as executor, would not be bound. It is well established that the declaration of a constructive trust is not inhibited by the Statute of Frauds or, more correctly for New South Wales, s 54A of the Conveyancing Act 1919: see Last v Rosenfeld. If I had reached the conclusion that the nature of the interest, which it was the parties’ intention that the defendant should have, fell short of a beneficial proprietary interest in the property, it would have been necessary to consider whether her interest might have been a specifically enforceable contractual licence which would have afforded an equitable defence to the plaintiff’s claim for possession as found in Tanner v Tanner [1975] 1 WLR 1346; [1975] 3 All ER 776, the decision in which is explained by Megaw LJ in Horrocks v Forray [1976] 1 WLR 230 at 235, 236; [1976] 1 All ER 737 at 741, 742 … [Holland J then dealt with the defendant’s alternative claim for specific performance based on the oral agreement with Ogilvie. The defence to this claim was that the agreement was unenforceable for want of the writing required by New South Wales, s 54A. The defendant relied on part performance to overcome the absence of writing, but Holland J felt obliged to apply Millett v Regent [1975] 1 NSWLR 62 and therefore reluctantly held that Mrs Ryan’s actions did not amount to part performance.] In my opinion, the authorities referred to do not establish the plaintiff’s contention. In my view, the true position is that, if the facts proved are such that, in equity, a constructive trust would arise, a court of equity will enforce that trust, notwithstanding that amongst the facts relied upon to establish it there is an agreement proved of which specific performance could not have been ordered because of the Statute of Frauds. A constructive trust may arise in circumstances where there is nothing that the law would call a contract, and a contract for the sale or other disposition of land may occur in circumstances which would not give rise to a constructive trust; but, in my opinion, the

enforceability of a constructive trust of a beneficial interest in land is not inhibited by the presence of an oral contract otherwise unenforceable, because that would make the statute an instrument of the fraud which the constructive trust is designed to prevent … The result is that, in my opinion, the defendant is entitled to succeed on her first claim for relief in the cross claim and the plaintiff cannot succeed on his claim for possession. I will dismiss the statement of claim, and, on the cross claim, I will make a declaration that the plaintiff holds the property known as 106 Barber Street, Gunnedah, on trust for the defendant during her life, to permit the defendant to occupy the same rent free for as long as the defendant may desire to do so, and, subject thereto, upon trust for the plaintiff, that is to say, for the plaintiff in his capacity as executor of the will of James Grant Ogilvie, deceased.

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4.118

In Allen v Snyder [1977] 2 NSWLR 685, the New South Wales

Court of Appeal examined the circumstances in which a constructive trust could arise in relation to property claimed by the parties to a marriage or de facto relationship. The plaintiff and defendant had lived together for a total of 13 years, but had never married. From 1966 to 1974 they lived in a house to which the plaintiff, the male, had title and from 1974 to 1977 the defendant lived there alone. In 1977 the plaintiff commenced proceedings to evict the defendant. She resisted the suit, claiming that the beneficial interest in the land was shared equally between them. The trial judge rejected her defence and she appealed on two grounds: first, that on the evidence the trial judge should have held that the parties had a common intention that the beneficial interest was to be shared equally; and, second, that he should have imputed such an intention as a matter of law. Glass JA summarised the effect of Pettitt v Pettitt [1970] AC 777; [1969] 2

All ER 385 and Gissing v Gissing [1971] AC 886; [1970] 2 All ER 780 as follows: Pettitt v Pettitt and Gissing v Gissing are two decisions of the House of Lords, each of which rejected a claim by a spouse to a beneficial interest in the matrimonial home held in the name of the other. In the course of their judgments their Lordships expressed numerous obiter opinions, of which I believe the following represents a consensus. 1.

The court merely declares the rights of the parties, and has no power to vary them in accordance with considerations of fairness …

2.

Except for the presumption of advancement, the principles governing equitable interests are the same in disputes between spouses as in a dispute between other parties.

3.

In the absence of writing to prove an express trust, the court will give effect to an agreement as to the manner in which the beneficial interest is to be held. The oral agreement so enforced is one under which the claimant spouse, by contributions of one kind or another, has facilitated the acquisition of the home.

4.

The common intention to which the court gives effect may be expressed in such an oral agreement, or it may be inferred from the conduct of the parties. What is enforced is an actual intention, inferred as a matter of fact, not an imputed intention which they never had, but would have had, if they had applied their minds to it.

5.

The court gives effect to the trust created by the agreement or common intention that, if the spouses contribute as contemplated, the beneficial interest will be held in accordance with their agreement or common intention.

6.

An agreement that a spouse in whom the title is not vested shall have a beneficial interest, without requiring any contribution from her, would be a voluntary declaration of trust and unenforceable …

7.

Financial arrangements between spouses will appear in many different forms. They may involve payments, loans, gifts or services. They may relate to the deposit, the balance purchase price, the mortgage payments, the furniture, the household expenditure. Whether the arrangement discloses an agreement or common intention referable to the beneficial enjoyment of the home is a problem of evidence, not of law.

8.

Proof of expenditure or services for the benefit of the household, or the provision of furniture,

is insufficient, standing alone, to show a common intention as to the ownership of the home.

[page 331]

9.

By appropriate evidence, it may be proved that an agreement or common intention arose after the home had been acquired.30

10. A relevant common intention may be inferred from conduct, although it has not been the subject of any express communication between the parties. There is a problem of no inconsiderable dimensions in determining what is the nature of the trust to which the courts give effect upon proof of such an agreement or common intention. In Gissing v Gissing it is variously called a resulting trust, a resulting, implied or constructive trust, or a resulting or implied trust, or breach of faith. Since it is based upon actual intention, expressed or inferred, and notions of justice are irrelevant, constructive trusts, as traditionally defined, appear to be excluded. Is it a new kind of constructive trust, an express trust or a resulting trust? … There is, no doubt, a problem of classification in deciding what kind of trust it is, when an agreement or common intention is established that the beneficial interest is to be held in certain proportions. Since the respective shares of the spouses may be unrelated to their respective contributions to the purchase price, it is not suggestive of a resulting or implied trust. It is rather an express trust which lacks writing. I conclude that their Lordships were describing it as a constructive trust, because, in the absence of writing, it was to be distinguished from express trusts. It would, nevertheless, be enforced because reliance by the trustee on the statute requiring writing would be an equitable fraud: Rochefoucauld v Boustead [1897] 1 Ch 196; Re Densham [1975] 1 WLR 1519 at 1525; [1975] 3 All ER 726 at 732. The expression ‘breach of faith’ used by Viscount Dilhorne, and the insistence by Lord Diplock that the legal owner’s conduct, in disclaiming the beneficial interest, would be inequitable support this view. So understood the trust falls into the same category as Bannister v Bannister [1948] 2 All ER 133, and Last v Rosenfeld [1972] 2 NSWLR 923, where the legal owner acquired his title pursuant to a bargain with his transferor that a beneficial interest was being reserved to the latter; Binions v Evans [1972] Ch 359; [1972] 2 All ER 70, where the legal owner took with express notice of an agreement made by the transferor to him that a third party retained a beneficial interest, and Ogilvie v Ryan [1976] 2 NSWLR 504, where the claimant was promised a beneficial interest by the legal owner, if she

lived with him and looked after him. The trust is enforced, because it is unconscionable of the legal owner to rely on the statute to defeat the beneficial interest. It could justifiably be called an express trust, as it was in Rochefoucauld v Boustead. Or it might be called an implied trust, based upon presumed intentions which have been modified by evidence to accord with the actual intentions. But when it is called a constructive trust, it should not be forgotten that the courts are giving effect to an arrangement based upon the actual intentions of the parties, not a rearrangement in accordance with considerations of justice, independent of their intentions and founded upon their respective behaviour in relation to the matrimonial home: Re Densham.

[page 332]

Glass JA referred to the view, advanced by Lord Denning, that the court could impose a constructive trust whenever it was necessary in order to achieve an equitable distribution of the property in dispute. He continued: With great respect to my learned colleagues, I am unable to accept the proposition that a trust of the matrimonial home may be based upon a common intention, which does not actually exist, but which is ascribed to the parties by operation of law. It is without authoritative backing and contrary to principle and authority … The doctrine that a trust of the matrimonial home may arise in favour of a spouse as a result of her contribution to the acquisition or maintenance of the home, in the absence of any actual understanding or reciprocal intention, is also wholly inconsistent with the line of reasoning in the High Court cases referred to in Hepworth v Hepworth (1963) 110 CLR 309 at 318. Since the decisions of the English Court of Appeal which establish a novel constructive trust are in conflict also with dicta in the House of Lords, this court is directed by ultimate authority both in England and Australia not to follow them.

Glass JA and Samuels JA took the view that the defendant had not demonstrated that the parties had a common intention that she should acquire a beneficial half interest in the house except in the event of her marrying the plaintiff. Hence, no constructive trust could arise. Mahoney JA

agreed with the trial judge’s conclusion that a constructive trust should not be held to arise in favour of the defendant. However, he took the view that in some circumstances the court could impose a constructive trust, irrespective of the intention of the parties, in order to avoid an inequitable result. In adopting this approach, Mahoney JA adhered to the views he had earlier expressed in Doohan v Nelson [1973] 2 NSWLR 320.31

4.119 Questions 1.

Is it realistic to draw a distinction between an implied intention which the court infers from the parties’ conduct, and an imputed intention which the court attributes to the parties irrespective of their real intention?32 Why should the court not be prepared to infer a common intention that the woman should have an interest in the property, by virtue of her expenditure on furniture and performance of household services? Does this approach have a discriminatory effect on women, because of the responsibility they have traditionally had for domestic labour?

2.

In Ogilvie v Ryan, reference is made to the principle that where a person has procured a transfer of title to land to himself or herself on the basis that the land will be held on trust for the transferor or some third party, equity will not permit the transferee to rely on the Statute of Frauds to defeat the trust: see, for example,

[page 333]

Binions v Evans [1972] Ch 359; [1972] 2 All ER 70; Dalton v Christofis [1978] WAR 42; Wratten v Hunter [1978] 2 NSWLR 367; see 4.95C. What is the correct way of classifying this principle? Is the court enforcing the express trust by preventing the trustee from pleading the Statute of Frauds? Or is the express trust regarded as unenforceable, the court imposing a constructive trust to prevent the trustee using the statute as an instrument of fraud? Does the distinction matter?

4.120

Even where the legal title holder intended that the other partner

should obtain an interest in the property, it is necessary for the claimant to show that he or she has acted to his or her detriment to establish a constructive trust of this kind: see Higgins v Wingfield [1987] VR 689.33 In Morris v Morris [1982] 1 NSWLR 61, the widowed father of S sold his home and used the proceeds to pay for an extension to the home of S and his wife. The arrangement between the parties was that the father would move into the extension and become part of his son’s family. There was no discussion as to the duration of the arrangement or as to what should happen if the relationship between the parties broke down. The son’s marriage did break down, and subsequently the relationship between the father and his daughter-in-law deteriorated to such an extent that the father moved out. Would the father succeed in a claim for the return of his contribution? The court held there was nothing from which a trust could be implied; but it would be unconscionable for the son and daughter-in-law to retain the benefit; an equitable charge was imposed to secure the father’s expenditure

plus interest. Compare Malsbury v Malsbury [1982] 1 NSWLR 226 where a father contributed to the purchase of a house by the son and daughter-in-law on the basis that he would live there and be cared for. The son and daughterin-law separated, the father remaining in the house with the daughter-in-law. The court held that the house was purchased on express trust for the father. However, there was no common intention that the father be repaid as it did not form part of the terms of the express trust. Nevertheless, the impossibility of performance by the trustees of the substantial terms of the original express trust gave rise to a constructive trust for the father in proportion to his contribution. 4.121

In Rasmussen v Rasmussen [1995] 1 VR 613, the father, Paul

Rasmussen, owned various properties which he farmed with his sons. The understanding between the father and the sons was that the property would be worked as a single enterprise, that the sons would not receive wages and that eventually land would be transferred to, or purchased in, the name of each of the sons. Various properties were transferred to some of the sons under this arrangement, and it was understood by one son, Ernest, that he would receive a particular property, known as ‘Markey’s’. Instead, Paul devised this property to his grandson, Harold. In the Supreme Court of Victoria, Coldrey J imposed a constructive trust on this property in Ernest’s favour, under the principles relating to common intention constructive trusts. Paul and Ernest had had a

[page 334]

common intention that Ernest would become owner of the property, upon which Ernest had acted to his detriment. It was unconscionable for Paul (or Harold taking as a volunteer under Paul’s will) to deny Ernest an interest in the property. 4.122

In Le Compte v Public Trustee [1983] 2 NSWLR 109, S expressed an

intention to purchase certain property for C because he had been so good to her. She subsequently purchased the property, and S and C lived there and both regarded it as their home. C worked upon it and spent money on it on that understanding. S died intestate and C sought an order that the Public Trustee, as executor of her estate, held the land upon trust for him. It was held that the doctrine of constructive trust was applicable. The quantum of the beneficial interest was held to be commensurate with inequity that would otherwise arise. This was satisfied by a life estate. In Allen v Snyder [1977] 2 NSWLR 685, the majority view was that it was necessary to show an actual common intention that the claimant would receive an interest in the property, before a constructive trust would be imposed in his or her favour. Such an intention could be inferred from the conduct of the parties, but could not be imputed to them. Performance of household services or expenditure for the benefit of the household, standing alone, would not give rise to the inference of such an intention. This requirement led to inconsistencies between cases where courts were, and were not, prepared to infer an intention from the conduct of the parties. It also limited the extent to which the imposition of a constructive trust could achieve a fair distribution of property between the legal title holder and a party who had indirectly contributed to household resources.34 In Muschinski v Dodds (1985) 160 CLR 583; 62 ALR

429; 60 ALJR 52 and Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29, below, the High Court found a new basis for the imposition of a constructive trust.

Constructive trusts based on unconscionable use of legal title 4.123C

Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29 High Court of Australia

[The parties, a man and a woman, were de facto partners for about four years and had a child during this period. Initially they lived in a home unit owned by the man. Later, the man bought land in his own name, a house was built on it, and the couple moved into the house. Throughout their relationship, except for about three months after the child was born, the woman was in paid work. She generally gave the man her pay packet. The man used the couple’s pooled earnings to meet household expenses, including repayments of the mortgage loan relating to the home unit. Because of the woman’s contributions, the loan was reduced more rapidly than would otherwise have been the case. The parties agreed that the total amount contributed to the common pool of earnings was approximately $89,000, of

[page 335]

which the man contributed approximately $51,000 and the woman approximately $38,000. (The court credited the woman with income she would have earned if she had not taken three months’ leave from paid work after the child was born.) The woman sought a declaration that she had an equitable interest in the house. The New South Wales Court of Appeal (Kirby P and Priestley JA, with Mahoney JA dissenting) held that there was sufficient evidence to infer a common intention that the woman should have an interest in the property. Thus, on the basis of the principle in Ogilvie v Ryan, a constructive trust arose in her favour. All members of the High

Court held that the finding of common intention could not be sustained. They went on to consider whether there was any other basis for the imposition of a constructive trust.] Mason CJ, Wilson and Deane JJ: … The question remains whether in the circumstances the respondent is entitled to relief by way of constructive trust. The answer to this question calls for some consideration of Allen v Snyder [1977] 2 NSWLR 685 which was thought by the Court of Appeal to be an obstacle to relief on this footing, and of Muschinski v Dodds (1985) 62 ALR 429; 60 ALJR 52 where the circumstances in which a constructive trust would be imposed were discussed. In Allen v Snyder a man and a woman lived together for many years, intending at first to marry, but not doing so. They lived in a house, of which the man was the legal owner, which was furnished by the woman out of her own funds. The house was purchased by the man during the period of cohabitation with the assistance of a loan. The Court of Appeal held that in the absence of a common intention to create a trust, there was no basis for holding that the man was a trustee of the house for the two of them in equal shares. The members of the Court of Appeal arrived at this conclusion for different reasons. Glass JA (with whom Samuels JA agreed), when referring to cases in which a trust, not evidenced in writing, of a home has been recognised, said (at 693): But when it is called a constructive trust, it should not be forgotten that the courts are giving effect to an arrangement based upon the actual intentions of the parties, not a rearrangement in accordance with considerations of justice, independent of their intentions and founded upon their respective behaviour in relation to the matrimonial home. Later his Honour observed (at 695): The doctrine that a trust of the matrimonial home may arise in favour of a spouse as a result of her contribution to the acquisition or maintenance of the home, in the absence of any actual understanding or reciprocal intention, is also wholly inconsistent with the line of reasoning in the High Court cases referred to in Hepworth v Hepworth (1963) 110 CLR 309 at 318. On the other hand Mahoney JA correctly acknowledged (at 704), as did Samuels JA (at 699), that a constructive trust may be imposed, even though a person on whom the trust is imposed had no intention to create a trust or to hold the property on trust. His Honour observed that in such situations an intention may be imputed in circumstances where the imputation is necessary ‘in good faith and in conscience’, though he added that this expression was of such generality that it did not provide an acceptable test for decisionmaking. In the ultimate analysis his Honour rejected (at 707) the argument that the court would impose a constructive trust by reference to what was ‘fair’ in the ordinary sense of that term. But in the course of [page 336]

reasoning to that result Mahoney JA indicated some situations in which it might be appropriate to impose a constructive trust. Thus, he said (at 706): A husband may pay for the matrimonial home and cause the legal title to be vested in the wife. The wife may earn money and use it in defraying household expenses, thus relieving the family budget and allowing the husband to pay mortgage instalments on the home. It will be necessary, from time to time, to determine whether, in such situations, the failure to recognise that the one or the other has a proprietary interest in the home is so contrary to justice and good conscience that a trust or other equitable obligation should be imposed. His Honour’s reference to ‘contrary to justice and good conscience’ is to be understood as ‘unconscionable’. The significance of this statement so understood is that it asserts that the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognise the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that unconscionable conduct. In Muschinski v Dodds a man and woman who had lived together for three years decided to buy a property on which to erect a prefabricated house and to restore a cottage. The woman was to provide $20,000 from the sale of her house and the man was to pay the cost of construction and improvement from $9,000 he would receive on the finalisation of his divorce and from loans. The property was conveyed to them as tenants in common. Although some improvements were made by the man, the erection of the house did not proceed and the parties separated. The woman contributed $25,259.45 and the man $2,549.77 to the purchase and improvement of the property. This court declared that the parties held their respective legal interests upon trust to repay to each his or her respective contribution and as to the residue for them both in equal shares. Deane J (with whom Mason J agreed) reached this result by applying the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them. His Honour said (at 620): … the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf Atwood v Maude (1868) LR 3 Ch App 369 at 374–5 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531. His Honour pointed out (at 614) that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention ‘to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle’. See also, at 617. In rejecting the

notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged (at 616) that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being [page 337]

a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust. In the present case the parties pooled their earnings with a view to meeting all the expenses and outgoings arising from their living together as a family. The individual contributions of each party were not allocated to a particular category or particular categories of expenses and outgoings. The pool of earnings was used to pay outgoings associated with accommodation — mortgage instalments on the unit at Cabramatta and the property at Leumeah — as well as other living expenses. There was no suggestion that the respondent’s contributions were paid and received by way of rent or a charge for use and occupation and for living expenses. Such a suggestion would be inconsistent with the relationship that came into existence between the appellant and the respondent, a family relationship which was for the most part until 1982 a long-term stable relationship in which marriage was under continuous contemplation. The land at Leumeah was acquired and the house on it was built in the context and for the purposes of that relationship. Together they planned the building of the house. Together they inspected it in the course of its construction. Together they moved out into it and made it their home after it was built. In this situation it is proper to regard the arrangement for the pooling of earnings as one which was designed to ensure that their earnings would be expended for the purposes of their joint relationship and for their mutual security and benefit. To the extent which the pooled funds were the source of payment of mortgage instalments by the appellant, the pooled funds contributed not only to present accommodation expenses but also to the security of the parties’ accommodation in the future. In this context it would be unreal and artificial to say that the respondent intended to make a gift to the appellant of so much of her earnings as were applied in payment or mortgage instalments. There is no evidence which would sustain a finding that the respondent intended to make a gift to the appellant in this way. The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent. It therefore becomes necessary to determine the terms of that constructive trust. The

facts that the Leumeah property was acquired and developed as a home for the parties and that, at least indirectly, it was largely financed out of money drawn from the pool of their earnings, this being one of the purposes which the pool was to serve, combine to support an equality of beneficial ownership at least as a starting point. Equity favours equality and, in circumstances where the parties have lived together for years and have pooled their resources and their efforts to create a joint home, there is much to be said for the view that they should share the beneficial ownership equally as tenants in common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind. The question which has caused us particular difficulty is whether any such adjustment is necessary in the circumstances of the present case to avoid any injustice which would otherwise result by reason of disparity between individual financial contributions. The conclusion to which we have come is that some such adjustment is necessary. [page 338]

Although the present case is close to the borderline, we do not consider that it is possible to treat the respective financial contributions of the parties as being approximately equal. Even after crediting the respondent with the amount she would have earned during the period of three months during which the respondent was precluded from working by reason of having and caring for their child, it is agreed that the respective contributions were approximately 55 per cent as to the appellant and 45 per cent as to the respondent, that is to say, the appellant contributed almost a quarter more than the respondent. The court should, where possible, strive to give effect to the notion of practical equality, rather than pursue complicated factual inquiries which will result in relatively insignificant differences in contributions and consequential beneficial interest. We do not think, however, that the difference in the present case can be regarded as relatively insignificant. Nor has it been suggested that the difference in the amount of the financial contributions was offset by the greater worth of the respondent’s contribution in other areas. In these circumstances, though acknowledging that the case is close to the borderline, we consider that the beneficial interests of the parties in the proportions 55 per cent to the appellant and 45 per cent to the respondent … [Mason CJ, Wilson and Deane JJ then held that these proportions were to be adjusted to take account of the mortgage instalments on the unit paid by the appellant prior to the commencement of the relationship and mortgage instalments paid on the house after the relationship terminated. A similar allowance was made for the value of furniture purchased from pooled funds which had been removed by the woman. Toohey J agreed with Mason CJ, Wilson and Deane JJ that a constructive trust could be imposed to prevent the man unconscionably retaining the benefit of the woman’s contributions. However, he suggested that unjust enrichment was an alternative basis for the imposition of such a trust. Gaudron J also agreed with

the reasoning of Mason CJ, Wilson and Deane JJ. She pointed out that if the money in the joint fund constituted by the parties’ pooled earnings had been directly applied to purchase the land and build the house, the parties would be presumed to have equitable interests proportionate to their contributions. The presumption of resulting trust arising from a direct contribution to the purchase price of property ‘has its foundation in Equity’s aversion to that which is unconscionable’: at 284. Similarly, it was unconscionable, in the circumstances of this case, for the man to retain the benefit of the woman’s contributions. Gaudron J suggested that, in the context of domestic relationships ‘it is relevant to inquire whether the asset was acquired for the purposes of the relationship, and whether non-financial contributions should be taken into account’: at 37.]

4.124

Baumgartner establishes an alternative basis for the imposition of a

constructive trust, which does not require proof that the legal title holder had an express or implied intention to benefit the contributor (the so-called ‘common intention’ requirement). However, the High Court also made it clear that it could not impose a constructive trust simply to achieve a fairer distribution of property between spouses or de facto partners. If the Baumgartner constructive trust is not based simply on ‘fairness’, what requirements must be satisfied by a person claiming an interest in property? The requirement that the ‘substratum of a joint relationship or endeavour is removed without attributable blame’ (Muschinski v Dodds (1985) 160 CLR 583 at 620; 62 ALR 429 at 455; 60 ALJR 52 at 67 per Deane J) appears to have been ignored, presumably because it is regarded as inconsistent with the philosophy which underpins ‘no-fault’ divorce.

[page 339]

4.125

Subsequent cases have examined the extent to which pooling of

earnings is necessary, and when it will be regarded as unconscionable for a person to retain the benefits of a relationship that has now ended. This aspect was considered by the Queensland Court of Appeal in Nolan v Nolan [2015] QCA 199 at [58], where Boddice J accepted the finding of the primary judge that ‘the court could take into consideration “the pooling of financial resources, the contribution of labour and the contributions to family welfare by way of domestic assistance, home making and parenting” and that in taking those matters into account there was no requirement for a “precise accounting”.’ Boddice J also noted the following observation of Campbell J in West v Mead (2013) 13 BPR 24,431 at [62]: Part of the justification for imposing the Baumgartner constructive trust is that the parties have jointly been building up assets, on the basis that those assets will be available for the joint endeavour in future. Part of the reason why it can be unconscionable to let the legal title lie where it falls, if the relationship fails, is that each knew that the other was contributing to a common pool on the basis that the pool, and assets acquired from it, would be used for their ongoing common benefit. It is unconscionable for the party who ends up, at the end of the relationship, with a disproportionate share of the assets which were built up during the relationship, to keep those assets when he or she knew that that was the basis on which the assets were being built up.

4.126

Nolan is also useful in highlighting some of the difficulties in

determining the correct apportionment of contributions to a joint endeavour. In that case, the court had to consider the applicability of an express agreement between the parties concerning how their respective contributions should be assessed. 4.127

The case extracted below is an example of a case in which one of

two parties who had lived together and who were registered as tenants in

common were held not to have a beneficial interest in a property, even though she had assumed liability under a mortgage over the property. 4.128C

McKenzie v Storer [2007] ACTSC 88 Supreme Court of the Australian Capital Territory

[The plaintiff and defendant were registered as tenants in common of a property in Kambah, Australian Capital Territory, in the proportion of 75:25. It was purchased with money advanced by the plaintiff and a loan made jointly to the plaintiff and defendant. A condition of the loan was that the defendant not only be a party to the loan but also be registered on the title to the Kambah property and a signatory to the mortgage. The plaintiff and the defendant were jointly and severally liable to the bank to repay the loan. Approximately two-thirds of the borrowed funds were used to buy the property. The remaining amount was borrowed by the defendant to pay off an existing personal loan, for personal use, and to pay for renovations on another house in Queanbeyan owned by the plaintiff which she was preparing to sell. Their intention was that the loan would be paid off with the proceeds of sale of the other property, and that the amount borrowed by the defendant would be paid off (by payments to the plaintiff) in 4–5 years. They agreed that the defendant would then not

[page 340]

have any rights over the Kambah property. However, when the Queanbeyan property was eventually sold, the plaintiff paid off only about half of the loan, retaining the balance of the proceeds of sale for herself. This action led to friction between the parties. The parties lived together for about five years until the defendant moved out. They both contributed to the mortgage repayments. The defendant claimed a 25 per cent share of the property.] Stone J: … In assuming liability under the mortgage taken out to finance the acquisition of the property Ms Storer would, in the absence of any intention to the contrary, be presumed to take beneficially as well as legally; Calverley v Green (1984) 155 CLR 242. The fact that the registered interest is held by Mrs McKenzie and Ms Storer as to 75% and 25% respectively would, in the absence of any intention to the contrary, be sufficient to show that their beneficial entitlement reflected their legal entitlement. In this case, however, there is ample evidence of an intention to the contrary.

The evidence shows that neither Ms Storer nor Mrs McKenzie ever intended that Ms Storer being on the title to the Kambah property should give her any interest in the property beyond the mere legal title that she acquired on registration as a tenant in common with Mrs McKenzie, and the right to live there while she repaid her part of the loan. This much is shown by Ms Storer’s own evidence and that of Ms Baskin. It is consistent with the evidence of the plaintiff. There was a great deal of evidence detailing the numerous ways in which the parties, in particular Mrs McKenzie, had failed to live up to the commitments they had made. It is not necessary for me to consider these in any detail. The joint endeavour had collapsed and the parties had not provided for this eventuality. Since the arrangement between Mrs McKenzie and Ms Storer was consensual but not contractual, it is not necessary to attempt to allocate fault. It is, however, necessary to give effect to the common intention of the parties in regard to the interests that they obtained on the purchase of the Kambah property. Counsel for Ms Storer submitted that the imposition of a constructive trust against Ms Storer would not be appropriate because she has not acted unconscionably. This submission fails to recognise that it would be unconscionable for Ms Storer to refuse to transfer her interest to Mrs McKenzie when the circumstances in which she acquired it included a common intention that she did not have a beneficial interest and would in due course transfer her interest to Mrs McKenzie. This is not an instance of the court ascribing to the parties an intention that does not exist. That is impermissible; Allen v Snyder [1977] 2 NSWLR 685 at 694 per Glass JA. I have found on the basis of oral and written evidence, that the parties had an actual intention that Ms Storer should not hold a beneficial interest in the property and that, once her debt had been repaid she would transfer her registered interest to the plaintiff. To refuse to give effect to this intention would be unconscionable and it is this unconscionability that equity will act to prevent by the imposition of a trust. In Allen v Snyder at 694, Glass JA in referring to such trusts, and to the House of Lords’ judgment in Gissing v Gissing [1971] AC 886, said: The courts have given effect to them because the legal owner, in denying the beneficial interest, has behaved inequitably. The rest of the judgment [in Gissing v Gissing per Lord Diplock at 905] makes it clear that the inequitable conduct relevant for present purposes consists in disclaimer by the legal owner of the obligations of conscience based upon an express agreement, or common intention of the parties. It follows that Ms Storer holds her 25% interest in trust for the plaintiff. While I accept that Ms Storer’s motivation in entering into the arrangement was benevolent and that she may, understandably, feel that her kindness and concern for Mrs McKenzie have not been [page 341]

appreciated, it would, nonetheless, be unconscionable for her to refuse to transfer her interest to Mrs McKenzie, subject to certain conditions to protect her legitimate interests. [Stone J went on to hold that under the Domestic Relationships Act 1994 (ACT) the order that

the defendant hold her 25 per cent share on trust for the plaintiff be subject to the condition that Ms Storer ‘be relieved of her obligations under the mortgage and, if necessary, for the refund to her of any amount paid under the mortgage in excess of an amount required to repay that part of the loan moneys that were applied to her personal use’ (at [87]).]

4.129 Questions 1.

How was the wife’s interest quantified in Baumgartner? How does the quantification of the interest of the contributor under a Baumgartner

type

of

constructive

trust

differ

from

the

quantification of an interest arising under a constructive trust based on ‘common intention’? Was Mrs Ryan’s equitable interest in Ogilvie v Ryan [1976] 2 NSWLR 504 (4.117C) quantified by reference to the value of her contributions, or in some other way? When does the claimant’s equitable interest arise under a Baumgartner-type constructive trust? For discussion of this issue, see Levine, ‘The Consequences Flowing from the Timing of the Imposition of A Constructive Trust’ (1997) 5 APLJ 74.35 2.

Do you agree with the calculations in Henderson? Would it have been fairer if the plaintiff’s claim for $103,000, based on her expected rental costs for the rest of her life, had been accepted? Do you agree that in the case of the plaintiff ‘the detriment is thus close to nil’ given that she had lived ‘rent free and virtually rates free’ (at [104]) for 17 years? Was the trust that was found to exist in McKenzie v Storer a common intention constructive trust?

4.130

In assessing the quantum of the woman’s equitable interest in

Baumgartner, the High Court credited the woman with the ‘opportunity costs’ related to the three-month period she spent at home caring for their child. But in that case, the woman made contributions of money, as well as contributions of unpaid domestic labour. It is noteworthy that the High Court took no account of the value of the woman’s domestic contributions performed during the period she was in paid work. To what extent does the Baumgartner-type constructive trust allow the court to recognise nonfinancial contributions to family welfare? On this point, Neave (‘The New Unconscionability Principle — Property Disputes Between De Facto Partners’ (1991) 5 AJFL 185 at 202) comments as follows:

[page 342]

Because the law has traditionally failed to recognise the value of domestic labour, courts may not regard it as unconscionable for a partner in a de facto relationship to take the benefit of the other partner’s domestic contributions while at the same time denying that partner an interest in the property. Ironically, women whose contributions have been largely domestic may have greater success in claiming an equitable interest under a common intention constructive trust. It is disappointing that the Baumgartner principle has not overcome the disadvantage which women experience because of their responsibility for housework and the care of children.

4.131

A similar criticism was voiced by Justice Kirby, then President of

the New South Wales Court of Appeal, in Bryson v Bryant (1992) 29 NSWLR 188. In that case, the majority of the court refused to impose a Baumgartner-type constructive trust in favour of the beneficiaries under the wife’s will. The wife had made domestic contributions over a 60-year

marriage. (She may have made some financial contributions as well.) Both the husband and wife had died, so that the contest was between the beneficiaries taking under the husband’s will (the husband had had legal title to the assets) and the beneficiaries under the wife’s will. The majority held that it was not unconscionable for the man to retain the benefit of his wife’s contributions. The President supported the imposition of a constructive trust, commenting that: It is important that the brave new world of unconscionability should not lead the court back to family property law of 20 years ago by the backdoor of a preoccupation with contributions, particularly financial contributions … [The brave new world should not] be confined to helping farmers’ and bee-keepers’ wives, leaving others who have provided ‘women’s work’ over their adult life-time to be told condescendingly, by a mostly male judiciary, that their services should be regarded as freely given labour only. Or catalogued as attributable solely to a rather one-way and quaintly described ‘love and affection’, when property interests come to be distributed [(1992) 29 NSWLR 188 at 204].36

In Miller v Sutherland (1990) 14 Fam LR 416, the Supreme Court of New South Wales applied the Baumgartner principle to contributions of labour made by the woman in extensively renovating a house in the name of her de facto partner. Why do you think courts may be more willing to recognise labour in the form of house renovations than to recognise labour in the form of household work and child-rearing? Is this an example of gender bias, built into the legal rules?37 For a case in which the court considered application of the Baumgartner principle in a commercial context, see KT & T Developments Pty Ltd v Tay (1995) 13 WAR 363, where three people including the defendant created the plaintiff company to buy and sell property. The other two director/shareholders agreed to issue shares to dilute the defendant’s

shareholding to a fraction of a per cent. However, no constructive trust was imposed on the plaintiff because there was no joint endeavour between the plaintiff and others, only between the three shareholders. In some cases, the Baumgartner principle has been applied in the situation where property is purchased in the names of a couple in the expectation that they will marry. If the marriage falls through, the party who has paid the whole or most of the purchase price may be entitled to an interest under a constructive trust, proportionate to these contributions. See Jancso v Vuong

[page 343]

(1988) 12 Fam LR 615; cf Jenkins v Wynen [1992] 1 Qd R 40. Why may it be necessary for the contributor to rely on a constructive trust, rather than a resulting trust, in this situation? 4.132

The mere fact of cohabitation and sharing of household expenses is

insufficient to constitute a ‘joint endeavour’. In Willis v The State of Western Australia (No 3) [2010] WASCA 56 (31 March 2010) a Mr Lamers purchased a property for $84,000 in 1998 by means of a $20,000 sum from a workers’ compensation payment and a $64,000 loan advanced by the Commonwealth Bank. The loan was secured by a mortgage over the property. In about June 2000, the appellant commenced a de facto relationship with Mr Lamers, moving in with him about November 2001, together with her daughter from a previous relationship. On 6 June 2002, the appellant gave birth to a child from her relationship with Mr Lamers. In

about February 2004, the appellant and Mr Lamers separated. They continued, however, to have a casual relationship. In February 2005, Mr Lamers was imprisoned. He was released in early June 2006. When the appellant moved into the Cooloongup property, the electricity and water services had been disconnected for non-payment of fees and charges. The appellant paid about $600 in outstanding electricity charges and $1,000 in outstanding water charges. On payment of these amounts, the services were reconnected. The appellant challenged the state’s right to confiscate the property under the Criminal Property Confiscation Act 2000 (WA) on the basis that she held an interest under a Baumgartner constructive trust: Buss JA (McLure P and Owen JA concurring): It was necessary for the appellant, as claimant, to identify with some precision, the nature, purpose and scope of her alleged joint endeavour with Mr Lamers. The de facto relationship between them, combined with any express or implied promise to provide support and accommodation, was not, of itself, a sufficient basis for creating or recognising a proprietary interest in the Cooloongup property. Counsel for the appellant suggested, in argument before this court, that ‘the basis of the joint endeavour’ was ‘the creation of the family unit and the furthering of the family unit’ (appeal ts 25). That general and unqualified submission is extraordinary and unsound. Mere cohabitation, without more, does not provide any basis for inferring the existence of a joint endeavour between the cohabitating parties, which has as its purpose the acquisition, improvement or maintenance of the property in which the members of the family unit make their home. I am satisfied, on the primary judge’s findings of fact and the other facts that were not in dispute, that no secure foundation exists for inferring that, at any material time, the appellant and Mr Lamers embarked upon a joint endeavour to increase the equity in the Cooloongup property (Mr Lamers having purchased it in 1998) or to improve or maintain the property. The primary judge was, in my respectful view, correct in deciding, on the evidence before him, that: (a) although the appellant and Mr Lamers pooled their resources from November 2001 until July 2005, his Honour was unable to make a finding as to the amount actually contributed by the appellant towards the mortgage payments; and (b) the pooling of resources was, on balance, a

matter of practical convenience, for the purpose of ensuring that essential household bills were met, rather than for the purpose of some joint endeavour. Further, the evidentiary deficiencies in the appellant’s case precluded any findings as at 10 August 2005 or any earlier date in relation to: (a) the amount of the appellant’s financial contributions; (b) the proportion which her financial contributions bore to Mr Lamers’ financial contributions; (c) the state of the mortgage account with the Commonwealth Bank; or (d) whether her financial contributions had reduced the outstanding principal amount of the mortgage (and, if so, the amount of the reduction) or had avoided a default.

[page 344]

In addition, the evidentiary deficiencies did not permit the making of a finding as to when any joint endeavour may have commenced. Presumably, any such endeavour would have come to an end in about February 2004 upon the relationship between the parties breaking down irretrievably and Mr Lamers ceasing to reside at the Cooloongup property.

4.133

The principle in Ogilvie v Ryan [1976] 2 NSWLR 504 (4.117C)

does not appear to be restricted to arrangements made by spouses or de facto partners: see Allen v Snyder [1977] 2 NSWLR 685 at 689 per Glass JA. The Ogilvie v Ryan principle was applied to a dispute involving parents and siblings in Glouftsis v Glouftsis (1987) 44 SASR 298. Can the Baumgartner constructive trust principle be applied in cases involving homosexual partners? See Harmer v Pearson [1993] ACL Rep 430 Qld 1; W v G (1996) 20 Fam LR 49. Although Baumgartner provides a broader basis for the imposition of a constructive trust than the actual common intention of the parties, courts have continued to apply Ogilvie v Ryan in cases where such an intention has been held to exist. For a case with very sympathetic facts in which the New South Wales Court of Appeal took this approach, see Green v Green (1989)

17 NSWLR 343; 13 Fam LR 336 (NSWCA); cf Cooke v Cooke [1987] VR 625. 4.134

Considerable judicial and academic controversy exists as to the

juridical nature of the constructive trust, and as to whether any underlying theme links together the disparate situations in which a constructive trust can be held to arise.38 In Canada, the Canadian Supreme Court has held that the imposition of a constructive trust may give rise to an order for compensation, rather than an interest in property: see Lac Minerals Ltd v International Corona Resources (1989) 61 DLR (4th) 14. See also Giumelli v Giumelli (1999) 196 CLR 101; 4.162C. In Muschinski v Dodds (1985) 160 CLR 583 at 615; 60 ALJR 52 at 65; 62 ALR 429 at 451, Deane J commented that: The acknowledgment of the institutional character of the constructive trust does not involve a denial of its continued flexibility as a remedy … The institutional character of the trust has never completely obliterated its remedial origins even in the case of the more traditional forms of express and implied trust. This is a fortiori in the case of constructive trust where, as has been mentioned, the remedial character remains predominant in that the trust itself either represents, or reflects the availability of, equitable relief in the particular circumstances. Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and inter-play of equitable principles in the circumstances of the particular case. In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date.

See also Re Osborn (1989) 91 ALR 135 where Pincus J held that an equitable interest under a constructive trust did not arise at the time of alleged acts giving rise to it. In Tasevska

[page 345]

v Tasevski [2011] NSWSC 174, Einstein J found that the contributions made by a mother to her son and daughter-in-law’s house gave her an equitable lien to the extent of the contributions. There could be no common intention constructive trust as the parties had agreed that her contributions would not give her a share of the property. His Honour reasoned, following Giumelli, that the equitable relief should be sufficient to avoid the legal title holder from getting a windfall gain. At the same time, to find an interest in the property under a constructive trust would jeopardise the couple’s right to remain in the house. Accordingly, an equitable lien was the most appropriate remedy.

4.135 Questions Does this mean that the equitable interest under the constructive trust comes into existence only from the date of a court order? What are the implications of this conclusion for its enforcement against a purchaser from the constructive trustee? Does a constructive trust arising from a contract for the sale of land come into existence at this time? See Bunny Industries v FSW Enterprises [1982] Qd R 712; 4.52C. In contrast, the idea that the constructive trust only comes into existence when the court declares it, was rejected by the Full Federal Court in Parsons and Parsons v McBain (2001) 109 FCR 120; 192 ALR 772.39 This issue will be re-examined below in relation to ‘equities’: see 4.202–4.213.

Legislative reform 4.136

The principles in Ogilvie v Ryan [1976] 2 NSWLR 504 (4.117C)

and Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29 (4.123C) have largely been overtaken by legislation. The Family Law Act 1975 (Cth) s 79 empowers the Family Court, in proceedings with respect to the property of the parties to a marriage, to make such order as it thinks just and equitable, altering the interests of the parties in the property taking into account the criteria specified in the legislation. The court is directed to take into account, inter alia, the contributions made by a party to the acquisition, conservation or improvement of the property, including not only financial contributions but those made in the capacity of ‘homemaker or parent’: s 79(4)(a), (b) and (c). Other matters to be taken into account by the court in deciding whether to make an order include the financial resources of each party; his or her age, state of health and capacity for employment; his or her responsibilities towards the children of the marriage; and the effect of any proposed order on his or her earning capacity: ss 75(2), 79(4) (d) and (e). For discussion of the operation of these provisions, see Kovacs, Family Property Proceedings in Australia, 1992, Ch IX.40 Importantly, the legislation has not rendered irrelevant the equitable doctrines. The provisions relating to constructive trusts remain applicable in disputes where s 79 of the Family Law Act 1975 does not apply, such as between a party to a marriage and a third party, for example, a wife and a creditor of her husband, or in contests

[page 346]

between the party to a marriage and a person claiming under the estate of the deceased spouse: cf Doohan v Nelson [1973] 2 NSWLR 320; Bryson v Bryant (1992) 29 NSWLR 188. However, if Family Law Act proceedings are commenced prior to the death of a spouse, they may now be continued by or against the deceased spouse’s personal representatives: see Family Law Act 1975 (Cth) s 79(8). 4.137

Pursuant to the Family Law Amendment (De Facto Financial

Matters and Other Measures) Act 2008 (Cth), the Federal Circuit Court and the Family Court of Australia now have the same range of powers to declare or adjust property interests in respect of de facto relationships, including same sex relationships, as in the case of matrimonial cases. The legislation, which is based on the referral of powers to the Commonwealth by participating jurisdictions, has some jurisdictional limits and requires a nexus with the participating jurisdictions.41

State and Territory legislation 4.138

In all Australian jurisdictions, legislation has been enacted which

gives courts power to vary the property rights of de facto partners: see Property Relationships Act 1984 (NSW) s 20; Relationships Act 2008 (Vic) s 45(1);42 De Facto Relationships Act 1996 (SA) ss 10-11; Relationships Act 2003 (Tas) s 40; Family Court Act 1997 (WA) s 205ZG; Domestic Relationships Act 1994 (ACT) s 15; De Facto Relationships Act 1991 (NT) s 18; Property Law Act 1974 (Qld) s 286. 4.139

As in the case of the Family Law Act, even where legislation confers

jurisdiction to reallocate the property rights of de facto partners, and parties to a domestic relationship, equitable principles remain relevant in a number of situations. First, such legislation preserves the operation of equitable principles, thus enabling partners to continue to make claims based on common intention constructive trusts or the Baumgartner principle. Second, some de facto partners will not be able to bring themselves within any of the categories as required by the legislation. One of the categories, for example, is that they must have lived together for the requisite period, usually two years: NSW, s 17(1); Vic, s 42(2); Qld, s 287(a); WA, s 205Z(1)(a); ACT, s 12(1); NT, s 16(1); Tas, s 37(1); SA, s 9(2) (three years). Third, de facto relationships legislation does not apply in disputes involving one partner in a de facto relationship and a third party claiming an interest in the property of the other partner.43 Until recently, the regulation of the property rights of parties in homosexual relationships was governed by the common law and equitable rules outlined above. Now, in all jurisdictions, the legislation has been extended to homosexual relationships: NSW, s 4; Vic, s 39; Qld, s 260; WA, s 205V; ACT, s 3; NT, s 3A(3)(a); Tas, s 4; SA, s 3(1).

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Acquisition of an interest in property by estoppel 4.140

In cases such as Ogilvie v Ryan [1976] 2 NSWLR 504 (4.117C)

and Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29 (4.123C), the court imposed a constructive trust to prevent the legal title holder from unconscionably denying the claimant an interest in the property. The concept of unconscionability, or, as it was described in the older cases, ‘equitable fraud’, also underpins the doctrine of proprietary estoppel, or, as it is also known, the doctrine of equity by acquiescence, which is examined in Inwards v Baker [1965] 2 QB 29; [1965] 1 All ER 446, below, and Crabb v Arun District Council [1976] Ch 197; [1975] 3 All ER 865, below. The equity of acquiescence appears to be firmly established, although it may have different characteristics from a full equitable interest. Although the doctrine of proprietary estoppel and the constructive trust based on the unconscionable behaviour of the legal title holder rest on similar principles, they have developed as separate lines of authority and the relationship between them has not yet been clearly defined. In Grant v Edwards [1986] 2 All ER 426 at 439; [1986] 3 WLR 114 at 130, Sir Nicholas Browne-Wilkinson J suggested that courts deciding whether a constructive trust should be imposed in favour of a person who had contributed to property held by another person might obtain useful guidance from the proprietary estoppel cases. He commented that ‘the two principles have developed separately without cross-fertilisation between them; but they rest on the same foundation and have on all other matters reached the same conclusions’. While the relationship between the principles applied in cases like Inwards v Baker and Crabb v Arun District Council, and in those like Allen v Snyder, is not entirely clear, it is common for them to be argued in the alternative in relation to the same set of facts: see Vinden v Vinden [1982] 1 NSWLR 618.

Proprietary estoppel 4.141C

Inwards v Baker [1965] 2 QB 29; [1965] 1 All ER 446 England and Wales Court of Appeal

Lord Denning MR: In this case old Mr Baker, if I may so describe the father, in 1931, was the owner of a little over six acres of land at Dunsmore in Buckinghamshire. His son, Jack Baker, was living in those parts and thinking of erecting a bungalow. He had his eye on a piece of land but the price was rather too much for him. So the father said to him: ‘Why not put the bungalow on my land and make the bungalow a little bigger’. That is what the son did. He did put the bungalow on his father’s land. He built it with his own labour with the help of one or two men, and he got the materials. He bore a good deal of the expense himself, but his father helped him with it, and he paid his father back some of it. Roughly he spent himself the sum of £150 out of a total of £300 expended. When it was finished, he went into the bungalow; and he has lived there ever since from 1931 down to date. His father visited him there from time to time. In 1951 the father died. The only will he left was one he made as far back as 1922 before this land was bought or the bungalow was built. He appointed as executrix Miss Inwards, who had been living with him for many years as his wife and by whom he had two children. He left nearly all his property to her and her two children by him. He left his son, Jack Baker, £400. Miss Inwards appointed her two children as trustees of the will with her. The trustees under [page 348]

the will did not take any steps to get Jack Baker out of the bungalow. In fact they visited him there from time to time. They all seem to have been quite friendly. But in the year 1963 they took proceedings to get Jack Baker out. Miss Inwards died during these proceedings. Her two children continue the proceedings as the trustees of the father’s will. The trustees say that at the most Jack Baker had a licence to be in the bungalow but that it had been revoked and he had no right to stay. The judge has held in their favour. He was referred to Errington v Errington and Woods [1952] 1 KB 290; [1952] 1 All ER 149, but the judge held that that decision only protected a contractual licensee. He thought that, in order to be protected, the licensee must have a contract or promise by which he is entitled to be there. The judge said: I can find no promise made by the father to the son that he should remain in the property at all — no contractual arrangement between them. True the father said that the son could live in the property, expressly or impliedly, but there is no evidence that this was arrived at as the result of a contract or promise — merely an

arrangement made casually because of the relationship which existed and knowledge that the son wished to erect a bungalow for residence. Thereupon, the judge, with much reluctance, thought the case was not within Errington’s case, and said the son must go. The son appeals to this court. We have had the advantage of cases which were not cited to the County Court judge — cases in the last century, notably Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1285; [1861–73] All ER Rep 384, and Plimmer v Wellington Corp (1884) 9 App Cas 699. This latter was a decision of the Privy Council which expressly affirmed and approved the statement of the law made by Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129 at 170. It is quite plain from those authorities that if the owner of land requests another, or indeed allows another, to expend money on the land under an expectation created or encouraged by the landlord that he will be able to remain there, that raises an equity in the licensee such as to entitle him to stay. He has a licence coupled with an equity. Mr Goodhart urged before us that the licensee could not stay indefinitely. The principle only applied, he said, when there was an expectation of some precise legal term. But it seems to me, from Plimmer’s case in particular, that the equity arising from the expenditure on land need not fail ‘merely on the ground that the interest to be secured has not been expressly indicated … the court must look at the circumstances in each case to decide in what way the equity can be satisfied’: (1844) 9 App Cas 696 at 713–14. So in this case, even though there is no binding contract to grant any particular interest to the licensee, nevertheless the court can look at the circumstances and see whether there is an equity arising out of the expenditure of money. All that is necessary is that the licensee should, at the request or with the encouragement of the landlord, have spent the money in the expectation of being allowed to stay there. If so, the court will not allow that expectation to be defeated where it would be inequitable so to do. In this case it is quite plain that the father allowed an expectation to be created in the son’s mind that this bungalow was to be his home. It was to be his home for his life or, at all events, his home as long as he wished it to remain his home. It seems to me, in the light of that equity, that the father could not in 1932 have turned to his son and said: ‘You are to go. It is my land and my house’. Nor could he at any time thereafter so long as the son wanted it as his home. Mr Goodhart put the case of a purchaser. He suggested that the father could sell the land to a purchaser who could get the son out. But I think that any purchaser who took with notice [page 349]

would clearly be bound by the equity. So here, too, the present plaintiffs, the successors in title of the father, are clearly themselves bound by this equity. It is an equity well recognised in law. It arises from the expenditure of money by a person in actual occupation of land when he is led to believe that, as the result of that expenditure, he will be allowed to remain there. It is for the court to say in what way the equity can be

satisfied. I am quite clear in this case it can be satisfied by holding that the defendant can remain there as long as he desires to as his home. I would allow the appeal accordingly and enter judgment for the defendant. [Danckwerts and Salmon LJJ agreed with Lord Denning.]

4.142 Questions 1.

How did the Court of Appeal intervene to prevent the defendant from being evicted from the land?

2.

Why did the court hold that Jack Baker had an ‘equity’? Could the Court of Appeal have held that Jack Baker had an equitable life interest arising under a constructive trust based on the principle in Ogilvie v Ryan [1976] 2 NSWLR 504; 4.117C?

3.

Was the result of the decision to confer a proprietary interest on the defendant?

4.

Could Baker have enforced his ‘equity’ against a purchaser from Inward’s executors?

5.

Would a purchaser from Inward’s executors be deemed to have notice of Baker’s interest on the basis of Hunt v Luck [1902] 1 Ch 428; [1900–3] All ER Rep 275; 4.190?

6.

Did Jack Baker have an interest he could convey to a purchaser? When did this interest arise?44

4.143

In coming to his conclusion, Lord Denning relied in part on the

decision of the Court of Chancery in Dillwyn v Llewelyn (1862) 4 De GF &

J 517; 45 ER 1285; [1861–73] All ER Rep 384. In that case, the plaintiff’s father made a will devising his real estate on trust for his widow for life, remainder on trust for the plaintiff for life, remainder on certain other trusts. Later, the father expressed a wish that his son, the plaintiff, should live nearby. So he offered him a farm on which a house could be built. The father signed a memorandum in which he stated that he presented the farm to his son for the purpose of building a house. The legal fee simple estate in the farm was never conveyed to the son. Nevertheless, with his father’s knowledge and approval the plaintiff built a house worth approximately £14,000 (a huge sum at the time) on the property. On the death of the father, the plaintiff brought an action seeking a declaration of his rights, and a conveyance of the farm to him in fee simple. Despite the well-established proposition that equity does not perfect an imperfect

[page 350]

gift, the plaintiff was successful in his action. Lord Westbury LC said (at De GF & J 521; at ER 1286): So if A puts B in possession of a piece of land, and tells him: ‘I give it to you that B may build a house on it’, and B on the strength of that promise, with the knowledge of A, expends a large sum of money in building a house accordingly, I cannot doubt that the donee acquires a right from the subsequent transaction to call on the donor to perform that contract and complete the imperfect donation which was made. The case is somewhat analogous to that of verbal agreement not binding originally for the want of the memorandum signed by the party to be charged, but which becomes binding by virtue of the subsequent part performance.

4.144 Questions 1.

How did the position of the defendant in Inwards v Baker differ from that of the son in Dillwyn v Llewelyn?

2.

Was the basis for the decision in Dillwyn v Llewelyn precisely the same as that in Inwards v Baker?

3.

Was it satisfactory to treat the relationship of father and son in Dillwyn v Llewelyn as contractual?

4.145

The principle in Dillwyn v Llewelyn and Inwards v Baker was

approved but not applied by the High Court in Olsson v Dyson (1969) 120 CLR 365; 43 ALJR 77; [1969] ALR 443. During his lifetime, Mr Dyson had purported to assign to his wife a debt owed to him by a company. However, he had not satisfied the legal requirements for the effective assignment of a debt. After his death, his executors brought an action against the company for repayment of the debt, together with interest. The executors argued that Dyson’s assignment of the debt to his wife was ineffective at law and that equity would not intervene to perfect the imperfect gift. Dyson’s widow claimed that she was entitled to the money. The company paid the money into court and availed itself of the inter-pleader process of the Supreme Court of South Australia. Under this process, the issue to be tried was whether the money was payable to Dyson’s executors or to his widow. The court thus had to determine the effectiveness of the purported assignment. The Supreme Court of South Australia decided in favour of the widow. The executors appealed from this decision to the High Court. One of

the arguments put forward by counsel for the widow was that she had abstained from taking testators’ family maintenance proceedings in reliance on the assignment of debt being valid and that therefore the principle of Dillwyn v Llewelyn and Inwards v Baker applied. All members of the High Court recognised the existence of the principle, but refused to apply it to the circumstances of the case. There was no evidence that the testator had adverted to the possibility that his wife might refrain from making a testators’ family maintenance application after his death, or act to her prejudice in reliance on the effectiveness of the gift. He did not encourage or induce her to act in a manner prejudicial to her interests. On this and other grounds, the majority of the High Court decided in favour of the executors.45

[page 351]

4.146

In Williams v Staite [1979] 1 Ch 291; [1978] 2 All ER 928, the

defendants, in earlier proceedings, had been held to have an ‘equitable licence for life’ in a certain cottage. The judge in those proceedings applied Inwards v Baker. Later, the cottage, together with an adjoining property, was sold to the plaintiff who took with notice of the defendants’ interest. The defendants deliberately harassed the plaintiff in his occupation of the adjoining property. The plaintiff commenced proceedings for possession of the defendants’ cottage and the trial judge held that the defendants’ conduct had been so outrageous as to terminate their right to remain. Accordingly, he made an order for possession of their cottage. The defendants appealed. The Court of Appeal held that the right of the defendants to remain in the cottage had not

been terminated. The reasons given in the judgments varied. Lord Denning MR expressed the opinion that, in an extreme case, the conduct of the holder of an equity might be sufficient to bring the equity to an end, but that the remedy for bad conduct should usually be an action for an injunction or damages. Goff and Cumming Bruce LJJ adopted a somewhat different approach. If a legal owner was attempting to assert his legal rights and it was alleged that an equity had arisen to restrain him from doing so, the conduct of the holder of the alleged equity could be taken into account by the court in deciding whether to exercise its discretion in his favour: cf Brynowen Estates Ltd v Bourne (1981) 131 NLJ 1212. This could be seen as a manifestation of the principle that he who comes to equity must come with clean hands. However, in this case, the pleadings had alleged that the defendants had already acquired an equity but that the equity had subsequently come to an end because of their bad conduct. Goff and Cumming Bruce LJJ took the view that an equity, once established, could not be revoked: Excessive user or bad behaviour towards the legal owner cannot bring the equity to an end or forfeit it. It may give rise to an action for damages for trespass or nuisance or to injunctions to restrain such behaviour, but I see no ground on which the equity, once established, can be forfeited: at Ch 300; All ER 934.

See also Thompson, ‘Estoppel and Clean Hands’ (1986) Conv 406; and Gray and Gray, Elements of Land Law, 3rd ed, 2001, 804–8. Compare Proctor v Milton [1987] ANZ Conv R 14. P granted M a contractual licence to occupy land for life. M breached the licence and P terminated, which the contract entitled him to do. M sought relief against forfeiture. Hodgson J held that forfeiture of the contract by P would have been unconscionable if he

did not also offer to pay M $2,500 for the value of work and materials provided by him. 4.147C

Crabb v Arun District Council [1976] Ch 197; [1975] 3 All ER 865 Court of Appeal

[The defendant council owned a road which ran between the plaintiff’s two-acre lot and their own land which had been purchased from the plaintiff’s predecessor in title. The plaintiff had access at point A to the road, and had a right of way from this point over the road to another road. The plaintiff decided to divide his lot into two, the partition line running at right angles to the defendant’s road. This required the plaintiff to acquire a second point of access to the road, to ensure that both lots had a means of egress following the subdivision. A meeting took place between the plaintiff, his architect and a representative of the defendant, at which the plaintiff understood that he was to be granted additional access at point B. No written agreement was ever entered into and no arrangements as to

[page 352]

payment were made, although the plaintiff’s architect gave evidence that he thought after the meeting that no payment would be demanded. Later, the defendant erected a fence along the road, with gaps at points A and B, and at these points gates were erected. Shortly afterwards, the plaintiff sold the acre lot that enjoyed access to the road at point A. He reserved no rights over that lot in favour of the lot he retained, believing that he already had a right of access to the road at point B. The council, acting in a manner described by the judge as ‘high-handed’, then fenced off access point B and refused to open it except on payment by the plaintiff of about £3,000. As the plaintiff refused to pay, his land could not be used. The plaintiff commenced proceedings, claiming a declaration that he was entitled to access to the road at point B and a right of way over the road, and an injunction restraining the defendant interfering with the reasonable enjoyment of the right of way. The trial judge rejected the plaintiff’s claim on the ground that, although there had been an agreement in principle to give the

plaintiff access to the road at point B, there was no definite assurance to that effect and, even if there had been, it would not have been binding in the absence of consideration or writing. The plaintiff appealed to the Court of Appeal.] Lord Denning MR: … The basis of this proprietary estoppel — as indeed of promissory estoppel — is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as ‘estoppel’. They spoke of it as ‘raising an equity’. If I may expand what Lord Cairns LC said in Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448: ‘it is the first principle upon which all courts of equity proceed’, that it will prevent a person from insisting on his strict legal rights — whether arising under a contract, or on his title deeds, or by statute — when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties. What then are the dealings which will preclude him from insisting on his strict legal rights? If he makes a binding contract that he will not insist on the strict legal position, a court of equity will hold him to his contract. Short of a binding contract, if he makes a promise that he will not insist upon his strict legal rights — then, even though that promise may be unenforceable in point of law for want of consideration or want of writing — then, if he makes the promise knowing or intending that the other will act upon it, and he does act upon it, then again a court of equity will not allow him to go back on that promise: see Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, and Charles Rickards Ltd v Oppenhaim [1950] 1 KB 616 at 623. Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights — knowing or intending that the other will act on that belief — and he does so act, that again will raise an equity in favour of the other; and it is for a court of equity to say in what way the equity may be satisfied. The cases show that this equity does not depend on agreement but on words or conduct. In Ramsden v Dyson (1866) LR 1 HL 129 at 170, Lord Kingsdown spoke of a verbal agreement ‘or what amounts to the same thing, an expectation, created or encouraged’. In Birmingham and District Land Co v London and North Western Railway Co (1888) 40 Ch D 268 at 277, Cotton LJ said that ‘… what passed did not make a new agreement, but … what took place … raised an equity against him’. And it was the Privy Council in Plimmer v Wellington Corp (1884) 9 App Cas 699 at 713–4, who said that ‘… the court must look at the circumstances in each case to decide in what way the equity can be satisfied’ giving instances … The question then is: were the circumstances here such as to raise an equity in favour of the plaintiff? True the defendants on the deeds had the title to their land, free of any access at [page 353]

point B. But they led the plaintiff to believe that he had or would be granted a right of access at point B. At the meeting of 26 July 1967, Mr Alford and the plaintiff told the defendants’ representative that the plaintiff intended to split the two acres into two

portions and wanted to have an access at point B for the back portion; and the defendants’ representative agreed that he should have this access. I do not think the defendants can avoid responsibility by saying that their representative had no authority to agree [to] this. They entrusted him with the task of setting out the line of the fence and the gates, and they must be answerable for his conduct in the course of it … The judge found that there was ‘no definite assurance’ by the defendants’ representative, and ‘no firm commitment’, but only an ‘agreement in principle’, meaning I suppose that, as Mr Alford said, there were ‘some further processes’ to be gone through before it would become binding. But if there were any such processes in the mind of the parties, the subsequent conduct of the defendants was such as to dispense with them. The defendants actually put up the gates at point B at considerable expense. That certainly led the plaintiff to believe that they agreed that he should have the right of access through point B without more ado. The judge also said that, to establish this equity or estoppel, the defendants must have known that the plaintiff was selling the front portion without reserving a right of access for the back portion. I do not think this was necessary. The defendants knew that the plaintiff intended to sell the two portions separately and that he would need an access at point B as well as point A. Seeing that they knew of his intention — and they did nothing to disabuse him but rather confirmed it by erecting gates at point B — it was their conduct which led him to act as he did: and this raises an equity in his favour against them. In the circumstances it seems to me inequitable that the council should insist on their strict title as they did: and to take the high handed action of pulling down the gates without a word of warning: and to demand of the plaintiff £3000 as the price for the easement. If he had moved at once for an injunction in aid of his equity — to prevent them removing the gates — I think he should have been granted it. But he did not do so. He tried to negotiate terms, but these failing, the action has come for trial. And we have the question: in what way now should the equity be satisfied? Here equity is displayed at its most flexible: see Snell’s Principles of Equity (27th ed, 1973) p 568, and the illustrations there given. If the matter had been finally settled in 1967, I should have thought that, although nothing was said at the meeting in July 1967, nevertheless it would be quite reasonable for the defendants to ask the plaintiff to pay something for the access at point B, perhaps — and I am guessing — some hundreds of pounds. But, as Mr Millett pointed out in the course of the argument, because of the defendants’ conduct, the back land has been landlocked. It has been sterile and rendered useless for five or six years: and the plaintiff has been unable to deal with it during that time. This loss to him can be taken into account. And at the present time, it seems to me that, in order to satisfy the equity, the plaintiff should have the right of access at point B without paying anything for it. I would, therefore, hold that the plaintiff, as the owner of the back portion, has a right of access at point B over the verge on to Mill Park Road and a right of way along that road to Hook Lane without paying compensation. I would allow the appeal and declare that he has an easement, accordingly. [Lawton and Scarman LJJ also concluded that the appeal should be allowed.]

[page 354]

4.148 Questions 1.

Did Lord Denning take the view that a binding agreement had been reached between the parties? If there were no such agreement, on what basis did the council incur an obligation to the plaintiff not to fence off the gate at point B?

2.

If the parties had reached an enforceable agreement (as Lawton LJ appears to suggest) was there any need to rely on equitable principles, as opposed to orthodox contractual doctrines?46

3.

How was the equity satisfied in this case?

4.

Why did the plaintiff not have to pay for the right to gain access to the road? Does it matter whether any payment was contemplated by the original ‘agreement’?

5.

Was the council obliged to compensate the plaintiff for his inability to use his land for several years pending resolution of the litigation?

4.149

In Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466, the Barbaros

granted a 10-year lease over part of their land and a licence over another part of their land to Mr S and Ms D, who were proprietors of a plant nursery. The grant of the lease was contrary to s 327AA of the Local Government Act 1919 (NSW), which prohibited, inter alia, leases of land for periods

exceeding five years unless the land was included in an approved subdivision. Hence, the lease could not be registered. The lessees planted Cocos palms and installed irrigation on the leased and licensed land, spending over $100,000. Subsequently, the Barbaros contracted to sell the land to Silovi Pty Ltd, who were aware of the arrangement made by the Barbaros with the lessees, and of the lessees’ expenditure on the land. It was held that in the circumstances of the case it would be unconscionable for the Barbaros to deny the plaintiffs the right to use the land, or to act in such a way (for example, by entering into a contract of sale) to enable it to be overridden. This gave the plaintiffs an equity coupled with an equitable profit, which took priority over Silovi’s later equitable interest. Powell J suggested that the plaintiffs may also have been able to establish a constructive trust vis-à-vis Silovi. 4.150

Recent cases suggest that the equitable doctrine of proprietary

estoppel is being subsumed within a broader concept of equitable estoppel. This development is discussed in Waltons Stores (Interstate) Ltd v Maher, extracted below.

[page 355]

Equitable estoppel 4.151C

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513; 62 ALJR 110 High Court of Australia

[Towards the end of 1983, the appellant, Waltons Stores (Interstate) Ltd, was negotiating with

Mr and Mrs Maher for the lease of property in Nowra. Under the proposed arrangements, the Mahers were to demolish a building on their property and construct a new one, to Waltons’ specifications. A lease had been forwarded to the Mahers’ solicitor, Elvy, who had suggested certain amendments. On 7 November Elvy told Waltons’ solicitor, Roth, that it was essential for the lease to be concluded quickly, because otherwise the Mahers would be unable to organise building supplies and labour before Christmas. He also said that the Mahers did not want to demolish the newer brick part of the building until it was clear there were no problems with the lease. Roth said he had received verbal instructions from his client that the amendments were acceptable, that he would send an amended copy of the lease to the Mahers’ solicitor and that in the meantime he would obtain formal instructions. On the same day, he sent the copy of the lease incorporating the amendments, accompanied by a letter saying he would let Elvy know the following day if there were any difficulties with the amendments. On 11 November Elvy forwarded to Roth ‘by way of exchange’ the lease executed by the Mahers, and shortly afterwards the Mahers began to demolish the building. About 21 November Waltons began to have second thoughts about the lease and instructed Roth to ‘go slow’ in processing the documents. On 10 December Waltons became aware that demolition work had begun. On 19 January Elvy was informed that Waltons did not intend to go ahead with the lease. However, building operations had commenced earlier in January, and by the time the notification was received, the building was 40 per cent complete. Between 11 November, when the lease signed by the Mahers was sent to Roth, and 19 February, Roth did not communicate with Elvy and retained the copy of the lease signed by the Mahers. The Mahers brought an action in the Supreme Court of New South Wales seeking a declaration that there was an enforceable agreement for a lease, an order for specific performance, or damages in lieu. They were successful before Kearney J and in the New South Wales Court of Appeal. Waltons appealed to the High Court. One of the major issues on the facts was whether the Mahers, as a result of the conduct of Waltons, had been induced to believe that a contract had come into existence between the parties or, alternatively, had believed that a contract would come into existence in the future. On the latter view of the facts, the Mahers were confronted with the problem that the doctrine of common law estoppel applied only to representations of fact, and not to representations of future conduct. Moreover, the equitable doctrine of proprietary estoppel appeared to be inapplicable in the case, since Waltons had no interest in the property. Other restrictions which were then thought to apply to equitable estoppel, and were relied upon by counsel for Waltons, are mentioned in the judgments.]

Mason CJ and Wilson J: [Mason CJ and Wilson J took the view that the Mahers did not believe that contracts had been exchanged (and hence that there was a binding lease between the parties) when they began demolishing the newer brick portion of the building. However, as the result of the transactions between the parties, the Mahers assumed that signing of the lease and its exchange was a formality which would occur as a matter of course.] [page 356]

… Our conclusion that the respondents assumed that exchange of contracts would take place as a matter of course, not that exchange had in fact taken place, undermines the factual foundation for the common law estoppel by representation found by Kearney J and the common law estoppel based on omission to correct a mistake favoured by the Court of Appeal. There is, as Mason and Deane JJ pointed out in Legione v Hateley (1983) 152 CLR 406 at 432, a long line of authority to support the proposition that, to make out a case of common law estoppel by representation, the representation must be as to an existing fact, a promise or representation as to future conduct being insufficient: Jorden v Money (1854) 5 HLC 185; 10 ER 868; Maddison v Alderson (1883) 8 App Cas 467 at 473 [other citations omitted]. Because estoppel by representation is often treated as a separate category, it might be possible to confine the distinction between a representation as to existing fact and one as to future conduct to that category. The adoption of such a course would leave an estoppel based on an omission to correct a mistaken assumption free from that troublesome distinction. However, the result would be to fragment the unity of the common law conception of estoppel and to confine the troublesome distinction at the price of introducing another which is equally artificial. And the result would be even more difficult to justify in a case where, as here, the mistaken assumption as to future conduct arises as a direct consequence of a representation. If there is any basis at all for holding that common law estoppel arises where there is a mistaken assumption as to future events, that basis must lie in reversing Jorden v Money and in accepting the powerful dissent of Lord St Leonards in that case. The repeated acceptance of Jorden v Money over the years by courts of the highest authority makes this a formidable exercise. We put it to one side as the respondents did not present any argument to us along these lines. This brings us to the doctrine of promissory estoppel on which the respondents relied in this Court to sustain the judgment in their favour. Promissory estoppel certainly extends to representations (or promises) as to future conduct: Legione v Hateley (1983) 152 CLR 406 at 432. So far the doctrine has been mainly confined to precluding departure from a representation by a person in a pre-existing contractual relationship that he will not enforce his contractual rights, whether they be pre-existing or rights to be acquired as a result of the representation [citations omitted]. But Denning J in Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 at 134–5 treated it as a wide-ranging doctrine operating outside the pre-existing contractual relationship: see the discussion in Legione (1983) 152 CLR 406 at 432–5. In principle there is certainly no reason why the doctrine should not apply so as to preclude departure by a person from

a representation that he will not enforce a non-contractual right: Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd [1968] 2 QB 839 at 847 per Donaldson J; Attorney-General (NZ) v Codner [1973] 1 NZLR 545 at 553. There has been for many years a reluctance to allow promissory estoppel to become the vehicle for the positive enforcement of a representation by a party that he would do something in the future. Promissory estoppel, it has been said, is a defensive equity: Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448; Combe v Combe [1951] 2 KB 215 at 219–20 and the traditional notion has been that estoppel could only be relied upon defensively as a shield and not as a sword [citations omitted]. High Trees [1947] KB 130 itself was an instance of the defensive use of promissory estoppel. But this does not mean that a plaintiff cannot rely on an estoppel. Even according to traditional orthodoxy, a plaintiff may rely on an estoppel if he has an independent cause of action, where in the words of Denning LJ in Combe v Combe [1951] 2 KB at 220 the estoppel ‘may be part of a cause of action, but not a cause of action in itself’. [page 357]

But the respondents ask us to drive promissory estoppel one step further by enforcing directly in the absence of a pre-existing relationship of any kind a non-contractual promise on which the representee has relied to his detriment. For the purposes of discussion, we shall assume that there was such a promise in the present case. The principal objection to the enforcement of such a promise is that it would outflank the principles of the law of contract … Sir Owen Dixon considered that estoppel cut across the principles of the law of contract, notably offer and acceptance and consideration: ‘Concerning Judicial Method’ (1956) 29 ALJ 468, at 475. And Denning LJ in Combe v Combe after noting that ‘The doctrine of consideration is too firmly fixed to be overthrown by a side-wind’, said that such a promise could only be enforced if it was supported by sufficient consideration … There is force in these objections and it may not be a sufficient answer to repeat the words of Lord Denning MR in Crabb v Arun District Council [1976] Ch 179 at 187: ‘Equity comes in, true to form, to mitigate the rigours of strict law’. True it is that in the orthodox case of promissory estoppel, where the promisor promises that he will not exercise or enforce an existing right, the elements of reliance and detriment attract equitable intervention on the basis that it is unconscionable for the promisor to depart from his promise, if to do so will result in detriment to the promisee. And it can be argued (see, eg Greig and Davis, Law of Contract p 184) that there is no justification for applying the doctrine of promissory estoppel in this situation, yet denying it in the case of a non-contractual promise in the absence of a pre-existing relationship. The promise, if enforced, works a change in the relationship of the parties, by altering an existing legal relationship in the first situation and by creating a new legal relationship in the second. The point has been made that it would be more logical to say that when the parties have agreed to pursue a course of action, an alteration of the relationship by non-contractual promise will not be countenanced, whereas the creation of a new relationship by a simple promise will be recognised: see Jackson, ‘Estoppel as a Sword’ (1965) 81 LQR 223 at 242.

[Mason CJ and Wilson J then discussed the American cases, explaining that ‘in the United States promissory estoppel has become an equivalent or substitute for consideration in contract formation, detriment being an element common to both doctrines’ so that a promise which is acted upon to the detriment of the promisee may be enforceable.] … None the less [this] proposition, by making the enforcement of the promise conditional on (a) a reasonable expectation on the part of the promisor that his promise will induce action or forbearance by the promisee and (b) the impossibility of avoiding injustice by other means, makes it clear that the promise is enforced in circumstances where departure from it is unconscionable. Note that the emphasis is on the promisor’s reasonable expectation that his promise will induce action or forbearance, not on the fact that he created or encouraged an expectation in the promisee of performance of the promise. Crabb v Arun District Council [1976] Ch 179 was an instance of promissory estoppel. It lends assistance to the view that promissory estoppel may in some circumstances extend to the enforcement of a right not previously in existence where the defendant has encouraged in the plaintiff the belief that it will be granted and has acquiesced in action taken by the plaintiff in that belief … The decision in Crabb is consistent with the principle of proprietary estoppel applied in Ramsden v Dyson (1866) LR 1 HL 129. Under that principle a person whose conduct creates or lends force to an assumption by another that he will obtain an interest in the first person’s land and on the basis of that expectation the other person alters his position or acts to his detriment, may bring into existence an equity in favour of that other person, the nature and extent of the equity depending on the circumstances. And it should [page 358]

be noted that in Crabb, as in Ramsden v Dyson, although equity acted by way of recognising a proprietary interest in the plaintiff, that proprietary interest came into existence as the only appropriate means by which the defendants could be effectively estopped from exercising their existing legal rights. One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has ‘played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it’: per Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 675; see also Thompson v Palmer (1933) 49 CLR 507 at 547. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption … Because equitable estoppel has its basis in unconscionable conduct, rather than the making good of representations, the objection, grounded in Maddison v Alderson, that promissory estoppel outflanks the doctrine of part performance loses much of its sting. Equitable estoppel is not a doctrine associated with part performance whose principal purpose is to overcome non-compliance with the formal requirements for the making of

contracts. Equitable estoppel, though it may lead to the plaintiff acquiring an estate or interest in land, depends on considerations of a different kind from those on which part performance depends. Holding the representor to his representation is merely one way of doing justice between the parties … The application of these principles to the facts of the present case is not without difficulty. The parties were negotiating through their solicitors for an agreement for a lease to be concluded by way of customary exchange. Humphreys Estate illustrates the difficulty of establishing an estoppel preventing parties from refusing to proceed with a transaction expressed to be ‘subject to contract’. And there is the problem identified in Amalgamated Property Co v Texas Bank [1982] QB 84 at 107 that a voluntary promise will not generally give rise to an estoppel because the promisee may reasonably be expected to appreciate that he cannot safely rely upon it. This problem is magnified in the present case where the parties were represented by their solicitors. All this may be conceded. But the crucial question remains: was the appellant entitled to stand by in silence when it must have known that the respondents were proceeding on the assumption that they had an agreement and that completion of the exchange was a formality? The mere exercise of its legal right not to exchange contracts could not be said to amount to unconscionable conduct on the part of the appellant. But there were two other factors present in the situation which require to be taken into consideration. The first was the element of urgency that pervaded the negotiation of the terms of the proposed lease. As we have noted, the appellant was bound to give up possession of its existing commercial premises in Nowra in January 1984; the new building was to be available for fitting out by 15 January and completed by 5 February 1984. The respondents’ solicitor had said to the appellant’s solicitor on 7 November that it would be impossible for Maher to complete the building within the agreed time unless the agreement were concluded ‘within the next day or two’. The outstanding details were agreed within a day or two thereafter, and the work of preparing the site commenced almost immediately. The second factor of importance is that the respondents executed the counterpart deed and it was forwarded to the appellant’s solicitor on 11 November. The assumption on which the respondents acted thereafter was that completion of the necessary exchange was a formality. The next their solicitor heard from the appellant was a letter from its solicitors dated [page 359]

19 January, informing him that the appellant did not intend to proceed with the matter. It had known, at least since 10 December, that costly work was proceeding on the site. It seems to us, in the light of these considerations, that the appellant was under an obligation to communicate with the respondents within a reasonable time after receiving the executed counterpart deed and certainly when it learnt on 10 December that demolition was proceeding. It had to choose whether to complete the contract or to warn the respondents that it had not yet decided upon the course it would take. It was not entitled simply to retain the counterpart deed executed by the respondents and do nothing: cf Thompson v Palmer (1933) 49 CLR 507; Olsson v Dyson (1969) 120 CLR

365 at 376. The appellant’s inaction, in all the circumstances, constituted clear encouragement or inducement to the respondents to continue to act on the basis of the assumption which they had made. It was unconscionable for it, knowing that the respondents were exposing themselves to detriment by acting on the basis of a false assumption, to adopt a course of inaction which encouraged them in the course they had adopted. To express the point in the language of promissory estoppel the appellant is estopped in all the circumstances from retreating from its implied promise to complete the contract. Also, as the other judgments demonstrate, there is no substance in the argument based on s 54A of the Conveyancing Act 1919 (NSW). We therefore think that the Court of Appeal was correct in its conclusion. We would dismiss the appeal. Brennan J: [Brennan J considered that the most likely interpretation of the facts was that the Mahers believed either that a contract had been made or that the matter had passed beyond the negotiation stage, and that Waltons would exchange contracts and were not free to withdraw. In reliance on that assumption, the Mahers had proceeded to demolish the new brick section and build the store. Waltons ‘intended that [they] should act on that assumption or expectation in order that Waltons should enjoy the option of completing the exchange and proceeding to take the lease if it should appear expedient to do so’: at 418. Referring to proprietary estoppel cases such as Inwards v Baker [1965] 2 QB 29; [1965] 1 All ER 446, Brennan J continued as follows:] … The element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity, and the remedy required to satisfy an equity varies according to the circumstances of the case … Sometimes it is necessary to decree that a party’s expectation be specifically fulfilled by the party bound by the equity; sometimes it is necessary to grant an injunction to restrain the exercise of legal rights either absolutely or on condition; sometimes it is necessary to give an equitable lien on property for the expenditure which a party has made on it: see Snell’s Principles of Equity (28th ed, 1982) p 562. However, in moulding its decree, the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct. What, then, is unconscionable conduct? An exhaustive definition is both impossible and unnecessary, but the minimum elements required to give rise to an equitable estoppel should be stated … In all cases where an equity created by estoppel is raised, the party raising the equity has acted or abstained from acting on an assumption or expectation as to the legal relationship between himself and the party who induced him to adopt the assumption or expectation. The assumption or expectation does not relate to mere facts, whether existing or future. (An assumption as to a legal relationship may be an assumption that there is no legal relationship, as in the cases where A builds on B’s land assuming it to be his own.) Though

[page 360]

the party raising the estoppel may be under no mistake as to the facts, he assumes that a particular legal relationship exists or expects that a particular legal relationship will exist between himself and the party who induced the assumption or expectation. The assumption or expectation may involve an error of law. Thus a promissory or a proprietary estoppel may arise when a party, not mistaking any facts, erroneously attributes a binding legal effect to a promise made without consideration. But, if the party raising the estoppel is induced by the other party’s promise to adopt an assumption or expectation, the promise must be intended by the promisor and understood by the promisee to affect their legal relations. The remedy offered by promissory estoppel has been limited to preventing the enforcement of existing legal rights. In Crabb v Arun District Council [1976] Ch 197 at 188, Lord Denning MR said that if a person: … by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights — knowing or intending that the other will act on that belief — and he does so act, that again will raise an equity in favour of the other; and it is for a court of equity to say in what way the equity may be satisfied. If the object of the principle were to make a promise binding in equity, the need to preserve the doctrine of consideration would require a limitation to be placed on the remedy. But there is a logical difficulty in limiting the principle so that it applies only to promises to suspend or extinguish existing rights. If a promise by A not to enforce an existing right against B is to confer an equitable right on B to compel fulfilment of the promise, why should B be denied the same protection in similar circumstances if the promise is intended to create in B a new legal right against A? There is no logical distinction to be drawn between a change in legal relationships effected by a promise which extinguishes a right and a change in legal relationships effected by a promise which creates one. Why should an equity of the kind to which Combe v Combe refers be regarded as a shield but not a sword? The want of logic in the limitation on the remedy is well exposed in Professor David Jackson’s essay ‘Estoppel as a Sword’ in (1965) 81 LQR 223 at 241–3. Moreover, unless the cases of proprietary estoppel are attributed to a different equity from that which explains the cases of promissory estoppel, the enforcement of promises to create new proprietary rights cannot be reconciled with a limitation on the enforcement of other promises. If it be unconscionable for an owner of property in certain circumstances to fail to fulfil a noncontractual promise that he will convey an interest in the property to another, is there any reason in principle why it is not unconscionable in similar circumstances for a person to fail to fulfil a non-contractual promise that he will confer a non-proprietary legal right on another? It does not accord with principle to hold that equity, in seeking to avoid detriment occasioned by unconscionable conduct, can give relief in some cases but not in others … The qualifications proposed bring the principle closer to a principle the object of which is to avoid detriment occasioned by non-fulfilment of the promise. But the better solution of the problem is reached by identifying the unconscionable conduct which gives rise to

the equity as the leaving of another to suffer detriment occasioned by the conduct of the party against whom the equity is raised. Then the object of the principle can be seen to be the avoidance of that detriment and the satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object. So regarded, equitable estoppel does not elevate non-contractual promises to the level of contractual promises and the doctrine of consideration is not blown away by a side-wind. Equitable estoppel complements the tortious remedies of damages for [page 361]

negligent mis-statement or fraud and enhances the remedies available to a party who acts or abstains from acting in reliance on what another induces him to believe. As an element in unconscionable conduct is the inducing of the other party to adopt an assumption or expectation as to the parties’ legal relations, the question arises whether silence is capable of inducing the adoption of the assumption or expectation … [Brennan J concluded that silence was capable of inducing the adoption of an assumption and that ‘(t]he evidence was capable of supporting an inference that Waltons knew the belief under which Mr Maher was labouring when Waltons became aware that Mr Maher was doing the work specified in the deed. Waltons deliberately refrained from correcting what Waltons must have regarded as an erroneous belief’. In the circumstances of the case, it would be unconscionable for Waltons to deny that they had entered into a binding agreement with the Mahers. Deane J held that the evidence supported the finding of the New South Wales Court of Appeal that the Mahers believed they had a binding contract with Waltons. Gaudron J held that the Mahers had believed that an exchange of agreements had occurred. The failure of Waltons to inform them of its changed attitude to the lease caused the Mahers to act on the faith of that assumption. Hence, common law estoppel precluded the appellant from denying that an exchange had occurred and the rights of the Mahers should be determined on that basis.]

4.152 Questions 1.

Is common law estoppel still confined to cases in which a person has been induced to make mistaken assumptions about existing facts, or can it extend to assumptions about future conduct? Do all members of the court take the same view on this issue?

2.

What is the basis of equitable estoppel? Is it necessary to differentiate between promissory and proprietary estoppel? Can equitable estoppel be relied on only defensively or can it form the basis of an action?

3.

In circumstances which give rise to equitable estoppel, must the court give effect to the representations on which the claimant has relied or is the purpose of equitable intervention to rectify detriment? If so, what effect does this have on traditional principles of contract law and, in particular, on the requirement that an enforceable promise must be supported by consideration?47

4.

The Waltons Stores case is discussed at length in most contract courses. Why is it included in a casebook on property law? Does the case recognise a new way in which proprietary interests may be created, or is its effect more limited?

[page 362]

4.153C

Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 New South Wales Court of Appeal

[Franklins were negotiating with Austotel for the grant of space in a shopping centre to be built by Austotel, which Franklins was to use as a supermarket. In the course of negotiations, Franklins provided Austotel with detailed specifications for the supermarket, based on Franklins’ experience in running supermarkets. At Austotel’s request, Franklins also provided letters for Austotel to produce to financial institutions, which indicated Franklins’ intention to lease the completed premises. The supermarket was erected in accordance with Franklins’ specifications and Franklins ordered equipment for installation on the premises, some of which could not be used elsewhere. Franklins also failed to renew a lease it held over other premises, on the assumption that it would be granted a lease of Austotel’s property. However, the parties never reached agreement on the rent to be paid, and Franklins declined to execute a lease to assist Austotel to obtain finance for the project. When Austotel decided to lease the supermarket to one of Franklins’ competitors, Franklins sought a declaration that a binding agreement for a lease existed between the parties and, in the alternative, argued that Austotel was estopped from denying the existence of an agreement because it would be unconscionable to do so. Kirby P held that there was no binding agreement for a lease because the parties had reached no agreement about rent, and that Austotel was not estopped from denying the existence of an agreement, for any such agreement would not contain a term as to rent and hence would not be enforceable. By a majority (Kirby P and Rogers A-JA; Priestley JA dissenting) the Court of Appeal also held that the principle in Waltons Stores (Interstate) Ltd v Maher was inapplicable since, in the circumstances of the case, it was not unconscionable for Austotel to refuse to enter into a lease.] Kirby P: I am prepared to accept that, for equitable estoppel to operate, there must relevantly be the creation of encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence, or a promise be performed, or a transaction carried out between the plaintiff and the defendant, and reliance on that by the plaintiff in circumstances where departure from the assumption by the defendant would be unconscionable. The difficulty which I have in this case lies not in the principle but in its application to the facts of this matter … There was, as counsel for the appellant put it, a ‘sort of cat and mouse game … going on between Franklins, Austotel and the financiers. Everyone [was] trying to put the other

one in a corner yet reserv[ing] for himself the liberty to have an out’. The accuracy of this description is brought out vividly by the evidence of Mr Frew, the respondent’s property manager, which is extracted and emphasised in the reasons of Rogers A-JA. We are not dealing here with ordinary individuals invoking the protection of equity from the unconscionable operation of a rigid rule of the common law. Nor are we dealing with parties which were unequal in bargaining power. Nor were the parties lacking in advice either of a legal character or of technical expertise. The court has before it two groupings of substantial commercial enterprises, well resourced and advised, dealing in a commercial transaction having a great value. As has been found, they did not reach the point of formulating their agreement in terms which would be enforced by the law of contract. This is not, of itself, a reason for denying them the beneficial application of the principles developed by equity. But it is a reason for scrutinising carefully the circumstances which are said to give rise [page 363]

to the conclusion that an insistence by the appellants on their legal rights would be so unconscionable that the court will provide relief from it. At least in circumstances such as the present, courts should be careful to conserve relief so that they do not, in commercial matters, substitute lawyerly conscience for the hard-headed decisions of business people: cf State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 177 and Geftakis v Maritime Services Board of New South Wales (Court of Appeal, 20 November 1987, unreported). If courts do not show caution here they will effectively force on commercial parties terms which the court may think to be reasonable and as ought commonly to govern such a contract but which the parties have themselves held back from concluding. Moreover, the contract then enforced will not be that which the parties have concurred in but a different one, determined by the court … The wellsprings of the conduct of commercial people are self-evidently important for the efficient operation of the economy. Their actions typically depend on self-interest and profit-making not conscience or fairness. In particular circumstances protection from unconscionable conduct will be entirely appropriate. But courts should in my view, be wary lest they distort the relationships of substantial, well-advised corporations in commercial transactions by subjecting them to the overly tender consciences of judges. Such consciences, as the case show, will typically be refined and sharpened by circumstances arising in quite different relationships where it is more apt to talk of conscience and to provide relief against offence to it.48

4.154

In Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752

Yeoman’s Row owned a block of flats in Knightsbridge with perceived development potential. Mr Cobbe, an experienced property developer,

reached an oral agreement with an agent of Yeoman’s Row as follows: (i) that Mr Cobbe at his own expense, would apply for planning permission to demolish the existing block of flats and to erect, in its place, a terrace of six houses; (ii) that, upon the grant of planning permission and the obtaining of vacant possession, the property would be sold to Mr Cobbe or to a company nominated by him, for an up-front payment to Yeoman’s Row of £12m; (iii) that Mr Cobbe or the nominee company would develop the property in accordance with the planning permission; and (iv) that Mr Cobbe or the nominee company would sell the six houses and pay to Yeoman’s Row 50 per cent of the amount, if any, by which the gross proceeds of sale exceeded £24m. There was no written contract and neither Mr Cobbe nor the agent of Yeoman’s Row thought that the agreement was a legally enforceable contract. The oral agreement covered the core terms but not everything that would have been expected in a formal written contract. The agent gave Mr Cobbe the impression, and intended so to do, that she intended to carry through the agreement into a formal binding contract if planning permission were obtained. Mr Cobbe obtained planning permission in March 2004 but the agent resiled from the agreement. The primary judge found in favour of Mr Cobbe on the basis of proprietary estoppel. The House of Lords allowed the appeal against the finding of proprietary estoppel and instead held Mr Cobbe was only entitled to relief by way of a quantum

[page 364]

meruit for his services and expenditure in securing planning permission. This

reduced the value of the claim from £2m to an estimated £150,000. Lord Scott concluded as follows: The terms of the oral ‘agreement in principle’, the second agreement, relied on by Mr Cobbe, are pleaded but it is accepted that there remained still for negotiation other terms. The second agreement was, contractually, an incomplete agreement. The terms that had already been agreed were regarded by the parties as being ‘binding in honour’, but it follows that the parties knew they were not legally binding.

Lord Walker analysed the case as a common expectation case and on that basis dismissed the estoppel claim on the basis that ‘hopes are not enough’. He said: ‘[C]onscious reliance on honour alone will not give rise to an estoppel’. Lord Walker summarised his reasons for allowing the appeal as follows: ‘Mr Cobbe’s case seems to me to fail on the simple but fundamental point that, as persons experienced in the property world, both parties knew that there was no legally binding contract, and that either was therefore free to discontinue the negotiations without legal liability …’. He distinguished the long line of ‘domestic cases’ on the basis that in those cases the claimant had believed the assurances relied on were binding and irrevocable. 4.155

The outcome of Austotel Pty Ltd v Franklins Self-Serve Pty Ltd

(1989) 16 NSWLR 582 and Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 can be contrasted with that of S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637. In that case, S & E Promotions Pty Ltd (hereafter ‘S&E’) held a Crown lease in the Australian Capital Territory. The land was subleased to Tobin Brothers Pty Ltd (hereafter ‘Tobin’) for a period which would expire on 30 June 1991. Under the sublease, Tobin had an option to renew for a further three years which was to be exercised by 30

March 1991. In 1988 Tobin and S&E began negotiating about a redevelopment of the property. At this stage, it was proposed that Tobin should surrender the original sublease and be granted a new sublease commencing on 1 July 1988, which would contain eight successive options to renew for three years each. A higher rental was to be paid under the new sublease, but instead of the maximum term available under the original sublease (15 years), the maximum term available under the new sublease would be 27 years. Before these arrangements were finalised, S&E sold a half share in the Crown lease to the co-defendant, M. Negotiations continued between S&E, Tobin and M, in which M made proposals for changes to the proposed development. The solicitor for Tobin forwarded an executed sublease to S&E’s solicitors based on the original understanding between the parties. In subsequent negotiations, it was suggested that if Tobin and M could not agree to the new development proposals the solution might be for Tobin to buy out M. On 13 March 1991, shortly before the option to renew in the original sublease was to expire, an amended sublease, executed by Tobin and reflecting the terms negotiated between the parties, was sent to the solicitors for S&E. The trial judge found that at that stage Tobin believed that the sublease would be executed, and that as a result, the sublessees would have occupation up until 1 July 1994, with the ability to exercise subsequent renewal options. Further amendments were then requested by M, which Tobin agreed to. The new sublease, which was stated to commence on 1 July 1988, was not executed by S&E and M until 10 May 1991, when Tobin also surrendered the original sublease. By that time, both the option contained in the original sublease and in the new sublease had expired, but Mr Tobin’s

belief was that the negotiations contemplated that Tobin would be able to remain as the tenant for 27 years. M began negotiating with a new tenant, and on the expiry of the original term of the new sublease, served a notice of termination.

[page 365]

The Federal Court (Neaves, Gummow and Higgins JJ) upheld the decision of Gallop J in the Supreme Court of the Australian Capital Territory, which applied the principle in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513 to establish an equitable estoppel against S&E and M. The Federal Court referred to the elements discussed by Brennan J in Waltons as a useful check for the application of the doctrine. They commented that: … in our view there was ample basis for the primary judge to reach the conclusion … he did … [T]he facts would support the conclusion that when Tobin Brothers had executed the new sublease in March 1991 and it had been sent for execution by the sub-lessors, Tobin Brothers had been lulled into a sense of false security. The sub-lessors were not entitled to stand by in silence when they must have known that Tobin Brothers was proceeding on the assumption that it was unnecessary for it to exercise any option under the 1986 sub-lease and it would be three years before it needed to exercise any option under the proposed new sub-lease. In addition, for the sublessors not to have known of the assumption on which Tobin Brothers were proceeding in March 1991 they would, on the evidence in this case, have been shutting their eyes to what should have been obvious … Upon that basis, and consistently with the approach taken by Gaudron J in Waltons Stores (164 CLR at 462–3), the sub-lessors came under a duty to inform the respondent that the assumption that it was unnecessary for the respondent to exercise any option under the 1986 sub-lease and that it would be three years before it needed to exercise any option under the

proposed new sub-lease, was misplaced … [(1994) 122 ALR 637 at 655–6 per Neaves, Gummow and Higgins JJ.]

The court declared that the defendants were estopped from denying that they were obliged to grant Tobin a further sublease for three years ending on 30 June 1994, with provision for eight further options to renew. Why did the court give effect to Tobin’s expectation in this case? How do the facts differ from those in Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989) 16 NSWLR 582 and Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752?

Remedies in cases of estoppel — proprietary or compensatory; expectation-based or detrimentbased? 4.156

In Commonwealth of Australia v Verwayen (1990) 170 CLR 394; 95

ALR 321; 64 ALJR 540, the plaintiff was a seaman who was injured in the 1964 collision between the HMAS Voyager and the HMAS Melbourne. The Commonwealth had made public statements and written to the solicitors acting for the plaintiff indicating that liability would not be contested and that it would not plead the limitation of actions legislation. The Commonwealth changed its policy, and sought to amend its defence to contest liability and plead that the plaintiff was statute-barred. One of the issues before the High Court was whether the Commonwealth was estopped from its undertaking not to plead the limitation of actions legislation. The majority of the High Court (Deane, Dawson, Toohey and Gaudron JJ) held that the Commonwealth was estopped from so doing. Mason CJ,

Brennan and McHugh JJ dissented. Four members of the High Court, Mason CJ (at CLR 413–16; ALR 330–3; ALJR 545–8), Brennan J (at CLR 428–30; ALR 344–5; ALJR 553–5), Toohey J (at CLR 471; ALR 379; ALJR 574) and Gaudron J (at CLR 487; ALR 387; ALJR 579) expressed the view that the purpose of equitable estoppel is to rectify the detriment suffered as the result of representations made by another person, rather than to make good those representations. However, in some cases (of which Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 62 ALJR 110 is

[page 366]

an example) it may be possible to rectify detriment only by giving effect to the promise made by the person who is estopped. This may involve a declaration that the estopped party transfer, or receive a transfer of, property. In such a case the remedy for the estoppel is proprietary in nature. Because estoppel is concerned with rectifying detriment, rather than with enforcing promises about future conduct, it does not undermine the common law principle preventing enforcement of voluntary promises. McHugh J agreed that ‘equitable estoppel is aimed at preventing unconscionable conduct and seeks to prevent detriment to the promisee’, although: … because the equitable doctrines create rights, they preclude the party estopped from denying the assumption of fact (or law) only as long as the equitable right exists. Once the detriment has ceased or been paid for, there is nothing unconscionable in a party insisting on reverting to his or her former relationship with the other party and enforcing his or her strict legal rights [at ALJR 585; ALR 397].

On the facts of the case, the dissentients, Mason CJ, Brennan and McHugh JJ, held that, although Verwayen had suffered delays and inconvenience as the result of the Commonwealth’s amendment of its defence, his detriment could be rectified by an appropriate order for costs. By contrast, both Deane and Dawson JJ held that Verwayen’s detriment extended beyond the payment of additional costs and included stress and aggravation of his psychiatric condition. Thus, it would be unconscionable for the Commonwealth to resile from its undertaking not to plead the Statute of Limitations.

4.157 Questions Was the doctrine of proprietary estoppel limited in the way McHugh J proposes in Inwards v Baker [1965] 2 QB 29; [1965] 1 All ER 446 and Crabb v Arun District Council [1976] Ch 197; [1975] 3 All ER 865? If it were so limited, would its application have led to a different result in these cases?

The problem of minimal detriment 4.158

According to the analysis of Deane J in Waltons v Maher, detriment

suffered by the person relying on the assumption is a necessary, but not sufficient, element in establishing an estoppel. However, Deane J does not suggest that the purpose of an estoppel is simply to rectify that detriment. In his view, relief for estoppel would normally preclude the party estopped from departing from the assumption which his or her representation or conduct

induced in the other party. However, there could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party. In these circumstances, good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party: There is clear support in the cases and learned writings for the view that, in this as in other fields, equitable relief must be moulded to do justice between the parties and to prevent a doctrine based on good conscience from being made an instrument of injustice or oppression. That being so, it should be accepted that the prima facie entitlement to relief based on the assumed state of affairs must, under a doctrine which is of general application in a system

[page 367]

where equity prevails, be qualified if it appears that that relief would exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party. In some such cases, an appropriate qualification may be a requirement that the party relying upon the estoppel do equity (see, eg, Texas Bank, at 108–9). In other cases, the relief to which the party relying upon the estoppel would be entitled upon the assumed state of affairs will merely represent the outer limits within which the jurisdiction of a modern court to mould its relief to suit the circumstances of a particular case should be exercised in a manner which will do true justice between the parties (cf Hamilton v Geraghty (1901) 1 SR (NSW) Eq 81 at 87–8). In some such cases the appropriate order may be one which places the party entitled to the benefit of the estoppel ‘in the same position as [he or she was] before’ … In others, the appropriate order may be an order for compensatory damages. To acknowledge the fact that the relief appropriate to a case of estoppel by conduct may vary according to the circumstances is not to suggest that relief is to be framed on an unprincipled basis. Prima facie, the operation of an estoppel by conduct is to preclude departure from the

assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh, that some lesser form of relief should be awarded [at CLR 441–3; ALR 354; ALJR 559].49

4.159

In Commonwealth v Clark [1994] 2 VR 333, the Appeal Division of

the Supreme Court of Victoria again held that the Commonwealth was estopped from relying on various defences to a claim arising out of the Voyager–Melbourne disaster, because of its previous assurance that it would not do so. In Clark, the plaintiff had not issued proceedings until after the Commonwealth had advised his solicitor of its intention not to rely on these defences. In considering the nature of the remedy to be provided to the plaintiff, Ormiston J commented that he was more inclined to favour the approach of Deane J in Verwayen’s case under which the effect of estoppel ‘was normally to preclude departure from an assumed state of affairs’: (1990) 170 CLR 394 at 436. However, he felt obliged to accept the view of the majority of the judges in Verwayen that the principle was designed primarily to avoid the detriment which the court saw as likely to flow from the nonfulfilment of the assumption induced in the plaintiff. He commented that he would favour a generous application of this principle ‘in the sense that it is not always obvious that the estimated detriment can be satisfied merely by an order for costs or some other monetary sum by way of compensation …’. He suggested that ‘uncertainty as to the extent of the detriment which may result from departing from an assumption may lead to a conclusion that the assumption should be made good’: [1994] 2 VR 333 at 383. 4.160

Where a property developer was encouraged to secure planning

permission, at great personal expense, on the basis of a hope that the

landowner would grant him an interest in the property, the House of Lords held that he was entitled to a restitutionary award reflecting his outlays attributable to the grant of permission: Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 (see above at 4.154). In such a case, the act was merely in anticipation of a contract, rather than in the positive expectation of a promised contract to sell, deliberately induced but then defeated by the unconscionable conduct of the defendant.

[page 368]

4.161

It was thought by some practitioners and academics that the

decision of the House of Lords in Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 had severely curtailed, or even virtually extinguished, the doctrine of proprietary estoppel: see, for example, McFarlane and Robertson, ‘The Death of Proprietary Estoppel’ [2008] LMCLQ 449. However, following the decisions of the High Court in Giumelli v Giumelli (1999) 196 CLR 101 (below at 4.162C) and the House of Lords in Thorner v Major [2009] 1 WLR 776 (below at 4.164C), it is now clear that proprietary estoppel remains clearly applicable in the domestic or family context, although it may be more difficult to establish in the commercial context. 4.162C

Giumelli v Giumelli (1999) 196 CLR 101; 161 ALR 473 High Court of Australia

[The respondent, Robert Giumelli, was the son of the appellants, Mr and Mrs Giumelli. In 1966,

Mr and Mrs Giumelli purchased a rural property (Dwellingup). After Robert left school in 1971, he commenced full-time work for the family partnership which managed the property. The primary judge found that Robert had worked hard and had made a major contribution to the development and that other members of Robert’s family had done likewise. He also made findings with respect to three alleged promises made to Robert by his parents concerning the grant of ownership of part of the Dwellingup property. His Honour identified these as ‘the general promise’, ‘the second promise’ and ‘the third promise’. His Honour found that Mr and Mrs Giumelli made a general promise to Robert in approximately 1974, when he was 18 years of age, without reference to any particular portion of the Dwellingup property. It was to the effect that his parents would give him part of the property to compensate him for working without wages, for the effort he was putting into the development and improvements and, later, for the fact that the costs of those matters were being met from funds of the partnership. The second promise was that he would have the land to build a house on the Dwellingup property; they joined with him in selecting a site and they promised him that the house and the land on which it stood (including the orchard) would be his. Robert claimed that, in reliance upon that promise, he engaged a builder and worked with him in constructing on the site a three-bedroom brick and tile house to the value of $47,000 (‘the house’). The primary judge found that Robert had not established the factual foundation for a finding in terms of the second promise as pleaded so far as it related to the land including the orchard. His Honour held that Robert had made out the pleading that he was promised ‘the house’. The third promise was to subdivide the Dwellingup property to include the house and the orchard if he agreed to stay on the property and not accept an offer to work for his father-in-law. On this basis, he was prepared to stay on the property. Subsequently, Robert separated from his wife and he returned to the property. On his return he was reassured that, on his divorce, the property would be transferred. In reliance on this promise, Robert stayed and planted the new orchard. He was divorced in 1983. Thereafter, Robert decided to remarry, but to a woman of whom his parents disapproved. In May 1985, his parents told him to choose between his proposed new wife and the Dwellingup property. Robert chose to go ahead with the marriage and left the property. His brother Steven married in 1985 and lived with his wife and children at the Dwellingup property in a transportable house which was brought to the promised lot in 1976. Steven and his family have not occupied the house referred to in the second

[page 369]

and third promises and also situated on the promised lot. Steven has made various improvements to the promised lot, including the building of coolrooms and the planting of 1,000 new trees. The primary judge, RD Nicholson J, held that not taking the job with his father-in-law ‘was not a detriment in the required sense’. The Full Court rejected this finding, and the High Court agreed, on the basis that it involved giving up the opportunity of an alternative career path, and so qualified as a relevant detriment.] Gleeson CJ, McHugh, Gummow and Callinan JJ [footnotes omitted]: In submissions to this Court, the term ‘constructive trust’ was used to identify the nature of the equitable remedy granted by the Full Court. Care is required in the use of the term ‘constructive’ in this context. Professor Scott has pointed out: It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court ‘constructs a trust.’ The expression is, of course, absurd. The word ‘constructive’ is derived from the verb ‘construe,’ not from the verb ‘construct’ … The court construes the circumstances in the sense that it explains or interprets them; it does not construct them. The relief granted by the Full Court involved a trust that was ‘constructive’ in that way. The Full Court so interpreted the circumstances as obliging the appellants, in good conscience, not to retain their beneficial interest in the whole of the Dwellingup property and as requiring them to answer the respondent’s equity by bringing about a subdivision of the Promised Lot and conveying the title to it. The equity of the respondent was seen by the Full Court as sufficiently strong as not only to prevent the appellants from insisting upon their strict legal rights but also, in respect of the Promised Lot, to convey it to the respondent. A constructive trust of this nature is a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties. The term ‘constructive trust’ is used in various senses when identifying a remedy provided by a court of equity. The trust institution usually involves both the holding of property by the trustee and a personal liability to account in a suit for breach of trust for the discharge of the trustee’s duties. However, some constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee. An example of a constructive trust in this sense is the imposition of personal liability upon one ‘who dishonestly procures or assists in a breach of trust or fiduciary obligation’ by a trustee or other fiduciary. In the present case, the constructive trust is proprietary in nature. It attaches to the Dwellingup property. Such a trust does not necessarily impose upon the holder of the legal title the various administrative duties and fiduciary obligations which attend the settlement of property to be held by a trustee upon an express trust for successive interests. Rather, the order made by the Full Court is akin to orders for conveyance made

by Lord Westbury LC in Dillwyn v Llewelyn (1862) 4 De GF & J 517 at 523 [45 ER 1285 at 1287] and, more recently, by McPherson J in Riches v Hogben [1985] 2 Qd R 292 at 302. In these cases, the equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant … [page 370]

The present case fell within the category identified by the Privy Council in Plimmer v Mayor, &c, of Wellington where ‘the Court must look at the circumstances in each case to decide in what way the equity can be satisfied’ [14]. Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust: Bathurst City Council v PWC Properties Pty Ltd (1998) 72 ALJR 1470 at 1479; 157 ALR 414 at 425–426. At the heart of this appeal is the question whether the relief granted by the Full Court was appropriate and whether sufficient weight was given by the Full Court to the various factors to be taken into account, including the impact upon relevant third parties, in determining the nature and quantum of the equitable relief to be granted. R D Nicholson J determined the appropriate measure of relief by reference to his findings as to the second promise. His Honour’s findings with respect to the third promise led to the dismissal of that aspect of the case from consideration. With respect to the second promise, the finding in favour of Robert as to the house but not the orchard led his Honour to conclude: ‘In my opinion it is not appropriate that an order be made that title in the land on which the house is situated be vested in [Robert]. The difficulties of access and use are patent. This appears to me to be a case where it is arguable that [Robert’s] expectation can be met by a monetary payment determined in the light of the findings I have made. Subject to what may later be submitted, I consider that the money payment should be either the amount expended by [Robert] on the house or the present value of the house and land on which it is situate, whichever is the greater.’ … After provision of the valuation and following additional argument and the provision of reasons to supplement those which had been delivered on 10 September 1993, the primary judge, on 26 May 1994, ordered that the appellants pay to Robert the sum of $66,071. The order provided that, for the purposes of the calculation of interest thereon pursuant to s 32 of the Supreme Court Act 1935 (WA) (‘the Supreme Court Act’), the date of judgment be deemed to be 10 September 1993. The figure of $66,071 represented the valuation as at 1993 of the house at $66,000 and the land at $71. The small sum in respect of the land represents the curiosity involved in valuing only that area of the Promised Lot upon which there stood the house. In his supplementary reasons, the primary judge said that the compensation to which Robert was entitled in respect of the second promise was that sum which would place him in the position he would be in if he owned the house on the land on which it was situated and was able now to realise that

asset. The relief sought on the pleadings did not independently extend to loss of rent from the house from the date of Robert’s exclusion and this was not a matter which could be taken into account ‘in the award of equitable compensation for loss of the house and the land on which it stands’. His Honour did not make any order which would have had the effect of charging upon the Dwellingup property, or the Promised Lot, or any portion thereof, the amount for which he entered judgment and interest thereon. Such a charge or lien has been ordered in various decisions which are authorities in this field. They include, in the Privy Council, Chalmers v Pardoe [1963] 1 WLR 677 at 681–682; [1963] 3 All ER 552 at 555; in New Zealand, In re Whitehead, Whitehead v Whitehead [1948] NZLR 1066 at 1071 and Stratulatos v Stratulatos [1988] 1 NZLR 424 at 438; and, in the Supreme Court of New South Wales, Morris v Morris [1982] 1 NSWLR 61 at 64 and Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 36–38. It may be noted that, in the United States, an equitable charge or lien of this variety is often regarded as a form of constructive trust which is ‘special and limited’ because, rather than giving complete title, it confers a security interest to satisfy an obligation sounding in money. This illustrates the point made earlier in these reasons respecting the care [page 371]

needed in using, without further detail, the term ‘constructive trust’. The Full Court differed from the primary judge with respect to the third promise. This extended to the Promised Lot. That being so, the consideration by the Full Court of the appropriate relief was not confined to the house and the land to which it was a fixture. The appellants challenge the width of the specific relief granted by the Full Court. In particular, they emphasise that an order for the creation and conveyance of the Promised Lot went beyond any ‘reversal’ of the detriment occasioned by the respondent in reliance upon the third promise. They submit that it was not open to the Full Court, in a case such as the present, to grant relief which went beyond the reversal of such detriment. In that regard, the appellants claim decisive support from the decision in Verwayen (1990) 170 CLR 394. However, in our view and consistently with the course of Australian authority since Verwayen, that decision is not authority for any such curtailment of the relief available in this case. Rather, there is much support in the judgments for a broader view of the present matter … The circumstances of the case … Before making an order designed to bring about a conveyance of the Promised Lot to the respondent, the Full Court was obliged to consider all the circumstances of the case. These circumstances included the still pending partnership action, the improvements to the Promised Lot by family members other than Robert, both before and after his residency there, the breakdown in family relationships and the continued residence on the Promised Lot of Steven and his family. It will be recalled that Steven is a party to the partnership action but not to the present action. When these matters are taken into account, it is apparent that the order made by the Full Court reflected what in Verwayen was described as the prima facie entitlement of

Robert. However, qualification was necessary both to avoid injustice to others, particularly Steven and his family, and to avoid relief which went beyond what was required for conscientious conduct by Mr and Mrs Giumelli. The result points inexorably to relief expressed not in terms of acquisition of title to land but in a money sum. This would reflect, with respect to the third promise, the approach taken by R D Nicholson J when giving relief in respect of the second promise. Conclusion Whilst the holding of the Full Court with respect to the third promise should be upheld, the Full Court erred in the measure of relief which it granted in respect of the Promised Lot. This is a case for the fixing of a money sum to represent the value of the equitable claim of the respondent to the Promised Lot. It will be necessary for the matter to be remitted to a judge of the Supreme Court to take that step. The amount so ascertained, with interest, should be charged upon the whole of the Dwellingup property. There will be no requirement of a subdivision of the Promised Lot as part of the remedy. Fixing of the amount will require the making of valuations and allowances for a range of matters, some of which have been indicated above. It is neither possible nor appropriate now to fix any closed list of matters properly to be taken into account when the matter is remitted. Further submissions and, if that court so chooses, additional evidence will be needed. [Kirby J agreed.]

[page 372]

4.163 Questions 1.

Does Giumelli v Giumelli offer full support for the principle that proprietary estoppel is an expectation, or proprietary-based doctrine rather than a compensation, or detriment-based one? Is this the best way to explain the court’s order? Does it represent a departure from the reasoning in Waltons v Maher?

2.

Does it follow from this case that interests under a constructive trust are equities rather than equitable interests? Or does the case represent a novel priority rule in the case of constructive trusts

where third parties acquire rights before a court rules on the matter? 3.

Would this case have been better resolved by reference to the traditional priority rules, including those governing equities and equitable interests? Should the possible knowledge by the third parties (Stephen and his family) of the existence of Robert’s earlier interest have been a relevant factor for the court to consider ‘to avoid injustice to others’?50

4.

Does this case indicate a judicial preference for a detriment-based or compensatory model of estoppel rather than an expectationbased or proprietary one? Consider the following case in light of this question.

4.164C

Thorner v Major [2009] All ER (D) 257; [2009] 1 WLR 776 House of Lords

Lord Hoffmann: … The appellant David Thorner is a Somerset farmer who, for nearly 30 years, did substantial work without pay on the farm of his father’s cousin Peter Thorner. The judge found that from 1990 until his death in 2005 Peter encouraged David to believe that he would inherit the farm and that David acted in reliance upon this assurance. In the event, however, Peter left no will. In these proceedings, David claims that by reason of the assurance and reliance, Peter’s estate is estopped from denying that he has acquired the beneficial interest in the farm. The judge found the case proved but the Court of Appeal reversed him … Such a claim, under the principle known as proprietary estoppel, requires the claimant to prove a promise or assurance that he will acquire a proprietary interest in specified property. A distinctive feature of this case, as Lloyd LJ remarked in the Court of Appeal (at [65]), was that the representation was never made expressly but was ‘a matter of implication and inference from indirect statements and conduct.’ It consisted of such matters as handing over to David in 1990 an insurance policy bonus notice with the words ‘that’s for my death duties’ and other oblique remarks on subsequent occasions

which indicated that Peter intended David to inherit the farm. As Lloyd LJ observed (at [67]), such conduct and language might have been consistent with a current intention rather than a definite assurance. But the judge found [page 373]

as a fact that these words and acts were reasonably understood by David as an assurance that he would inherit the farm and that Peter intended them to be so understood. The Court of Appeal said, correctly, that the fact that Peter had actually intended David to inherit the farm was irrelevant. The question was whether his words and acts would reasonably have conveyed to David an assurance that he would do so. But Lloyd LJ accepted (at [66]) that the finding as to what Peter would reasonably have been understood to mean by his words and acts was a finding of fact which was not open to challenge. That must be right. The fact that he spoke in oblique and allusive terms does not matter if it was reasonable for David, given his knowledge of Peter and the background circumstances, to have understood him to mean not merely that his present intention was to leave David the farm but that he definitely would do so. However, the Court of Appeal allowed the appeal on the ground that the judge had not found that the assurance was intended to be relied upon and that there was no material upon which he could have made such a finding. The judge had found that David had relied upon the assurance by not pursuing other opportunities but not, said Lloyd LJ, that Peter had known about these opportunities or intended to discourage David from pursuing them. At that point, it seems to me, the Court of Appeal departed from their previously objective examination of the meaning which Peter’s words and acts would reasonably have conveyed and required proof of his subjective understanding of the effect which those words would have upon David. In my opinion it did not matter whether Peter knew of any specific alternatives which David might be contemplating. It was enough that the meaning he conveyed would reasonably have been understood as intended to be taken seriously as an assurance which could be relied upon. If David did then rely upon it to his detriment, the necessary element of the estoppel is in my opinion established. It is not necessary that Peter should have known or foreseen the particular act of reliance. The judge found (at [98]) not only that it was reasonable for David to have understood Peter’s words and acts to mean that ‘he would be Peter’s successor to [the farm]’ but that it was reasonable for him to rely upon them. These findings of fact were in my opinion sufficient to support the judge’s decision. The judge held that the equity in David’s favour created by the proprietary estoppel required a declaration that Peter’s personal representatives held the farm with its chattels, live and dead stock and cash at bank on trust for David absolutely. The personal representatives object on two grounds. First, they say although the judge placed reliance on the incident of the handing over of the insurance policy in 1990, the assurance was not unequivocal until affirmed by later words and conduct, after which the detriment suffered by David was a good deal less than if one took the whole period from 1990 until Peter’s death and therefore did not justify an award of the whole farm. I do not think that the judge was trying to pinpoint the date at which the assurance

became unequivocal and I think it would be unrealistic in a case like this to try to do so. There was a close and ongoing daily relationship between the parties. Past events provide context and background for the interpretation of subsequent events and subsequent events throw retrospective light upon the meaning of past events. The owl of Minerva spreads its wings only with the falling of the dusk. The finding was that David reasonably relied upon the assurance from 1990, even if it required later events to confirm that it was reasonable for him to have done so. The second ground of objection is that the farm when Peter died in 2005 was not the same as it was in 1990. In between, he had sold some land and bought other land. I agree with my noble and learned friends Lord Walker of Gestingthorpe and Lord Neuberger of [page 374]

Abbotsbury that changes in the character or extent of the property in question are relevant to the relief which equity will provide but do not exclude such a remedy when there is still an identifiable property. In the present case, I see no reason to question the judge’s decision that David was entitled to the beneficial interest in the farm and the farming business as they were at Peter’s death. I would therefore allow the appeal and restore the decision of the judge. Lord Walker of Gestingthorpe: … This appeal is concerned with proprietary estoppel. An academic authority (Simon Gardner, An Introduction to Land Law (2007) p101) has recently commented: ‘There is no definition of proprietary estoppel that is both comprehensive and uncontroversial (and many attempts at one have been neither).’ Nevertheless most scholars agree that the doctrine is based on three main elements, although they express them in slightly different terms: a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reasonable) reliance (see Megarry and Wade, Law of Real Property, 7th edn (2008) para 16-001; Gray and Gray, Elements of Land Law, 5th edn (2009) para 9.2.8; Snell’s Equity, 31st edn (2005) paras 10-16 to 10-19; Gardner, An Introduction to Land Law (2007) para 7.1.1). This appeal raises two issues. The first and main issue concerns the character or quality of the representation or assurance made to the claimant. The other (which could be regarded as a subsidiary part of the main issue, but was argued before your Lordships as a separate point) is whether, if the other elements for proprietary estoppel are established, the claimant must fail if the land to which the assurance relates has been inadequately identified, or has undergone a change (in its situation or extent) during the period between the giving of the assurance and its eventual repudiation. I should say at once that the respondents to the appeal did not contend that this House’s decision in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752 (‘Cobbe’) has severely curtailed, or even virtually extinguished, the doctrine of proprietary estoppel (a rather apocalyptic view that has been suggested by some commentators: see for instance Ben McFarlane and Professor Andrew Robertson, ‘Death of Proprietary Estoppel’ [2008] LMCLQ 449 and Sir Terence Etherton’s extrajudicial

observations to the Chancery Bar Association 2009 Conference, paras 27ff.) But Cobbe is certainly relevant to the second issue. The respondents’ case is that in Cobbe this House reaffirmed the need for certainty of interest which has, it is argued, been part of the law since Ramsden v Dyson (1866) LR 1 HL 129. The respondents argue that Re Basham [1986] 1 WLR 1498 was wrongly decided so far as it extended, not just to the deceased’s cottage, but to the whole of his residuary estate … David’s mother Dorothy died in 1992. Her death was a heavy blow to Jimmy, and David did his best to support his father. In relation to this period (about the mid-90’s) the deputy judge found: 98. From time to time, Peter made remarks to David in conversation which, though not saying so directly, carried with them the implication that David was to have [a] continuing long-term involvement with Steart Farm. Peter would point out to him little things about the farm which would only be of relevance to someone with such an involvement (as they were of no immediate relevance at the time they were made), and which it was only necessary to communicate to someone who would be there after Peter had gone, and the undocumented knowledge in his head was no longer available. The underlying context of such remarks was of course the remark made in 1990 coupled with the handing over of the bonus notice, which I have already dealt with, [page 375]

and David’s continuing heavy commitment to wholly unremunerated work on Steart Farm. Understandably, the evidence does not date these remarks with any precision. One such remark was when Peter made a point of drawing to David’s attention a cattle trough which, he explained to him, never froze up in winter. I find that this and other such remarks encouraged the expectation which David had formed (in the circumstances I have already explained) that he would be Peter’s successor to Steart Farm, upon his death, and encouraged David to continue with his very considerable unpaid help to Peter there. I am also satisfied that it was reasonable for David to understand them and rely on them in that way … In my opinion it is a necessary element of proprietary estoppel that the assurances given to the claimant (expressly or impliedly, or, in standing-by cases, tacitly) should relate to identified property owned (or, perhaps, about to be owned) by the defendant. That is one of the main distinguishing features between the two varieties of equitable estoppel, that is promissory estoppel and proprietary estoppel. The former must be based on an existing legal relationship (usually a contract, but not necessarily a contract relating to land). The latter need not be based on an existing legal relationship, but it must relate to identified property (usually land) owned (or, perhaps, about to be owned) by the defendant. It is the relation to identified land of the defendant that has enabled proprietary estoppel to develop as a sword, and not merely a shield: see Lord Denning MR in Crabb v Arun DC [1976] Ch 179, 187. In this case the deputy judge made a clear finding of an assurance by Peter that David

would become entitled to Steart Farm. The first, ‘watershed’ assurance was made in 1990 at about the time that Peter made an advantageous sale of one field for development purposes, and used part (but not the whole) of the proceeds to buy more agricultural land, so increasing the farm to the maximum at about 582 acres (some merely tenanted by Peter) which Peter farmed in 1992. Both Peter and David knew that the extent of the farm was liable to fluctuate (as development opportunities arose, and tenancies came and went). There is no reason to doubt that their common understanding was that Peter’s assurance related to whatever the farm consisted of at Peter’s death (as it would have done, barring any restrictive language, under section 24 of the Wills Act 1837, had Peter made a specific devise of Steart Farm). This fits in with the retrospective aspect of proprietary estoppel noted in Walton v Walton … The situation is to my mind quite different from a case like Layton v Martin [1986] 2 FLR 227, in which the deceased made an unspecific promise of ‘financial security’. It is also different (so far as concerns the award of the whole of the deceased’s residuary estate) from Re Basham [1986] 1 WLR 1498. Your Lordships do not need to decide whether Re Basham was correctly decided, so far as it extended to the residuary estate, and I would prefer to express no decided view. But on this point the deputy judge in Re Basham relied largely on authorities about mutual wills, which are arguably a special case … In any event, for the reasons already mentioned, I do not perceive any real uncertainty in the position here. It is possible to imagine all sorts of events which might have happened between 1990 and 2005. If Peter had decided to sell another field or two, whether because of an advantageous development opportunity or because the business was pressed for cash, David would have known of it, and would no doubt have accepted it without question (just as he made no claim to the savings account which held that part of the proceeds of the 1990 sale which Peter did not roll over into land). If Peter had decided in 2000 to sell half the farm in order to build himself a retirement home elsewhere (an unlikely hypothesis) David might well have accepted that too (as the claimant in Gillett v Holt might have accepted a reduction in his expectations, had he been asked to do so rather than being abruptly and humiliatingly [page 376]

dismissed: see [2001] Ch 210, 229). But it is unprofitable, in view of the retrospective nature of the assessment which the doctrine of proprietary estoppel requires, to speculate on what might have been. Apart from his principled attack based on uncertainty, Mr Simmonds, realistically, did not criticise the deputy judge’s decision to award David the whole farm and the whole of the farming assets. There is no ground on which to challenge the judge’s discretion in determining the remedy. I would allow the appeal and restore the judge’s order. [Lords Scott, Neuberger and Rodger concurred.]

4.165

Thorner v Major has been seen by many commentators as returning

the doctrine of proprietary estoppel to its status after its weakening in Cobbe v Yeoman’s Row Management Ltd.51 Compare the result in Thorner v Major with that in Henry v Henry [2010] 1 All ER 988, where the Privy Council found proprietary estoppel by encouragement where a testator informally promised to leave a share in a property to the promisee. The Board held (at 1002) that ‘[p]roportionality lies at the heart of the doctrine of proprietary estoppel and permeates its every application’ and awarded a half share in the deceased’s interest as ‘the minimum equity required to do justice’. The ‘minimum equity’ doctrine now appears to have been rejected in Australia, as indicated in the cases referred to below. 4.166C

Delaforce v Simpson-Cook (2010) 78 NSWLR 483 New South Wales Court of Appeal

[A married couple purchased a house, title to which was in the husband’s name. Later, when the couple was in the process of getting divorced, they made a property settlement, under which the husband would pay the wife $50,000 and leave the house to her in his will. Later, they agreed that the wife would relinquish claims to the $50,000 on condition that the husband would build a granny flat on the property. The wife was not confident that the husband would keep his promises, and later insisted on the inclusion of a non-binding reference in the Family Court’s consent orders to the fact that the ‘parties have entered into this agreement on the basis’ of the husband’s promises in relation to the house. On the basis of this reference, the wife did not proceed to seek binding orders in relation to the house from the court. The husband died without having built the granny flat. Furthermore, his will did not leave the house to the wife, but to a cousin. The wife commenced proceedings in the New South Wales Supreme Court for an order that the husband’s executor transfer the house to her. The trial judge found that the husband, by means of the promises he made, had encouraged the wife to alter her position in reliance on the

expectation of obtaining a proprietary interest in the house. Furthermore, the wife’s reliance was reasonable and,

[page 377]

in agreeing to forgo the $50,000 payment, she suffered a detriment. The husband’s executor appealed against the decision to the New South Wales Court of Appeal.] Handley AJA: A proprietary estoppel by encouragement may be established where the conduct of the party estopped did not define the expectation: Plimmer v Mayor of Wellington (1884) 9 App Cas 699, 713; Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712 CA, 738–9, 742, 743; Gillett v Holt [2001] Ch 210 CA, 226 per Robert Walker LJ. ‘[T]he quality of the assurances which give rise to the claimant’s expectations’ is an important factor: Jennings v Rice [2003] 1 P & CR 100, 112, 114 per Robert Walker LJ repeating what he said in Gillett v Holt [2001] Ch 210, 225: ‘the quality of the relevant assurances may influence the issue of reliance [and] reliance and detriment are often intertwined’, which was approved by the Privy Council in Henry v Henry [2010] 1 All ER 988 PC, 995, 1000. Although there are statements in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7, 164 CLR 387 and Commonwealth v Verwayen [1990] HCA 39, 170 CLR 394 that relief in these cases must be limited to removing or reversing the detriment suffered by the party entitled to the estoppel, the joint judgment in Giumelli [1999] HCA 10, 196 CLR 101, 120, 125 established that there is no such restriction. The detrimental reliance that supports the estoppel need not constitute, in any sense, a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it. Relief depends very much on the facts and, as the Privy Council said in Plimmer (1884) 9 App Cas 699, 714: ‘the court must look at the circumstances in each case to decide in what way the equity can be satisfied.’ … It has been said that the Court should frame the relief to enforce ‘the minimum equity to do justice to the plaintiff’: Crabb v Arun DC [1976] Ch 179 CA, 198 per Scarman LJ. This principle has frequently been applied in England: Yaxley v Gotts [2000] Ch 162 CA, 175; Gillett v Holt [2001] Ch 210 CA, 235, 237; and Jennings v Rice [2003] 1 P & CR 100 CA, 110, 113; however, as Robert Walker LJ said there it ‘does not require the Court to be constitutionally parsimonious, but … recognise[s] that [it] must also do justice to the defendant’. The minimum equity principle was applied in Verwayen [1990] HCA 7, 170 CLR 394 by Mason CJ at 441, and Brennan J at 429, 430, but since Giumelli is probably not the law in this country. It was only mentioned once, and then only in passing in the speeches in Thorner v Major [2009] 1 WLR 776. This was to the statement of issues in the Court of Appeal: ibid at 792. Relief may be moulded to recognise practical considerations such as the need for a clean break: Pascoe v Turner [1978] EWCA Civ 2; [1979] 1 WLR 431 CA, 438–439;

Giumelli (above) at 113–114, 125; Gillett v Holt [2001] Ch 210 CA, 237; Jennings v Rice [2003] 1 P & CR 100 CA, 115. The Court must also take into account the impact of its orders on third parties and any hardship or injustice they would suffer: Giumelli (above) at 113–114, 125; Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712 CA, 749, 750. Relief may be refused or reduced if the plaintiff’s equity has been diminished by later events. In Sledmore v Dalby [1996] EWCA Civ 1305; (1996) 72 P & CR 196 CA the Court held that the plaintiff’s equity based on his improvements had been fully amortized over 18 years of rent free occupation. Subsequent events may also enlarge the plaintiff’s equity as in Crabb v Arun DC [1976] Ch 179 CA where the defendant’s repudiation of the expectation had landlocked the plaintiff’s land for five years: ibid at 189, 199. Relief may also be limited where the enforcement of the plaintiff’s expectation would be out of all proportion to the detriment: Jennings v Rice [2003] 1 P & CR 100 CA, 104, 111, 115. This is particularly so where the expectation was not defined and the Court has a broader discretion: ibid at 114. A gardener had looked after an elderly widow and been [page 378]

promised that ‘he would be alright’ and ‘this will all be yours one day’. He was awarded £200,000, and the Court of Appeal rejected his claim to the house and contents worth £435,000. The Court should, prima facie, enforce a reasonable expectation which the party bound created or encouraged: Meagher Gummow and Lehane, Equity Doctrine and Remedies, 4th ed 2002, pp 567–568. In Ramsden v Dyson (1866) LR 1 HL 129, 170 Lord Kingsdown said: ‘If a man … under an expectation created or encouraged by the landlord that he shall have a certain interest [acts to his detriment] upon the faith of such expectation … a Court of equity will compel the landlord to give effect to such … expectation’ (Lord Kingsdown’s principle). In Chalmers v Pardoe [1963] 1 WLR 677 PC, 681–682, the Privy Council said that if such an estoppel is established ‘a court of equity will prima facie require the owner … to fulfil his obligation’. In Attorney General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114, 121 Lord Templeman said: The authorities expound and illustrate the principle upon which a litigant who is led to believe that he will be granted an interest in land and who acts to his detriment in that belief is enabled to obtain that interest. In Giumelli [above] the joint judgment (at 123) quoted with approval this statement of Deane J in Verwayen [1990] HCA 39, 170 CLR at 443: Prima facie, the operation of an estoppel by conduct is to preclude departure from the assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh, that some lesser form of relief should be awarded … The prima facie entitlement to which his Honour had referred

would be qualified if that relief ‘would exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party’. The House of Lords has since considered estoppel by encouragement in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752 (Cobbe), and Thorner v Major [2009] 1 WLR 776, as did the Privy Council in Henry v Henry [2010] 1 All ER 988 … In Henry the Privy Council upheld a proprietary estoppel by encouragement based on an informal promise to leave the promisor’s share in a property to the promisee. Sir Jonathan Parker, who delivered the judgment of the Board, said at p 1002: ‘Proportionality lies at the heart of the doctrine of proprietary estoppel and permeates its every application.’ The Board did not enforce the expectation but awarded a half share in the deceased’s interest as ‘the minimum equity required to do justice to’ the claimant, without otherwise explaining why the expectation was not enforced. In my opinion, and with respect there is no positive requirement for a plaintiff to prove that the relief sought is proportionate. The principle, a negative one, is that enforcement of the expectation must not be disproportionate. Proportionality was not mentioned in the speeches in Thorner v Major (above). With respect the Board in Henry did not explain why statements not made expressly but by ‘implication and inference from indirect statements and conduct’ and ‘in oblique and allusive terms’ by the promisor in Thorner v Major (at 778, 779) established a proprietary estoppel for the interest promised, but similar statements in Henry established a proprietary estoppel for only half that promised. Mr Harper relied on the vicissitudes of life which may have required the deceased to mortgage or sell the subject property despite his promise in the consent orders. However the Court was not referred to any decision where adverse vicissitudes affected the enforceability of an estoppel by encouragement or the quantum of relief … [page 379]

I see no reason for devaluing the plaintiff’s reliance and detriment because of the possible effect of adverse vicissitudes on the deceased. In any event he had other assets of substantial value. It is unnecessary in this case, as it was in Thorner v Major, to determine the rights of the parties in hypothetical circumstances in the deceased’s lifetime. Compare the position where parties have made mutual wills: Birmingham v Renfrew [1937] HCA 52, 57 CLR 661, 674, 689; Re Goodchild [1996] 1 WLR 694, 700. The arrangement between these parties was for the deceased to have the use of the subject property in his lifetime but when he no longer had any need for it it was to pass to the plaintiff. In the events that happened performance of his assurance involved no opportunity cost other than a restriction on his testamentary freedom. Given the principles referred to [above] can it be said that the judge erred in enforcing the plaintiff’s expectation? The deceased made a solemn written promise which was

incorporated in a court order. That promise in relation to the subject property was clear and unambiguous. It defined the interest the plaintiff was to receive and when she was to receive it. In this case the ‘quality of the deceased’s assurances’ provides no basis for refusing to enforce the plaintiff’s expectation. Lord Kingsdown’s principle and the cases in the Privy Council ([63] above), the joint judgment in Giumelli, the cases referred to (at [65]–[67] above) and the confirmation of Lord Kingsdown’s principle in Cobbe and Thorner v Major (at [71]–[74] above) support the enforcement of the plaintiff’s expectation. See also the valuable discussion in Robertson, ‘The reliance basis of proprietary estoppel remedies’ [2008] Conv 295. Where the expectation is undefined or uncertain equity must fashion its relief from the circumstances [51], but where the expectation was defined with certainty by the party estopped that is where the Court must start. There is no other principled starting point. What are the circumstances here which call for something less? In my judgment there are none. Notwithstanding the statement in Henry v Henry (at [76] above) there is no basis for applying the proportionality principle in this case. The beneficiary under the deceased’s will is a volunteer with no other claim, and in any event he will inherit property worth some $2 million. There are no countervailing equities, there is no hardship, and there are no practical difficulties. Subsequent events have not inflated the value of the expectation beyond that in contemplation when the deceased made his promise. The Judge has enforced the expectation in the very circumstances envisaged when the deceased created and encouraged it. In my judgment this part of the appeal fails. Allsop P: I have had the privilege of reading in draft the reasons of Handley AJA. I agree with his Honour’s reasons and with the orders proposed by him. I would only add the following comments. As Handley AJA says, there is no occasion in the resolution of this controversy to deal with the position of the property and the relationship between the parties during the deceased’s lifetime, in hypothetical circumstances. In that context, and given the argument in this case, there is also no occasion to consider the possible alternative or additional perspective of analysis through the prism of a remedial constructive trust (rather than, or in addition to, estoppel) as discussed by Lord Scott of Foscote in Thorner v Major [2009] UKHL 18; [2009] 1 WLR 776 at 781 [14] and 784–785 [20]. I agree in particular with Handley AJA that the reasons of Gleeson CJ, McHugh, Gummow and Callinan JJ in Giumelli v Giumelli [1999] HCA 10; 196 CLR 101 appear to remove as a governing principle in the relief to be granted in equitable or proprietary estoppel cases the notion of enforcement or vindication only of the ‘minimum equity’: see Giumelli at 123–125 [40]–[48]. That, of course, does not make irrelevant matters that can assuage the [page 380]

detriment brought about by the resiling from the representation or encouragement by the party concerned. It does mean, however, that relief in such cases is not to be measured by weighing detriment too minutely in order that it be converted into some equivalent of

cash or kind, as if one were measuring the consideration for a commercial bargain. Equity will look at all the relevant circumstances that touch upon the conscionability (or not) of resiling from the encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character. Equity has always had a place in keeping parties to representations or promises: see for example, Burrowes v Lock [1805] EngR 89; (1805) 10 Ves Jr 470; 32 ER 927; Horn v Cole 51 NH 287; 12 Am Rep 111 (1868); J N Pomeroy, A Treatise on Equity Jurisprudence Vol 3 (5th ed, 1941) at 179–188 [802]– [803]; R Meagher, J Heydon and M Leeming, Meagher, Gummow and Lehane’s Equity: Doctrine and Remedies (4th ed, 2002) at 556–560 [17-065]–[17-070] and 567–568 [17-110]. Proportionality of the claimed interest or remedy to the prejudice or detriment is undeniably a relevant consideration, and sometimes of considerable importance. It should not, however, be transformed into a necessary constitutive element of a cause of action to be pleaded or proved by the party seeking relief. To do so would elevate one consideration above others, and in particular above the importance of making good an expectation by encouragement or representation: Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at 713–714; Riches v Hogben [1985] 2 Qd R 292; Giumelli at 113–114 [10] and 121–122 [35]. It would tend to equate the analysis to one requiring that the party encouraged receive no more than it can prove that it suffered in detriment. This would see the equity become one of compensation for proved equivalent detriment. The equity is a broader one based on the just and conscionable satisfaction in appropriate fashion of the equity arising from the expectation created in another by encouragement or representation. As Handley AJA says, the role of proportionality is better understood, in a doctrine dealing with the legitimacy or otherwise of resiling from an encouragement or representation that has created an expectation, as assisting in an assessment whether what is claimed or contemplated to be granted is disproportionate or unjust in all the circumstances. The importance of keeping a party to a representation or encouragement previously made is all the stronger where, as here, the encouragement or representation has been relied upon by a party to abandon a course of conduct that could possibly have led to a different outcome. This can be described in the language of loss of a chance that is not fanciful or unrealistic, or in the language of proceeding thereafter on the basis of a new or changed convention or conventional basis. Such expression of the matter is not different to how Dixon J put the matter in Grundt v Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; 59 CLR 641 at 674–675. For instance, if, as here, in reliance upon a representation or encouragement, a court case is abandoned and the representation or encouragement is later sought to be resiled from, the party to whom the representation or encouragement was made and in whom the expectation was raised is left in the position not only of the loss of the entitlement to pursue his or her rights in the case in the past, but also is likely to be in the position of being unable to demonstrate what would, or even may, have happened in the case, it being an alternative, complex and now hypothetical body of human conduct. That the party encouraged cannot show that he or she would have been better off in the posited alternative reality is not fatal to the making out of the

estoppel. Indeed, the inability to prove such things reveals a central aspect of the detriment: being left, now, in that position. Of course, if it is self-evident [page 381]

or can be clearly demonstrated that the case was fanciful or otherwise doomed to fail, there may be no real detriment; but that was not the case here. The respondent gave up her right to propound her case in the Family Court on the faith of the deceased’s representation. It was not self-evident, or otherwise clearly demonstrated, that she could not have been successful in securing her rights to the subject property after the death of the deceased. [Giles JA concurred.]

4.167 Questions 1.

Does the Court of Appeal in Delaforce adopt a different approach to remedies in proprietary estoppel than the Privy Council in Henry v Henry?

2.

To what extent does ‘proportionality’ play a role in determining the remedy when a proprietary estoppel is established?

3.

Does Giumelli v Giumelli indicate an approach informed by the notion of ‘proportionality’?

4.

Is there a difference of approach between the English and Australian courts to proprietary estoppel cases? Note the following comment of Michael Bryan: Judicial reliance on proportionality in Henry v Henry and other English decisions shows that the aim of relief in recent English proprietary estoppel decisions involving family disputes is not to enforce a plaintiff’s expectations. Enforcement of expectations is not even assumed to be the starting point for assessing relief. The

aim is instead to conduct a ‘family law’ type inquiry into the resources of both parties, treating the estoppel claim as the occasion for a reallocation of property according to the needs of the parties and the contributions they have made to the relationship.52

Do you agree with this assessment of the cases? Which is the fairer approach to disputes of this nature?

4.168

The ‘prima facie’ approach of Handley AJA in Delaforce — namely,

that the ‘court should, prima facie, enforce a reasonable expectation which the party bound created or encouraged’ at [63] — has been confirmed in subsequent cases: see, for example, Milling v Hardie [2014] NSWCA 163 at [55] and Wantagong Farms Pty Ltd (as trustee for Bulle Family Trust) v Bulle [2015] NSWSC 1603 at [70]. The principle that the relief must not be disproportionate to the damage has also been accepted: see Milling per Macfarlan JA at [55]. In Milling, Macfarlan JA noted at [68] that in considering relief for a proprietary estoppel by encouragement, ‘the court looks backwards rather than forwards’ and that in the case in point, the plaintiffs’ expenditure on improvements to the property could ‘be regarded as having been largely, if not wholly, amortised over the period of their occupation’: at [69]. Consequently, the plaintiffs’ ‘equity would be satisfied by holding that [the defendant] is estopped from denying an entitlement [of the plaintiffs to occupy the property] during [the defendant’s] lifetime’: at [71].

[page 382]

4.169

The ‘prima facie’ approach has been rejected in New Zealand, where

the NZ Court of Appeal in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567 held that expectation-based relief should be granted ‘when the minimum equity will not be satisfied by anything less than enforcing the promise’: at [123]. 4.170

In the case extracted below, the High Court recognised the need for

the relief to take into account the requirements of good consicence and also cast doubt over the ‘minimum equity’ doctrine.53 4.171C

Sidhu v Van Dyke (2014) 308 ALR 232 High Court of Australia

[In 1996, the respondent and her husband rented a building from the appellant and his wife. The building was called Oaks Cottage and was located approximately 100 metres away from the main homestead on a 32-hectare rural property called Burra Station, in which the appellant and his wife lived. Towards the end of 1997, the appellant and the respondent commenced a sexual relationship. The appellant told the respondent that he loved her and was planning to subdivide Burra Station, after which he would arrange for Oaks Cottage to be transferred into her name. The respondent subsequently divorced her husband, but did not seek a property settlement as she had been told by the appellant that she did not need a settlement from him as she had the Oaks Cottage. The respondent continued to live in Oaks Cottage with her young child, paying rent to the appellant’s wife at a rate that was lower than the market rate and carrying out unpaid work in relation to the maintenance and renovation of Oaks Cottage and also the improvement and maintenance of Burra Station. The respondent did not seek full-time employment during her stay at Burra Station. As a result, over a period of eight and a half years, she lost the opportunity to earn wages that she might have earned. During her time in the property, the respondent was given written assurances by the appellant that he would gift the property to her once the subdivision had been completed. In 2006, Oaks Cottage burnt down and the respondent and her child moved into another property on the homestead block. After the relationship between the

respondent and the appellant came to an end, the appellant and his wife refused to convey the Oaks Property to the respondent. Subdivision of the property did not proceed as the conditions imposed by the council had not been satisfied by the appellant. In proceedings brought by the respondent, the primary judge found that the respondent had not established that she had relied on the appellant’s promises to her detriment other than in one respect and, in that respect, it was not ‘objectively reasonable’ for the respondent to rely on the promise given the conditional nature of the promise. On appeal, the New South Wales Court of Appeal found that the primary judge had erred and allowed the appeal, ordering equitable relief in the form of equitable compensation measured by reference to the value of the respondent’s disappointed expectation. The Court of Appeal declined to make an order that the property be transferred to the respondent on the ground that this would have involved hardship to a third party; namely, the appellant’s wife as co-owner of the property.

[page 383]

The appellant appealed to the High Court. On the question of reliance, French CJ, Kiefel, Bell and Keane JJ (Gageler J agreeing) held that the onus of proving reliance was always on the party seeking to establish the estoppel and that the respondent had discharged this onus. Further, to establish estoppel by encouragement, it was not necessary that the conduct of the party estopped should be the sole inducement operating on the mind of the party setting up the estoppel. Noting that ‘[i]t is not the breach of the promise, but the promisor’s responsibility for the detrimental reliance by the promise, which makes it unconscionable for the promisor to resile from his or her promise’ at [58], the High Court stated that ‘this category of equitable estoppel serves to vindicate the expectations of the representee against a party who seeks unconscionably to resile from an expectation he or she has created’: at [77]. The High Court then considered the measure of relief:] French CJ, Kiefel, Bell and Keane JJ (Gageler J agreeing): In Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ held that, because the fundamental purpose of equitable estoppel is to protect the plaintiff from the detriment which would flow from the defendant’s change of position if the defendant were to be permitted to resile from his or her promise, the relief granted may require the taking of active steps by the defendant including the performance of the promise and the performance of the expectation generated by the promise. That holding is supported by the leading decisions to which this category of equitable estoppel is usually traced.

The requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief. In Verwayen, Deane J noted that: There could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party. If the respondent had been induced to make a relatively small, readily quantifiable monetary outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for her outlay. But this case is one to which the observations of Nettle JA in Donis [Donis v Donis (2007) 19 VR 577] are apposite (at [34]): [H]ere, the detriment suffered is of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature … beyond the measure of money and such that the equity raised by the promisor’s conduct can only be accounted for by substantial fulfilment of the assumption upon which the respondent’s actions were based. The appellant’s argument, rightly, sought no support from the discussion in cases decided before Giumelli v Giumelli of the need to mould the remedy to reflect the ‘minimum relief necessary to “do justice” between the parties’ [Verwayen at CLR 416; ALR 335, see also at CLR 429; ALR 345; Waltons Stores at CLR 404-5 and 419; ALR 524 and 535]. There may be cases where ‘[i] t would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption’ [Verwayen at CLR 413; ALR 333]; but in the circumstances of the present case, as in Giumelli, justice between the parties will not be done by a remedy the value of which falls short of holding the appellant to his promises. While it is true to say that ‘the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct’, [page 384]

[Waltons Stores at CLR 419ALR 535] where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise. In the circumstances of the present case, no reason has been identified by the appellant to conclude that good conscience does not require that the appellant be held to his promises. In particular, it is no answer for the appellant to say that the performance of his promises was conditional on the completion of the subdivision and the consent of his wife to the transfer to the respondent. His assurances to the respondent were expressed categorically so as to leave no room for doubt that he would ensure that the

subdivision would proceed and that the consent of the appellant’s wife would be forthcoming. [The appeal was dismissed with costs.]

4.172

For recent cases citing Sidhu, see Evans v Braddock [2015] NSWSC

249; Mahoney (who sues both personally and as executor of the estate of Mahoney (dec’d)) v Mahoney (who is sued both personally and as executor of the estate of Mahoney (dec’d)) [2015] VSC 600; Nolan v Nolan [2014] QSC 218; Wantagong Farms Pty Ltd (as trustee for Bulle Family Trust) v Bulle [2015] NSWSC 1603; and Milling v Hardie [2014] NSWCA 163.54

EQUITABLE PRIORITY RULES Introduction 4.173

Two or more persons quite often claim proprietary interests in the

one object. In most cases there is no doubt as to which of the interests takes precedence, and indeed no dispute between the holders of those interests. In a typical sale of the fee simple estate in land the purchaser becomes aware of outstanding interests in the land well before final settlement of the transaction. The purchaser may agree to take a conveyance (or a transfer in the case of Torrens system land) subject to existing interests in third parties, such as easements or mortgages. Where this occurs the agreed purchase price reflects the fact that the purchaser is not to take an unencumbered fee simple estate. If, on the other hand, the purchaser does not agree to take subject to existing interests, the vendor is obliged to discharge those interests before

settlement. If the vendor is unable to do so, the purchaser is entitled to refuse to complete the transaction since the vendor has failed to comply with his or her contractual obligations. 4.174

Occasionally, as a result of fraud or mistake, several people claim

interests in one object, the claims being inconsistent with each other. This difficulty usually arises in one of two ways. First, a flaw in the title of the person purporting to create or transfer an interest in land may preclude the creation or transfer of an unencumbered title. For example, A purports to convey a fee simple estate to B when in fact, perhaps unknown to A, the true holder of the legal fee simple estate is C. In this situation the basic common law principle, nemo dat quod non habet, applies under the general law. The second case is where the person purporting to create or transfer the interest has a valid title, but purports to create several interests wholly or partially inconsistent with each other. For example, the holder of the fee simple estate may

[page 385]

create several security interests in the one piece of land, concealing the existence of the earlier mortgage or charge from the later creditor. Each transaction is effective as between the grantor and the grantee, but wholly or partially inconsistent with the other transactions. In this case it is necessary for the courts to resolve the priorities conflict by determining the ranking of these interests. The superior claim is generally that of the prior claimant, but

the interaction of legal and equitable principles sometimes produces a different result. A decision that one interest takes priority over another may mean that the latter is entirely defeated, but this is not always so. The second interest may continue, but take effect subject to the first. If, for example, A has an interest in Blackacre and separately mortgages that interest to B and to C, each of whom is unaware of the existence of the other’s interest, a decision that B’s mortgage prevails over C’s does not prevent the latter operating as a second mortgage — that is, as a security interest subject to the satisfaction of B’s interest. In practice, C’s interest will prove to be worthless if the value of the land is insufficient to cover the amount due under the first mortgage. If, however, the value of the land exceeds that amount it will be worthwhile for C to enforce the second mortgage although, depending on the value, C will not necessarily receive the full amount due under the mortgage. 4.175

As noted in Chapter 1, a proprietary interest can be distinguished

from a contractual right by the entitlement of the holder to enforce the interest against persons other than the grantor. The need to resolve priorities conflicts suggests that different classes of proprietary interests have different spheres of enforceability depending on their place in the hierarchy. The materials in this chapter show that the enforceability of each recognised class of interest (legal interests, equitable interests and equities) depends on the identification of the interest as belonging to a particular class, the principles of common law and equity and, where relevant, statutory variation of those principles. 4.176

Before the Judicature Act of 1873 provided for the concurrent

administration of law and equity, the distinction between legal and equitable interests was of prime importance from the very inception of any legal action since a plaintiff’s case would at the least be severely prejudiced if commenced in the wrong jurisdiction. Without canvassing the merits or otherwise of the judicature system, the end of the common law system of pleading and the vesting of full equitable and legal jurisdiction in the superior courts have meant that for practical purposes the question whether a proprietary interest is legal or equitable is relevant only to the issue of its enforceability. Indeed, where the sphere of enforceability of an interest is prescribed by statute, as is the case for registered interests in Torrens title land, the question of whether a competing proprietary interest is legal or equitable is generally irrelevant. However, where the competing interests are both unregistered the general principles of law and equity will generally apply: Spark v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970) 92 WN (NSW) 1087; Newington v Windeyer (1985) 3 NSWLR 555.

Enforceability of legal interests in old system land 4.177

The priority rules for old system land hinge on the formal

requirement for the creation of legal interests by executing deeds, as noted earlier in this chapter. It should be emphasised that with the gradual disappearance of general law land, or old system title, this manner of creating legal interests in land is becoming increasingly rare, and now for practical purposes is only evident, and rarely, in New South Wales, Victoria, Western

Australian and Tasmania. The manner of creating legal interests over Torrens land, and the very different priority rules

[page 386]

that apply, are considered in detail in Chapter 5. However, the equitable priority rules continue to apply in relation to Torrens land, and will be further elaborated in Chapter 5. The rules below fall into three broad categories: legal against legal; legal against equitable; and equitable against equitable (including what is referred to as ‘equities’ or ‘mere equities’).

Earlier legal interest against later legal interest 4.178

The general common law principle is that legal interests are good

against all the world. It follows from this principle that a legal interest prevails over any subsequently created legal or equitable interest, to the extent to which there is an inconsistency. (This is subject to the logical limitation that if two inconsistent legal interests are created in the one object, clearly one must yield to the other. Usually the later interest will be subject to the earlier in the same way as the interest of a possessor of land or goods is subject to a prior possessory interest.) In this area, it is difficult to separate the application of the nemo dat quod non habet principle from a true case of conflicting priorities, if indeed it is ever possible to distinguish the two. Thus, if A, the holder of a legal fee simple in Blackacre, conveys the legal fee simple to B and later conveys the legal fee simple to C, C receives no interest in the

land, as A had nothing to convey. This could be regarded as an application of nemo dat, or as an application of the rule that a legal interest prevails over subsequently created interests. Since B’s interest is entirely inconsistent with C’s interest, B’s interest must prevail. On the other hand, it may be possible for the two competing interests to stand together in a situation of partial inconsistency. For example, if A leases Blackacre to B for a legal term of 10 years and subsequently conveys the legal fee simple to C without disclosing the existence of the lease, C’s fee simple estate is subject to B’s legal leasehold estate. In practical terms, this means that C is unable to obtain possession of Blackacre from B (unless B breaches the covenants in the lease), although of course C is entitled to receive the rent payable under the lease.

Equitable interests against legal interests Earlier legal interest against a later equitable interest 4.179

As with most general rules, the courts have developed significant

exceptions to the principle that legal interests are good against all the world. Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 concerned a priority dispute between a legal mortgagee and a subsequent equitable mortgagee. The equitable mortgagee was unaware of the earlier legal mortgage and sought a declaration that the earlier legal mortgage was fraudulent and should be postponed by virtue of the conduct of the legal mortgagee in giving up or not retaining possession of the title deeds. The court (Fry J) confirmed the principle that a prior legal estate should have

priority over a subsequent equitable estate but recognised that the prior legal estate should be postponed (1) ‘where the owner of the legal estate has assisted in or connived at the fraud which has led to the creation of a subsequent equitable estate, without notice of the prior legal estate’; or (2) ‘where the owner of the legal estate has constituted the mortgagor his agent with authority to raise money, and the estate thus created has by the fraud or misconduct of the agent been represented as being the first estate.’ However, ‘the court will not postpone the prior legal estate to the subsequent equitable estate on the ground of any mere carelessness or want of prudence on the part of the legal owner.’ Although the court acknowledged that there had been great carelessness on the part of the prior legal mortgagee, the circumstances did not fall into either of the two categories identified above.

[page 387]

4.180

Whipp’s case states that postponement may take place where ‘the

owner of the legal estate has constituted the mortgagor his agent with his authority to raise money, and the estate then created has by the fraud or misconduct of the agent been represented as the first estate’: (1884) 26 Ch D 482 at 494. What is envisaged by this statement? In Perry-Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895, two prior joint mortgagees gave the mortgagor possession of the title deeds for the purpose of giving priority to a particular charge. Instead, the mortgagor gave a different charge. They were postponed. In Brocklesby v Temperance Permanent Building Society [1895] AC 173 the holder of the legal estate gave the deeds to his son to raise a sum of

money, but when the son exceeded his authority and raised more, the father was postponed. 4.181

By his marriage settlement W conveyed real property to trustees to

be held upon certain trusts. Under the terms of the settlement W had an equitable life interest which would determine if he alienated the property. The same solicitors acted for all parties. They held a bundle of deeds, which were said to be the title deeds of the property. Both the solicitors and the trustees of the settlement were unaware that after execution of the settlement W retained the deed by which the real estate was conveyed to him. Some years later W mortgaged the property and handed over the conveyance, which he had retained, to the mortgagee. Later the mortgagee sold the real estate to L. Neither the mortgagee nor L had notice of settlement. The court held that all the parties had acted perfectly honestly: Walker v Linom [1907] 2 Ch 104. In the course of his judgment, Parker J concluded: In my opinion any conduct on the part of the holder of the legal estate in relation to the deeds, which would make it inequitable for him to rely on his legal estate against a prior equitable estate of which he had no notice, ought also to be sufficient to postpone him to a subsequent equitable estate the creation of which has only been rendered possible by the possession of deeds, which but for such conduct would have passed into the possession of the owner of the legal estate. This must, I think, have been the opinion of Fry LJ in Northern Counties of England Fire Insurance Co v Whipp, for he explains both Worthington v Morgan (1849) 16 Sim 547, and Clarke v Palmer 21 Ch D 124 as based upon the same sort of fraud. I do not think, therefore, that there is anything in the authorities to preclude me from holding … that the trustees, although they have the legal estate, are postponed to the defendant [at 114].

Even though the later interest was created by deed and therefore was intended to create a legal estate, it could not do so as the legal estate had

already been transferred. In this case equitable doctrine came to the defence of Linom, by preventing the trustees from enforcing their legal title against him. In this indirect way he was given a later equitable interest. Worthington v Morgan and Clarke v Palmer, mentioned by Parker J, were concerned with the holder of the legal estate being postponed to a prior equitable estate and to a subsequent equitable owner respectively. Compare Hudson v Viney [1921] 1 Ch 98. Do these cases represent a qualification to the principles discussed in Whipp’s case? 4.182

In modern times, the more important exceptions to the principle

that legal interests are good against all the world have been created by statute. In particular, the Torrens system of ‘title by registration’ permits a purchaser of an estate in land, on becoming registered as proprietor of that estate, to acquire a good title not with standing fundamental defects in

[page 388]

the vendor’s title, so long as the purchaser was not involved in any fraud. This doctrine of ‘indefeasibility of title’, as it is known, even protects the purchaser who becomes registered by means of a forged transfer. It follows that under the Torrens system the holder of a legal (or registered) interest may be defeated by a legal interest created and registered subsequently: see generally Chapter 5.

Prior equitable interest against a later legal

interest The principle 4.183C

Pilcher v Rawlins (1872) 7 Ch App 259 Court of Appeal in Chancery

[Pilcher held a sum of money in trust for certain beneficiaries. In 1851 Pilcher advanced the money to Rawlins, a solicitor. Rawlins executed a mortgage of Blackacre to Pilcher as security for the advance. The effect of this transaction was to convey the legal fee simple estate to Pilcher and the equitable fee simple estate to the beneficiaries. Rawlins was entitled to receive a reconveyance of the legal fee simple estate on repayment of the advance. All of this was perfectly proper. Rawlins and Pilcher decided to make some money through a fraudulent scheme. Rawlins arranged to borrow £10,000 from Stockwell and Lamb, who happened to be trustees for a second set of beneficiaries. Rawlins agreed to give Stockwell and Lamb a legal mortgage of Blackacre as security for the loan. But since Pilcher had the legal estate, this could not be done. Accordingly, Rawlins prepared an abstract of title (that is, a list of all documents relating to the land over a certain period of time designed to prove the title of the vendor or mortgagor) which omitted all mention of the 1851 mortgage to Pilcher. This was designed to, and did, satisfy Stockwell and Lamb that Rawlins had the legal estate, although of course he did not. On 2 April 1856 Pilcher discharged the mortgage he had received from Rawlins by executing a reconveyance of the legal estate to Rawlins. The reconveyance was expressed to be in consideration of the repayment by Rawlins of a portion of the advance to him. Later on the same day, 2 April 1856, Rawlins executed a legal mortgage to Stockwell and Lamb, who at that time had no knowledge of the 1851 mortgage or the reconveyance. As a result of this mortgage Stockwell and Lamb acquired the legal fee simple estate in Blackacre, although not under the title deeds they had examined, but through the 1851 mortgage and the reconveyance of 2 April 1856. In fact, Stockwell and Lamb knew nothing of the mortgage and reconveyance until after this suit was filed. One question in the suit was whether the equitable interest of the beneficiaries for whom Pilcher was trustee could prevail against the legal interest of Stockwell and Lamb.] Mellish LJ: … The general rule seems to be laid down in the clearest terms by all the great

authorities in equity, and has been acted on for a great number of years, namely, that this court will not take an estate from a purchaser who has bought for valuable consideration without notice: and I find that the appellants in both the cases before us are very clearly purchasers for valuable consideration without notice. … I am of the opinion that the appellants have made out their case. [Lord Hatherly LC and James LJ delivered judgments to the same effect.]

[page 389]

4.184 Questions 1.

What is the purpose of the doctrine that an equitable interest will not prevail against a bona fide purchaser of the legal estate for value without notice?

2.

Is it true to say that the beneficiaries of the trust of which Pilcher was trustee had a proprietary interest in Blackacre?

4.185

Assume that after discovery of the fraud perpetrated by Pilcher and

Rawlins, Stockwell and Lamb, the bona fide purchasers without notice, exercised their power of sale under the mortgage from Rawlins and conveyed the legal fee simple estate to X. X provided full value for the conveyance, but was fully aware of the outstanding equitable interest claimed by Pilcher’s beneficiaries. Would X take free of the beneficiaries’ equitable interest? In Wilkes v Spooner [1911] 2 KB 473, Mr Spooner, senior, leased two premises from different landlords — Nos 137 and 170 High Street. At No 137 he carried on the business of pork butcher and at No 170 that of general

butcher. He assigned both the business at No 170 High Street and his lease of the premises to the plaintiff. He also covenanted with the plaintiff on behalf of his successors and assigns, that he would not conduct the business of a general butcher at No 137. The effect of the covenant was to give the plaintiff an equitable interest in the premises at No 137. Mr Spooner, senior, then surrendered his lease of No 137 to the landlord, who had no notice of the restrictive covenant in favour of the plaintiff. The landlord subsequently granted a new lease to Mr Spooner, junior, who knew of the covenant but nevertheless proceeded to conduct the business of a general butcher at No 137. The Court of Appeal decided that the plaintiff was not entitled to an injunction against Mr Spooner, junior. The principle applied by the court was as follows: ‘A purchaser for valuable consideration without notice can give a good title to a purchaser from him with notice. The only exception is that a trustee who has sold property in breach of trust, or a person who has acquired property by fraud, cannot protect himself by purchasing it from a bona fide purchaser for value without notice’: Re Stapleford Colliery Co (1880) 14 Ch D 432 at 445.

4.186 Questions 1.

Would the plaintiff in Wilkes v Spooner have had any remedy at all in respect of the covenant?

2.

A, the holder of the fee simple estate in Blackacre, enters into a restrictive covenant with B, a neighbouring landowner. The effect of the transaction is to give B an equitable interest in Blackacre. C

dispossesses A and remains in adverse possession of Blackacre for 25 years. C then contracts to convey the unencumbered legal fee simple estate in Blackacre to D. Is he able to do so? In Re Nisbet and Potts’ Contract [1906] 1 Ch 386; [1904–7] All ER Rep 865 the court held that C could not do so for although he may not have had notice of the covenant he was not a purchaser for value of Blackacre. 3.

T, the holder of a legal fee simple estate in Blackacre on trust for B, conveys Blackacre to X in breach of the terms of the trust deed. X is a bona fide purchaser for value without notice. X in turn conveys Blackacre to Y, who is also a bona fide purchaser. T repurchases Blackacre from Y. Does T still hold Blackacre on trust for B?

[page 390]

The statutory definition of notice 4.187E

Property Law Act 1958 (Vic)

199(1) A purchaser shall not be prejudicially affected by notice of any instrument, fact or thing unless — (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his legal practitioner or other agent, as such, or would have come to the knowledge of his legal practitioner or other agent, as

such, if such inquiries and inspections had been made as ought reasonably to have been by the legal practitioner or other agent.

4.188C

Smith v Jones [1954] 1 WLR 1089; [1954] 2 All ER 823 Chancery Division

[In 1946 the defendant, Jones, purchased a farm at an auction. He knew the farm was occupied by the plaintiff, a tenant. Before the sale the defendant inspected the plaintiff’s tenancy agreement and formed the opinion that the plaintiff was liable for structural repairs to the farm buildings. After the sale, a dispute arose between the plaintiff and the defendant as to liability for certain structural repairs. Ultimately a case was stated for the opinion of a County Court judge, who ruled that the plaintiff was liable, but suggested that he might have a claim for rectification of the tenancy agreement. Accordingly, the plaintiff commenced this action, seeking rectification of the agreement in order to impose liability for structural repairs on the defendant. The defendant disputed the plaintiff’s claim on the facts and also pleaded that, even if a case for rectification was made out against the original landlord, he was a bona fide purchaser for value without notice and thus not bound by the equity to rectify. Upjohn J rejected the plaintiff’s claim on the facts.] Upjohn J: … Counsel for the plaintiff contended that, as the plaintiff was in actual occupation as tenant, the defendant was affected with notice of all his rights and equities, including an equity to rectify. On the view which I have formed of the facts and law as to rectification this point does not strictly arise, but as it has been fully argued I think that I ought to express my views thereon. In Barnhart v Greenshields (1853) 9 Moo PCC 18; 14 ER 204, where the law is conveniently and compendiously stated, the judgment of the Privy Council was delivered by Mr Pemberton Leigh (later Lord Kingsdown), who said (at 32): With respect to the effect of possession merely, we take the law to be, that if there be a tenant in possession of land, a purchaser is bound by all the equities which the tenant could enforce against the vendor, and that the equity of the tenant extends not only to interests connected with his tenancy, as in Taylor v Stibbert (1794) 2 Ves 437; 30 ER 713, but also to interests under collateral agreements, as in Daniels v Davison (1809) 16 Ves 249; 33 ER 978; Allen v Anthony (1816) 1 Mer 282; 35 ER 679, [page 391]

the principle being the same in both classes of cases; namely, that the possession of the tenant is notice that he has some interest in the land, and that a purchaser having notice of that fact, is bound, according to the ordinary rule, either to inquire what the interest is, or to give effect to it, whatever it may be. Later in the judgment (at 33) Mr Pemberton Leigh cited a passage from the judgment in Allen v Anthony, where Lord Eldon LC said: ‘It is so far settled as not to be disputed, that a person purchasing, when there is a tenant in possession, if he neglects to inquire into the title, must take, subject to such rights as the tenant may have’. On the other hand, counsel for the plaintiff has not produced any case which goes so far as to say that an equity of rectification is an equity which is enforceable against a purchaser. In my judgment, it would be extending the doctrine of notice and the obligation to make inquiry far too much if the doctrine was intended to cover an equity of rectification. Of course, the purchaser is bound by the rights of the tenant in occupation — that is quite clear. As is shown by earlier cases, notably, I think, Taylor v Stibbert, he is not entitled to assume that the tenant is in possession from year to year. He must look at the agreement and he is bound by the agreement, and if, as in Daniels v Davison, the tenant has not only a tenancy agreement but also an option to purchase, he is bound by that also. In my judgment, however, a purchaser is not only entitled but bound to assume, when he is looking at the agreement under which the tenant holds, that that agreement correctly states the relationship between the tenant and the landlord, and he is not bound to ask or to make inquiry whether the tenant has any rights which would entitle him to have the agreement rectified. Barnhart v Greenshields was followed by the Court of Appeal in Hunt v Luck [1902] 1 Ch 428; [1900–3] All ER Rep 295, where the principle was again stated, but as CozensHardy LJ pointed out in argument, and as Vaughan Williams LJ pointed out at the beginning of his judgment, the real question to determine was the true construction of the Conveyancing Act 1882, s 3. Farwell J, who heard the case at first instance, had dealt with the matter without reference to the statutory enactment. I have no doubt that that was because he treated the Act as merely declaratory of the existing law, but it is, after all, a matter of construction of the Act, although I have already expressed an opinion as though the matter rested solely on decided cases. The provisions of the Conveyancing Act 1882, s 3, are replaced by s 199(1)(ii), (2) and (3), of the Law of Property Act 1925. Section 199(1) reads: A purchaser shall not be prejudicially affected by notice of: (i)

any instrument or matter capable of registration under the provisions of the Land Charges Act 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the nonregistration thereof; (ii) any other instrument or matter or any fact or thing unless — (a) It is within his own knowledge, or would have come to his knowledge if such enquiries and inspections had been made as ought reasonably to have been made by him … The question which I have to answer is this. What inspection and inquiries ought

reasonably to have been made by the defendant of the plaintiff before the sale, so far as relevant to this question? I think that the only relevant inquiry which he should have made would have been to say to the plaintiff: ‘May I see your tenancy agreement? I want to see whether it corresponds with the copy agreement which I have seen in the auction room’. That [page 392]

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

4.189 Questions 1.

What does the principle of Barnhart v Greenshields, referred to by Upjohn J, effectively require of solicitors acting for purchasers of land? In this connection it should be noted that the doctrine of notice has been modified somewhat in its application to land under the Torrens system (see Chapter 5.) The legislation governing notice has been passed by four other states: NSW, s 164; Qld, s 346; SA, s 117; Tas, s 5 (note also s 35A, inserted in 1978).

2.

What are the categories of notice? What is the rationale for each category?

3.

What is the effect of the above legislation on the doctrine of

notice? 4.

What obligations does the doctrine of notice effectively impose upon a purchaser of land? Why?

4.190

There have been many cases in which attempts have been made to

extend the principle of Barnhart v Greenshields. Perhaps the best-known case is Hunt v Luck [1902] 1 Ch 428. Hunt, the holder of the fee simple estate in certain land subject to tenancies, was fraudulently induced by Gilbert to sign a conveyance of the legal estate to Gilbert. As a result of this, Gilbert obtained the legal fee simple estate, but Hunt had an equitable right to have the conveyance set aside by reason of the fraud. Gilbert then mortgaged the land to the defendants, receiving the loan moneys himself. In due course, Hunt’s personal representatives (Hunt having died) sought to have the conveyance to Gilbert set aside, claiming in addition that Hunt’s equitable interest took priority over the legal interest of the mortgagees. They argued that the mortgagees had notice of Hunt’s interest because at the time the mortgagees were negotiating with Gilbert, the tenants paid their rent to Woodrow, an estate agent, who in turn paid the moneys to Hunt. Thus, it was argued, if the mortgagees had inquired as to the ultimate destination of the rents they would have realised that Gilbert was not the beneficial owner and this would have led them to Hunt’s interest. In fact, the mortgagees, having ascertained that the rents were paid to an estate agent, inquired no further. Both Farwell J and the Court of Appeal refused to extend the doctrine of constructive notice to this case. They accepted that a purchaser is

deemed to have notice of the rights of the person in possession of the land. But they held that the principle did not extend to the rights of the

[page 393]

person to whom an occupier is paying rent, unless of course the purchaser is actually aware that the person receiving the rents is not the beneficial owner. In short, it is not reasonable to require a purchaser to ascertain, at his or her peril, the ultimate destination of rental payments. Since the payments to the agent in Hunt v Luck were consistent with Gilbert being the beneficial owner of the land, the mortgagees did not have notice of Hunt’s interest. Does the decision in Hunt v Luck discourage inquiries by the purchaser of land? Is it wise to discourage inquiries? 4.191

In Hodgson v Marks [1971] Ch 892; [1971] 2 All ER 684 the

plaintiff transferred her house to Evans, her lodger, but it was orally agreed that Evans would hold the house on trust for her. Later Evans sold the house to Marks, who became registered as proprietor subject only to a charge in favour of a building society from which Marks had borrowed money. Marks had seen the plaintiff at the house prior to the sale, but did not know who she was. He assumed she was Evans’ wife. The provisions of the Land Registration Act 1925 (Eng) protected as an ‘overriding interest’ the interest of a person in ‘actual occupation’ of the land. The plaintiff claimed a declaration that she was entitled to registration as proprietor free of the charge, on the basis of an overriding interest.

The trial judge held, inter alia, that, since the plaintiff’s occupation was not apparent to Marks, it was not ‘actual occupation’ within the terms of s 70(1) (g) of the Land Registration Act 1925 and was not an overriding interest. This decision was reversed by the Court of Appeal, which held that Hodgson was in actual occupation of the property, and thus had an overriding interest enforceable against Marks and the building society. Russell LJ assumed for the purposes of the decision that s 70(1)(g) was designed to apply to the cases where the occupation was such as would, in the case of unregistered land, affect a purchaser with notice of the rights of the occupier. However, the fact that the vendor of the property was in occupation of the property did not prevent the plaintiff being in actual possession for the purposes of the doctrine of notice. What difficulties face a purchaser as a result of this decision? See Leeming, ‘Engines of Fraud and Occupational Hazards’ (1971) 5 Conv & PL 255. 4.192

The reasoning of Russell LJ has been extended in a number of

subsequent cases. In Williams and Glyn’s Bank Ltd v Boland [1980] 2 All ER 408; [1980] 3 WLR 138, on facts similar to those in Caunce v Caunce, the House of Lords held that the wife’s interest prevailed over the registered mortgage of the bank as she was a person ‘in actual occupation’ within s 70(1) (g). In Lord Wilberforce’s view the wife was physically present on the land and in plain English this amounted to ‘actual occupation’. His Lordship rejected the view that the wife’s occupation should be regarded as a ‘shadow’ of her husband’s. Nor was he prepared to distinguish between occupation which was consistent and that which was inconsistent with the title of the registered proprietor, pointing out the difficulties inherent in this approach.

In his view it would be extraordinarily difficult, for example, to determine whether the occupation of a person and their de facto partner, or of two people of the same sex living together, should be regarded as inconsistent. In Kingsnorth Trust Ltd v Tizard [1986] 2 All ER 54, Judge Finlay QC, sitting as a judge of the High Court, held that the mortgagee had constructive notice of the interest of a wife although she stayed in the house only intermittently and although the mortgagor, the husband, had taken positive steps to conceal all evidence of her presence. The judge felt that three factors indicated that the inspection made on behalf of the mortgagee was inadequate.

[page 394]

First, there was evidence of the occupation of teenage children which should have put the inspector on inquiry as to the possible existence of a spouse; second, the husband described himself on the application form as single though he told the inspector that he was married but separated from his wife; and, third, the inspection was at a time which had been pre-arranged with the husband. In Lloyds Bank PLC v Rossett [1988] 3 WLR 1301, the Court of Appeal held that a charge created when the relevant house was being renovated, and before the purchaser and his family moved in, was subject to the wife’s equitable interest. The wife had been on the premises daily during the renovations, supervising the builders and assisting with painting and decorating. The majority of the court held that in the circumstances the wife was in actual occupation. In view of these findings, what should the mortgagee have done to protect itself? Do the decisions in Williams and

Glyn’s Bank v Boland and Kingsnorth Trust Ltd v Tizard raise serious problems for conveyancers?55 4.193

The rights of a wife in occupation were considered by the

Queensland Court of Appeal in Commonwealth Bank of Australia v Platzer [1997] Qd R 266. Mr Platzer was the legal owner of property which he held on a resulting trust for Mrs Platzer who had provided the purchase price. In April 1989, Mr Platzer executed a mortgage in favour of the Commonwealth Bank and a guarantee in favour of another party. It was held that the bank had notice of the rights of Mrs Platzer both from the fact that it knew she was living in the property with her husband but also from other indications of a proprietary interest such as her interest being noted on the list of assets which Mr Platzer submitted when applying for the loan. The bank had notice of matters which would have been revealed to it by inquiries which ought reasonably to have been made. 4.194

There are other statutory provisions in each state designed to limit

the searches required of a purchaser in investigating the title. In general, these relate to the obligation of the vendor to make a good title to the purchaser, but in some instances, the provisions may result in a purchaser taking free of an outstanding interest in a third party. For example, s 44(6) of the Property Law Act 1958 (Vic) provides that a purchaser shall not be deemed to have had notice of any matter or thing of which, if the purchaser had investigated the title or made inquiries in regard to matters prior to the period of commencement of title fixed by the Act (30 years) he or she might have had notice, unless that purchaser actually makes such investigation or inquiries. Is

this section, of itself, sufficient to induce solicitors to limit their searches to a period of 30 years? 4.195

In an action brought by the holder of a prior equitable interest

claiming priority over the later legal interest of the defendant, it is for the defendant to raise the question of constructive notice, not the plaintiff: Barclays Bank plc v Boulter [1998] 1 WLR 1.

[page 395]

Enforceability of equitable interests Prior equitable interest against a later equitable interest 4.196C

Rice v Rice (1854) 2 Drew 73; 61 ER 646 Court of Chancery

Kindersley VC: The question to be decided in this case is whether the equitable interest of the plaintiffs in respect of the vendor’s lien for unpaid purchase money is to be preferred to the equitable interest of the defendant Ede as equitable mortgagee. What is the rule of a Court of Equity for determining the preference as between persons having adverse equitable interests? The rule is sometimes expressed in this form: ‘As between persons having only equitable interests, qui prior est tempore potior est jure’. This is an incorrect statement of the rule; for that proposition is far from being universally true. In fact, not only is it not universally true as between persons having only equitable interests, but it is not universally true even where their equitable interests are of precisely the same nature and, in that respect precisely equal; as in the common case of two successive assignments for valuable consideration of a reversionary interest in stock standing in the names of trustees, where the second assignee has given notice, and the first has omitted it. Another form of stating the rule is this: ‘As between persons having only equitable interests, if their equities are equal, qui prior est tempore potior est jure’ [that is, he who

is first in time has the stronger case in law]. This form of stating the rule is not so obviously incorrect as the former. And yet even this enunciation of the rule (when accurately considered) seems to me to involve a contradiction. For when we talk of two persons having equal or unequal equities, in what sense do we use the term ‘equity’? For example, when we say that A has a better equity than B, what is meant by that? It means only that, according to those principles of right and justice which a Court of Equity recognizes and acts upon, it will prefer A to B, and will interfere to enforce the rights of A as against B. And therefore it is impossible (strictly speaking) that two persons should have equal equities, except in a case in which a Court of Equity would altogether refuse to lend its assistance to either party as against the other. If the court will interfere to enforce the right of one against the other on any ground whatever, say on the ground of priority of time, how can it be said that the equities of the two are equal; ie in other words, how can it be said that the one has no better right to call for the interference of a court of equity than the other? To lay down the rule therefore with perfect accuracy, I think it should be stated in some form as this: ‘As between persons having only equitable interests, if their equities are in all other respects equal, priority of time gives the better equity; or, qui prior est tempore potior est jure. I have made these observations, not of course for the purpose of a mere verbal criticism on the enunciation of a rule, but in order to ascertain and illustrate the real meaning of the rule itself. And I think the meaning is this: that, in a contest between persons having only equitable interests, priority of time is the ground of preference last resorted to; ie that a Court of Equity will not prefer the one to the other, on the mere ground of priority of time, until it finds upon an examination of their relative merits that there is no other sufficient ground of preference between them, or, in other words, that their equities are in all other respects equal; and that, if the one has on other grounds a better equity than the other, priority of time is immaterial. [page 396]

In examining into the relative merits (or equities) of two parties having adverse equitable interests, the points to which the court must direct its attention are obviously these: the nature and condition of their respective equitable interests, the circumstances and manner of their acquisition, and the whole conduct of each party with respect thereto. And in examining into these points it must apply the test, not of any technical rule or any rule of partial application, but the same broad principles of right and justice which a court of equity applies universally in deciding upon contested rights. Now, in the present case, each of the parties in controversy has nothing but an equitable interest; the plaintiff’s interest being a vendor’s lien for unpaid purchase money, and the defendant Ede having an equitable mortgage. Looking at these two species of equitable interests abstractedly, and without reference to priority of time, or possession of the title deeds, or any other special circumstances, is there anything in their respective natures or qualities which would lead to the conclusion that in natural justice the one is better, or more worthy, or more entitled to protection than the other? Each of the two equitable interests arises out of the forbearance by the party of money due to him. There is, however, this difference between them, that the vendor’s lien for

unpaid purchase money is a right created by a rule of equity without any special contract; the right of the equitable mortgagee is created by the special contract of the parties. I cannot say that in my opinion this constitutes any sufficient ground of preference; though, if it makes any difference at all, I should say it is rather in favour of the equitable mortgagee, in as much as there is no constat of the right of the vendor to his lien for unpaid purchase money until it has been declared by a decree of a court of equity; whereas there is a clear constat of the equitable mortgagee’s title immediately on the contract being made. But I do not see in this any sufficient ground for holding that the equitable mortgagee has the better equity. So far, then, as relates to the nature and quality of the two equitable interests abstractedly considered, they seem to me to stand on an equal footing; and this I conceive to have been the ground of Lord Eldon’s decision in Mackreth v Symmons (1808) 15 Ves 329; 33 ER 778, where, in a contest between the vendor’s lien for unpaid purchase money and the right of a person who had subsequently obtained from the purchasers a mere contract for a mortgage, and nothing more, he decided in favour of the former as being prior in point of time. If, then, the vendor’s lien for unpaid purchase money and the right of an equitable mortgagee by mere contract for a mortgage are equitable interests of equal worth in respect of their abstract nature and quality, is there anything in the special circumstances of the present case to give to the one a better equity than the other? One special circumstance that occurs is this, that the equitable mortgagee has the possession of the title deeds. The question therefore arises — between two persons having equitable interests of equal worth, does the possession of the title deeds by one of them give him the better equity? In Foster v Blackstone (1883) 1 My & K 298, 307; 39 ER 694, Sir John Leach MR says: ‘A declaration of trust of an outstanding term, accompanied by a delivery of the deeds creating and continuing the term, gives a better equity than a mere declaration of trust to a prior incumbrance’. That is a case in which the two parties have equitable interests in the term of precisely the same nature, viz a declaration of trust of the term without an actual assignment; and there the delivery of the deeds to the subsequent incumbrancer gives him the better equity … Indeed it appears to me that in all cases of contest between persons having equitable interests the conduct of the parties and all the circumstances must be taken into consideration in order to determine which has the better equity. And if we take that course in the present case, everything seems in favour of the defendant, the equitable mortgagee. The vendors, [page 397]

when they sold the estate, chose to leave part of the purchase money unpaid, and yet executed and delivered to the purchaser a conveyance by which they declared in the most solemn and deliberate manner, both in the body and by a receipt endorsed, that the whole purchase money had been duly paid. They might still have required that the title deeds should remain in their custody, with a memorandum by way of equitable mortgage as a security for the unpaid purchase money, and, if they had done so, they would have been secure against any subsequent equitable incumbrance; but that they did not choose to do, and the deeds were delivered to the purchaser. Thus they voluntarily armed the

purchaser with the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of incumbrance or adverse equity. In truth it cannot be said that the purchaser, in mortgaging the estate by the deposit of the deeds, has done the vendors any wrong, for he has only done that which the vendors authorised and enabled him to do. The defendant, who afterwards took a mortgage, was in effect invited and encouraged by the vendors to rely on the purchaser’s title. They had in effect by their acts assured the mortgagee that, as far as they (the vendors) were concerned, the mortgagor had an absolute indefeasible title both at law and in equity. The mortgagee was guilty of no negligence; he was perfectly justified in trusting to the security of the equitable mortgage by deposit of the deeds, without the slightest obligation to go and inquire of the vendors whether they had received all their purchase money, when they had already given their solemn assurance in writing that they had received every shilling of it, and had conveyed the estate and delivered over the deeds; and I do not think that the fact of the conveyance bearing date only the day before the mortgage imposed on him any such obligation. The defendant omitted nothing that was necessary to constitute a complete and effectual equitable mortgage; and although the mortgage was taken, not for money actually advanced at the time, but for an antecedent debt, the forbearance of that debt constitutes a full and sufficient valuable consideration. Upon a comparison then of the conduct of the two parties, and a consideration of all circumstances of the case, and especially the fact of the possession of the deeds, which the mortgagee acquired with perfect bona fides, and without any wrong done to the vendors, I am of opinion that the equity of the mortgagee is far better than that of the vendor, and ought to prevail. I may, in conclusion, venture to make the suggestion that the point now under consideration is often put by text writers in a form calculated to mislead, when it is propounded as a question whether the vendor, in respect of his lien for unpaid purchase money, or an equitable mortgagee, ought to be preferred; or when an opinion is expressed that the one or the other has the better equity. If I am right in my view of the matter, neither the one nor the other has necessarily and under all circumstances the better equity. Their equitable interests, abstractedly considered, are of equal value in respect of their nature and quality; but whether their equities are in other respects equal, or whether the one or the other has acquired the better equity, must depend upon all the circumstances of each particular case, and especially the conduct of the respective parties. And among the circumstances which may give to the one the better equity, the possession of the title deeds is a very material one. But if after a close examination of all these matters, there appears nothing to give to the one a better equity than the other, then, and then only, resort must be had to the maxim qui prior est tempore potior est jure, and priority of time then gives the better equity.

4.197

In Cave v Cave (1880) 15 Ch D 639, a solicitor was trustee of

certain funds comprised in a settlement. As part of a fraudulent scheme, the solicitor used the funds to purchase land, the conveyance being made to the

solicitor’s brother. The effect of this transaction, so Fry J held, was to give the legal fee simple estate to the brother, subject to an equitable estate in

[page 398]

the beneficiaries under the settlement, as distinct from a mere equity. The brother executed a mortgage to Chaplin as security for an advance. Chaplin had no notice of the beneficiaries’ interest. Subsequently the brother executed another mortgage to White, who had no notice either of the beneficiaries’ interest or of the first mortgage. The first mortgage was legal. The second was equitable, since at the time of its execution the mortgagor had parted with the legal estate. In what order do the interests take effect? See also Re Samuel Allen & Sons Ltd [1907] 1 Ch 575; [1904–7] All ER Rep 785, where goods let on hire–purchase had become fixtures, but the owner was held entitled to repossess them on default by the hirer as against a subsequent equitable mortgagee of the hirer’s land. The case was treated as a competition between equitable interests, the first in time prevailing. Compare Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 436–8. 4.198

Despite the insistence of Kindersley V-C that priority in time

should be considered only when the merits have been found to be equal, the significance of chronological priority is still uncertain. Some cases have clearly adopted the approach of Rice v Rice and treated the fact that one interest is prior in time as a matter of last resort; for example, Clark v Raymor [1982]

Qd R 790. Others seem to regard the earlier equity as prima facie having priority which ‘is not to be postponed … unless because of some act or neglect of the prior equitable owner’: Lapin v Abigail (1930) 44 CLR 166 at 204 per Dixon J, quoted with approval by Barwick CJ in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 555. Is there any difference between saying that in a competition between equitable interests, (a) priority is decided according to merit and that only where the merits are equal will the order of creation determine priority; and (b) the first-created equity has priority unless on the merits there are reasons why it should be postponed? Compare the following statements from Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326; 49 ALR 229: In the present case the interest of the appellant was first in time. The question therefore is whether his conduct … has the consequence that [the respondent] has the better equity and that the appellant’s interest should be postponed to that of [the respondent] [per Gibbs CJ at CLR 333; ALR 233]. For our part we consider it preferable to avoid … basing the postponement of the first to the second equity exclusively on the doctrine of estoppel and to accept the more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances [per Mason and Deane JJ at CLR 341; ALR 239].

In AG (CQ) Pty Ltd v A&T Promotions Ltd [2011] 1 Qd R 306 the court adopted this broader approach to find the ‘better equity’. The same approach was adopted in Claremont 24-7 Pty Ltd v Invox Pty Ltd (No 2) [2015] WASC 220, where the registered proprietor of a property had entered into an agreement for a lease with two parties. Le Miere J held that an agreement for a lease was an equitable interest and not a mere equity, and found in favour of

the equitable interest that was first in time on the basis that the merits were equal. Although the principle of the bona fide purchaser for value without notice does not directly apply to determine the priority of competing equitable interests, notice is still a relevant concept in this context. A person who acquires an equitable interest with knowledge of an existing equitable interest cannot claim to have been misled by the earlier interest holder in circumstances where the earlier interest holder’s conduct would otherwise be held to be ‘postponing’. This is also true of someone who would have known about the earlier interest had he or she made the inquiries expected of a reasonable purchaser. In Moffett v Dillon [1999]

[page 399]

2 VR 480 (5.192C) the Victorian Court of Appeal held that notice of an earlier equitable interest by a later equitable mortgagee will in general secure priority of the earlier interest. It is therefore an exception to the Rice v Rice rule. In Australian Guarantee Corporation (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129, the New Zealand Court of Appeal held that in considering the relative merits of the parties the court was not confined to considering only the behaviour of the holder of the earlier interest but could consider the conduct of both parties including their conduct subsequent to the creation of the second interest. The purchaser of a legal interest without

notice of a prior equitable interest is in a better position than a purchaser of an equitable interest without notice, as the former can rely on the bona fide purchaser principle to defeat the earlier equitable interest. What justifies the more favourable position of the purchaser of the legal interest? 4.199

A special priority rule governs competing equitable interests where

the first is that of a beneficiary under a trust. The beneficiary will retain priority if the trustee acts in breach of trust and sells to a purchaser of the equitable interest who knows nothing of the interest of the beneficiary: Shropshire Union Railways & Canal Co v R (1875) LR 7 HL 496. If, however, the trustee fails to acquire the title deeds in the first place, the beneficiaries will lose priority in the same way that the trustee does: Walker v Linom [1907] 2 Ch 104. Also, if the trustee would lose priority under general equitable principles, for instance if he or she retained an unpaid vendor’s lien over trust property sold, and the purchaser created an equitable interest in favour of a third party, the third party will prevail over the beneficiary: Rice v Rice (1854) 2 Drew 73; 4.196C.

4.200 Questions 1.

What acts or omissions will postpone the holder of an earlier equitable interest to the holder of the later equitable interest?

2.

Why was the holder of the first interest in Rice v Rice postponed? If the holder of the first equitable interest (such as an equitable mortgagee) is entitled to possession of the title deeds, but allows the mortgagor to retain them, that interest will be postponed to a

later equitable interest created by deposit of the title deeds: Farrand v Yorkshire Banking Co (1888) 40 Ch D 182. But there will be no postponement if the holder of the first equitable interest is not entitled to possession of the title deeds: Shropshire Union Railways & Canal Co v R (1875) LR 7 HL 496. 3.

As a practical matter is it ever possible to separate out the question of temporal priority and the question of merit? Does this therefore make the test proposed by Deane and Mason JJ preferable?

4.

What degree of carelessness is necessary before a prior equitable interest is postponed to a later equitable interest? In FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 at 554– 5, Young J, relying on the views of Mason and Deane JJ in Heid’s case, commented that although the court must examine all the circumstances, it does not conduct an inquiry into ‘general naughtiness’. It must be reasonably foreseeable that the plaintiff’s actions will affect other persons who may be interested in the property before the court will decline to give relief to the holder of the prior equitable interest. Do the same principles apply as in the case of a competition between a prior legal and a subsequent equitable interest? See 4.179–4.182.

[page 400]

4.201

From Rice v Rice it appears that the doctrine of notice is irrelevant

to the question of priority between equitable interests. But if the later equitable interest holder has notice of the earlier equitable interest at the time the later interest was acquired, it cannot be alleged that he or she was misled as to the existence of the earlier interest, which is the basis for priority. Notice therefore has the effect of nullifying what might otherwise be postponing conduct on the part of the earlier interest holder. As Knox CJ held in Lapin v Abigail (1930) 44 CLR 166 at 182: If the holder of the subsequent equity acquired it with notice of the prior equity, his claim for priority necessarily fails; but the fact that he took without notice or that it is not proved that he had notice of the prior equity amounts to no more than a fact to be considered in connection with the other circumstances on the question whether the conduct of the holder of the prior equity is such as to entitle the holder of the subsequent equity to priority over him.

In Moffett v Dillon [1999] 2 VR 480 this principle was reiterated by Brooking JA (with whom Buchanan JA concurred) in the following terms: ‘The rule is that a person taking with notice of an equity takes subject to it is distinct from the rule that where the equities are equal, the first in time prevails’ (at 506). In Meadow Springs Fairway Resort Ltd (in liq) v Balanced Securities Ltd (No 2) [2008] FCA 471, Siopas J expressed agreement with Brooking JA’s view. For further discussion, see 5.191ff. Might it not be argued that where there is notice on the part of the later interest holder, ‘the equities’ are equal, so that it comes within the general rule and that therefore Knox CJ’s formulation is to be preferred? Do these different formulations make any substantive difference in application?

Enforceability of equities

Earlier equity and later equitable interest 4.202

So far in this chapter we have dealt with two major categories of

proprietary interests: legal interests and equitable interests. The category of equitable interests can be further divided into two subclasses. The first consists of proprietary interests which follow the pattern of established legal interests. Obvious instances are the equitable fee simple and life estates in land which are the equitable versions of the legal freehold estates. Similarly, equitable leases and easements are equitable versions of the equivalent legal interests. The second subclass comprises well-established interests developed by equity to mitigate the harshness of rigid common law rules and/or to satisfy a perceived need which the common law left unfulfilled. This subclass includes interests that have no precise equivalent at common law, although legislation may elevate the equitable interests to the status of legal estates. A court of equity, for example, regards a mortgage as essentially a security transaction and therefore permits the mortgagor to redeem the legal estate upon repayment of all moneys due to the mortgagee, even if the right of redemption has been lost at law. The mortgagor’s interest is known as the equity of redemption which, despite the misleading name, is a fully-fledged equitable interest. There was no equivalent to the equity of redemption at common law, but the Torrens system legislation has transformed the mortgagor’s equity of redemption into a legal estate if it is registered: see 11.23Cff. Restrictive covenants are clearly established as full equitable interests, although they have no counterpart at law and can trace their genesis to a single case: Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143; [1843–60] All

ER Rep 9; 9.30C. The rules relating to the creation and enforceability of the two classes of equitable interests are relatively

[page 401]

clear and well defined. Moreover, for the purposes of priority, the two classes of interests operate in exactly the same way under the rules governing the enforceability of equitable interests noted above. Additionally, in a number of cases courts appear to have created a third class of proprietary interests protected by equity, referred to as ‘equities’, or ‘mere equities’.56 For instance, in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672, Brooking J commented on the notion of ‘an equity’ in the following terms (at 675–6): Snell’s Equity, 29th ed, chapter 2, distinguishes between four senses in which the term ‘an equity’ may be used. In the first sense it means an equitable interest in property, that is, some right of ownership enforced by equity but not by the common law. An equity in the second sense — often called a ‘mere equity’ — is not a right of property and is accordingly contrasted with the equitable interest. It is difficult to define; Snell defines it as a right, usually of a procedural character, which is ancillary to some right of property, and which limits it or qualifies it in some way. Examples are a right to have a transaction set aside for fraud or undue influence, or to have a document rectified for mistake. The third sense of the term equity is the floating equity, and an example is the right which the next-of-kin have in respect of the unadministered estate of an intestate. With this use of the term we are in no way concerned. In its fourth and widest sense ‘an equity’ means no more than the right to seek an equitable remedy, whether or not that remedy is sought in aid of a property right. The distinction between equitable interests and ‘mere equities’ has often been considered in the context of competing estates and interests.

The types of interests that may qualify as ‘equities’ is by no means certain.

Some examples will be examined at the end of this section. Despite the unresolved issues as to the range and scope of the category of equities, a further question arises as to their enforceability against third parties. The following case examines this issue. 4.203C Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR 775 High Court of Australia

Menzies J: The respondent Hotel Terrigal Pty Ltd (which I shall call ‘Terrigal’) was the registered proprietor of land subject to a mortgage to the firstnamed appellant, Latec Investments Ltd (which I shall call ‘Latec’). Upon the land there was erected the Terrigal Hotel. The mortgage being in arrears, Latec on 26 November 1958, in purported exercise of its powers of sale as a mortgagee, sold the land to one of its wholly-owned subsidiaries, the second named appellant Southern Hotels Pty Ltd (which I shall call ‘Southern’), and that company became registered as the proprietor of an estate in fee simple in the land free from any incumbrances in favour of Terrigal. Subsequently, on 18 March 1960, Southern gave the third named appellant the MLC Nominees Ltd (which I shall call ‘MLC Nominees’) security by way of floating charge over its assets, including the land in question, to support a guarantee, so that MLC Nominees became in equity the mortgagee of the land. The contest in this suit, which was not instituted until 22 October 1963, is really between Terrigal and MLC Nominees, the former affirming, and the [page 402]

latter denying, three main propositions: (1) that the mortgagee’s sale was voidable; (2) that accordingly Terrigal has an equity or an equitable interest in the land taking priority — in the absence of any special circumstances warranting its postponement — over the later equitable interest of MLC Nominees; and (3) that by reason of the foregoing, and notwithstanding Terrigal’s inaction for five years, the conveyance to Southern giving effect to the mortgagee’s sale should be set aside and Terrigal should be restored to the register as the proprietor of the land subject to the original mortgage. Else-Mitchell J decided in favour of Terrigal and this appeal is from his judgment. … It is agreed [that these three matters] are to be determined on the footing that MLC Nominees took its security from Southern for value and without notice that Terrigal had any rights in, or in respect of, land the subject of the charge. As to the first of these three matters, I agree with Else-Mitchell J that the mortgagee’s sale was voidable. What happened was that on 27 June 1958 Latec, exercising its power under the mortgage, appointed a receiver of Terrigal who, on 24 September and to the

knowledge of Latec, instructed LJ Hooker Ltd to offer the Terrigal Hotel for public auction on Friday, 3 October, with a reserve of £85,000. These instructions, stipulating Friday as the day of the sale, leaving insufficient time for proper advertising and fixing a reserve of £85,000, made it virtually certain that there would be no sale of the hotel, and so it turned out. The hotel was passed in at £58,000. By a contract dated 26 November 1958 but arranged earlier the Terrigal Hotel was sold by Latec to Southern for £60,000, payable by a deposit of £6000 upon the signing of the contract and the balance of £54,000 on completion. It seems that the £60,000 was paid as follows:

To Beattie & Frost on 23 June 1959 to discharge a mortgage given to them as builders: To LJ Hooker Ltd on 23 June 1959: To IAC (Finance) Pty Ltd: To Latec Investments Ltd on 27 November 1959 balance:

£17,040 10s 0d £1,800 0s 0d £2,350 0s 0d £38,809 9s 7d

Else-Mitchell J held that this sale by Latec to Southern was not an honest sale and, in my opinion, there were ample grounds for his so holding. What Mr Mahoney referred to as a genuine attempt at an open sale hardly bears that aspect upon a critical appraisal. The auction could well be regarded as nothing but a piece of camouflage to hide Latec’s plan for a private sale to a subsidiary company and to provide a not-too-high figure as the minimum at which that sale might, with some measure of safety, be made. It was argued by Mr Mahoney for the appellant that the price of £60,000 was in fact a fair price, but the evidence does not warrant this court in making such a finding. There was evidence for and against such a conclusion but, without making any finding as to the value of the Terrigal Hotel in November 1958, Else-Mitchell J found that the sale was not made in good faith, and this was a finding open upon the evidence. Furthermore, as the learned judge thought, it is the character of the transaction as a virtual foreclosure, rather than the particular price fixed, that warranted the intervention of the court. The finding of lack of good faith on the part of Latec, to which of course its creature, Southern, must have been a party, is sufficient ground for avoiding the sale to Southern: Kennedy v De Trafford [1897] AC 180; [1895–9] All ER Rep 408, so that as against Latec and Southern, Terrigal is entitled to be registered as proprietor of the land subject to the mortgage. The second question — that is, the question of priority between Terrigal’s and MLC Nominees’ equitable rights — I find one of substantial difficulty. If the maxim Qui prior est tempore potior est jure applies, Terrigal’s right to have the conveyance set aside and to be [page 403]

restored to the register, without regard to MLC Nominees’ equitable interest, prevails, but the appellants’ contention is that this right is a mere equity and the maxim has no application when the contest is between such an equity and an equitable interest of the character held by MLC Nominees. This contention rests upon the line of authority based upon Phillips v Phillips (1861) 4 De GF & J 208 at 215–8; 45 ER 1164 at 1166–7. Lord Westbury there said: Hence grantees and incumbrancers claiming in equity take and are ranked according to the dates of their securities; and the maximum applies. Qui prior est tempore potior est jure. The first grantee is potior — that is, potentior. He has a better and superior — because a prior — equity. The first grantee has a right to be paid first, and it is quite immaterial whether the subsequent incumbrancers at the time when they took their securities and paid their money had notice of the first incumbrance or not … Now, the defence of a purchaser for valuable consideration is the creature of a court of equity, and it can never be used in a manner at variance with the elementary rules which have already been stated … But there appear to be three cases in which the use of this defence is most familiar: … thirdly, where there are circumstances that give rise to an equity as distinguished from an equitable estate — as for example, an equity to set aside a deed for fraud, or to correct it for mistake — and the purchaser under the instrument maintains the plea of purchase for valuable consideration without notice the court will not interfere. In Cave v Cave (1880) 15 Ch D 639 at 646, Fry J, referring to the defence of purchaser for value without notice, said: That defence, as we all know, has been the subject of a great deal of decision, and it is by no means easy to harmonize the authorities and the opinions expressed upon the subject. Criticisms upon old cases lie many strata deep, and eminent Lord Chancellors have expressed diametrically opposite conclusions upon the same question. The case of Phillips v Phillips is the one which has been principally urged before me, and that, as being the decision of a Lord Chancellor, is binding upon me, notwithstanding the subsequent comments upon it of Lord St Leonards in his writings. His Lordship went on to cite the passage I have already quoted from Lord Westbury’s judgment in Phillips v Phillips and, having come to the conclusion that he was dealing with a contest between equitable estates and not between an equitable estate and a mere equity concluded (at 649): Therefore I shall conclude that, within the case of Phillips v Phillips, the interest of the plaintiff in this case is an equitable interest, and not merely an equity like the equity to set aside a deed, and therefore it must take its priority according to the priority of date. There is, however, as Fry J said, another line of cases, the authority of which is beyond question, establishing that where there is an equity to have the voidable conveyance of an estate set aside, there remains in the conveyor, notwithstanding the conveyance, an equitable estate which may be devised or transferred. Thus, in Stump v Gaby (1852) 2

De GM & G 623 at 630; 42 ER 1015 at 1018, Lord St Leonards, speaking of a conveyance by an heir at law of his solicitor, said: I do not deny that a deed may be so fraudulent as to be set aside at law; this, however, is not such a case; but I will assume that the conveyance might have been set aside [page 404]

in equity for fraud: what then is the interest of a party in an estate which he has conveyed to his attorney under circumstances which would give a right in this court to have the conveyance set aside? In the view of this court he remains the owner, subject to the repayment of the money which has been advanced by the attorney, and the consequence is that he may devise the estate, not as a legal estate, but as an equitable estate, wholly irrespective of all questions as to any rights of entry or action, leaving the conveyance to have its full operation at law, but looking at the equitable right to have it set aside in this court. The testator therefore had a devisable interest. My strong impression is that this very point is concluded upon authority, but if not I am ready to make an authority on the present occasion, and to decide that, assuming the conveyance to have been voidable, the grantor had an equitable estate which he might have devised. Likewise, in Gresley v Mousley (1859) 4 De G & J 78 at 90; 45 ER 31 at 35, Knight Bruce LJ, in deciding that a conveyor of land who has an equity to be relieved against a sale, has a devisable interest in the said property sold, said that the Lords Justice were bound by the cases cited to the court, including Stump v Gaby. He added that, if the Lords Justice were not so bound, I still think that the decisions were correct and ought to be followed. The argument that Stump v Gaby proceeded on a sound principle, which seems to have been accepted, was as follows: When a decree is made for setting aside a conveyance it relates back, and the grantee is to be treated as having been, from the first, a trustee for the grantor, who, therefore, has an equitable estate, not a mere right of suit. As to the conveyance inter vivos of such an interest carrying the right to sue the original conveyee, see Dickinson v Burrell (1866) LR 1 Eq 337. If there is a difference between the two lines of authority, that difference seems to me to arise from concentration upon different aspects of what follows from a voidable conveyance. Thus, Phillips v Phillips, in so far as it says that a person with the right to have a voidable conveyance set aside has but a mere equity, directs attention to the right to have the conveyance set aside as a right to sue which must be successfully exercised as a necessary condition of there being any relation back to the equitable interest established by the suit. Stump v Gaby directs attention to the result of the eventual avoidance of the conveyance upon the position ab initio and throughout of the persons by whom and to whom the conveyance of property was made and says that, in the event of a

successful suit (which may be maintained by a devisee), the conveyor had an equitable estate capable of devise and that the conveyee holds, and has always held, as trustee. There is no doubt that the two lines of authority are well established. Furthermore, there is room for the application of each in appropriate circumstances. Thus, if Terrigal were a person instead of a company and the question were whether, in the circumstances here, that person had a devisable interest in the hotel property by virtue of his equity to have the conveyance to Southern set aside, Stump v Gaby would require an affirmative answer on the footing that, in the circumstances, Terrigal had an equitable interest in the hotel property. Where, however, the question arises in a contest between Terrigal and MLC Nominees, the holders of an equitable interest in the hotel property acquired without notice of Terrigal’s rights, the authority of Phillips v Phillips is (i) that the contest is between Terrigal’s equity to have the conveyance set aside and the equitable interest of MLC Nominees and (ii) that in that contest, [page 405]

Terrigal’s equity is not entitled to priority merely because it came into existence at an earlier time than the equitable interest of MLC Nominees. In the circumstances here, therefore, the maxim Qui prior est tempore potior est jure has no application. The conclusion I have just expressed with regard to the second matter in issue makes reference to the third matter unnecessary. Accordingly, it is because I think that the equitable estate of MLC Nominees takes priority over the equity of Terrigal that I would allow this appeal. Kitto J allowed the appeal, holding that the priority dispute should be categorised as one between a prior equity and a subsequent equitable interest and that the holder of the prior equity should be postponed to a subsequent purchaser of the equitable interest for value without notice. Taylor J allowed the appeal. However, his Honour held that Terrigal enjoyed an equitable interest but that the authorities had established that where the person entitled to the earlier interest required the assistance of a court of equity to remove an Impediment to its tiles as a preliminary to asserting its interest, the equitable interest of an intervening purchaser for value without notice would prevail.

4.204 Questions 1.

Is Latec Investments Ltd v Hotel Terrigal Pty Ltd an authority on the enforceability of equities, equitable interests or some interest between the two?

2.

Can the case be regarded as establishing that an ‘equity’, as distinct from a full equitable interest, is a recognised proprietary interest?

3.

4.205

What interests will fall within the classification of ‘equity’?

In Re Jonton Pty Ltd [1992] 2 Qd R 105, Mrs G and Mr E agreed

that Mr E would purchase a home which would become the matrimonial home for them and their respective children. Mrs G agreed to sell certain property and contribute the proceeds of sale to the purchase of the new home but only if the new home were in their joint names. In fact, the property was put in the name of Mr E only and an equitable mortgage was granted to Jonton Pty Ltd. In an earlier hearing the court made a declaration that Mr E held the new home on trust for himself and Mrs G as tenants in common in equal shares. Relying on the decision of the High Court in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) and the judgment of Deane J in Muschinski v Dodds (1985) 160 CLR 583, counsel for Jonton argued, inter alia, that until the court declared that a constructive trust existed, Mrs G had only a mere equity which would not take priority over the equitable interest of the mortgagee. The court rejected this argument, holding that she held a full equitable interest.57 In Double Bay Newspapers Pty Ltd v A W Holdings Pty

Ltd (1996) 42 NSWLR 409, a mortgage based on part performance was held by Bryson J to be a mere equity, and was defeated by a later equitable interest taken without notice of it.58 Likewise, in Shawyer v Amberday (2001) 10 BPR 18,869, it was held that an interest under the doctrine of part performance was an equity rather than an equitable interest, and that it lost priority against a later equitable interest acquired without notice.

[page 406]

4.206

Though equities to set aside a transaction for fraud, mistake, or

undue influence are on high authority ‘equities’, is the interest that arises as a result of estoppel an equitable interest, or an equity? For instance, was the lease that came into existence because of the representation and detrimental reliance in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513; 62 ALJR 110 an equitable lease, or an equity? As noted above, the term ‘equity’ can be confusing because it can be used with a number of different meanings. In Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 434–5; 95 ALR 321 at 348–9 (4.156) Deane J, in commenting on the doctrines of promissory estoppel and estoppel by conduct, addressed this issue: The phrase ‘an equity’ can be used in the narrow sense of referring to an immediate right to positive equitable relief. The word ‘equity’ was used in that sense in the standard pre-Judicature Act submission (as if it were a plea or demurrer) in equity in New South Wales to the effect that the plaintiff had ‘no equity’ entitling him or her to invoke equitable jurisdiction … The phrase ‘an equity’ can, however, be used in a broader and less precise sense to refer to any entitlement or obligation (the equities) of which a court of equity will take cognisance. In that sense, the phrase

can be used to refer to a ‘defensive equity’ such as ‘laches, acquiescence or delay’ or a mere set-off or to an interest or entitlement which does not of itself found equitable relief. It is in that broader and less precise sense that it is permissible to speak of the operation of estoppel in equity as giving rise to ‘an equity’.

In which sense is the term used in the Terrigal case? Is the distinction relevant in determining whether an equity is a proprietary interest and, if so, in resolving questions of priority?59 In Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 444; 95 ALR 321 at 355; 64 ALJR 540 at 560, Deane J went on to suggest that ‘an estoppel by conduct can be the origin of primary rights of property and of contract’. What is the nature of the interest of a person who can claim the benefit of an estoppel in relation to land?

4.207 Questions A mortgagee of Torrens system land, previously used as a service station, purported to exercise the power of sale under the mortgage. It did so by entering a contract to sell the premises to an oil company at a price which barely covered the amount due under the mortgage, although the mortgagee knew that another oil company was interested in the property at a higher price. The majority of the High Court in the case referred to below held that the mortgagee had acted recklessly and not in good faith. Given that the purchaser from the mortgagee had no notice of the latter’s impropriety at the date of the contract of sale, is the mortgagor entitled to an injunction restraining both the mortgagee and the purchaser from completing the contract of sale? What is the relevant priority rule applicable to this situation?

4.208

In Forsyth v Blundell (1973) 129 CLR 477; 1 ALR 68 (11.99C) the

High Court held that at this stage the mortgagor has a full equitable interest in the form of an equity of redemption. Thus, the decision in the Terrigal case is not relevant in this situation. See also Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317. Compare Swanston

[page 407]

Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 where the court held that the right of a mortgagor to have an improper sale set aside was a mere equity and not an interest in the land. This decision seems to be plainly at odds with both Forsyth v Blundell (1973) 129 CLR 477; 1 ALR 68 and Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR 775.60 The authors of Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies make the following comment on Swanston at 151: Even if the competition were viewed as between the mortgagor entitled only to an equitable interest (his equity of redemption) and the purchaser asserting his equitable interest under the contract, the former must succeed on the ordinary rules as to priority. Before completion of the contract there was no conveyance to be set aside and thus no ‘impediment’ to the assertion of the mortgagor’s equity of redemption. In contrast to Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR 775, the mortgagor’s interests had not been degraded to a ‘mere equity’. In a suit to restrain completion of the contract the earlier equitable interest was to prevail. These principles were ignored in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672, where Brooking J was beguiled by the reasoning in Latec’s case into holding that

a registered proprietor whose mortgagee had entered into, but not completed, a contract in fraudulent exercise of its power of sale lacked an interest in the land sufficient to support a caveat.

In Patmore v Upton (2004) 13 Tas R 95, Underwood J adopted this criticism and concluded (at [61]) that ‘insofar as Swanston is authority for the proposition that the equitable interest of a mortgagor in the case of a voidable sale by a mortgagee, not yet completed, is insufficient to create an equitable interest in land, it should not be followed’. 4.209

Despite doubts about the exact nature of ‘equities’, courts appear to

have accepted the existence of other proprietary interests described as ‘equities’, though their sphere of enforceability has not been clearly defined. These include the ‘equity of rectification’ (see Smith v Jones [1954] 1 WLR 1089; [1954] 2 All ER 823 (4.188C); Downie v Lockwood [1965] VR 257) and the equity to have a conveyance set aside for fraud: see Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR 775; 4.203C. 4.210C

Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 Court of Appeal of New South Wales

[In February 1997 Ruthol granted Mr and Mrs Mills an option to purchase its land provided the option was exercised between 7 April 1997 and 30 June 1997. The option was conditional on the non-exercise of the existing lessee, Alphega, of a right to renew its lease. Before the time had expired for the Mills to exercise their option they were told by Ruthol (fraudulently and falsely) that Alphega had exercised its option. For that reason the Mills did not attempt to exercise their option during the relevant period. When Mills became aware that Alphega had not exercised its option in early 1999 they purported to exercise their option to purchase. In March 1999 they commenced proceedings against Ruthol for specific performance and in the alternative for

damages for breach of contract. In the meantime Tricon, on 6 May 1998, entered into a five-year lease with Ruthol to commence upon Alphega vacating the subject premises in July of that year. The instrument of lease contained

[page 408]

an option to purchase within three years. Tricon claimed that it had exercised the option in May 1999. At the time Tricon entered into the lease agreement containing the option to purchase it had no notice of any interest the Mills might have in the subject property. Later Tricon became aware of the interest of the Mills and it commenced proceedings against Ruthol and the Mills seeking an order for specific performance against Ruthol and an order against the Mills that it remove the caveat it lodged to protect its interest. The primary judge, Palmer J, held that the equitable entitlement of the Mills prevailed over the equitable interest of Tricon. His Honour concluded that the interest of the Mills was not a ‘mere equity’ but an equitable interest in the property and because it was earlier in time it prevailed over the equitable interest of Tricon. The earlier interest was recognised on the ground that Ruthol was not permitted to take advantage of its own wrongdoing to claim that the Mills had not exercised the option within time.] Sheller JA: [His Honour agreed with Palmer J that Alphega did not give Ruthol at any time prior to 7 April 1997, notice of its desire to take a renewal of the lease upon the same terms and conditions as in the original lease. Accordingly, the Mills’ option was not terminated at any time prior to expiry of the option period: that is, 30 June 1997.] In his reasons for judgment, Palmer J carefully considered the competition between Mr and Mrs Mills and Tricon. There was no dispute that the grant of the Millses’ option to purchase and the grant of the Tricon option to purchase the Manly Vale property gave each grantee an equitable interest in the property; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at 75 per Gibbs J. Mr Young submitted that the equitable interest which Mr and Mrs Mills had so acquired came to an end on 30 June 1997 at the expiry of the option period without the option having been exercised. Thereafter on 6 May 1998 the Tricon option was granted when the Tricon lease was executed. Palmer J said that it followed, according to Mr Young, that at the time Tricon’s equitable interest in the property came into existence, Mr and Mrs Mills had no prior equitable interest. The exercise of the option on 3 March 1999 might be valid as against Ruthol but that was only because the court would decree that, as against Mr and Mrs Mills, Ruthol could not rely upon its own wrongdoing to deny valid exercise of the option. The right of Mr and Mrs Mills to have the exercise of their option validated against Ruthol by a judgment of the court was a ‘mere equity’ which could not prevail against an equitable interest in the Manly Vale property which Tricon acquired for value without notice. Palmer J said that there was no doubt that as a general rule a ‘mere equity’ did not enter into competition with an equitable interest in property which was taken for value and without notice, even if the equitable

interest was acquired later in time. Palmer J said that Phillips v Phillips could be explained as a policy decision rather than a decision resting on distinctions in the qualities of various equitable rights. The policy was that where the holder of a prior equitable interest needs the assistance of the equity court to perfect his or her title to it, that equitable interest will be defeated if, before the title is perfected, the third party takes an equitable interest for value without notice. On this appeal it is unnecessary further to investigate this proposition which can be taken to be correct … Assuming, as Palmer J does correctly, that Ruthol was estopped from denying that the Millses’ option was properly exercised, what application could the maxim that no man may take advantage of his own wrong have to Tricon’s priority which could be reconciled with the decision of the High Court in Latec Investments? The maxim (that no party may take advantage of its own wrong) is well established at common law … However, in Hooper v Lane at 461–2 and 1376, Bramwell B instanced limitations of the rule … The maxim that a party may not take advantage of its own wrong will not usually apply to affect the right of an innocent third party acquired from the wrongdoer. [page 409]

Palmer J determined that Mr and Mrs Mills did not need the assistance of the equity court to perfect their equitable interest on the ground that they ‘validly exercised their option, even though the option period had expired, because of the principle of the common law which deprives a wrongdoer of the advantage of his or her wrongdoing.’ With respect, the maxim did not enable Mr and Mrs Mills to defeat Tricon’s claim to priority. Ruthol could not rely on its wrongdoing in misleading Mr and Mrs Mills to defeat their claim against it. But Tricon was not guilty of any wrongdoing and the maxim did not prevent its asserting its priority over the interest claimed by Mr and Mrs Mills. Accordingly, in my opinion, for the reasons given in Latec Investments, Tricon’s equitable interest as purchaser of the Manly Vale property took priority over Mr and Mrs Mills’ equity to proceed against Ruthol for breach of contract in reliance on their late exercise on 3 March 1999 of their option to purchase. Cripps AJA: In my opinion the issue should be resolved in favour of Tricon by reason of the decision of the High Court in Latec Investments Limited v Hotel Terrigal Pty Limited (In liquidation) (1965) 113 CLR 265 without the need to categorize the interest of the Mills. Latec was concerned with competing equities over land on which was erected the Terrigal Hotel. Terrigal was in arrears under its mortgage and Latec purported to exercise its powers of sale as mortgagee. It sold the land to one of its wholly owned subsidiaries entitling Terrigal to set aside the sale by reason of Latec’s fraudulent conduct. Later the subsidiary gave MLC Nominees Limited security by way of floating charge over its assets with the result that it became in equity the mortgagee of the land. The issue for determination was whether Terrigal’s equitable entitlement being first in time prevailed over the equitable entitlement of MLC Nominees Limited … In my opinion the facts in the present case are relevantly the same as those in Latec. In Latec the registered proprietor was deprived of its property by fraud. In the present case the Mills were

precluded from acquiring property by fraud. In both cases the equitable interests arising subsequently were acquired without notice of the earlier interests. In my opinion the authority of Latec concludes the matter in favour of Tricon’s equitable interest in the property prevailing over the equitable interest of the Mills. Accordingly I agree with the orders of Sheller JA setting aside the decision of Palmer J. [Meagher JA agreed with Sheller JA.]

4.211 Questions 1.

Does this case resolve the difficulties in Latec? Do the judgments display a sensitivity to the distinction between equities and equitable interests, as recognised in Latec?

2.

Is Cripps AJA’s conclusion that it is possible to find in favour of Tricon ‘by reason of the decision of the High Court in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 without the need to categorise the interest of the Mills’ a convincing approach to the competing interests in this case?

3.

To what extent is Sheller JA’s view (agreeing with the primary judge, Palmer J) that a mere equity ‘did not enter into competition with an equitable interest which was taken for value and without notice, even if the equitable interest was taken later in time’ consistent with Smith v Jones, or Latec?61

[page 410]

4.212

In Vasiliou v Westpac Banking Corporation [2007] VSCA 113, the

Victorian Court of Appeal (Maxwell P, Neave and Kellam JJA) considered whether a ‘mere equity’, such as a right of a mortgagor to set aside an improper sale of the land by a mortgagee, was a proprietary right, concluding as follows (at [114]–[121]): In Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd this Court held that a mortgagor’s equity to have an improper sale of mortgage property set aside is ‘a mere equity’ and not the ‘estate or interest in land’ which a person must have in order to lodge a caveat under s 89 of the Transfer of Land Act 1958 … Brooking J said that the judgments of Kitto and Menzies JJ [in Latec v Terrigal] supported the characterisation of the mortgagor’s interest as an equity, not an equitable interest in the property. Thus the mortgagor’s interest was not caveatable. The Latec case was not concerned with the question of whether a mortgagor who had a right to set aside a mortgagee’s sale had a caveatable interest in the land. It is also arguable that Menzies J’s judgment did not support the proposition that a mortgagor with the right to set aside a sale of the mortgaged land has a mere equity, rather than an estate or interest in land. The decision in Swanston Mortgage has been followed or implicitly approved in decisions of this Court, but a different approach has been taken in New South Wales. In Patmore v Upton,62 Underwood J undertook a detailed analysis of the competing authorities and declined to follow the Swanston Mortgage decision. The decision in Swanston Mortgage has been criticised in journal articles and the learned authors of Meagher Gummow and Lehane, Equity Doctrines and Remedies, suggest that it is wrong. It may be that the correctness of the Swanston Mortgage decision requires reconsideration. But, unless and until that decision is overruled after a full hearing before a bench of five appellate judges, we are bound by it.

4.213 Questions 1.

How can this case be reconciled with Latec and Ruthol?

2.

What is the best way of treating ‘mere equities’ or ‘equities’ in property law? Is it fairer to treat them as proprietary interests rather than purely personal, or contractual, rights?

1.

For a general discussion of the ambit and underlying rationale for the term ‘equitable property’, see Cutts, ‘The Nature of Equitable Property: A Functional Analysis’ (2012) 6 J Eq 44; MacFarlane and Stevens, ‘The Nature of Equitable Property’ (2010) 4 J Eq 1.

2.

See Territory Parks and Wildlife Conservation Act 1976 (NT) s 62; National Parks and Wildlife Act 1974 (NSW) s 97; Nature Conservation Act 1992 (Qld) s 83; Wildlife Conservation Act 1950 (WA) s 22. For more detailed discussion, see Halsbury’s Laws of Australia, 20-10 to 20-15 and the decision of the High Court in Yanner v Eaton (1999) 201 CLR 351; 166 ALR258; [1999] HCA 53.

3.

Patents Act 1990 (Cth); Copyright Act 1968 (Cth); Trade Marks Act 1995 (Cth); Designs Act 2003 (Cth).

4.

See Sale of Goods Act 1954 (ACT); Sale of Goods Act 1923 (NSW); Sale of Goods Act 1972 (NT); Sale of Goods Act 1896 (Qld); Sale of Goods Act 1895 (SA); Sale of Goods Act 1896 (Tas); Goods Act 1958 (Vic); Sale of Goods Act 1895 (WA). In the remainder of this paragraph this legislation is cited by reference to the initial letters of the enacting states and territories.

5.

See generally Sutton, Sales and Consumer Law in Australia and New Zealand, 4th ed, 1995; Tong, Sale of Goods and Consumer Law, 2nd ed, 1992; Atiyah and Adams, Atiyah’s Sale of Goods, 12th ed, 2010; Pearson, Fisher, Peden and Tolhurst, Commercial Law: Commentary and Materials, 3rd ed, 2010.

6.

See ACT, s 23; NSW, s 23; NT, s 23; Qld, s 21; SA, s 18; Tas, s 23; Vic, s 23; WA, s 18.

7.

In the remainder of this chapter, the following Acts are hereafter referred to by the abbreviation of the state enacting them: Civil Law (Property) Act 2006 (ACT); Conveyancing Act 1919 (NSW); Law of Property Act 2000 (NT); Property Law Act 1974 (Qld); Law of Property Act 1936 (SA); Conveyancing and Law of Property Act 1884 (Tas); Property Law Act 1958 (Vic); Property Law Act 1969 (WA). The equivalent of s 52 of the Victorian legislation in other jurisdictions is found in the following provisions: NT, s 9(1); NSW, ss 14, 23B, 23D(2) (s 23B, equivalent to Vic, s 52, does not apply to land under the Torrens system, s 23B(3)); Qld, ss 8, 10 (unlike other states, Queensland no longer requires the execution of a deed but merely a document in writing signed by the person making the ‘assurance of land’); SA, ss 8, 28, 30(2); Tas, ss 59, 60(1), (4); WA, ss 32, 33, 35(2).

8.

NSW, s 38; Vic, ss 73, 73A, 73B; Qld, ss 45, 47; SA, ss 41, 41AA; WA, s 9.

9.

Similar provisions are contained in the Civil Law (Property) Act 2006 (ACT) s 204;

Conveyancing Act 1919 (NSW) s 54A; Law of Property Act 2000 (NT) s 62; Law of Property Act 1936 (SA) s 26; Conveyancing and Law of Property Act 1884 (Tas) s 36; Instruments Act 1958 (Vic) s 126; Property Law Act 1974 (Qld) s 59. In relation to the writing requirements, reference should also be made to s 53(1) (Vic) and the equivalent provision in other jurisdictions, as extracted in 4.94E below. 10. For a discussion of the rationale of the doctrine of part performance, see Spry, 250–4; see also Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, 5th ed, 2015, 678-686. For further analysis of the doctrine of part performance and its relationship with equitable remedies, see J C Williamson Pty Ltd v Lukey and Mulholland (1931) 45 CLR 282; [1931] ALR 157. In England the doctrine of part performance no longer applies to contracts for the sale of land as the result of Law of Property (Miscellaneous Provisions) Act 1989 s 2. 11. See Land Title Act 1994 (Qld) s 75; Land Title Act 2000 (NT) s 77. For a general discussion, see Barnett, ‘The Mirror of Title Crack’d From Side to Side? The Amazing Half-Life of the Equitable Mortgage’ (2007) 14 APLJ 238–58; Hepburn, ‘Reconsidering the Scope of the Equitable Mortgage Arising From the Deposit of Title Deeds’ (2007) 80 ALJ 121. In England, the Law of Property (Miscellaneous Provisions) Act 1989 s 2, which requires contracts to be in writing, signed by the parties, appears to prevent the creation of mortgages by deposit of title deeds: Gray and Gray, Elements of Land Law, 3rd ed, 2001, 602–4. 12. For other examples of the application of the principle, see KLDE Pty Ltd v Commissioner of Stamp Duties (1984) 155 CLR 288; 56 ALR 337; Davjoyda Estates Pty Ltd v National Insurance Co of New Zealand Ltd [1965] NSWR 1257; (1965) 69 SR (NSW) 381; Kidner v Department of Social Security (1993) 18 AAR 545; see also Note (1967) 40 ALJ 319. For commentary on the principle, see McLure, ‘Specific Performance and the Constructive Trust’ in Bant and Bryan (eds), Principles of Proprietary Remedies, 2013, Ch 8; Swadling, ‘The Vendor-Purchaser Constructive Trust’ in Degeling and Edelman (eds), Equity in Commercial Law, 2005, Ch 18. For commentary on whether the principle should apply to personal property such as company shares, see Worthington, ‘Proprietary Remedies: The Nexus between Specific Performance and Constructive Trusts’ (1996) 11 Journal of Contract Law 1. See also Luxe Holding Limited v Midland Resources Holding Limited [2010] EWHC 1908, a case involving an application for injunctive relief in respect of the sale of shares, where Roth J accepted that ‘an agreement for the sale of the shares in a private company, like an agreement for the sale of land, entitles the purchaser to specific performance’: at [28]. 13. For a discussion of Walsh v Lonsdale, see Meagher, Hedon and Leeming, Meagher, Gummow and

Lehane’s Equity: Doctrines and Remedies, 5th ed, 2015, 57ff; Sparkes, ‘Walsh v Lonsdale: The NonFusion Fallacy’ (1988) 8 OJLS 350; Gardner, ‘Equity, Estate Contracts and the Judicature Acts: Walsh v Lonsdale Revisited’ (1987) 7 OJLS 60; Fitzgerald, ‘Walsh v Lonsdale: Eighties Style’ (1990) 6 QUT Law Journal 119. 14. For a case applying Chan v Cresdon, see Gobblers Inc Pty Ltd v Stevens (1993) 6 BPR 13,591. 15. See also Rushton v Smith [1975] 2 All ER 906; Gardner, ‘Equity, Estate Contracts and the Judicature Acts: Walsh v Lonsdale Revisited’ (1987) 7 Oxford J Leg Studies 60. 16. See Supreme Court Act 1933 (ACT) s 33; Supreme Court Act 1979 (NT) s 68; Civil Proceeding Act 2011 (Qld) s 7(3); Supreme Court Act 1935 (SA) s 28 (applies to all courts); Supreme Court Civil Procedure Act 1932 (Tas) s 11(10); Supreme Court Act 1986 (Vic) s 29(1) (applies to all courts); Supreme Court Act 1935 (WA) s 25(12). 17. In cases within these monetary limits, the principle in Walsh v Lonsdale applies. For a general discussion of these and related provisions, see Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, 2002, 4th ed, 69–74; Dunlop Olympic Ltd v Ellis [1986] WAR 8. 18. Apparently the landlord had withdrawn a plea based on s 40 of the Law of Property Act 1925 (the successor to s 4 of the Statute of Frauds: see 4.31). Presumably this plea would have provided a good defence to the claim for damages at law. See also Borman v Griffith [1930] 1 Ch 493. 19. For a more detailed discussion of this area, see Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, 5th ed, 2015, 243–53; Ford and Lee, [3030]–[3190]; McKay, ‘Share Transfers and the Complete and Perfect Rule’ (1976) 40 Conv&PL 139. 20. See, however, Anning v Anning (1907) 4 CLR 1049; Norman v FC of T (1963) 109 CLR 9; 37 ALJR 49; Shepherd v FC of T (1965) 113 CLR 385; 39 ALJR 351; see also Zines, ‘Equitable Assignments: When Will Equity Assist a Volunteer?’ (1965) 38 ALJ 337; Property Law Act 1974 (Qld) s 200. 21. For discussion of Corin v Patton, see Bell, ‘Corin v Patton: Solving the Riddle of the Imperfect Gift’ (1990) 6 QUT Law Journal 126. For cases in which the principle was considered or applied, see Oboohoff v Melnicke [1990] ACLD 35.1039 (NSWSC); Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284; Sistrom v Urh (1992) 40 FCR 550; 117 ALR 528; Bluebird Investments Pty Ltd v Graf (1994) 13 ALJR 271 at 308. 22. Compare ACT, s 201; NSW, ss 23C, 23D(1), 23E; NT, ss 9–11; Qld, ss 11, 12; SA, ss 29, 30(1),

31; Tas, s 60(2), (3), (5); WA, ss 34, 35(1), 36. On the Queensland legislation, see (1973) 47 ALJ 110. 23. As to resulting and constructive trusts, see 4.108ff. 24. On the Statute of Frauds provisions relating to equitable interests, see Battersby, ‘Formalities for the Disposition of Equitable Interests Under a Trust’ (1979) 43 Conv & PL 17; Meagher, Heydon and Leeming, Meaher, Gummow and Lehane’s Equity: Doctrines and Remedies, 5th ed, 2015, Ch 7; Ford and Lee, Ch 6. 25. Victorian Law Reform Commission, Review of the Property Law Act 1958: Final Report, 2010. 26. See Dowling, ‘The Presumption of Advancement Between Mother and Child’ [1996] Conv 274. 27. See also Martin v Martin (1959) 110 CLR 297; 33 ALJR 362; Bloch v Bloch (1981) 180 CLR 390; 37 ALR 55; 55 ALJR 701; Calverley v Green (1984) 155 CLR 242; 56 ALR 483; 59 ALJR 111; Delehunt v Carmody (1986) 161 CLR 464; 68 ALR 253; 61 ALJR 54, discussed in Shelton, ‘Informal Arrangements Affecting Land: Carmody v Delehunt (1988) 11 Syd I 611; Nelson v Nelson (1995) 184 CLR 53. 28. See Married Persons Property Act 1986 (ACT) s 13; Law of Property Act 1936 (SA) s 105; Marriage Act 1958 (Vic) s 161 (this section was extensively amended in 1961 to overcome in part the effect of Wirth v Wirth (1956) 98 CLR 228; 4.114); cf Family Law Act 1975 (Cth) s 78. 29. See generally, Wright, The Remedial Constructive Trust, Butterworths, Sydney, 1998. 30. In Director of Public Prosecution v Ali (No 2) [2010] VSC 503 at [75], Hargrave J noted that a common intention constructive trust may arise from an agreement or common intention arising after acquisition of the relevant property and cited the following cases to this effect: Allen v Snyder (1997) 2 NSWLR 685 at 691; Butler v Craine [1986] VR 274 at 284–7; Grant v Edwards [1986] 1 Ch 638 at 651; Green v Green (1989) 17 NSWLR 343 at 355–652; Rasmussen v Rasmussen [1995] 1 VR 613 at 616; and Austin v Keele (1987) 10 NSWLR 283 at 290 (Privy Council). 31. For a note on Allen v Snyder, see (1978) 94 LQR 351; see also McMahon v McMahon [1979] VR 239; Dale v Haggerty [1979] Qd R 83; Hohol v Hohol [1981] VR 221; [1980] FLC 90-824; Cooke v Cooke [1987] VR 625; Arthur v The Public Trustee (1988) 90 FLR 203; Green v Green (1989) 17 NSWLR 343; Hunt v Luengo [1991] ACL Rep 395 Vic 7; Stowe and Devereaux Holdings Pty Ltd v Stowe (1995) 19 Fam LR 409; Bell v Bell (1995) 19 Fam LR 690; Wade, ‘Trusts, the Matrimonial Home and De Facto Spouses’ (1979) 6 U Tas LR 97. 32. See, on this point, Kardynal v Dodek [1980] FLC 90-823, discussed in a comment by Neave, (1978) 4 MULR 580; Pearce v Pearce [1977] 1 NSWLR 170; Horton v Public Trustee [1977] 1

NSWLR 182; Calverley v Green (1984) 155 CLR 242 at 261; 56 ALR 483 at 496. 33. For discussions of this area, see Bisset-Johnson, ‘Ownership of Family Assets’ (1972) 46 ALJ 436; Webb, ‘Trusts of Matrimonial Property’ (1976) 92 LQR 489; Helsham, ‘De Facto Relationships and the Imputed Trust’ (1979) 8 Syd LR 571; Davies, ‘Constructive Trusts, Contract and NonProprietary Remedies for Informal Arrangements Affecting Land’ (1980) 7 Adel LR 200. 34. For a critical examination, see Wade, ‘Trusts, the Matrimonial Home and De Facto Spouses’ (1979) 6 U Tas LR 97; Helsham, ‘Comment: De Facto Relationships and the Imputed Trust’ (1979) 8 Syd LR 571; Neave, ‘Three Approaches to Family Property Disputes — Intention/Belief, Unjust Enrichment and Unconscionability’ in Youdan (ed), Equity, Fiduciaries and Trusts, 1989, 256. 35. For cases considering the application of Baumgartner, see Bryson v Bryant (1992) 29 NSWLR 188 (noted in 16 Syd LR 403); KT and T Developments Pty Ltd v Tay (1995) 13 WAR 363. For discussion of the cases, see Black, ‘Baumgartner v Baumgartner: The Constructive Trust and the Expanding Scope of Unconscionability’ (1988) 11 UNSWLJ (No 1) 117; Parkinson, ‘Doing Equity Between De Facto Spouses: From Calverley v Green to Baumgartner’ (1988) 11 Adel LR 370; Neave, ‘Living Together — The Legal Effects of the Sexual Division of Labour in Four Common Law Countries’ (1991) Mon LR 14-63; Neave, ‘From Difference to Sameness — Law and Women’s Work’ (1992) 18 MULR 768 Ward, ‘Constructive Trusts and Equitable Proprietary Relief: Insights from Estoppel’ in Bant and Bryan (eds), Principles of Proprietary Remedies, 2013, Ch 10.. For cases following Muschinski v Dodds, see Plumb v Breen [1991] ACL Rep 185 NSW 6; Re Jonton Pty Ltd [1992] 2 Qd R 105. 36. For discussion of the case, see Riley, ‘The Property Rights of Home-makers under General Law: Bryson v Bryant (1994) 16 Syd LR 412; Bryan, ‘The Conscience of Equity in Australia’ (1990) 106 LQR 25. 37. See Otto, ‘A Barren Future? Equity’s Conscience and Women’s Inequality’ (1992) 18 MULR 808; Spry, ‘Non-Financial Contribution to a De Facto Relationship and Constructive Trusts: Dunne v Turner (1997) 5 APLJ 86. 38. See Wright, The Remedial Constructive Trust, 1998; and Cope, Constructive Trusts, 1992. See also Oakley, ‘Has the Constructive Trust Become a General Equitable Remedy?’ (1973) 26 Current Legal Problems 17; O’Connor, ‘Happy Partners or Strange Bedfellows: The Blending of Remedial and Institutional Features in the Evolving Constructive Trust’ (1996) 20 MULR 735; Rotherham, ‘The Redistributive Constructive Trust: “Confounding Ownership with Obligation’” (1992) 5

Canta LR 84. 39. See also Meagher and Gummow in Jacobs’ Law of Trusts in Australia, 7th ed, Butterworths, 2006, para [1311] who conclude that ‘the decree recognises and enforces the trust, but does not create it; the trust arises immediately the circumstances exist in respect of which equity would construe a trust’. 40. For a critique, see Graycar, ‘Matrimonial Property Reform and Women: Discourses in Discord’ (1995) 25 VUWLR 9. 41. For an outline of the provisions, see Hall, ‘Equal Under the Law’ (2009) 83(7) Law Institute Journal 28. 42. Amendments to the Victorian legislation will come into effect on 1 October 2016. These amendments, which follow similar developments in NSW, Qld, ACT and Tas, will make it easier to register relationships and to recognise relationships registered in other jurisdictions. NT, WA and SA have not yet established registration mechanisms. 43. For cases applying the legislation, see Black v Black (1991) 15 Fam LR 109; Conn v Martusevicus (1991) 14 Fam LR 751; Reitsema v Reitsema (1991) 15 Fam LR 706; Linich v Garland (1992) 15 Fam LR 596; Dwyer v Kaljo (1992) 15 Fam LR 645; Theodoropoulos v Theodosiou (1995) 19 Fam LR 632; Green v Robinson (1995) 36 NSWLR 96; Evans v Marmont (1997) 21 Fam LR 760. 44. For cases considering the principle, see ER Ives Investment Ltd v High [1967] 2 QB 379; Pascoe v Turner [1979] 1 WLR 481; [1979] 2 All ER 945; Re Sharpe [1980] 1 All ER 198; Vinden v Vinden [1982] 1 NSWLR 618; Wood v Browne [1984] 2 Qd R 593; Riches v Hogben [1986] 1 Qd R 315; Sharp v Anderson (1994) 6 BPR 13,801. For articles discussing equities, see Neave and Weinberg, ‘The Nature and Function of Equities’ (1978) 6 U Tas LR 24; see also Everton, ‘Equitable Interests and Equities — In Search of a Pattern’ (1976) 40 Conv & PL 209. 45. See also Thomas v Thomas [1956] NZLR 785; Raffaele v Raffaele [1962] WAR 29; Timber Top Realty Pty Ltd v Mullens [1974] VR 312; Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82 (Fed Ct). 46. See the critique by Atiyah in Note (1976) 92 LQR 174; and also Crane (1976) 40 Conv (NS) 156; Millett (1976) 92 LQR 342. Compare Crabb v Arun with Western Fish Products Ltd v Penwith District Council [1981] 2 All ER 204, where the Court of Appeal held that the requirements for estoppel had not been satisfied. The doctrine of proprietary estoppel has been applied in many cases: Jackson v Crosby (No 2) (1979) 21 SASR 280; Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 2 WLR 576; Riches v Hogben [1986] Qd R 315; Burrows and Burrows v

Sharp [1991] Fam Law 67. 47. See further, Bennett, ‘Equitable Estoppel and Some Related Estoppels’ (1987) 61 ALJ 540; Clark, ‘The Swordbearer Has Arrived: Promissory Estoppel and Waltons Stores (Interstate) v Maher’ (1987–89) 9 U Tas LR 68; Bagot, ‘Equitable Estoppel and Contractual Obligations in the Light of Waltons v Maher’ (1988) 62 ALJ 926; Dorney and Grimshaw, case note on Waltons Stores (Interstate) Ltd v Maher (1988) 11 UNSWLJ 231; Lunney, ‘Towards a Unified Estoppel — The Long and Winding Road’ [1992] Conv 239; Carter, ‘Contract, Estoppel and Unconscionability’ (1993) 1 Judicial Review 129. 48. For another case in which the court held that it was not unconscionable for the defendant to fail to conclude a contract of sale, although the plaintiff had commenced building works on the land, see Marek v Australasian Conference Association Pty Ltd [1993] 2 Qd R 521. 49. For a discussion of some of the issues raised in these extracts, see Robertson, ‘Satisfying the Minimum Equity: Equitable Estoppel Remedies After Verwayen’ (1996) 20 MULR 805; Robertson, ‘Towards A Unifying Purpose for Estoppel’ (1996) 22 Mon ULR 1; Burns, ‘The Fusion Fallacy Revisited’ (1993) 5 Bond LR 152; Munro, ‘The New Law of Estoppel’ (1993) 23 VUWLR 271; Robertson, ‘Situating Equitable Estoppel Within the Law of Obligation’ (1997) 19 Syd LR 32; Gray and Gray, 3rd ed, 753ff; Robertson, ‘Unconscionability and proprietary estoppel remedies’ in Bant and Harding (eds), Exploring Private Law, 2010, Ch 18. 50. For a general discussion, see Burns, ‘Giumelli v Giumelli Revisited: Equitable Estoppel, the Constructive Trust and Discretionary Remedialism’ (2001) 22 Adel LR 123; Evans, ‘Defending Discretionary Remedialism’ (2001) 23 Syd LR 463. 51. See, for example, G Griffiths, ‘Proprietary Estoppel — The Pendulum Swings Again?’ (2009) 73 Conveyancer and Property Lawyer 141; B McFarlane and A Robertson, ‘Apocalypse Averted: Proprietary Estoppel in the House of Lords’ (2009) 125 LQR 535; J Randall, ‘Proprietary Estoppel and the Common Intention Constructive Trust’ (2010) 4 J Eq 171; N Hopkins, ‘Proprietary Estoppel: A Functional Analysis’ (2010) 4 J Eq 201. 52. Bryan, ‘Almost 25 Years On: Some Reflections on Waltons v Maher’ (2012) 6 J Eq 131 at 142. 53. For a note discussing the case law following Sidhu, see Dunnett, ‘The Prima Facie Approach to Proprietary Estoppel by Encouragement’ (2015) APLJ 298. 54. For commentary on Sidhu, see Barnett, ‘Estopped from Denying the “Love Shack”: Sidhu v Van Dyke’ on Opinions on High (21 May 2014) http://blogs.unimelb.edu.au/opinionsonhigh/2014/05/‐ 21/barnett-sidhu/.

55. See National Provincial Bank Ltd v Ainsworth [1965] AC 1175; [1965] 2 All ER 472 per Lord Wilberforce. See also Butt, ‘Conveyancing and the Rights of Persons in Occupation’ (1981) 55 ALJ 119; McNicol, ‘Constructive Notice of a Spouse in Actual Occupation’ (1981) 13 MULR 226; Luxton, ‘Clandestine Co-owners: An Occupational Hazard for Mortgagees?’ [1986] NLJ 771. 56. Neave and Weinberg, ‘The Nature and Function of Equities’ (1979) 6 U Tas LR 24. 57. See also Kuckucka v Kuckucka (1980) 48 FLR 282; Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870. 58. This case is discussed in Butt, ‘Priorities Between Unregistered Mortgages’ (1996) 70 ALJ 794. 59. See Skapinker, ‘Equitable Interests; Mere Equities, “Personal” Equities and “Personal Equities” — Distinctions With a Difference’ (1994) 68 ALJ 593. 60. On this point see the criticisms of Wright, (1995) 69 ALJ 935. 61. See Note (2003) 77 ALJ 432. 62. (2004) 13 Tas R 95.

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Title to Land: The Torrens System

CHAPTER

5

INTRODUCTION 5.1

The problem of how to prove ‘title’ to land, that is, one’s legal

entitlement to it, and how best to facilitate the effective conveyance or transfer of interests in land has perplexed lawyers and legislators for centuries. From the nineteenth century onwards, land not only continued to serve its traditional role in the production of wealth and in the provision of shelter, but increasingly became an independent commercial commodity to be bought and sold in the same manner as many other investments. The increasing commodification of land places greater pressure on the systems that govern the creation and transfer of interests in land. The common law system inherited from England proved to be inadequate to deal with the demands for a secure, cheap and efficient mechanism for land titles. Accordingly, ‘general law’ or ‘old system’ came to be overtaken by an Australian ‘first’, the Torrens system, which now has almost completely replaced the former model. For

this reason, the common law position will be dealt with only briefly in this chapter. 5.2

The materials analysed in the previous chapter suggest that the English

common law principles relating to the transfer of interests in land based primarily on deeds were hardly conducive to the emergence of a reliable and efficient conveyancing system. This can be illustrated by the typical case in which a vendor contracts to sell the fee simple estate in ‘Blackacre’ to a purchaser for an agreed price. The purchaser is concerned, at the minimum, with two matters: first, to ensure that on completion of the transaction the fee simple estate in Blackacre is transferred, free of any interest in a third party. After paying the purchase price to the vendor and receiving a conveyance in return, the purchaser does not want possession of Blackacre disturbed by a third party claiming an easement over the land or, worse still, claiming to be its ‘true owner’. Since land is permanent and since interests in land may be asserted after long periods of time have elapsed, the purchaser has cause for concern. Second, the purchaser does not want the task of verifying the vendor’s title to be unduly complex and costly. If it is, the delay and expense required to complete the transaction may be intolerable.

‘GENERAL LAW’ OR ‘OLD SYSTEM’ LAND 5.3

In England, at common law, the purchaser could verify the vendor’s

title in only one way, namely by tracing the history of dealings in Blackacre by examining all documents relating to

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the land. These documents representing transactions with the land were collectively known as the ‘title deeds’ or the ‘chain of title’. Each document in the chain, theoretically centuries long, would have effected some dealing such as a conveyance or a mortgage. If the documents did not evidence a continuous chain (that is, if the chain was defective) then the owner would not be able to show good title to a purchaser. The practice of English conveyancers, before legislative intervention, was to require the production of documents dating back at least 60 years prior to the proposed conveyance. 5.4

By contrast, in Australia, starting with the first Crown grant of land to

James Ruse on 22 February 1789, all interests in land could be traced back to that original, unimpeachable source.1 Early colonial administrations sought to make that process more secure by establishing registers of deeds, starting with Governor King, from 1802 onwards.2 It followed that the process of conveyancing in the colonies differed fundamentally from the model in existence in England at the time. Subject to any time limits restricting the scope of the search, the purchaser would commence the search by inspecting the Crown grant and would then investigate the succeeding dealings with the land, by examining all conveyances, mortgages, wills and other instruments relevant to title. The object of the search was to ensure that the vendor’s title was not subject to interests other than those specified in the contract of sale. The vendor was obliged to produce all relevant title documents to enable the purchaser to make the appropriate inquiries.

5.5

Unfortunately, the local regime was from the earliest days bedevilled by

maladministration and major shifts in policy. Crown grants took two basic forms: grants in ‘fee simple’ subject to a ‘quit rent’, and conditional grants in fee simple. Many grants were subject to both quit rents and conditions. Where grants were subject to quit rents, these may not have been paid in full, or at all, rendering the grant defeasible. Equally, in the case of conditional grants,3 the grantees may have paid for it, but in addition were subject to various obligations such as to improve it, not to sell it, to remain in occupation of it and to grow crops in order to support the population of the colony.4 These interests were also defeasible, but prospective purchasers were often not in a position to know if that was the case. An additional, third type of dealing was simply a ‘promise’ of a grant: some early settlers acquired land by virtue of taking possession of land pursuant to a ‘promise from the Crown’ of a grant in the future. Their titles to the land were uncertain, as

[page 413] would be the titles of any purchaser from them.5 An attempt at imposing rationality over the land title system was finally introduced in 1825 with a general register of deeds.6 5.6

The introduction of a register of deeds, however, was only a partial

solution, as it was based on the existing system of (frequently defective) titles. Moreover, the English common law system — known as ‘general law’ or ‘old system’ title, namely, proving title to land by means of producing a chain of

title — which formed part of the received law in the colonies, was grafted onto colonial practices, but did not resolve the already endemic problems. These problems were manifold. 5.7

First, even an exhaustive search of the chain of title would not give the

purchaser complete security, largely because of the principle nemo dat quod non habet (‘no one gives who does not possess’) and the ever-present possibility of undetected (and undetectable) outstanding interests. Cases in which defects of title would not be revealed by a search included the following: If the vendor or some other person deliberately removed a document from the chain of title, such as an instrument creating an easement of way over the land, the purchaser would be bound by any legal interest created by the document, even if unaware of its existence at the time of the conveyance. If the vendor conveyed the fee simple estate in Blackacre to P1, but retained the title deeds and fraudulently purported to convey the fee simple estate to P2, the latter would generally receive only the title retained by the vendor — in short, nothing. If the vendor relied upon a document in the chain of title which for some reason did not operate according to its terms, the vendor might have acquired no interest in the land to convey to the purchaser. This would have been so, for example, if the conveyance to the vendor was void because it was a forgery or because it was executed in circumstances giving rise to the application of the doctrine of non est factum.

Defects may have appeared on the face of documents comprising the chain of title, yet have been very difficult to detect and thus have been inadvertently overlooked by the purchaser’s solicitors. For example, an early document in the chain of title may have contained incorrect words of limitation and therefore failed to pass the interest it purported to convey. This may have caused subsequent documents to be ineffective in operating according to their terms. A search of the chain of title did not reveal proprietary interests in the land acquired other than by means of a document. For example, the vendor’s title may have been barred by a squatter’s adverse possession, or a neighbouring landowner may have acquired an easement over the land by long user. It was sometimes impossible for the purchaser to discover such defects of title by inspection of the land, or, indeed, any other means. Apart from the threat to the purchaser’s title posed by these cases, the search of a chain of title was (and for that matter still is) time-consuming and expensive. It was not a simple

[page 414]

procedure and required the services of persons who understood the intricacies of the common law rules governing interests in land. 5.8

The common law position has been changed in minor respects by

legislation designed to minimise the searches that should be undertaken by a

prospective purchaser. Thus, in some states, a limitation has been placed on the period of commencement of title a purchaser may require, subject to any express contractual stipulation to the contrary. Usually the period of commencement of title specified by statute is 30 years, reduced from the period of 60 years adopted by English conveyancers.7 In South Australia, the common law obligation to investigate title for 60 years presumably remains, while in England the period of commencement of title has been altered to 15 years: Law of Property Act 1969 s 23. The 30-year provision relates to the obligation of the vendor to prove a good title. The effect of the provision is that the vendor must prove title for a period of 30 years preceding the date of the contract, commencing with what is known as a ‘good root of title’. A good root of title has been defined to mean: [An] instrument of disposition dealing with or proving on the face of it (without the aid of extrinsic evidence) the ownership of the whole legal or equitable estate in the property sold, containing a description by which the land can be identified, and showing nothing to cast any doubt on the title of the disposing parties [Re Lemon and Davies’ Contract [1919] VLR 481 at 483, quoting from Williams, Vendor and Purchaser, 2nd ed, 106].

The instrument most clearly constituting a good root of title is a conveyance of the fee simple estate; a legal mortgage, since it operates as a conveyance of the legal fee simple, serves equally well. However, a specific devise of land contained in a will does not of itself constitute a good root of title, since it is not the will but the subsequent acknowledgment by the executor of the testator that operates as the instrument of disposition to the devisee: Gateway Developments Pty Ltd v Grech (1970) 71 SR (NSW) 161. The 30-year provision is supplemented by a section which, subject to any

contrary intention in the contract, prevents the purchaser from requiring the production of any deed, will or other document made before the time stipulated for the commencement of title.8 5.9

Another approach is to discourage purchasers from searching the

vendor’s title over-assiduously by promising them certain immunities. For example, four states provide that a purchaser shall not be deemed to have any notice of matters prior to the statutory period for the commencement of title unless the purchaser actually makes investigations or inquiries into matters prior to that period.9 These provisions, at first glance, appear to be very significant in reducing the purchaser’s burden in searching title and therefore in eliminating many of the problems associated with general law conveyancing. A little reflection will show, however, that if the provisions are designed to prevent purchasers being concerned with transactions occurring before the period of commencement of title, they do not necessarily achieve their objective. The restrictions on the

[page 415]

purchaser’s right to require the production of documents do not relate to the question of whether interests created by documents executed before the period of commencement of title will bind the purchaser if he or she takes a conveyance of the fee simple estate. Thus, legal interests created before the period of commencement of title will bind the purchaser. The immunity against notice does not protect the purchaser against legal interests, since the

enforceability of such interests does not depend on notice: see also Darbyshire v Darbyshire (1905) 2 CLR 787; 11 ALR 417; cf Tas, s 35(6). Nor do these restrictions necessarily prevent a purchaser relying on defects in the vendor’s title, in order to avoid the contract of sale.10

THE DEEDS REGISTRATION SYSTEM 5.10

In 1825, New South Wales adopted the Irish system whereby

recording or registration of a deed affecting land was not essential to the validity of the deed, but a deed that was recorded took priority over one which was either not recorded or recorded subsequently: Registration of Deeds Act 1825 (NSW). Tasmania, South Australia and Western Australia followed suit.11 When Victoria and Queensland separated from New South Wales in 1851 and 1859 respectively, they took over all laws that had previously applied to them by virtue of their status as part of the colony of New South Wales, including the laws relating to deeds registration. Thus, the deeds registration system, in the form of the Registration of Deeds Act 1843 (NSW), applied in Victoria and Queensland from the beginning of their existence as separate colonies. Although the original enactments have been amended in all states, the deeds registration system continues to apply to land not under the operation of the Torrens system. In Victoria, the deeds registry is closed to registration of dealings since 1 January 1989, and instruments can be registered only under the Transfer of Land Act 1958. In the Australian Capital Territory, the Registration of Deeds Act 1957 (ACT)

establishes a deeds registration system, but does not confer priority on registered over unregistered instruments. 5.11

The system of registration of instruments affecting general law land

was not compulsory, except in special cases such as statutory discharge or mortgage where registration is made a condition precedent to the operation of the instrument. The legislation in general allowed the registration, inter alia, of any agreement in writing, deed, conveyance or other instrument (except a lease for less than three years), will or devise affecting any estate in land. The incentive to register instruments affecting land is that registered instruments (except wills) if made and executed bona fide and for valuable consideration shall have priority over all other instruments registered later or remaining unregistered.12 The effect of registration is not to cure all defects in the instrument registered, nor necessarily to give the person registering the instrument a title free from all anterior defects. For example, registration of a forged conveyance will confer neither validity on the otherwise invalid document, nor priority for it over a subsequently registered instrument properly executed by the holder of the fee simple estate: Re Cooper (1881) 20 Ch D 611.

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5.12

The effect of registration is to give the instrument registered ‘priority’

over all instruments that are either unregistered or not registered until later.13 This may allow a person who would have had a defective title at common law

(for example, because the vendor had previously parted with the fee simple estate) to take a good title under the deeds registration system by virtue of the timely registration of the relevant instrument: see Boyce v Beckman (1890) 11 LR (NSW) (L) 139. The priority principle comes into play where there is an inconsistency between a registered interest and an unregistered interest, or between two registered interests. There may be considerable difficulty in determining whether there is an inconsistency between two documents: see Boyce v Beckman (1890) 11 LR (NSW) (L) 139; Andrews v Taylor (1869) 6 WW & A’B (L) 223.

Registrable instruments and the effect of registration 5.13

The primary policy behind the deeds registration system is one of

publicising titles. By means of the carrot of priority, the holders of interests created by deeds and other interests are induced to register. But the deeds registration system did not resolve the other problems of ‘general law’ or ‘old system’ title. In particular, the problems of forgeries, possessory title, the need to locate and search long chains of title deeds remained, producing a costly, inefficient and insecure model of land titling. Accordingly, the search for a more effective system of establishing and transferring title was explored. This resulted in the Torrens system, which has had the effect of completely overtaking the former system, so that now, as we shall see, the former system represents a tiny proportion of land titles in Australia.

THE TORRENS SYSTEM 5.14

An optimal model of conveyancing would achieve a number of goals

simultaneously. They would be efficiency, simplicity, accuracy and low cost. The old system, supplemented by the deeds registration regime, was deficient in each of those respects. As the preamble to the original Torrens statute proclaimed, the Real Property Act 1858 (SA), was enacted because it was ‘expedient to amend’ the law for the reason that ‘the inhabitants of the Province of South Australia are subjected to losses, heavy costs, and much perplexity, by reason that the laws relating to the transfer and encumbrance of freehold and other interests in land are complex, cumbrous, and unsuited to the requirements of the said inhabitants …’. The Torrens system, in the form in which it eventually emerged in South Australia (the 1858 legislation was substantially amended in 1861), fundamentally changed the nature of real property law in the colony. The principles embodied in the South Australian legislation still serve as the basis of the Torrens system in Australia. 5.15

The Torrens system was subsequently adopted elsewhere in the

country. The legislation introducing the Torrens system provided that all land alienated by the Crown after a certain date would automatically come under the system: see, for example, Real Property Act 1862 (NSW) s 13 (1 January 1863). Land alienated by the Crown before that date and not brought within

[page 417]

the Torrens system retains its character as general law or old system land and is therefore subject to the deeds registration system. The states have enacted legislation designed to encourage the conversion of general law land to Torrens system and in some cases have required conversion to take place: see 5.22–5.24. These policies have met with substantial success. Although there are small pockets of land outside the Torrens system, particularly in the areas of New South Wales, South Australia, Tasmania, Western Australia and Victoria which were first settled, none exists in Queensland, the Australian Capital Territory and the Northern Territory. According to the assessment of registration officials where it does exist, transfers of general law land represent perhaps no more than 0.1% of Australian land titles, with most remaining old system parcels rarely, if ever, transferred because they are in the hands of state instrumentalities or institutions such as religious bodies which held them prior to the introduction of the Torrens system. These titles are unlikely to be converted without some form of compulsion, so the conversion to Torrens title remains unsatisfactorily incomplete.14 5.16

There is some debate concerning the precise historical origins of the

Torrens system in South Australia. The title registration scheme formulated by Torrens, by his own admission, was not completely new. He acknowledged adapting his proposals from earlier systems of transfer and registration, particularly that embodied in the Imperial Merchant Shipping Acts which dealt with the registration of title to ships. Despite Torrens’ own denials, he derived ideas from many sources, including the 1857 report of the English Royal Commissioners investigating registration of title, and that he

received considerable assistance from a number of persons within South Australia.15 While commentators agree that Torrens was far from unaided in the formulation and presentation of his proposals, there has been disagreement from the beginning as to the extent of the assistance he received.16 Whatever the truth as to the contributions to the drafting of the legislation, Torrens’ political activities were substantially responsible for securing acceptance of the new system in South Australia and, eventually, in the other Australian colonies.

Bringing land under the Torrens system 5.17

The Torrens legislation has always contemplated a limited form of

compulsion in relation to the conversion of old system land (also known as ‘general law land’) to the Torrens system. The earliest legislation provided that land alienated or granted by the Crown after the date of commencement was automatically to be under the Torrens system. This provision has

[page 418] been continued in the current legislation.17 It follows that only land alienated by the Crown before the introduction of the Torrens system can retain its status as old system land. In the case of this land, the Torrens legislation establishes a procedure whereby the holder of the fee simple estate, or other specified persons, may apply to bring the land under the legislation.

5.18

Certain persons, including the owner of the fee simple estate at law

or in equity, the person having the power to appoint or dispose of the fee simple estate (for example, under the Settled Land Act 1958 (Vic)) and trustees for sale of the land are empowered to apply to bring old system land onto the Torrens register.18 A mortgagor (that is, the holder of the equity of redemption under the general law) cannot apply without the consent of the mortgagee. In general, the Registrar has administrative responsibility for processing the application to register land and is entrusted with discretion to decide whether or not to issue a certificate of title to the applicant. An unsuccessful applicant may, however, call on the Registrar to state the grounds on which the application has been rejected and may require that these grounds be substantiated before the court.19 The procedures followed vary from state to state but the Victorian provisions are reasonably representative. 5.19

The legislation appears to give the Registrar a broad discretion to

determine the standards the applicant’s title must meet in order to be accepted under the Act.20 The discretion of the Registrar in states other than New South Wales, Victoria and Tasmania tends to be more circumscribed, varying according to the class into which the application falls. Even where the discretion appears to be broad, the applicant may appeal against the Registrar’s rejection of the application or, alternatively, seek an order for mandamus to compel the Registrar to register a ‘good, safe, holding and marketable title’.21 Before assessing the applicant’s title, the Registry undertakes an investigation of that title, using the powers conferred by the Act. Where the application for registration is made on behalf of the applicant

by a solicitor (as it usually is) the Registrar sometimes regards himself or herself as relieved from the obligation of verifying the matters that might otherwise require independent official investigation. 5.20

In the Victorian Act, there is an express provision empowering the

Registrar to grant an application where the evidence of title is incomplete or a document cannot be produced or there is some other imperfection, conditioned upon a contribution to the assurance fund of such sum as the Registrar considers to be a sufficient indemnity: Vic, s 108(3). Land may be brought under the provisions of the Act by a variety of conversion schemes, including upon lodgment of a legal practitioner’s certificate as to title: see Vic, s 12; Pt II, Div 2. The Registrar has a discretion to issue an ordinary folio or a provisional folio: s 18. A provisional folio is a transitional folio for bringing land under the operation of the Act without full investigation. It is issued with a warning as to subsisting interests, or as to a qualification in a legal practitioner’s certificate. After 15 years, the warning is removed and the folio ceases to be subject to the subsisting interests or qualification. A folio may also be provisional as to title

[page 419]

dimensions where the dimensions of the lot are not based on survey information which has been investigated by the Registrar. In New South Wales and Tasmania, a qualified certificate of title may be issued in a doubtful case: NSW, s 28B; Tas, s 21. A qualified title does not

prevail over subsisting interests and a caution is recorded on the title to indicate this. In New South Wales, the procedure enables the RegistrarGeneral to create a qualified title based upon initiative and without a detailed search of the existing old system chain of title: NSW, ss 28B–28E. When the title is first issued, all interests of which the Registrar-General is aware are recorded and additional interests may be recorded at any time before the caution lapses: see Stein and Stone, 42. In Tasmania, if the applicant’s claim is doubtful, or the applicant fails to produce all the necessary documents, or make all proofs to the recorder’s satisfaction, the recorder may issue the applicant with a qualified certificate of title which may contain a general or specific caution about defects in title: Tas, s 21(2). The caution lapses after 20 years in Tasmania and after 12 years in New South Wales: Tas, s 25; NSW, s 28M(3). In addition, in New South Wales, the caution also lapses six years from the date of issue of the qualified folio in relation to any estate or interest in respect of which a bona fide purchaser becomes registered: NSW, s 28M(2). The effect of the lapsing of a caution is to free the land from any interests that affected the land when it was brought under the Torrens system, other than those recorded on the title or otherwise protected by the Act. While a caution is extant, the title of the vendor of land under qualified title should be investigated as if the land were still under the general law even though the transfer is effected by the same procedures as for the transfer of any land under the Torrens system. 5.21

The fact that the New South Wales provisions for the issue of

qualified title empower the Registrar-General to take the initiative in bringing land under the system provides a framework for the conversion of

much remaining old system land in the state. The Registrar-General has power, for example, to require any person to supply particulars relating to land, produce instruments evidencing title and support any claim to an interest in the land. The potential effect of this legislation has been limited both by the resources available to the Registrar-General and the fact that, as originally drafted, the powers were limited to land which had been surveyed adequately and the boundaries of which could be defined. In 1976, Pt 4B was added to the Real Property Act 1900 (NSW). This Part authorises the Registrar-General to create a limited folio of the register where the boundaries are not sufficiently defined for an ordinary title. The RegistrarGeneral must make a notation on the limited title indicating that the description of the land has not been verified: NSW, s 28T(4). Once a plan of survey has been lodged in which the boundaries are adequately described, the Registrar-General may remove the limitation: NSW, s 28V. The effect of a limitation is that where any land is incorrectly included in a limited folio because of a wrong description of boundaries, the title of the registered proprietor is defeasible to the extent of the error: NSW, s 28U. A title may be both limited and qualified.

Compulsory extension of the Torrens system 5.22

The initially slow rate of voluntary conversion of Torrens system land

prompted state legislatures, acting on the recommendation of the administrators of the schemes, to pass legislation requiring the conversion of

old system land to Torrens title. Several different approaches have been taken. Most importantly, land which is to be used for a strata titles

[page 420]

scheme must be brought under the Torrens system. This limited form of compulsion has also been adopted in relation to subdivisions of land. Thus, in New South Wales the Registrar-General is empowered to refuse to register a plan of subdivision that includes old system land unless the last document in the subdivider’s chain of title is lodged, together with any registered deed creating a legal mortgage. The Registrar-General may bring the subdivided land under the Torrens system by issuing a qualified folio, the effect of which has been noted in 5.21, or, if considered appropriate, an ordinary folio: NSW, ss 28D, 28EA. Compare Local Government (Building and Miscellaneous Provisions) Act 1993 (Tas) s 113, which requires the Registrar, on receiving a plan of subdivision comprising old system land, to bring it under the Real Property Act by proceeding as if a primary application had been made: see also Tas, s 18. 5.23

More sweeping approaches to the problem of conversion to Torrens

title have been attempted. In Victoria and South Australia, for example, legislation directs the Registrar with ‘all convenient speed’ to bring old system land under the Torrens system (Vic, s 9) or ‘with all reasonable speed’: Real Property (Registration of Titles) Act 1945 (SA) s 3. Under Victoria’s 1998 conversion reforms, once a parcel of old system land is identified, the

Registrar must create an ‘identified folio’ for it, unless a provisional or ordinary folio is created: Vic ss 26E, 26W; and see 5.20. Interests may be recorded on an identified folio, but no person is registered as owner, no certificate of title issues, and subsisting interests are enforceable under the rules of the old system. Instruments relating to old system land can be registered only under the Transfer of Land Act 1958. If a conveyance, mortgage, or assignment of a possessory title is lodged, the Registrar may create a provisional folio or an ordinary folio for the land: Vic ss 4(1), 22–24; see 5.21. 5.24

The Real Property (Registration of Titles) Act 1945 (SA) requires

the Registrar to proceed, with such modifications as are necessary, as if an application has been made to bring land under the Torrens system. The Registrar is to issue an ordinary certificate of title if he or she is satisfied that such a certificate would have been issued had an application been made by a qualified applicant and that there is no person in adverse possession of the land. In other cases, a ‘limited’ certificate of title is to issue. The limitation may be as to description of the land or to title or both. Where the title is limited as to description it can be replaced by an ordinary certificate only when the Registrar is satisfied as to the proper measurements. Where the certificate is limited as to title, it will be replaced by an ordinary certificate when the Registrar is satisfied that the defect no longer exists; in any event it will be replaced automatically by an ordinary certificate after the expiration of 12 years. No contribution to the assurance fund is payable in respect of land brought under the Torrens system by direction. In this respect, see also Tas, ss 17, 19–20, establishing a procedure for bringing land under the Act where

a conveyance or mortgage is lodged for registration under the Registration of Deeds Act 1935. In Queensland, conversion of land to the Torrens system is now complete.

The principle of indefeasibility 5.25

Torrens saw clearly that the inadequacies of the deeds registration

system flowed from the dependent nature of old system titles: that is, from the principle that one weak link in the chain of title, unless cured by a sufficient period of adverse possession, was sufficient to destroy or impair the title of the last person in the chain. Accordingly, he concluded that a new scheme was required to achieve security and simplicity in matters of title to land. The scheme

[page 421]

he proposed was based on the idea that the state should authoritatively establish title by setting up a register and guaranteeing that the person named as proprietor had a perfect title subject only to encumbrances specifically notified on the register. Interests in land were to be created or transferred not by the execution of documents, as was the case (in general) with old system land, but by the registration of dealings on the register. Thus, a dealing was not to be completed until registration although, as the authorities have developed in Australia, an unregistered dealing is by no means without effect. Since the state was to guarantee the title of the person registered as proprietor

of an estate or interest in land, there would be no need for a purchaser to investigate the history of the vendor’s title, nor to determine whether it was defective when registered. In short, Torrens attempted to make titles to land ‘independent’ by making the register conclusive and by barring ‘retrospective investigation of title’.22 Ideally, this principle required the register to reflect all facts bearing on the title of the proprietor, thereby relieving anyone searching title from the need to go behind the register. The conclusiveness of the register is, in general, what is meant by the principle of indefeasibility. In Frazer v Walker [1967] 1 AC 569 at 580; [1967] 1 All ER 649 at 652, the Privy Council stated that the expression ‘indefeasibility of title’ ‘is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys’. At the time of the decision in Frazer v Walker the term ‘indefeasibility’ was not used in the Torrens legislation itself, but was adopted by the courts along with such other terms as ‘unimpeachable’, ‘conclusive’ and ‘unexaminable’. Presently the term is used in the Torrens legislation of the Northern Territory, Queensland, South Australia and Tasmania.23 5.26

The objects of the Torrens system have traditionally been equated

with its methods, as, for example, in the following passage: The first [object] is to provide a register from which persons who propose to deal with land can discover all the facts relative to the title … The second object is to ensure that a person dealing with land which is subject to the system is not adversely affected by any infirmities in his vendor’s title which do not appear on the register, thus saving the difficulty and expense of going behind the register to investigate the title. Thirdly, the Torrens system aims to provide a guarantee by the State that the picture presented by the register book is true and complete. If this turns out not to be the case, compensation is to be paid to any person who suffers loss either through the land

being made subject to the system or else through the register not disclosing all the facts relevant to the title.24

The Torrens system is a variant of the system known internationally as a system of registration of title. The objects of such systems are generally understood to be security of title and security of transaction — ‘static’ and ‘dynamic’ security in Demogue’s terms: see further 5.35. A register that provides publicity for interests in land, the state guarantee of title (comprising the statutory vesting of title and compensation for losses caused by the system) and wider enforceability for registered interests are the methods employed by the Torrens system to achieve the objects.25

[page 422]

The indefeasibility provisions 5.27

Several sections in each of the state Acts are relevant to the principle

of indefeasibility. The structure and language of these sections are similar, but there are significant differences. In the outline below, the Victorian provisions are taken as a model, but the more important legislative variations in the other states are noted. 5.28

Section 41 of the Victorian Act asserts that ‘every Crown grant or

certificate of title registered under this Act … shall be conclusive evidence that the person named in such grant or certificate as the proprietor of or having any estate or interest in … the land therein described is seised or possessed of such estate and interest’.26 This is primarily an evidentiary

provision and must be read subject to the key indefeasibility section (Vic, s 42), which determines the effect of registration of a person as proprietor of an estate or interest in land. A good example of the subordination of the apparently absolute terms of s 41 to the qualifications introduced by s 42 is National Trustees, Executors and Agency Co v Hassett [1907] VLR 404, where the certificate of title which erroneously included certain land was not conclusive despite the terms of s 41, because s 42(1)(b) denied conclusiveness to a certificate of title covering land included by a wrong description. The New South Wales legislation (NSW, s 40) most clearly emphasises that the conclusive evidence provision is not a major source of indefeasibility, but is designed to assist in relation to the proof of title. The legislation was amended in 1979 to state the evidentiary value of a ‘computer folio certificate’: NSW, ss 40(1A), (1B), 96D. The key indefeasibility provision (the ‘paramountcy provision’) provides as follows: 5.29E

Transfer of Land Act 1958 (Vic)

42 Estate of proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest … which but for this Act might be held to be paramount or to have priority, the registered proprietor of land shall, except in the case of fraud, hold such land subject to such encumbrances as are recorded on the relevant folio of the Register but absolutely free from all other encumbrances whatsoever, except — (a) the estate or interest of a proprietor claiming the same land under a prior folio of the Register; (b) as regards any portion of the land that by wrong description of parcels or boundaries is included in the folio of the Register or instrument evidencing the title of such proprietor not being a purchaser for valuable consideration or deriving from or through such a purchaser. (2) Notwithstanding anything in the foregoing the land which is included in any folio of

the Register or registered instrument shall be subject to [a number of matters to be considered] notwithstanding the same respectively are not specially notified as encumbrances on the relevant folio of the Register.27

[page 423]

5.30

This provision has a threefold operation. First, it states that fraud will

vitiate a registered title. Second, that the estate or interest of the registered proprietor is subject only to those encumbrances actually noted on the register, with two exceptions; and third, that nevertheless there are certain unregistered interests which are enforceable against the registered proprietor (these vary from state to state). The paramountcy provision is accompanied by the so-called ‘notice provision’, which states that: 5.31E

Transfer of Land Act 1958 (Vic)

43 Persons dealing with registered proprietor not affected by notice Except in the case of fraud no person … dealing with … the registered proprietor … shall be required … to … ascertain the circumstances under … which such proprietor or any previous proprietor … was registered … or shall be affected by notice actual or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.28

5.32

The main purpose of the notice provision is to prevent certain

equitable principles applying to registered land and to narrow accordingly the definition of ‘fraud’, a term otherwise undefined in the legislation: Templeton

v Leviathan (1921) 30 CLR 34 at 69–70. The first of these objectives is achieved by protecting a person dealing with the registered proprietor from the effect of notice of any trust or unregistered interest. Thus, a purchaser taking a transfer from the registered proprietor takes free of any outstanding unregistered interest once the transfer is registered in the purchaser’s name, notwithstanding that the purchaser has notice of the unregistered interest, unless the unregistered interest is protected by a specific statutory exception to indefeasibility. The second objective is achieved by the direction in s 43 that ‘the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud’ to the person purchasing from the registered proprietor. 5.33

A further provision, known as the protection of purchasers provision,

extends the protection accorded to a purchaser bona fide by providing that nothing in the Act is to be interpreted so as to leave a bona fide purchaser for valuable consideration open to an action for recovery of damages or to an action of ejectment or to deprivation of his or her estate or interest, on the ground that the vendor may have been registered through fraud or error, or that he or she may have derived title from or through a person registered as proprietor through fraud or error.29

[page 424]

Deferred vs immediate indefeasibility 5.34

Perhaps the most fundamental decision confronting courts

interpreting the Torrens legislation has been the necessity to choose between the competing theories of deferred and immediate indefeasibility. Both theories relate to a case where a purchaser or mortgagee, acting without fraud, registers an instrument (such as a transfer or mortgage), to which the signature of the registered proprietor has been forged by a rogue. A common scenario is that the rogue (F) is a family member or trusted agent of the registered owner (O). F forges O’s signature on a mortgage or transfer, pockets the loan advance or proceeds of sale, and absconds with the money. The purchaser or mortgagee (P1) registers the forged instrument, ignorant of the forgery. Both O and P1 are therefore innocent parties. O wants to set aside the registration of the forged instrument, and P1 wants to retain the title conferred by registration, but the law cannot meet the expectations of both. The Australian authorities show two approaches to resolving this conflict. Under the doctrine of deferred indefeasibility, the title of a purchaser (P1) who registers a forged instrument is ‘defeasible’, which means that it can be set aside by a court at the suit of O. However if, before P1’s title is set aside, P1 passes an instrument to a subsequent purchaser (P2), who registers in good faith, P2’s title is indefeasible. Indefeasibility is ‘deferred’ until the subsequent purchaser, P2, registers without fraud. The opposing doctrine of immediate indefeasibility confers a good title on P1 ‘immediately’ on registration of the forged instrument. Thus, P1’s registered title cannot be set aside, even though it was procured by registration of a forged instrument, provided of course that P1 has acted without fraud. 5.35

The debate over immediate and deferred indefeasibility is about how

the law should allocate the loss when two innocent parties to a transaction are affected by a fraud perpetrated by a third party. The law’s dilemma is explained in the following passage: The choice of an adjudication rule to resolve disputes arising from unauthorised registration is perhaps the most vexed legal problem in land title registration systems. It presents a stark choice between two antithetical conceptions of security of title that Demogue called static and dynamic security. Demogue applied the term ‘static security’ to rules that protect the interests of existing owners in a third party property dispute with purchasers. Static security is based on the idea that owners should not be deprived of their property by the act of another without their consent. This type of security is static in the sense that it preserves the existing allocation of property. The opposing principle, dynamic security, is so called because it provides an incentive to acquire assets for productive purposes. It protects the reasonable expectations of purchasers that they will acquire a title free of unknown prior claims and defects. Land title registration is established to promote both forms of security. It has long been said that the objects of the system are twofold: ‘security of title’ and ‘ease of transaction’. The first object refers to making existing property rights secure, and is identical to static security. The second object is often expressed as being to facilitate the transfer of property rights, or to make conveyancing quicker, cheaper and easier, but these are merely the consequences of enhancing security of transfer and acquisition. If purchasers are unsure that they are dealing with the true owner and that nobody else can enforce a prior claim against them in respect of the land, they will expend time and resources on title investigations in an attempt to remove the insecurity. If the insecurity can be relieved by other means, the transaction costs of conveyancing will diminish. The second object of land title registration can therefore be reformulated as follows: to reduce transaction costs, and thereby to make conveyancing

[page 425]

quicker, cheaper and easier, by providing dynamic security. Accordingly, the two objects of land title registration systems are in fact to provide static security and dynamic security. Both objects are essential to the enterprise of land title registration. For land assets to be used

productively, existing owners must be sure that they will not be deprived of their property without their consent. Without static security, there would be little incentive to invest in improving land or bringing it into production. Purchasers need to be sure that the law will uphold their reasonable expectations that they are acquiring a sound title free of hidden claims. If they are to invest in the productive use of land, they need to be sure that no challenger will step forward in the future to assert a prior claim. Long after acquisition, purchasers and owners continue to require dynamic security. The dilemma for the law is that it is sometimes impossible to provide both forms of security when the rights of a prior owner conflict with those of a good faith purchaser. Land title registration systems use a combination of risk management strategies to reduce the incidence of such conflicts. The strategies include: generating publicity for interests so that conflicts of property rights are less likely to arise, establishing new priority rules that provide an incentive to register, transferring some risks to the State, and spreading risk through an indemnity scheme. These measures do not entirely eliminate the possibility for a collision of rights to occur. Where a purchaser in good faith registers an unauthorised disposition, the law must still provide an adjudication rule to determine who gets the land. A rule that awards the land to O promotes static security. It assures existing owners that they cannot be deprived of their land through a nonconsensual disposition. But this rule ipso facto diminishes dynamic security, for purchasers can no longer be sure that they will get a clear title if they take an instrument for value and register it in good faith. Alternatively, the law might adopt a rule that awards the land to P1. This promotes dynamic security, by upholding the reasonable expectations of purchasers that they will gain an indefeasible title if they register an instrument in good faith. Owners of land are now at risk of losing their title to land as a result of an invalid instrument. P1 will be happy that the rule enables him to acquire his title more securely, but must then live with the risk that he could lose his title through a nonconsensual disposition occurring after his registration. The law’s dilemma is that we need both dynamic and static security, but the law must sometimes choose between them. The dilemma lies at the heart of land title registration, which incorporates both forms of security in its object [O’Connor, ‘Registration of Invalid Dispositions: Who Gets the Property?’ in E Cooke (ed), Modern Studies in Property Law Vol 3, Hart Publishing, Oxford, 2005, 45 at 47–49 (footnotes omitted)].

5.36

Immediate indefeasibility is a rule of dynamic security, while deferred

indefeasibility is a compromise which provides static security so long as P1, the person who registered the forged instrument, retains the land. Once a registered title has passed to P2 without fraud, dynamic security prevails, and P2’s title cannot be set aside. 5.37

Before the Privy Council decided Frazer v Walker [1967] 1 AC 569;

[1967] 1 All ER 649 (5.41C), there was a substantial body of conflicting authority as to which theory of indefeasibility was consistent with the Torrens indefeasibility provisions. One of the principal authorities was Gibbs v Messer [1891] AC 248, decided by the Privy Council on appeal from the Supreme Court of Victoria. In that case Mrs Messer, the registered proprietor of certain land, travelled to Scotland, leaving the certificate of title with her solicitor for safekeeping, together with a power of attorney in favour of her husband. The solicitor, Cresswell, forged the signature of the husband

[page 426]

(as attorney) to a transfer of Mrs Messer’s land to ‘Hugh Cameron, grazier’, a fictitious person. Cresswell, purporting to act as Cameron’s agent, secured the latter’s registration as proprietor of the land. Subsequently, Cresswell executed a mortgage in favour of the McIntyres, in return for a loan by them (the proceeds of which Cresswell misappropriated). The mortgage was executed in Cameron’s name as mortgagor and purported to be signed by him. The McIntyres, who acted in good faith, duly registered the mortgage.

On returning to the colony and discovering the fraud, Mrs Messer commenced proceedings seeking cancellation of the certificate of title in Cameron’s name and of the mortgage registered in the McIntyres’ name. Mrs Messer ultimately succeeded in her claim before the Privy Council. Lord Watson observed (at 255): … [the] protection which the statute gives to persons transacting on the faith of the register is, by its terms, limited to those who actually deal with and derive right from a proprietor whose name is upon the register. Those who deal, not with the registered proprietor, but with a forger who uses his name, do not transact on the faith of the register; and they cannot by registration of a forged deed acquire a valid title in their own person, although the fact of their being registered will enable them to pass a valid right to third parties who purchase from them in good faith and for onerous consideration.

5.38

There are a number of possible interpretations of the judgment in

Gibbs v Messer. The broadest interpretation is that the case denies indefeasibility of title to a person registering any void instrument, regardless of whether the invalidity is caused by forgery or some other matter, such as the transferor’s lack of capacity. On this view even a purchaser dealing with the registered proprietor is not protected, if registration is obtained with a void instrument. A second, narrower interpretation is that the ratio decidendi is confined to the case where a forged instrument is registered. According to this interpretation, the Privy Council’s holding was based on the contention that a purchaser cannot obtain an indefeasible title unless he or she has ‘dealt with’ the registered proprietor, as required by the notice provisions of the legislation. In the case of forgery, the purchaser fails to gain protection because he or she deals not with the registered proprietor, but a forger using the proprietor’s name. The third and narrowest interpretation of Gibbs v

Messer has been adopted enthusiastically by courts anxious to overrule the case in effect, without appearing to do so. This approach contends that the decision ‘turned on the non-existence of any real person to accept a transfer and get registered himself’: Assets Co Ltd v Mere Roihi [1905] AC 176 at 211. 5.39

The first major attempt to confine Gibbs v Messer to its facts was

made by the Privy Council in Assets Co Ltd v Mere Roihi [1905] AC 176. The fact situation in that case was very complex and involved, in part, the effect of initial registration of land under the Torrens system. Nevertheless, the judgment of Lord Lindley contained several statements indicating acceptance of the principle of immediate indefeasibility. See also Creelman v Hudson’s Bay Insurance Co Ltd [1920] AC 194. This approach was carried further in the New Zealand case of Boyd v Mayor of Wellington [1924] NZLR 1124. A proclamation vested a portion of the land of which the plaintiff was registered as proprietor in the Wellington Corporation for public purposes. A copy of the proclamation, together with a plan of the land, was deposited in the Land Registry Office and registered against the plaintiff’s title. The plaintiff argued that the proclamation was void as being ultra vires the corporation and asked for rectification of the register in his favour. A majority held that, even assuming the proclamation was void,

[page 427]

registration of it conferred an indefeasible title to the land in the Wellington Corporation. Salmond J (at 1201) dissented on the ground that:

… an instrument which is null and void before registration remains equally null and void inter partes not withstanding such registration, and creates no indefeasible title until and unless the rights of some third person purchasing in good faith and for value on the faith of the registered instrument have supervened. Until then it is the right and duty of the District Land registrar to rectify the register by cancelling a registration which was wrongly procured …

In Garofano v Reliance Finance Corp Pty Ltd (1992) 5 BPR 11,941; NSW ConvR ¶55-640, the New South Wales Court of Appeal rejected an attempt to give Gibbs v Messer an expanded meaning. Meagher JA (with whom Mahoney and Priestley JJA both agreed) commented (at 11,944) that the case, ‘insofar as it is still good law, only applies when the forgery is in the name of a fictitious person … If anything the tendency has been to restrict the operation of Gibbs v Messer, not to expand it’. The court held that ‘fraud’ within the meaning of the Act required actual fraud or moral turpitude. The court held that the term ‘mortgagee’ in s 124 could include a person whose forged mortgage is recognised or valid under ss 42 and 43 of the New South Wales Act.30 The possible application of a Gibbs v Messer exception in New South Wales seems to be precluded since 2000 by an amendment to the definition of ‘fraud’ to include ‘fraud involving a fictitious person’: NSW, s 3. 5.40

In Clements v Ellis (1934) 51 CLR 217; 23 ALR 62, the High Court

was called upon to decide whether a registered proprietor, acting without fraud, obtained an indefeasible title on registration of a forged instrument. As the court was equally divided, the decision of the court below was affirmed. The case was regarded for over three decades as establishing that registration pursuant to a void instrument did not carry the protection of the indefeasibility provisions of the Act. See, for example, Coras v Webb [1942]

QSR 66 (mortgage executed by infant); Davies v Ryan [1951] VLR 283 (forgery); Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415 (invalid notice of resumption). But compare Percy v Youngman [1941] VLR 275 (infancy). However, a new orthodoxy emerged following the advice of the Privy Council in Frazer v Walker.

The adoption of immediate indefeasibility 5.41C

Frazer v Walker [1967] 1 AC 569; [1967] 1 All ER 649 Privy Council

Lord Wilberforce: The appellant, Alan Frederick Frazer, and his wife, Flora Agnes Frazer, were in 1961 the registered proprietors under the Land Transfer Act 1952 of a farm property in a suburb of Auckland, subject to a mortgage to one Bailey on which £1732 was owing. [page 428]

In 1961, Mrs Frazer, professing to act on behalf of herself and the appellant, arranged to borrow £3000 from the second respondents, which sum was to be secured on a mortgage over the property. A form of mortgage was prepared by the second respondents’ solicitors, from whom it was collected by Mrs Frazer. She took it to solicitors acting for her and in their office a clerk witnessed her genuine signature to the mortgage and also a signature purporting to be that of the appellant which she had previously inserted. The mortgage document and the certificate of title were forwarded by the solicitors to the solicitors of the second respondents: they paid the £3000 partly to Mrs Frazer’s solicitors and partly on her behalf in discharge of the existing mortgage, and in due course registered at the land registry office, Auckland, on 21 July 1961, the memorandum of mortgage together with a discharge of the previous mortgage. As no payment of principal or interest was made, the second respondents exercised their power of sale, and on 26 October 1962 the property was sold by auction to the first respondent for £5000. The second respondents as mortgagees executed a memorandum of transfer to the first respondent which was registered on 29 November 1962. It is conceded that the second respondents and the first respondent acted throughout in good faith and without any knowledge of the irregularity on the part of Mrs Frazer. On 16 March 1964, the first respondent commenced proceedings in the Magistrates

Court at Auckland against the appellant for possession of the property, relying on his title as registered proprietor. These proceedings were removed into the Supreme Court. The appellant delivered a defence to this claim and also filed a counter claim against the first respondent, to which he joined the second respondents as defendants, asserting that what purported to be his signature on the mortgage was a forgery and that the mortgage, the advance by the second respondents, and the sale by the mortgagees had occurred without his knowledge. He claimed a declaration that his interest in the land was not affected by the purported mortgage or by the sale to the first respondent, a declaration that the mortgage was a nullity and an order directing the district land registrar to cancel the entries or memorials in the register whereby the second respondents were registered as mortgagees and the first respondent was registered as proprietor and to restore the name of the appellant and Mrs Frazer as joint owners of the land. At the trial, Richmond J held that the appellant had given no authority to Mrs Frazer to mortgage his interest in the land. But nevertheless he gave judgment in favour of the first respondent and dismissed the appellant’s counter claim, holding that the second respondents had obtained by registration an indefeasible title and that in any event the subsequent transfer gave the first respondent an indefeasible title. On appeal to the Court of Appeal, the appellant’s appeal was dismissed on the ground that the first respondent, as a bona fide purchaser, had obtained an indefeasible title. The court gave no decision as to the position of the second respondents, although certain observations as to this appeared in the judgments. Before their Lordships, both the first respondent and the second respondents appeared and addressed arguments. Their Lordships will deal first with the appellant’s claim against the second respondents. This raises the question whether it was open to the appellant to bring proceedings attacking the validity of the mortgage against the second respondents, whose interest as mortgagees was entered in the register, and claiming cancellation of this entry. This question must be considered by reference to the provisions of the Land Transfer Act 1952. The relevant sections may be considered under five main headings: Those sections which deal with the procuring of registration … Section 42 contains a prohibition against registration of any instrument except in the manner provided in the [page 429]

Act and unless the instrument is in accordance with the provisions of the Act … Even if non-compliance with the Act’s requirements as to registration may involve the possibility of cancellation or correction of the entry … registration once effected must attract the consequences which the Act attaches to registration whether that was regular or otherwise … It is in fact the registration and not its antecedents which vests and divests title. Those sections which provide protection to the registered proprietor against claims and proceedings. These are ss 62 and 63. Without attempting any comprehensive or exhaustive description of what these sections achieve, it may be said that while s 62 secures that a registered proprietor, and consequently anyone who deals with him, shall hold his estate or interest absolutely free from incumbrances, with three specified

exceptions, s 63 protects him against any action for possession or recovery of land, with five specified exceptions. It is these sections which, together with those next referred to, confer upon the registered proprietor what has come to be called ‘indefeasibility of title’. The expression, not used in the Act itself, is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys. This conception is central in the system of registration. It does not involve that the registered proprietor is protected against any claim whatsoever; as will be seen later, there are provisions by which the entry on which he relies may be cancelled or corrected, or he may be exposed to claims in personam. These are matters not to be overlooked when a total description of his rights is required. But as registered proprietor and while he remains such, no adverse claim (except as specifically admitted) may be brought against him. Those sections which state the effect of the certificate of title. The principal section on this subject is s 75. The certificate, unless the register shows otherwise, is to be conclusive evidence that the person named in it is seised of or as taking estate or interest [sic] in the land therein described as seised or possessed of that land for the estate or interest therein specified and that the property comprised in the certificate has been duly brought under the Act. This section is of a similar character to those last discussed; it creates another — a probative — aspect of ‘indefeasibility’, nonetheless effective, though, as later provisions show, there are means by which the certificate may be cancelled or its owner compelled to hold it upon trust or to deliver it up through an action in personam. Those sections which deal with correction or calling in of the certificate … Those sections which relate to the position of third parties dealing with a registered proprietor. These are, in effect, ss 182 and 183. Section 182 deals with notice. In all systems of registration of land it is usual and necessary to modify and indeed largely to negative the normal rules as to notice, constructive notice, or inquiry as to matters possibly affecting the title of the owner of the land. Section 182 is of no direct relevance in the present case, which does not involve any question of notice. Section 183 is in the following terms: (1) Nothing in this Act shall be so interpreted as to render subject to action for recovery damages, or for possession, or to deprivation of the estate or interest in respect of which he is registered as proprietor, any purchaser or mortgagee bona fide for valuable consideration of land under the provisions of this Act on the ground that his vendor or mortgagor may have been registered as proprietor through fraud or error, or under any void or voidable instrument, or may have derived from or through a person registered as proprietor through fraud or error, or under any void or voidable instrument, and this whether the fraud or error consists in wrong description of the boundaries or of the parcels of any land, or otherwise howsoever. [page 430]

Their Lordships will revert to it when they deal with the appellant’s claim against the first

respondent. The effect of these provisions upon the claim of the appellant against the second respondents must now be considered. It does not in their Lordships’ view admit of any doubt. Although a mortgage of a fee simple does not take effect as a transfer of the fee simple (see s 100) it does create a charge on the land which the Act treats as an estate or interest in the land (see s 2, definitions of ‘estate or interest’ and ‘proprietor’). It is therefore apparent that the appellant’s counter claim against the second respondents, in so far as it sought a declaration that the appellant’s interest in land was not affected by the purported mortgage and a declaration that the mortgage was a nullity, was an action for recovery of land within the terms of s 63. In so far as it sought cancellation by the court of the entry of the mortgage on the register, it could only be based on s 85. The proceeding does not fall within either the exception of fraud or within any of the other exceptions allowed by s 63. The power of cancellation by the court is also excluded by the express terms of s 85, because the proceeding (for recovery of land) is itself barred. No question of the invocation of the registrar’s powers under ss 80 and 81 arises in the case. The conclusion must follow that the appellant’s claim against the second respondents was correctly dismissed by Richmond J, and their Lordships find that his judgment on this point is supported by the authorities. The leading case as to the rights of a person whose name has been entered upon the register without fraud in respect of an estate or interest is the decision of this Board in Assets Co Ltd v Mere Roihi. The Board there was concerned with three consolidated appeals from the Court of Appeal in New Zealand, which had decided in each case in favour of certain Aboriginal natives as against the registered proprietors. In each appeal their Lordships decided that registration was conclusive to confer upon the appellants a title unimpeachable by the respondents. The facts involved in each of the appeals were complicated and not identical one with another, a circumstance which has given rise to some difference of opinion as to the precise ratio decidendi — the main relevant difference being whether the decision established the indefeasibility of title of a registered proprietor who acquired his interest under a void instrument, or whether it is only a bona fide purchaser from such a proprietor whose title is indefeasible. In Boyd v Mayor, etc, of Wellington [1924] NZLR 1174, the majority of the Court of Appeal in New Zealand held in favour of the former view, and treated the Assets Co case as a decision to that effect. The decision in Boyd v Mayor, etc, of Wellington related to a very special situation, namely, that of a registered proprietor who acquired his title under a void proclamation, but with certain reservations as to the case of forgery it has been generally accepted and followed in New Zealand as establishing, with the supporting authority of the Assets Co case, the indefeasibility of the title of registered proprietors derived from void instruments generally. Their Lordships are of opinion that this conclusion is in accordance with the interpretation to be placed on those sections of the Land Transfer Act 1952, which they have examined. They consider that Boyd’s case was rightly decided and that the ratio of the decision applies as regards titles derived from registration of void instruments generally. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. The appellant relied on the earlier decision of the Board in Gibbs v Messer [1891] AC 248, as supporting a contrary view, but their Lordships do not find anything in the case

which can be of assistance to him. Without restating the unusual facts, which are sufficiently well known, it is sufficient to say that no question there arose as to the effect of such sections as corresponded (under the very similar Victorian Act) with ss 62 and 63 of the Act now under [page 431]

consideration. The Board was then concerned with the position of a bona fide ‘purchaser’ for value from a fictitious person and the decision is founded on a distinction drawn between such a case and that of a bona fide purchaser from a real registered proprietor. The decision has in their Lordship’s opinion no application as regards adverse claims made against a registered proprietor, such as came before the courts in Assets Co Ltd v Mere Roihi, in Boyd v Mayor, etc, of Wellington and in the present case. Before leaving this part of the present appeal their Lordships think it desirable, in relation to the concept of ‘indefeasibility of title’ as their Lordships have applied it to the facts before them, to make two further observations. First, in following and approving in this respect the two decisions in Assets Co Ltd v Mere Roihi and Boyd v Mayor, etc, of Wellington, their Lordships have accepted the general principle that registration under the Land Transfer Act 1952 confers upon a registered proprietor a title to the interest in respect of which he is registered which is (under ss 62 and 63) immune from adverse claims, other than those specifically excepted. In doing so they wish to make clear that this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant. That this is so has frequently, and rightly been recognised in the courts of New Zealand and of Australia: see, for example, Boyd v Mayor, etc, of Wellington and Tataurangi Tairuakena v Mua Carr [1927] NZLR 688 at 702. Their Lordships refer to these cases by way of illustration only without intending to limit or define the various situations in which actions of a personal character against registered proprietors may be admitted. The principle must always remain paramount that those actions which fall within the prohibition of ss 62 and 63 may not be maintained. The second observation relates to the power of the registrar to correct entries under ss 80 and 81. It has already been pointed out (as was made clear in Assets Co case [1905] AC 176 at 194–5) by this Board that this power is quite distinct from the power of the court to order cancellation of entries under s 85, and, moreover, while the latter is invoked here, the former is not. The powers of the registrar under s 81 are significant and extensive. They are not coincident with the cases excepted in ss 62 and 63. As well as in the case of fraud, where any grant, certificate, instrument, entry or endorsement has been wrongfully obtained or is wrongfully retained the registrar has power of cancellation and correction. From the argument before their Lordship it appears that there is room for some difference of opinion as to what precisely may be comprehended in the word ‘wrongfully’. It is clear, in any evident, that s 81 must be read with and subject to s 183 with the consequence that the exercise of the registrar’s powers must be limited to the period before a bona fide purchaser, or mortgagee, acquires a title under the latter section.

As the appellant did not in this case seek relief under s 81, and as, if he had, his claim would have been barred by s 183 (as explained in the next paragraph), any pronouncement on the meaning to be given to the word ‘wrongfully’ would be obiter and their Lordships must leave the interpretation to be placed on that word in this section to be decided in a case in which the question directly arises. The failure of the appeal against the second respondents entails (and it was not contended otherwise) that it must equally fail against the first respondent. But their Lordships would add that the action against that respondent was an action for the recovery of land within the meaning of s 63 and that it would be directly barred by that section, quite apart from the fact that it could not be maintained against the other respondents. The appellant could not bring his case against the first respondent within any of the exceptions to that section. Also their Lordships would add that, if it had been necessary for the first respondent to rely upon s 183 [page 432]

of the Act, he would by it have had a complete answer to the claim. The appellant argued that the second respondents were not ‘vendors’ within the meaning of the section — the suggestion being that he is only a vendor who sells the precise estate or interest of which he is the registered proprietor, so that a mortgagee does not fall within the description. It was further contended that the second respondents were not ‘proprietors’ because they did not own the estate or interest (ie the fee simple) which they purported to transfer. Their Lordships are in agreement with the Court of Appeal in holding that the section should not be so narrowly read and that it extends to the case of a mortgagee who is ‘proprietor’ of the mortgage and who has power of sale over the fee simple. Their Lordships need not elaborate on this part of the case since they concur with the conclusions agreed on by all three members of the Court of Appeal. Their Lordships will humbly advise Her Majesty that the appeal should be dismissed. The appellant must pay the respondent’s costs. Appeal dismissed.

5.42 Questions 1.

In Frazer v Walker it was not necessary for the Privy Council to decide the case on the ground of immediate indefeasibility as the transfer to the purchasers from the mortgagee had been registered. Thus, the purchasers were protected whichever view of indefeasibility the Privy Council adopted. Is the reasoning of the

Privy Council consistent with the approach of the High Court in Clements v Ellis (1934) 51 CLR 217; 23 ALR 62 (5.40)? Why did Their Lordships not refer to Clements v Ellis? 2.

Is it proper for a court deciding a case as significant as Frazer v Walker to make no reference to the policy arguments for and against immediate indefeasibility?

3.

What are the consequences of the decision in Frazer v Walker for a defrauded registered owner in Mr Frazer’s position?

5.43

The decision in Frazer v Walker received a mixed response in New

Zealand. Some hailed it as providing better security of transaction. One legal practitioner said that the protection for purchasers provided by immediate indefeasibility had come at a high price to security of title for owners: Little does [the] proprietor realise that by the very act of making [his] title indefeasible (through Frazer v Walker) a new and even more dangerous weakness has been introduced … He makes it susceptible to loss by theft and forgery for the whole period of his ownership. No system can give absolute security to all parties: if excessive protection is given to a purchaser (usually a careless purchaser) under a forged transfer, it is at the expense of the security of all existing owners.31

Taylor recognised that the choice between immediate and deferred indefeasibility involved a trade-off between dynamic and static security (although he did not use those terms): see 5.33.

[page 433]

Although immediate indefeasibility is often equated with ‘certainty’, the continuous risk to static security that it entails for registered owners should be borne in mind when considering the cases below. 5.44

Following the Privy Council’s decision in Frazer v Walker, a law

reform committee in New Zealand recommended that the law be reformed to provide a presumption of immediate indefeasibility with a judicial discretion to set aside a registered instrument in cases where it would be unjust not to do so.32 This recommendation has been confirmed by a recent review undertaken by the New Zealand Law Commission and Land Information New Zealand.33 5.45

The New South Wales Parliament gave legislative recognition to the

decision in Frazer v Walker by amendment to NSW, s 135. That section reads: Nothing in this Act contained shall be so interpreted as to leave subject to action for recovery of damages or to … proceedings or action for the recovery of land, or to deprivation of the estate or interest in respect to which he is registered as proprietor, any purchaser or mortgagee bona fide for valuable consideration of land under the provisions of this Act on the plea that his vendor or mortgagor may have been registered as proprietor, or procured the registration of the transfer to such purchaser or mortgagee through fraud or error, or under any void or voidable instrument, or may have derived from or through a person registered as proprietor through fraud or error, or under any void or voidable instrument …

The italicised words were added by the Real Property (Amendment) Act 1970 s 17(f), and made s 135 identical to s 183(1) of the Land Transfer Act 1952 (NZ), considered in Frazer v Walker.34 The relevant New South Wales provision is now s 45.

The Law Reform Commission of Victoria reviewed the Victorian provisions and concluded that a presumptive rule of deferred indefeasibility was preferable in forgery cases.35

The policy debate over deferred and immediate indefeasibility 5.46

The choice between deferred and immediate indefeasibility represents

a fundamental policy dilemma for registered title systems. Australia, New Zealand, Papua New Guinea, Singapore, and the Canadian province of Saskatchewan are among the minority of registered title systems which use the rule of immediate indefeasibility.36 British Columbia’s Land Title Act, RSBC 1996 c 250, ss 25.1, 26(1) confers immediately indefeasible title upon registered owners of estates in land if they acquired in good faith and for valuable consideration, but denies indefeasibility to mortgagees and their assignees: Gill v Bucholtz (2009) 90 BCLR (4th) 276; [2009] BCCA 137. Immediate indefeasibility was briefly adopted as an interpretation of Ontario’s Land Titles Act, RSO 1990, c L-5 by the Ontario Court of Appeal in Household

[page 434]

Realty Corp Ltd v Liu (2005) 261 DLR (4th) 679. The decision received a hostile reception and was overturned, first by legislative amendments in 2006 operating prospectively, and in 2007 by the Ontario Court of Appeal in

Lawrence v Maple Trust Co and Wright; 5.49. The Federal Court of Malaysia in Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng [2001] 1 MLJ 241; 2 CLJ 133, interpreted s 340 of National Land Code as creating a rule of immediate indefeasibility, upsetting what was believed to be a settled interpretation. The decision was widely condemned as unjust and a ‘forger’s charter’, and was reversed by the Federal Court in Tan Ying Hong v Tan Sian San [2010] 2 CLJ 269.37

5.47 Questions Why has the choice between deferred and immediate indefeasibility been so controversial (and often so unstable) in a number of jurisdictions? And why has it usually been left to the judiciary to determine which rule applies? Is it simply a question of inadequate legislative drafting?38

5.48C

Breskvar v Wall (1971) 126 CLR 376; [1972] ALR 205 High Court of Australia

[Mr and Mrs Breskvar (the appellants) were the registered proprietors of certain land in Queensland. On 5 March 1968 they executed a memorandum of transfer for an expressed consideration of $1,200, the name of the transferee being omitted from the instrument at the time of execution. Section 53(5) of the Stamp Act 1894 (Qld) provided that no transfer was to ‘be valid either at law or in equity unless the name of the … transferee (was) written therein in ink’ at the time of execution. The section further declared a blank transfer to be ‘absolutely void and inoperative’. The trial judge found that the transfer was executed to afford security for a loan of $1,200 provided by Petrie (the second respondent), who took possession of the transfer and

duplicate certificate of title from the Breskvars. In September 1968 Petrie inserted the name of his grandson, Wall (the first respondent), as transferee and shortly thereafter procured registration of the transfer. On 31 October 1968, Wall contracted to sell the land to Alban Pty Ltd (the third respondent). On 7 November 1968 Wall executed a transfer to Alban Pty Ltd, which acted in good faith without notice of the earlier transaction. The trial judge found that Petrie and Wall were acting fraudulently (Wall being affected by the fraud of his agent Petrie), in an attempt to cheat the Breskvars out of their land.

[page 435]

In December 1968 the Breskvars discovered that Wall had become registered as proprietor and accordingly lodged a caveat against further dealings with the land. On 9 January 1969 Alban Pty Ltd lodged its transfer for registration, but registration could not take place by reason of the Breskvars’ caveat. The Breskvars (the appellants) sought a declaration that the transfer was void by reason of s 53(5) of the Stamp Act, an order that the entry of Wall’s transfer in the register be cancelled, and damages.] Barwick CJ: … The first named respondent is the now registered proprietor of the said land for an estate in fee simple free of incumbrances. [His Honour summarised Queensland’s indefeasibility provisions and continued:] These sections are to my mind central to the Torrens system of title by registration: they make the certificate conclusive evidence of its particulars and protect the registered proprietor against actions to recover the land, except in the specifically described cases. Section 44 complements these provisions by providing that the registered proprietor holds the land absolutely free from all unregistered interests except (a) ‘in the case of fraud’ which means except in the case that the registration as proprietor was obtained by the proprietor’s own fraud — see Assets Co Ltd v Mere Roihi [1905] AC 176 (b) in the case of a proprietor claiming the same land under a prior certificate of title or under a certificate of title issued under Pt III of the amendment of the Act in 1952, ie, a certificate based on a possessory title or under a prior registered grant (c) in the case of right of way or other easement omitted from or misdescribed in the certificate of title and (d) in the case of the wrong description of the land or of its boundaries. The substantial correspondence of these exceptions to s 123 is readily observed, though the correspondence clearly enough is not complete … Proceedings may of course be brought against the registered proprietor by the persons and for the causes described in the quoted sections of the Act or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title: or in default of his compliance with such an order on his part, perhaps

vesting orders may be made to effect the proper interest of the claimants in the land. Also s 124 gives the Supreme Court power to cancel an entry in the register book and to substitute another entry in the event of the recovery of any land by ejectment from a fraudulent proprietor or from any of the persons against whom an action of ejectment is not expressly barred by the Act. This is the only power of the Supreme Court to amend the register. See Assets Co Ltd v Mere Roihi [1905] AC 176 at 195; Frazer v Walker [1967] 1 AC 569 at 581. Section 85 of the Land Transfer Act 1952 of New Zealand with which the last-mentioned case was concerned gives the power of amendment upon the recovery of any land estate or interest by any proceedings whereas s 124 of the Act deals only with the recovery of land by action of ejectment. The suit for declarations and orders for amendment of the register brought by the appellant in Frazer v Walker was held by the Privy Council in that case to be an action for the recovery of land. The appellants’ suit in this case was not an action of ejectment but it was, in my opinion, an action for the recovery of land and, in any case, so far as it concerned the first respondent was within the exceptions contained in s 123. Such a suit not within those exceptions would be effectively barred by s 123. Thus, except in and for the purpose of such excepted proceedings, the conclusiveness of the certificate of title is definitive of the title of the registered proprietor. That is to say, in the jargon which has had currency, there is immediate indefeasibility of title by the registration of the proprietor named in the register. The stated exceptions to [page 436]

the prohibition on actions for recovery of land against a registered proprietor do not mean that that ‘indefeasibility’ is not effective. It is really no impairment of the conclusiveness of the register that the proprietor remains liable to one of the excepted actions any more than his liability for ‘personal equities’ derogates from that conclusiveness. So long as the certificate is unamended it is conclusive and of course when amended it is conclusive of the new particulars it contains. The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor. Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void. The affirmation by the Privy Council in Frazer v Walker of the decision of the Supreme Court of New Zealand in Boyd v Mayor of Wellington [1924] NZLR 1174 at 1223, now places that conclusion beyond question. Thus the effect of the Stamp Act upon the memorandum of transfer in this case is irrelevant to the question whether the certificate of title is conclusive of its particulars. [Having found that the registration of Wall was defeasible for his own fraud, his Honour

proceeded to consider the position of Alban Pty Ltd, the purchaser from Wall, which had obtained an unregistered transfer:] The situation therefore immediately after the registration of the memorandum of transfer of 5 March 1968, by the endorsement of a memorial on the certificate of title was that the fee simple in the land was vested in the first respondent. It follows that it was not and still is not vested in the appellants. But according to the findings of the trial judge that registration was procured by the first respondent by his own actual fraud. Consequently, although the registered proprietor in whom the fee simple was vested, the first respondent did hold his estate subject to the rights of the appellants. He did not hold it on trust for the appellants but as between themselves and the first respondent they had a right to sue to recover the land and to have the register rectified, their ability to make such a claim being within s 124(d). But, as the trial judge correctly points out, such a claim is an equitable claim enforceable by reason of the principles of the Court of Chancery. The appellants require the assistance of a court having equitable jurisdiction. If there had been no transaction by the first respondent with the third respondent, the appellants would have been entitled to succeed against the first respondent. Whether or not the Supreme Court could have amended the register need not be decided. Clearly an order for the execution by the first respondent of a memorandum of transfer to the appellants and for delivery to them of the duplicate certificate of title could have been ordered: and that order appropriately enforced. But the purchase by the third respondent bona fide for value and without notice intervened before that equitable right of the appellants was fulfilled. The third respondent thus acquired an equitable interest in the land. The ability to create and the validity of an equitable estate in land the title to which is under the Torrens system were fully established in Barry v Heider (1914) 19 CLR 197. See also Great West Permanent Loan Investment Co v Friesen [1925] AC 208. The interest of the third respondent in the land was competitive with that of the appellants as persons deprived of their land by fraud. Their claim to the assistance of a court of equity whether regarded as a mere equity or an equitable interest in the land was not in its nature paramount or superior to that of the third respondent: nor in my opinion was that of [page 437]

the third respondent over that of the appellants which I think was an equitable interest in the land … There is thus a competition between the respective interests of the appellants and of the third respondent to be resolved on equitable principles. Those principles are well established. See Rice v Rice (1854) 2 Drew 73; 61 ER 646; Shropshire Union Railways & Canal Co v R (1875) LR 7 HL 496; Lapin v Abigail (1930) 44 CLR 166; Abigail v Lapin (1934) 51 CLR 58; [1934] AC 491. The creation of the appellants’ interest is prior in point of time. It arose at the time the first respondent became the registered proprietor. The circumstance that the memorandum of transfer by virtue of which the registration was obtained was executed in breach of the Stamp Act and void did not, in my opinion, prevent the appellants’ right to sue the respondent arising. The priority of the creation of that right will only be lost by some conduct on the

part of the appellants which must have contributed to the assumption, false as the event proved, upon which the holder of the competing equity acted when that equity was created. Here the appellants armed the second respondent with the means of placing himself or his nominee on the register. They executed a memorandum of transfer, without inserting therein the name of a purchaser; they handed over the relevant duplicate certificate of title and they authorised the second defendant, if occasion arose for the exercise of his powers as a mortgagee, to complete and register the memorandum of transfer. It seems to me that the actual decision of their Lordships in Lapin v Abigail governs this case. Here, as there, it can properly be said that ‘the case becomes one of an agent exceeding the limits of his authority but acting within its apparent indicia’. The appellants therefore lose the priority to which the prior creation of their interest in the land would otherwise have entitled them. The third respondent also sought to postpone the equity of the appellants by reason of their failure to lodge a caveat to protect their interest in the land as mortgagors. But having regard to what I have already said there is no need for the third respondent to place any reliance on that circumstance. However, I have recently expressed myself in relation to the effect of the failure of a person to lodge a protective caveat and find no need to repeat or amplify what I have written in J & H Just (Holdtngs) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. I agree with the conclusion of the trial judge that the right of the appellants to recover their land from the first respondent should be postponed to the equitable interest therein of the third respondent as a purchaser bona fide for value and without notice. Consequently the order of the Supreme Court was correct. In my opinion, the appeal should be dismissed. Menzies J: … It is apparent, therefore, that there are two objections to whatever title Wall has. The first is that it was obtained illegally by the use of an invalid instrument made in breach of s 53(5) of the Stamp Acts; the second is that it was obtained by his own fraud. The appellants can, I have no doubt, displace Wall’s title. To succeed, however, at the expense of Alban Pty Ltd, they must go further than they have to go against Wall. They must show either that Wall had no title at all, or, that their claim is to be preferred to that of Alban Pty Ltd. The claim of Alban Pty Ltd is that it holds a transfer from Wall to carry out a purchase of the land, made for valuable consideration by Alban Pty Ltd from Wall, and made, so far as Alban Pty Ltd was concerned, in good faith, without notice of any rights of the appellants. Their rights came to the notice of Alban Pty Ltd only when a caveat to prevent the registration of the transfer to it by Wall had been lodged. The learned trial judge found that Alban Pty Ltd was a purchaser in good faith and for valuable consideration without notice of the appellants’ rights. [page 438]

In support of their claim that Wall is not the registered proprietor, the appellants call in aid certain passages from the judgment of Dixon J in Clements v Ellis … Clements v Ellis was a case decided under the Transfer of Land Act (Vic) but the provisions of the Real

Property Act (Qld) are, with one exception to which I will refer later, substantially the same. What Dixon J said has been followed in New South Wales and in Victoria: Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415, and Davies v Ryan [1951] VLR 283. Since these decisions, however, the Privy Council has decided Frazer v Walker. In their opinion in this case their Lordships made no reference to Clements v Ellis, although it had been cited, but they did apply the decision of the majority in Boyd’s case, preferring the judgment of the majority to the dissenting judgments of Springer and Salmond JJ. Their Lordships [1967] 1 AC 569 at 584 said: They consider that Boyd’s case was rightly decided and that the ratio of the decision applies as regards titles derived from registration of void instruments generally. As regards all such instruments it established that registration is effective to vest and to divest title and to protect the registered proprietor against adverse claims. It is important, however, to observe what their Lordships meant by the words ‘all such instruments’ in the passage which I have just cited. They meant void instruments whereby the name of the person had been registered without fraud in respect of an estate or interest. This appears clearly from the reference to Assets Co Ltd v Mere Roihi, on the preceding page, and from the statement that the main relevant difference between the majority and the minority in Boyd’s case was whether the Mere Roihi case established ‘the indefeasibility of title of a registered proprietor who acquired his interest under a void instrument, or whether it is only a bona fide purchase from such a proprietor whose title is indefeasible’. Frazer v Walker was not a case of conflict between unregistered interests. In that case mortgagees, who had registered a mortgage from registered proprietors to which one signature was a forgery, sold the land under their power of sale to a purchaser who was duly registered as proprietor. The only fraud in the case was that of one of the registered proprietors who forged the name of her husband, a co-proprietor with her. Her fraud afforded no statutory basis for impeaching the title of the mortgagees when they were registered, or, of the registered proprietor from them. Both the mortgagees and the registered proprietor acted in good faith and without knowledge of the forgery. The decision in Frazer v Walker cannot, therefore, govern this case. Indeed, one may perhaps be excused from wondering how the former registered proprietor, who suffered from his wife’s forgery, could ever have hoped to succeed against the newly registered proprietor who took a transfer from registered mortgagees. The problem of competition for registration never arose in that case. Indeed, it is a case which would have fallen fairly and squarely within the statement of Dixon J in Clements v Ellis … Nevertheless, Frazer v Walker is important here in establishing that, if and to the extent that earlier decisions were to the effect that an indefeasible title cannot be acquired by the registration of a void instrument, they have lost their authority. It must now be recognised that, in the absence of fraud on the part of a transferee, or some other statutory ground of exception, an indefeasible title can be acquired by virtue of a void transfer. It seems to me to follow that, where there is fraud or one of the other statutory exceptions to indefeasibility, a transferee does, by registration of a void transfer, obtain a defeasible title. In this case, as I have already indicated, Wall, although he became registered

proprietor, clearly enough did not obtain an indefeasible title. He obtained registration by the fraudulent [page 439]

use of an invalid instrument. It is the significance of his becoming registered in those circumstances that matters here. The first critical question which I pose is, therefore, whether, when Wall became registered as proprietor of the land, the appellants ceased to be the registered proprietors. With the guidance of Frazer v Walker about the effect of the registration of void instruments, I have reached the conclusion that they did, and I think so regardless of whether the transfer was invalid by virtue of s 53(5) of the Stamp Acts, or, that, by reason of fraud, the title acquired was defeasible. The registration was of an instrument executed by the appellants as registered proprietors, albeit in breach of law, and, upon its registration, they ceased to be registered proprietors … This is not a case where it is possible to apply Gibbs v Messer [1891] AC 248, where, as the Privy Council has explained, there was no real registered proprietor at all but only a fictitious person. After the registration of Wall as registered proprietor the appellants’ rights were no longer those of registered proprietors but were simply to impeach the defeasible title which Wall had obtained by that registration. Furthermore, as I read s 53(5) of the Stamp Acts, the breach of law seems to lie in the execution of the instrument and not in its use. I therefore reserve any question arising out of the illegal use of an instrument to obtain registration in the name of the law breaker. Frazer v Walker was not concerned with illegality on the part of those becoming registered. [His Honour proceeded to hold that as the appellants had executed a blank transfer in breach of the Stamp Act which enabled Wall to become registered, they should be postponed to the later interest of Alban Pty Ltd.] The learned trial judge decided that the claim of the appellants must be postponed to that of Alban Pty Ltd and I would, for the reasons which I have given, dismiss this appeal from his judgment. Walsh J: In my opinion, the principles laid down in Frazer v Walker as to the indefeasibility of a registered title, where the instrument by means of which registration is obtained is void, are applicable in the present case notwithstanding that it has been found here that there was fraud by which the transferee Wall was affected. The effect of the fraud upon the rights of the parties must, of course, be considered. But it is a different question from that which is raised by the non-compliance with the provisions of the Stamp Acts. In so far as the appellants, in addition to their reliance upon fraud, base their claim upon the contention that the transfer was rendered void by s 53(5) of the Stamp Acts, I am of opinion that the principles stated in Frazer v Walker preclude them from succeeding. I am of opinion that those principles require the conclusion that when the transfer was registered then, as the learned trial judge said, ‘the registration of Wall as the registered proprietor was effective to vest the title in him and to divest the title of

the plaintiffs’. Wall was not a person who had nothing and, therefore, could grant nothing to a person with whom he dealt. Although what he had may have been vulnerable because of fraud to a claim by the appellants to have restored to them their former rights, it cannot be said that nothing had passed from the appellants to Wall. I must consider now the effect of the fraud which was found to have been practised upon the appellants … In my opinion, the appellants would be entitled, as between themselves and Wall, to have the registered title restored to them because of the fraud by which he was found to have been affected. He could not defeat their claims by reliance upon his registered title … But in the circumstances of this case, the appellants were not entitled in my opinion to take [page 440]

proceedings on the footing that they remained entitled to the legal estate. They could not assert an unconditional right to recover both possession of the land and the registered title to it. The right that they had was in my opinion of the nature of an equitable right. It was a right to ask a court to compel Wall as the holder of the registered title to deal with it in such a way that he would obtain no benefit from the fraud that had been practised on the appellants. In so far as they sought to have the legal title transferred back to them, that relief (if no right of any third party had to be considered) could no doubt have been granted but, I should think, only upon terms that they repaid the loan, which they asserted in their amended statement of claim they were willing and had offered to do. The rights which the appellants had by reason of the fraud were rights enforceable primarily against Wall as a party (through his agent) to the transaction with them and as the holder of the registered title acquired by means of the transfer. But it is important to examine the nature of their rights, not in order to determine what relief could be obtained against Wall, but to ascertain whether any relief can be obtained against Alban. In this respect what I have so far said may be summed up by stating that the provisions of the Stamp Acts did not prevent the registration of the transfer from divesting the legal estate from the appellants and vesting it in Wall and that the right of the appellants against Wall to have the legal estate restored to them was, in my opinion, an equitable and not a legal right. It is not necessary in this case, in my opinion, to enter into the question whether the appellants should be regarded as having an equitable estate in the land or as having ‘an equity unaccompanied by an equitable interest’ or, in other words, ‘a mere equity as distinguished from an equitable estate’: see Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265 at 277, 285. I am of opinion that, if it be assumed that the appellants had an equitable estate or interest in the land after their transfer had been registered, that interest is not entitled to priority over the interest which Alban acquired in the land. If the latter interest is to be considered as an equitable interest, arising out of the contract for the purchase of the land made by it with the registered owner of the land without notice of any defect in his title and completed by payment of purchase money and the obtaining of a transfer, Alban is entitled, in my opinion, to priority over the interest of the appellants. In my opinion, the principles enunciated in Butler v Fairclough and in Abigail v Lapin, require the conclusion upon the facts of this

case that the interest of the appellants, although prior in time, is postponed to the interest of Alban … [Windeyer and Owen JJ concurred with Barwick CJ. Gibbs and McTiernan JJ delivered judgments reaching the same conclusions.] Appeal dismissed.

5.49 Questions 1.

Would a decision in favour of the Breskvars in this case necessarily have been inconsistent with the decision in Frazer v Walker [1967] 1 AC 569; [1967] 1 All ER 649, given that the title of the registered proprietor, Wall, was defeasible for fraud? Was the endorsement of the principle of immediate indefeasibility part of the ratio decidendi? Do the judgments differ in any way in their treatment of the effect of registration of a void instrument? See Note (1972) 46 ALJ 357. What interest did the Breskvars retain in the land after the registration of Wall as proprietor? Why did that interest not prevail against the unregistered interest of Alban Pty

[page 441]

Ltd? On this aspect of the case, see Sackville, ‘Competing Equitable Interests in Land Under the Torrens System — A Postscript’ (1972) 46 ALJ 344 at 346–8. 2.

While the shift from deferred to immediate indefeasibility is the most significant turning point in the operation of the Torrens

system, the policy issues and the consequences of the rule change were not discussed in the leading cases of Frazer v Walker and Breskvar v Wall, where the question was treated as one of statutory interpretation. In earlier authorities, deferred indefeasibility had been supported by arguments from policy as well as statutory interpretation. See, for example, Dixon J in Clements v Ellis (1934) 51 CLR 217 at 237; Salmond J in Boyd v Mayor of Wellington [1924] NZLR 1174 at 1205. 3.

Would purchasers need to investigate the history of the vendor’s title if deferred indefeasibility were the rule? In a transaction, there may a defect in the vendor’s root of title (for example, the vendor’s registered title was procured by a forged instrument), or a defect in the current transaction (for example, the instrument given to the purchaser is forged). Under both immediate and deferred indefeasibility, purchasers are protected against a defect in their vendors’ root of title. If, for example, V registers a forged transfer from O, and then executes a transfer to P who registers it, P gets an indefeasible title under both rules. P can safely deal with V as registered owner, so does not need to investigate the history of V’s title. The choice of rule matters only if the defect is in the current transaction (for example, a forged transfer from V to P). By registering the transfer without fraud, P gets an indefeasible title under the rule of immediate indefeasibility. But if deferred indefeasibility applies, P’s title would be defeasible. Indefeasibility is ‘deferred’ until P grants an interest to another registered

proprietor in a later transaction. Should purchasers be expected to take steps to ensure that the instrument which they present for registration is duly executed by the registered owner and valid in all respects? Would such a rule require purchasers to make inquiries that are ‘unduly burdensome or difficult’? 4.

Do you agree that it is easier for a registered proprietor to take steps to prevent fraudulent dealings than it is for the purchaser (or more usually, the mortgagee) who registers a forged instrument? A five-member bench of the Ontario Court of Appeal in Lawrence v Maple Trust Co and Wright (2007) 51 RPR (4th) 1, 84 OR (3d) 94, 220 OAC 19 reached the opposite conclusion. The court adopted an interpretation of ss 78(4) and 155 of the Land Titles Act (Ont) that is consistent with deferred indefeasibility, for reasons of statutory interpretation, consistency with the authorities and policy. Gillese JA (with whom all members of the court agreed) said at [57]–[58]: Further and most importantly, in my view, deferred indefeasibility is also preferable for policy reasons. Under the theory of immediate indefeasibility, the innocent homeowner has no defence to a mortgagee’s action for possession. The homeowner is exposed to the loss of her home through eviction with the only available remedy being to make a claim for loss of value of the property from the Fund. The idea that a person who buys a specific parcel of land with a specific house on it should be compensated in damages runs contrary to the notion that real property, in such circumstances, is not fungible. To see a lender compensated in damages does not offend that same notion.

[page 442]

Moreover, unlike the intermediate owner, the homeowner has no opportunity to avoid the fraud. Ms Lawrence had no ability to discover that her home was being fraudulently sold and mortgaged. By contrast, Maple Trust made the decision to advance money and had the opportunity to avoid the fraud. By interpreting the Act in accordance with the theory of deferred indefeasibility, the law encourages lenders to be vigilant when making mortgages and places the burden of the fraud on the party that has the opportunity to avoid it, rather than the innocent homeowner who played no role in the perpetration of the fraud.

The Ontario Court of Appeal evaluated deferred and immediate indefeasibility as different approaches to the allocation of losses arising from title frauds. Does immediate indefeasibility reduce the incentive for mortgagees to ensure that they are dealing with the registered proprietor?39 Queensland, New South Wales and Victoria have amended their legislation to deny indefeasibility to mortgagees who fail to take reasonable steps to check the identity of the person purporting to deal as mortgagor: see 5.84–5.85. The New

Zealand

Law

Commission

has

recommended

that

mortgagee’s registered titles should be defeasible in these circumstances: Review of the Land Transfer Act (2010), paras 2.19–2.24 and recommendation R4.

5.50

Doubts about the policy soundness of immediate indefeasibility

continue to be aired, prompted by high rates of identity fraud, and the losses suffered by owners evicted from their homes and deprived of their land

because someone has forged a transfer or, more commonly, a mortgage.40 Australian courts have maintained the view that immediate indefeasibility facilitates land transactions by providing certainty, and is fundamental to the Torrens system as a system of title by registration.41

Immediate indefeasibility in the states and territories 5.51

In Breskvar v Wall (1971) 126 CLR 376, the High Court relied on

arguments of statutory interpretation in support of its adoption of immediate indefeasibility in the context of the Queensland provisions. This raised questions as to whether the differently worded provisions of other Torrens statutes should be interpreted as having the same effect. In South Australia the application of the principle of immediate indefeasibility is more doubtful by reason of SA,

[page 443]

s 69(b). Section 69 provides that the title of the registered proprietor shall be absolute and indefeasible subject to, inter alia: (b) In the case of a certificate or other instrument of title obtained by forgery or by means of an insufficient power of attorney or from a person under some legal disability, in which case the certificate or other instrument of title shall be void: Provided that the title of a registered proprietor who has taken bona fide for valuable consideration shall not be affected by reason that a certificate or other instrument of title was obtained by any person through whom he claims title from a person under disability, or by any of the means aforesaid …

The subsection was considered by O’Loughlin J in Wicklow Enterprises Pty Ltd v Doysal Pty Ltd (1986) 45 SASR 247. His Honour read the subsection as preserving the concept of deferred indefeasibility in the case of a disposition from a person under a legal disability. However, in respect of the title of a registered proprietor who has taken bona fide for a valuable consideration by any of the other means referred to in the subsection, his Honour held that the title so acquired is immediately indefeasible. This approach was rejected in Rogers v Resi-Statewide Corp Ltd (1991) 101 ALR 377 as being unnecessary for the earlier decision and as inconsistent with the history of the section and the mischief which it was introduced to remedy. Von Doussa J (at 382) held that deferred indefeasibility would ‘best promote the purpose or object for which the provision was enacted’. However, the Full Bench of the South Australian Supreme Court has rejected these arguments and confirmed the approach of O’Loughlin J: Whittem v Acardi (1992) 59 SASR 57. An application to the High Court was refused: (1993) 67 ALJR 514. The High Court held that an appeal would involve the construction of a Torrens Act with no equivalent except in the Northern Territory and that the issue turned ‘to a significant extent upon punctuation and syntax and, in our view, involves no real question of principle’: per Deane J at 514, delivering the judgment of the court. However, Deane J went on to state the court’s preference for the construction adopted by the South Australian Full Court. It would seem, therefore, that immediate indefeasibility is restored as the basic position in South Australia42. In Lansen v The Honourable Justice Olney (acting as Aboriginal Land Commissioner) (1999) 169 ALR 49, Sackville J commented (at 75):

Subject to one exception, this line of authority brings South Australia … into line with the construction of the Torrens legislation in other States and Territories, notwithstanding that none has any equivalent to s 69II … That is to say, a registered proprietor who obtains registration in good faith and for value on the basis of an instrument that is void will ordinarily be entitled to an absolute and indefeasible title notwithstanding the invalidity of the instrument or dealing by which he or she obtains registration … The exception in South Australia, to which I have referred, is that where a registered proprietor has obtained registration from a ‘person under disability’, s 69II [now s 69(b)] appears to deny the proprietor the benefits of immediate indefeasibility … In addition, it may be that a volunteer cannot claim the protection of the indefeasibility provisions of Torrens legislation.

5.52

Controversy about indefeasibility has not confined itself to South

Australia. In Chasfild Pty Ltd v Taranto [1991] 1 VR 225, Gray J took the view that the cases establishing immediate

[page 444]

indefeasibility were of limited significance for Victoria because of material differences between the Victorian legislation and that of Queensland and New South Wales. Section 44(1), a provision unique to Victoria, provides: Any folio of the Register or amendment to the Register procured or made by fraud shall be void as against any person defrauded or sought to be defrauded thereby and no party or privy to the fraud shall take any benefit therefrom.

Gray J held that the subsection makes it clear that ‘fraud’ is not confined to the fraud of the registered proprietor or his or her agent, and that accordingly, a registered title procured by use of a forged instrument is defeasible. That interpretation was rejected in subsequent decisions.43 The

decisions in both Victoria and South Australia, which promote a consistent national adoption of immediate indefeasibility, were welcomed by commentators.44

Instruments void for defects other than forgery 5.53

The effect of registration in rendering void instruments indefeasible is

not confined to forgeries: Story v Advance Australia Bank Ltd (1993) 31 NSWLR 722 at 736. Other examples of void or voidable instruments leading to indefeasible title on registration are Morton v Black (1986) 4 BPR 9164 (where an unauthorised alteration by the mortgagor’s solicitor did not affect the rights of the mortgagee); Broadlands International Finance v Sly (1987) 4 BPR 9420 (which concerned the registration of a document purporting to be executed under a power of attorney which was actually created after the execution of the relevant document); Spina v Conran Associates Pty Ltd (2008) NSW ConvR ¶56-218; [2008] NSWSC 326 (registration of mortgage executed by attorney acting beyond the powers conferred by a power of attorney); Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607 (registration of an instrument invalid at common law under the rule against perpetuities). In Horvath v Commonwealth Bank of Australia [1999] 1 VR 643, a mortgage given by a minor intended to secure moneys owing under a loan contract that was void by force of statute was held to be indefeasible. See also Co-operative Property Developments of Australia Limited (in liq) v Commonwealth Bank of Australia [1992] 1 Tas R 308, where the registration of an invalidly executed mortgage was held to give the mortgagee an indefeasible title in the absence of fraud.

5.54

At common law, a deed was rendered void if altered in a material way

after execution. This was known as the rule in Pigot’s Case ((1614) 11 Co 26b; 77 ER 1177). Registration cures an instrument invalidated by the rule by reason of a material alteration: Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235: Barton v Upton [2000] TASSC 20; Paradise Constructors & Co Pty Ltd v Poyser (2007) 20 VR 294. Note that in New South Wales, the rule in Pigot’s Case has been abrogated by statute: Conveyancing Act 1919 (NSW) s 184. In Boyd v Mayor of Wellington [1924] NZLR 1174, a void proclamation purporting to acquire land under statutory power conferred a valid title on registration.

[page 445]

Indefeasibility of the terms in a registered instrument 5.55C

Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326; 9 ALR 39 High Court of Australia

Gibbs J: The respondent is the lessee of land at Adelaide, now owned by Celtic Agencies Pty Ltd, on which is erected a service station and garage. The appellant is the mortgagee of that land. The lease to the respondent was registered under the Real Property Act 1886, as amended (SA) (the Act) on 2 February 1969. It contained two covenants under which the lessee was entitled upon notice to renew the term for three successive periods each of five years. That right of renewal was exercised, with the result that the term of the lease was extended so that it would expire on 1 March 1974 and that extension was registered on 30 August 1969. The mortgage in favour of the appellant was registered on 3 August 1973. Subsequently, on 15 February 1974, the respondent gave notice to Celtic Agencies Pty Ltd that it exercised its right to renew the term of the lease for a further five years, and on 23 April 1974 Celtic Agencies Pty Ltd executed an extension of

the lease in registrable form. This extension has not been registered. Celtic Agencies Pty Ltd defaulted in its obligations under the mortgage and on 31 May 1974 the appellant gave notice of its intention to sell the land. [The proceedings were commenced after the respondent, in July 1974, lodged a caveat claiming to be entitled to the registration of an extension of lease until 1 March 1979, and forbidding the registration of any dealing with the estate and interest of Celtic Agencies Pty Ltd unless such dealing was expressed to be subject to the respondent’s claims. The appellant took out an originating summons seeking a declaration that the extension of lease was not binding on it as mortgagee and that it was entitled to exercise its power of sale free from any leasehold estate in the respondent. Sangster J dismissed the summons and held that the respondent was entitled to registration of the extension of lease.] The appellant now claims to be entitled to exercise its power of sale under the mortgage free from any leasehold interest in the respondent. The respondent on the other hand claims to be entitled to have the extension registered. The question is which prevails — the title of the respondent arising from the exercise of the right of renewal or the title of the appellant under the mortgage. It is not in doubt that the lease is entitled to priority over the mortgage since the former was registered before the latter (see s 56 of the Act). The appellant, however, contends that the right of renewal was not an integral part of the lease, and was not registrable, and that priority is given by s 56 only to the term of the lease and not to the right of renewal or to any extended term resulting from the exercise of that right … The registration of an instrument does not in all cases give priority or the quality of indefeasibility to every right which the instrument creates. Speaking generally, the Act would not appear to be intended to render indefeasible a personal right created by a covenant which, although contained in a registered instrument, in no way affects the estate or interest in land with which the instrument deals … It then becomes necessary to consider the nature of a covenant for renewal. It is well settled that such a covenant runs both with the land and the reversion … [T]he right of renewal is an incident of the lease and directly affects the nature of the term itself. However, it is clear that when the right is exercised ‘a new lease, a new demise’ comes into being. [page 446]

The question whether the right of renewal gained priority over the mortgage by reason of the prior registration of the lease is, in my opinion, by no means an easy one. On the one hand it may be said that the right of renewal is an integral part of the estate vested in the lessee, and upon registration, obtains the same protection as the term itself. This was the view taken in Pearson v Aotea District Maori Land Board [1945] NZLR 542, by Finlay

J. He said (at 550): ‘A right of renewal is something which affects and is, in a sense, definitive of the term of a lease’. He went on: The right of renewal is adjectival in relation to the term granted. It constitutes a material qualification of the term, and is therefore something more than a mere ancillary right. It is in other words an integral part of the estate shown by the Register as vested in the lessee. On the other hand, it might be said that what the lessee seeks in substance is to have priority according to the new lease which came into existence as a result of the exercise of the right of renewal, and that the new lease is not itself registered and gains no priority because it has its origin in a right conferred by a registered instrument. It does not appear ever to have been found necessary in Australia to decide whether Roberts v District Land Registrar of Gisborne (1909) 28 NZLR 616, and Pearson v Aotea District Maori Land Board should be followed and that question was left open by members of this court in Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; [1972– 73] ALR 1153. The present case, unlike those two New Zealand cases, is not one in which the grant of the right of renewal was illegal or void and we are concerned not with a question of indefeasibility but with one of priority; although the two questions appear to depend on the same considerations, it is unnecessary to consider what the position would have been if the covenant had been void before the registration of the lease. In my opinion the judgment of Finlay J in Pearson v Aotea District Maori Land Board, so far as it is relevant to the present case, was correct. The right of renewal is so intimately connected with the term granted to the lessee, which it qualifies and defines, that it should be regarded as part of the estate or interest which the lessee obtains under the lease, and on registration is entitled to the same priority as the term itself. I am assisted to this conclusion by two further considerations. First, it would be unjust and inconvenient if a right to renew contained in a registered lease could be defeated by the subsequent registration of a mortgage, and it is difficult to attribute to the legislature the intention that rights of renewal, which of course are a common incident of leases and are often of considerable value, should be liable to be defeated in this way. If the provisions of the Act are ambiguous, they should be construed in a way that will avoid inconvenience and injustice. Secondly, the provisions of s 119 of the Act appear to me strongly to support the view that it was intended that rights of renewal contained in a lease should be protected by the registration of the lease. … Under this section, a right to renewal contained in a lease for a term not exceeding one year to a tenant in actual possession is valid as against (inter alios) a subsequent mortgagee if the lease is registered or protected by caveat and it would be an extraordinary anomaly if a similar right contained in a registered lease for a greater term received no protection. On behalf of the appellant, reliance was placed on the express provision in s 117 of the Act that a right to purchase contained in a lease shall be binding, and it was submitted that this implies that it was intended that a right to renew should not be binding. However, a covenant giving a right to purchase is essentially different in character from a covenant for renewal. It is ‘not a covenant concerning the tenancy or its terms’; it ‘does not directly affect or concern the land’ and it is ‘not a provision for the continuance of the term, like a covenant to renew’: Woodall v Clifton [1905] 2 Ch 257 at 279; [1904–7] All

ER Rep 268 at 272 … Since such a covenant is collateral, and does not affect the estate or interest in land granted [page 447]

by the lease, the registration of the lease, in the absence of a provision such as that contained in s 117, would not (or at least might not) confer any priority or indefeasibility upon the covenant or the right which it creates. The provisions of s 117 were necessary to make it clear that the protection of the Act extends to a right for or covenant to purchase the land described in a lease but the same reason did not exist to make specific provision for the protection of covenants for renewal … For these reasons I consider that the respondent’s right of renewal prevails over the appellant’s mortgage. The appellant’s rights as mortgagee can only be exercised subject to the respondent’s right of renewal and any extension resulting from its valid exercise. I would dismiss the appeal. Stephen J: … To confer indefeasibility upon rights of renewal contained in registered leases does violence neither to the general scheme of the Act nor to the objects which it seeks to attain. The existence of such rights of renewal will be apparent upon any inspection of the register and those who deal in the land may thus learn of the extent to which the reversion is thereby contingently affected. What will be registered, and protected by that registration, is a right conferred by covenant which touches and concerns the land and runs with the land; it is an incident of the lease creating an interest in the land and forming a part of the lessee’s interest in that land. To accord it the protection afforded by registration is thus in no way inconsistent with the tenor of the legislation and gives rise to no anomalies. Barwick CJ: … In Travinto Nominees Pty Ltd v Vlattas, the court decided that a covenant which was illegal when made, obtained no validity or protection from the registration of the instrument in which it was found because its illegality denied the possibility of its specific performance. The position of covenants for renewal of the term of the lease which are not illegal was left as an open question. It now falls for decision. It is now settled that an estate or interest purportedly created by an instrument, void under the general law, derives validity and indefeasibility from the registration of the instrument purporting to create that estate or interest: see Frazer v Walker [1967] 1 AC 569; [1967] 1 All ER 649, and the New Zealand decisions of which their Lordships there approved. But the specific enforceability of the covenant for renewal, assuming its validity either under the general law or because of its presence in the registered instrument, will be decided under the general law. The interest in the land derived from the covenant will be coextensive with the extent to which the covenant could be ordered to be specifically performed. We are not troubled in this case with a question which on occasions can arise, namely, whether, upon its proper construction, the covenant is merely personal to the covenantee or runs with the land. Here, clearly, the right of renewal is not personal and does run with the land. Further, the lease had not been

transferred: the lessee was at all times the registered proprietor of the interest in the land created by the memorandum of lease. In my opinion, because of the specific enforceability of the right to renew, if exercised, the registration of the memorandum of lease containing the covenant for renewal created an interest in the land commensurate with the extent of the covenant. The memorandum of lease in its entirety so far as it affected any estate or interest in the land obtained the priority given by s 56, and the title of the registered proprietor of the lease, including that interest in the land derived from the covenant for renewal, became absolute and indefeasible by virtue of s 69. [Barwick CJ agreed that the appeal should be dismissed.] Appeal dismissed.

[page 448]

5.56 Questions 1.

To what extent is a registered lease indefeasible? Does indefeasibility attach to all the terms of the lease or only to some? If the latter, how is the dividing line to be drawn? What kinds of covenants might be invalid or unenforceable notwithstanding registration of the lease containing them? In Mercantile Credits, Gibbs J says that indefeasibility does not extend to an option to purchase in a registered lease because it is not a covenant concerning the tenancy or its terms, or a provision for the continuance of the term: (1976) 136 CLR 326 at 346. It is different if the Act contains a provision such as SA, s 117 which specifically provides for an option to purchase to be included in a registered lease. If the option is exercised, the lessor is bound to execute a transfer to the lessee, and to that extent, the option is

indefeasible. New South Wales and the Australian Capital Territory have similar provisions: NSW, s 53(3); ACT, s 83; SA, s 117. 2.

Does an option to renew, under the general law, create a legal or equitable interest in the lessee? If the latter, how can an equitable interest attract the benefits of indefeasibility? If the right to renew a lease is expressed to be dependent on the tenant observing the terms and conditions of the lease (as is usually the case), does registration of the lease relieve the lessee or his or her assignee of the obligation to perform those terms and conditions before being entitled to exercise the option? See Robinson, 265. Barwick CJ said registration of the lease would confer indefeasibility on the covenant for renewal only if it was specifically enforceable under the general law. Rossiter comments: Section 42 of the Real Property Act 1900 only renders title to an estate indefeasible upon registration. The section is not a panacea to cure all the ills in the estate itself, and even to begin to argue about the indefeasibility of a covenant is to misconceive the scope of the section. It is equally irrelevant to make the specific enforceability of an option to renew an issue as the Real Property Act is not concerned with the registration of equitable interests and, indeed, it is almost a contradiction in terms to refer to the registration of an equitable interest … Thus, registration of a lease ought to have no effect at all upon an option to renew; the enforceability of covenants should depend entirely upon the general law and the fact that an option to renew is also an equitable interest in land ought not to be allowed to cloud the issue [Rossiter, ‘Options to Acquire Interests in Land — Freehold and Leasehold’ (1982) 56 ALJ 576 at 626].

3.

In Karacominakis v Big Country Pty Ltd (2000) 10 BPR 18,235;

[2000] NSWCA 313, the lessee argued that the covenant to pay rent was rendered unenforceable by the rule in Pigot’s Case notwithstanding registration of the lease: see 5.54 above. Giles JA (with whose judgment Handley and Stein JJA agreed) said the following about the effect of registration of a lease on the enforceability of the lessor’s covenant to pay rent (at 18,247): Payment of the agreed rent is an essential part of the transaction between the lessor and lessee. The lessor gives the lessee an estate or interest in land in return

[page 449]

for the lessee giving the lessor rent, rent being ‘a sum issuing out of the land demised payable by the lessee to the lessor for the right to occupy that land and all that went with it’: Junghenn v Wood [1958] SR (NSW) 327 at 330 per Owen J. The covenant to pay rent, to adopt the words of Blanchard J in Duncan v McDonald, is a condition upon which the leasehold interest is held and intimately related to the lessee’s title created upon registration; taking up concepts found in Travinto Nominees Pty Ltd v Vlattas and in Mercantile Credits Pty Ltd v Shell Co of Australia Ltd, because of its connection with the continuance of the lessee’s interest in the land, it delimits or defines that interest.

4.

What if state legislation provided that an option to renew contained in a lease of service station premises was to be void unless the lease were approved by the Industrial Commission? Would the option to renew be enforceable against (a) the lessor; and (b) a later mortgagee in these circumstances? If not, why not? In Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; [1972–

73] ALR 1153, the High Court held that where there was statutory illegality, registration could not validate the option; compare Pearson v Aotea District Maori Land Board [1945] NZLR 542. Would it make any difference if the legislation did not declare the option to renew void, but merely imposed a penalty on parties entering into a lease containing such an option? In either case does it matter whether the party seeking to exercise the option to renew is the original lessee or the assignee of the lease whose assignment has been registered? 5.

In the Mercantile Credits case Barwick CJ stated that the specific enforceability of a covenant for renewal contained in a registered lease was to be decided under the general law. Does this principle apply to other indefeasible interests? What if the option to renew in a registered lease had been granted by the lessor, a trustee, in breach of trust? Could the option to renew be enforced against a later mortgagee? How would such a case differ from the Mercantile Credits case? How would it differ from Travinto Nominees v Vlattas?45

6.

If an option to renew contained in a registered lease is indefeasible, what is the status of the lease that results from the exercise of the option prior to registration? What is the status of any options contained in such an unregistered lease? In Re Eastdoro Pty Ltd (No 2) [1990] 1 Qd R 424, the Supreme Court of Queensland held that the second of a series of options to renew contained in a registered lease was enforceable against a proprietor of the land

who obtained registration after registration of the lease. This was despite the original lease having expired by effluxion of time and the lease created by the exercise of the first option not having been registered. The High Court refused leave to appeal the decision in Re Eastdoro: see also Tenstat Pty Ltd v Permanent Trustee Aust (1992) 28 NSWLR 625; Re Maisons Pty Ltd [1991] 2 Qd R 61. The decision imposes on purchasers the need to investigate registered leases for which the original term has expired, to discover if the options to renew have been exercised.

[page 450]

What is indefeasible in a void mortgage? 5.57

The indefeasibility of a forged mortgage on registration does not

extend to a personal right created by a mortgage covenant, such as the mortgagor’s obligations under a deed of guarantee: Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 at 343 (5.56); PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643. Does registration of a forged mortgage entitle the mortgagee to enforce the mortgagor’s covenant to pay? The charge created on registration (the property right) is conceptually distinct from the covenant to pay, even where they are contained in the same instrument: French v Queensland Premier Mines Pty Ltd [2006] VSCA 287 at [13] per Maxwell P, cited with approval by Kiefel J on appeal: Queensland Premier Mines Pty Ltd v French [2007] HCA 53 at [35]. The mortgage in

that case purported in effect to secure all moneys owing by the mortgagor to the mortgagee. The High Court interpreted Qld, s 62 to mean that when the mortgage was transferred, the transferee was entitled to the amounts specified in the mortgage but did not get the benefit of amounts owing under collateral loan agreements. Those debts would need to be separately assigned. There are three different lines of authority on the question of whether the mortgagor’s covenant to pay is made enforceable on registration of a void mortgage. Harding calls them the ‘full indefeasibility’ approach, the ‘no indefeasibility’ approach and the ‘limited indefeasibility’ approach.46 The ‘full indefeasibility’ approach was adopted in In Pyramid Building Society v Scorpion Hotels [1998] 1 VR 188 at 196, Hayne JA (with whom Tadgell and Brooking JJA concurred) held that the indefeasibility of a registered mortgage ‘plainly’ extends to the mortgagor’s covenant to pay. In PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 681 Giles J said that the mortgagee’s ability to recover the debt by suing on the personal covenant to pay was so connected with the mortgagee’s property interest that it would attract the benefit of indefeasibility.47 On this view, the mortgagee would be able to hold the registered owner personally liable for the debt that exceeds the amount recovered by the mortgagee on sale. Stoljar argues that such a result is inconsistent with the indefeasibility provisions which protect estates and interests in land, not contractual covenants.48 The ‘no indefeasibility’ approach holds that while the mortgagee’s security interest is indefeasible, the covenant to pay is not. In Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 224, Powell JA (Meagher and Handley JJA agreeing) declared that, notwithstanding that the

registered proprietor’s land was charged with the moneys secured by the bank’s mortgage, he was not liable to the mortgagee on the personal covenant to pay in the forged mortgage.49 Harding notes that it is implicit in this approach that when a forged mortgage is registered, the indefeasibility provisions generate a debt, along with the charge that secures it. Therefore the enforceability of a registered mortgage does not depend

[page 451] upon the existence of an enforceable covenant to pay.50 Grattan suggests that the view that the covenant to pay does not attract indefeasibility is indirectly supported by the High Court’s holding in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237; 244 ALR 1 at [104], that the mortgagor’s covenant to pay does not touch and concern the land. Such a covenant, being merely personal, is unlikely to attract the benefit of indefeasibility.51 The ‘limited indefeasibility’ approach holds that the personal covenant to pay is made enforceable by registration only to the extent necessary to make the mortgagee’s security interest effective. The New Zealand Court of Appeal in Duncan v McDonald (1997) 3 NZLR 669 held that the covenant to pay in a forged mortgage made indefeasible on registration is enforceable only to the extent necessary to make out the mortgagee’s charge on the land. At 682–3, Blanchard J said: What registration of an otherwise void mortgage gives the innocent mortgagee in these

circumstances is the right of recourse to the security for such value as the land may have. The charged property is rendered liable for the debt by the registration. The covenants to pay and supporting covenants given by the registered proprietor then become operative to such extent only as is necessary to enable realisation of the security and recovery of the advance or part thereof by that means.

Blanchard J further declared that the mortgagee could not hold the mortgagor personally liable for the debt in reliance on the covenant to pay in a forged mortgage: at 682–3. See also Dollars & Sense Finance Ltd v Nathan [2007] NZCA 177 at [20]. Brett Harding argues that the limited indefeasibility approach is preferable, as the mortgage interest conferred on registration must encompass the covenants which provide the basis for quantifying the debt it secures and make the security effective. While Duncan v McDonald has not been endorsed by Australian courts, some of the judicial statements which emphasise the dual nature of the covenant to pay could be interpreted as consistent with the ‘limited indefeasibility’ approach52. For example, In Perpetual Trustees Victoria Ltd v Tsai [2004] NSWSC 745 at [17], Young CJ in Eq said: [T]he reason why the personal covenant is considered to be part of the package of rights protected by the indefeasibility principle is that it maps out or may map out the extent of the quantum of the interest of the mortgagee in the land and in that sense is closely related to title requiring it to be considered as to limiting the rights. That seems to be what Giles J is saying in Maradona (above) at 681. See also what Bryson J said in Challenger Managed Investments Ltd v Direct Money Corp Pty Ltd [2003] NSWSC 1072 at [52]–[53].

5.58

The distinction between the mortgage as an interest in land and the

covenant to pay as a contractual obligation has other consequences. A registered mortgage can subsist as a charge on land after the debt has been

fully repaid, until the mortgagor exercises his or her right to call for a discharge of the mortgage. A mortgage can also be discharged without discharging the covenant to pay. The effect of the mortgage on the covenant to pay depends upon the

[page 452]

wording of the instrument of discharge. In Grundy v Ley [1984] 2 NSWLR 467, a discharge in the Registrar-General’s approved form was held to be effective only to release the land from the charge, while leaving the mortgagor’s personal liability intact. In Groongal Pastoral Co Ltd v Falkiner (1924) 35 CLR 157, the discharge of mortgage was couched in terms that indicated a full and complete discharge of all personal obligations.

Indefeasibility and the all moneys mortgage 5.59

In Frazer v Walker [1967] 1 AC 569 (5.43C), the Privy Council

determined that a registered mortgagee was a ‘registered proprietor’ within the scope of the paramountcy provision of the New Zealand Torrens statute, and accordingly enjoyed an indefeasible title on registration of a forged mortgage (assuming that the fraud was not brought home to the mortgagee). The traditional instrument of mortgage included a statement of the principal sum lent and an acknowledgment by the mortgagor that the loan moneys had been advanced by the mortgagee. This type of mortgage is effective on registration to create a charge for the secured sum: see, for example, Royalene

Pty Ltd v Registrar of Titles [2008] Q ConvR 54-689; [2008] QSC 64. In recent years, the ‘facility’ mortgage has become the most common form. It may secure moneys advanced under an existing loan agreement, or it may be expressed to secure all moneys owing or payable from time to time by the mortgagor under any present or future loan agreement. The loan agreement is held separately from the Torrens register. If the loan agreement is a forgery, and no moneys have actually been advanced to the person shown as mortgagor, is there any debt that is secured by the mortgage? In Perpetual Trustee Victoria Ltd v Tsai (2004) 12 BPR 22,281; [2004] NSWSC 745, Young CJ in Eq expressed the view that the indefeasibility provisions do not entitle a mortgagee to enforce a mortgage where the debt arises under a separate loan agreement which is void for forgery and no funds were received by the person named as mortgagor.53 5.60

It is clear that a registered mortgage comprises not just the covenants

in the registered instrument but others which are incorporated into it. Statutory provisions in some jurisdictions allow a party to lodge with the Registrar a memorandum of common provisions which can then be incorporated by reference into instruments which are subsequently lodged for registration: see, for example, Vic, ss 91A, 91B; NSW, s 80A. In cases after Perpetual Trustee Victoria Ltd v Tsai, the enforcement of a forged facility mortgage usually turned on whether the registered instrument of mortgage effectively incorporated the separate loan agreement.54 5.61

In Perpetual Trustees Victoria Ltd v English (2010) 14 BPR 27,339;

[2010] NSWCA 32, a husband and wife had been separated for 13 years but

continued to be jointly registered as owners of land. At the husband’s request, the mortgagee made a loan offer to the husband and the wife. To accept the loan, the terms of the loan offer stated that ‘you, and if there is more than one person all of you, must sign’. The terms of the offer defined ‘you’ to mean ‘the

[page 453]

person or persons to whom the offer is made’. The husband forged the wife’s signature on the acceptance document and on the mortgage, which became registered. The mortgage was expressed to secure moneys payable under a ‘secured agreement’, being agreement ‘between me or us, or any one of us, and you’. The Court of Appeal held that the loan offer was capable of acceptance only by the signature of both of the parties to which it was made. Therefore, no agreement ever came into existence between the couple and the mortgagee, or between the husband and the mortgagee. Accordingly, there was no ‘secured agreement’, and no debt secured by the mortgage. When reading the following case decided by the Court of Appeal shortly after English, consider the reasons for the difference in outcome. 5.62C

Van Den Heuvel v Perpetual Trustees Victoria Ltd (2010) 15 BPR 28,647; [2010] NSWCA 171 Supreme Court of New South Wales (Court of Appeal)

[A husband and wife were jointly registered as proprietors of land in New South Wales. Without the wife’s knowledge, the husband forged her signature to an ‘all moneys’ mortgage and loan contract, both bearing the same date. The mortgage was registered and was not defeasible for fraud. The wife received no money from the loan advance. Upon default, the mortgagee sought

an order for possession and judgment for the debt against both the husband and the wife. The husband did not defend the proceedings. The wife appealed from the trial judge’s order granting the mortgagee possession. The Registrar-General appealed against being found liable to compensate the wife, partly on the ground that the wife should not have been held liable under the mortgage. The two appeals were consolidated. One of the questions was whether the mortgage secured a debt. As in previous cases, the court treated this question as a matter of construction of the documents.] Young JA: … It is now necessary to consider the terms of the relevant mortgage in some detail. The mortgage itself was fairly innocuous. However, to understand it, one needs to look not only to the mortgage, but also to the memorandum filed by Perpetual’s solicitors under s 80A of the Real Property Act 1900 (setting out standard clauses deemed to be included in the mortgage) and the underlying Loan Agreement. This is because, instead of adopting the traditional format of a simple mortgage document dealing with a security given to secure a definite sum lent plus interest, Perpetual elected to use the contemporary computer friendly format of the mortgage referring to monies due under the underlying Loan Agreement. An additional complication is that a so-called ‘plain English’ document was employed. This endeavoured to deal with the situation of a loan to two persons by defining the word ‘I’ as embracing ‘us’ but forgetting to define ‘we’ and sometimes using ‘we’ instead of ‘I’. If ‘plain English’ is to be employed in a document, great care must be taken to see that precision is not lost as it was in the case of the present mortgage. One more comment must be made before turning to the text of the document. After the primary judge’s decision, this court decided Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32; (2010) 14 BPR 27,339. That case was a forged mortgage case on documents very close, but not identical, to those used in the present case. The English case must be considered binding on us (indeed no-one argued to the contrary), and enables answers to be given on some of the questions posed in the present appeal. [page 454]

The mortgage is dated 11 November 2004. It includes the provisions of Memorandum 3161863. Clause 2.2 of the memorandum include[s] the charging clause, viz: ‘The Mortgage is security for payment to you of the Secured Money …’. It also contains the covenant to repay, viz: ‘I agree to pay the Secured Money as and when the Secured Money becomes due and payable in accordance with the provisions of each Secured Agreement or the Mortgage’. The mortgage form describes both the wife and her husband as ‘Mortgagor’. The mortgage form states that the ‘Mortgagor’: mortgages to the mortgagee all the mortgagor’s estate and interest in the land

specified above … One then needs to turn to the definitions in cl 1.1 of the Memorandum. ‘I’ is there defined as having the meaning ‘the person or persons named and described as the Mortgagor in the Mortgage Form and “me” and “my” and, if there is more than one of us, “us” has a corresponding meaning.’ ‘You’ is defined to mean ‘the person or persons named and described as the Mortgagee in the Mortgage Form and “your” has a corresponding meaning.’ ‘Mortgage Form’ means ‘the form of Mortgage which I have executed which refers to and incorporates this document.’ ‘Secured Agreement’ means ‘any present or future agreement between me or us, or any one of us, and You’. ‘Secured Money’ means: all amounts which are payable at any time or are contingently owing or payable to you under a Secured Agreement; and Enforcement Expenses. Clause 1.2 includes as the penultimate bullet point: a reference to any thing (including without limitation, to the Secured Money or to the Property) is a reference to the whole or any part of it and a reference to a group of things or persons is a reference to any one or more of them. I will refer to this as ‘the Group Clause’. Clause 11.7 of the Memorandum is headed ‘Joint and Several liability’ and provides: ‘If I am [sic] comprised of more than one person, each person will be liable individually, and every two or more persons are liable jointly, for all promises and obligations under the Mortgage.’ [Presumably the drafter meant to write ‘I is’ rather than ‘I am’ as the word ‘I’ does not mean a person, but an expression, a trap for the ‘plain English’ user]. It is also vitally necessary to look into the precise terms of the underlying Loan Agreement. This also bears date 16 November 2004. It is said to supersede the preliminary loan approval of 19 October 2004, a document not in evidence. Clause 1 of the Loan Agreement is as follows: LOAN We hereby agree to lend money to you which you agree to borrow and repay. The terms of the Loan are as set forth in this agreement (including the Schedule) and the Terms and Conditions Booklet (Non-Consumer Credit Code) (‘Terms and Conditions’). [page 455]

The terms ‘Borrower’ and ‘You’ appear next to the names of ‘Peter Harry Van Den Heuvel’ and ‘Elizabeth Van Den Heuvel’. The schedule to the Loan Agreement provides for the interest rates to be charged and

beside the words ‘New Security’ is the following: Registered First Mortgage by Peter Harry Van Den Heuvel and Elizabeth Van Den Heuvel over 18 McIntosh Street QUEANBEYAN NSW 2620 being the land more particularly described in Certificate of Title 24/12658. The Loan Agreement incorporates a booklet of Terms and Conditions. Clause 1.1 of these Terms and Conditions defines ‘You’ to mean ‘the Borrower or Borrowers’, and ‘your’ has a corresponding meaning. Clause 1.2 includes the Group Clause. Clause 3 of the Terms and Conditions includes: Before a drawdown of your facility can be made: You must sign and return the Loan Agreement to our solicitors or settlement agent … Clause 22.3 of the Terms and Conditions is as follows: Joint and several liability If the Loan is being made to more than one person, then each person will be liable individually, and every 2 or more persons are liable jointly, for all amounts due under the Loan. All of your obligations attach to your successors and permitted assigns. [His Honour referred to Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32 and continued:] … Sackville AJA helpfully set out the basic principles that govern this type of case as follows: 1.

2.

3.

Registration of a mortgage does not transfer the fee simple estate, but the mortgage takes effect as a security over the land: [Real Property Act (1900) NSW] s 57(1). Upon registration, the land becomes liable as security in manner and subject to the covenants set forth in the mortgage: [Real Property Act (1900) NSW] s 41(1); Provident Capital Ltd v Printy per Basten JA (with whom Tobias and McColl JJA agreed) [2008] NSWCA 131; 13 BPR 25,199 [25]. Registration of a forged mortgage confers an indefeasible title on the mortgagee, provided that the mortgagee has not been party or privy to the fraud and no other exception to indefeasibility applies: Breskvar v Wall [1971] HCA 70; 126 CLR 376; Yazgi v Permanent Custodians [2007] NSWCA 240; 13 BPR 24,567 at [14], per Beazley JA (with whom Ipp and Tobias JJA agreed); Pyramid Building Society (In Liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, at 191, per Hayne JA (with whom Brooking and Tadgell JJA agreed). Registration of the mortgage does not necessarily ensure the validity of every term of the mortgage, irrespective of the relationship between the term and the estate or interest created by the mortgage itself: Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; 129 CLR 1, at 17, per Barwick CJ (with whom McTiernan and Stephen JJ agreed). Hence a personal right created by a covenant in a mortgage, such as a

guarantee, is not rendered indefeasible by registration of the mortgage: Mercantile Credits Ltd [page 456]

4.

5.

6.

7.

8.

v Shell Co of Australia Ltd [1976] HCA 9; 136 CLR 326, at 343, per Gibbs J; PT Ltd v Maradona (1992) 27 NSWLR 643. In New South Wales, the view has been taken that a personal covenant in a registered but forged mortgage to pay the amount of the mortgage debt, where the debt exceeds the value of the property, is not protected by the indefeasibility provisions of the RP Act: Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202, at 224, per Powell JA (with whom Meagher and Handley JJA agreed); cf Pyramid Building Society v Scorpion Hotels, at 196, where a different view may have been taken. The registration of a forged mortgage validates those terms of the mortgage which delimit or qualify the estate or interest of the mortgagee or are otherwise necessary to assure that estate or interest to the registered proprietor: PT v Maradona, at 679; Yazgi v Permanent Custodians, at [19]–[20]. It is necessary to construe the terms of a mortgage to determine the scope of the estate or interest in respect of which indefeasibility is conferred by registration of the mortgage: Yazgi v Permanent Custodians, at [22]. Thus whether registration of a forged mortgage allows the mortgagee to enforce its security interest in the land in relation to a debt or obligation arising under an agreement separate from the mortgage is a question of construction of the mortgage: Westpac New Zealand Ltd v Clark [2009] NZSC 73, at [43], per Blanchard, Tipping and Wilson JJ. Generally speaking, if the mortgagee specifies a sum of money (plus interest) as the amount secured by the mortgage, the charge created by the mortgage will secure the amount so specified even if the document creating the indebtedness is void under general law principles: Small v Tomasetti. However, if as a matter of construction, the mortgage does not take effect as a security over the land in relation to a claimed debt or obligation, registration of the mortgage will not entitle the mortgagee to exercise remedies, such as the power of sale, to enforce any such claimed debt or obligation: Provident Capital v Printy, at [50]–[52]; Yazgi v Permanent Custodians, at [25]ff. The question of construction may be particularly difficult where the registered mortgage refers to antecedent documentation which is not incorporated in the Torrens register and which may be invalid on general law principles.

… It is vital as between the wife and the Registrar General, and, to a lesser extent between the wife and Perpetual, as to whether the mortgage secured the money lent to the husband. If it did, then, by operation of the indefeasibility principle, the wife’s interest in the land can be realized by Perpetual; to recover the money it lent. If it did not, then the wife’s interest is protected and she has little or no claim against the Registrar General. As far as the husband is concerned, there is little difference. He either is bound by the

mortgage or, if he is not, then, in equity, he will be considered under the same obligations as if he had signed the mortgage. This latter proposition is, in my view, the more technically correct way of stating the proposition that is sometimes put in a shorthand way by saying there is an implied agreement for a mortgage by conduct: Mestaer v Gillespie (1805) 11 Ves 231; 32 ER 1230; Katsaitis v Commonwealth Bank of Australia (1987) 5 BPR 12,049 at 12,052, English at [100]. Again, it must be noted that it is always open to a joint tenant to mortgage his or her aliquot share in the land if he or she can find a person willing to lend on that security. Under the Torrens System, such a mortgage, being a mere hypothecation, does not sever the joint [page 457]

tenancy. The security is over the mortgagor’s interest alone. If the mortgagor predeceases the other joint tenants, the security ceases to exist over the land: Lyons v Lyons [1967] VR 169. … The decision in the English case … cannot simply be applied to the present case. However, the English case does decide that the Group Clause means that the argument that ‘I’ means only the jointure of wife and husband should not succeed … Thus I come back to the question as what was secured by the indefeasible mortgage. This leads to the definition of ‘Secured Money’ set out earlier which means monies owing under a ‘Secured Agreement.’ ‘Secured Agreement’ is defined as ‘any present or future agreement between me or us, or any one of us, and You’. The only possible ‘Secured Agreement’ is the Loan Agreement. It was not signed by the wife, nor is it binding on her. However, the vital matter is whether, it being binding on the husband, the wife has (by virtue of indefeasibility) mortgaged her interest in the land because ‘one of us’ as named in the mortgage, that is the husband, by the Loan Agreement owes money to Perpetual. It has been argued that because the Loan Agreement is drafted for both husband and wife to sign and only the husband signed it, it never came into effect. This argument is reinforced by reference to the condition in cl 3 of the terms and conditions noted above which required a return of the signed Loan Agreement before the loan was payable. The cases cited to support this proposition are principally those decided in the area of guarantees, where, as a general rule, if a guarantee is to be given by four people and only three sign the documentation, the usual result is that the court will hold that the three signed on condition that the guarantee would, only operate after all had signed; see eg Marston v Charles H Griffith & Co Pty Ltd [1982] 3 NSWLR 294. However, as I said in Katsaitis at 12,051, in each case the court must look at the intention of the parties. If the conclusion is that a person did not intend to take on an obligation unless others were also bound, then the document will not operate until all intended to be bound, have signed. However, this does not always follow. The primary judge held [71] that it was not contemplated that the Loan Agreement was not binding until both Mr and Mrs Van den Heuvel had signed it. He said that there

existed between Perpetual and the husband all of the essentials of a binding contract and the monies were advanced to him in accordance with its terms. That finding was within the primary judge’s mandate. Moreover, as Mr Leopold submits in the instant case, Perpetual in paying over the money would know from past experience that wives’ signatures are sometimes forged and that it would at least have the husband bound by the documentation. On the husband’s side, he knew he had forged his wife’s signature to the documents and wanted the documents to be operative so as to receive the money he wanted. With respect to Basten JA, I cannot draw the contrary inferences that he considers should be drawn. In my view it follows that the conclusion must be that the parties (Perpetual and the husband) intended the documents to be operative even without the wife’s signature. The balance of probabilities is that in the light of past history in the industry, the possibility that the wife’s signature was forged or that the loan was unenforceable against the wife would have occurred to Perpetual. It would more likely than not accept that in that situation, so long as the husband was bound, it was commercially appropriate to lend out the money. [page 458]

Thus, the monies were owing under a Secured Agreement and the mortgage catches up the wife’s interest as part of the land charged. Thus, the primary judge’s view on this part of the case must be affirmed. [Hodgson JA agreed with Young JA that the appeals should be dismissed. His Honour held that there was an implied agreement between Perpetual and the husband arising from the execution of a written document by the husband and the advancing of loan funds by Perpetual, and that the implied agreement fell within the definition of ‘secured agreement’ in the mortgage document. His Honour said that in Perpetual Trustees Victoria Ltd v English, an implied agreement would not have been secured by the mortgage because the mortgage in that case secured money owing under an agreement ‘which I acknowledge in writing to be an agreement secured by the Mortgage’: at [4]–[13]]. Basten JA (dissenting) … Senior counsel for Perpetual invited the court to conclude that the loan and mortgage were intended to be binding agreements, whether or not they were signed by each of the borrowers and mortgagors respectively. In my view, that inference should not be drawn, the preferable inference being that Perpetual would not have advanced the money pursuant to the proposed facility unless both borrowers signed each document … [His Honour reviewed the facts which, in his opinion, supported this inference:] … Accordingly, it is probable that Perpetual intended that the financial arrangement only

go ahead if both mortgagors were also identified as borrowers under the loan agreement. … I would conclude that the loan agreement was not a binding agreement under the general law. Indefeasibility The second question is whether the loan agreement, despite its invalidity under the general law, obtained the benefit of indefeasibility, because it was secured by a registered mortgage which enjoys that benefit. In English, Sackville AJA (with whom Allsop P and Campbell JA agreed) set out principles, said not to be in dispute, as to the effect of registration of a mortgage over land: at [68]. However, the mortgage in question in English included an element in the definition of ‘Secured Agreement’, not found in the present case, namely a reference to any present or future agreement ‘which I acknowledge in writing to be an agreement secured by the Mortgage’: at [76]. The court held that there was no such acknowledgment in writing and hence the default under the loan agreement was not secured by the mortgage … Finally, it is necessary to consider whether the mortgage secured an ‘implied’ agreement between Mr van den Heuvel and Perpetual, manifested, as explained by Hodgson JA, ‘by the conduct of Perpetual and the husband in signing the loan agreement document … and advancing and accepting money conformably with the terms of that agreement’ … … [t]he mortgage expressly picks up an agreement between Perpetual and both, or either of, the mortgagors. That language is apt to catch an ‘agreement’ with Mr van den Heuvel alone. The question is whether the implied agreement between Mr van den Heuvel and Perpetual is an ‘agreement’ for the purposes of the definition of ‘Secured Agreement’ in the mortgage … … I would not allow Perpetual to rely upon this basis of liability. If it were permitted to rely upon an ‘implied agreement’, I would not consider such a legal construct to fall within the concept of ‘agreement’ in the mortgage. It is not a mortgage which secures all [page 459]

monies outstanding on any account or basis as between the mortgagors or either of them and Perpetual: it is limited to monies owing under an agreement. Like the court in English, I would construe that concept as applying to contractual arrangements entered into by the parties and not to agreements constructed by the law in the circumstances where the contractual arrangement has been held not to exist. For these reasons, there was no debt owing under the mortgage and Perpetual was not entitled to the relief it sought on the basis pleaded by it. [The wife’s appeal was dismissed. The appeal relating to compensation was allowed in part, to allow evidence as to the quantum of the wife’s beneficial interest in the land.]

5.63 Questions 1.

In Van Den Heuvel, as English, the husband forged the signature of the wife to a mortgage of their jointly owned land without her knowledge. What were the drafting differences that led to the mortgage being held enforceable against the wife in Van Den Heuvel but not in English?

2.

What risk does the decision in Van Den Heuvel highlight for a person who holds land as a joint proprietor with another? Does the decision create a new form of ‘sexually transmitted debt’, in which a person may become liable for a co-owner’s debts without having agreed to or signed anything at all? The Australian Law Reform Commission finds that case law suggests that women are more at risk of injustice than men from sexually transmitted debt: ALRC, Equality before the Law: Women’s Equality, Report 69, Pt II, 1994, Ch 13. Would it have made any difference to the outcome in Van Den Heuvel if the joint owners had been a mother and son, or business partners?

3.

Would the danger to the joint owner be greater if (as Hodgson JA accepts) an implied loan agreement can be secured by the mortgage?

5.64

In Solak v Bank of Western Australia Ltd [2009] VSC 82, the question

of incorporation turned on the person to whom the documentation was

addressed. An imposter pretending to be Tarik Solak, who had possession of his certificate of title and identity documents, procured a loan from the bank on the security of a registered mortgage over Solak’s land. Clause 12 of the registered mortgage purported to secure to the mortgagee, ‘the payment of the amount owing by you’. ‘You’ was defined in the mortgage as Tarik Solak. Clause 2.1 of the mortgage said that ‘[y]ou, the mortgagor, agree that the terms and conditions are set out in a memorandum of common provisions and that the mortgage includes that document’. That memorandum said ‘you’ (the person named in the mortgage as the mortgagor) will pay to the Bank ‘all money which you owe to the bank for any reason’ under a bank document (defined to include any agreement or arrangement under which ‘you’ incur or owe obligations to the bank). The home loan contract identified the borrower as Tarik Solak and defined him as ‘you’. Solak argued that the person described as ‘you’ in the mortgage was himself, the registered proprietor, while the ‘you’ in the loan agreement referred to the imposter who

[page 460]

assumed the obligation to repay the loan. In rejecting Solak’s arguments, Pagone J reasoned as follows at [14]–[17]: The Bank West Home Loan Contract identifies the borrower as Mr Tarik Solak … and, for the purposes of the contract, defines him as ‘you’. It is that person who assumed the obligation to pay money albeit that he signed it on 16 March 2006 pretending to be the real Mr Solak. The force of Mr Solak’s claim would seem, therefore, to depend upon whether there is, as a matter of construction, a mismatch between the ‘you’ referred to in the memorandum of common provisions and the Bank West home loan contract. The argument was that the latter is a contract entered

into between Bank West and a person purporting to be Mr Solak but not Mr Solak whilst the memorandum of common provisions imposes upon the real Mr Solak, through registration of the mortgage, only those obligations actually assumed by him. I do not accept this to be the correct construction of the documents. The Bank West home loan contract is intended to come within the definition of ‘Bank Document’ in the memorandum of common provisions and, therefore, to be incorporated into the mortgage … ‘You’ in the definition of ‘Bank Document’ in the memorandum of common provisions is properly to be seen as a drafting device connecting the person named in the mortgage with the person named in another bank document as a means of identifying the document. In this case the person named in the mortgage is, of course, the registered proprietor but the person signing the mortgage as such is in fact the same as the person who signed the Bank West home loan contract as the real Mr Solak. It seems to me that the ‘you’ in the memorandum of common provisions which links the obligation to pay in the home loan contract with the security in the mortgage is the same both as a matter of drafting and as a matter of fact: the ‘you’ was the forger purporting to be Mr Solak in each document. The position is the same as if the memorandum of common provision had described Mr Solak by name. It is inherent in any forgery that the victim of the forgery has not assumed contractual obligations upon which he or she can be sued personally. It is, therefore, not an answer to the consequences of indefeasibility that there may be no personal obligations assumed by the true owner of the land where the covenant to pay is identified by the mortgage. In Pyramid Building Society (In liquidation) v Scorpion Hotels Pty Ltd Hayne J sitting in the Court of Appeal (with whom Brooking and Tadgell JJA agreed) observed: It has not been contended that the indefeasibility of the mortgage does not extend to the covenant for payment and it is plain that it does so extend. In this case, I consider the proper construction of the mortgage to be that the covenant to pay is found in the mortgage, incorporating, as it does, the memorandum of common provisions and, through it, the Bank West home loan contract. Accordingly, the mortgage, albeit forged, is effective as security. This conclusion is, in my view, consistent with the authorities relied upon for Mr Solak. The contrary outcomes in each of Printy, Chandra and Tsai depended upon the collateral agreement not having been incorporated into the mortgages. The contrary outcome in Yazgi depended upon the instrument of mortgage providing a narrower and overriding definition

of ‘mortgage debt’ than that in the collateral document. In the case before me the mortgage document refers to, incorporates, and intends to incorporate, the obligations in the collateral document upon the stated assumption expressed in all three agreements that the person assuming the obligation and mortgaging the property is the same. Counsel for Mr Solak did not submit that I should adopt the broad view of the dicta from Vella; that is, it was not contended (in my view correctly) in this case that a covenant

[page 461]

to pay obtained by forgery could not be enforced upon registration. The system of title by registration gives effect to the public policy in favour of the title standing in the register over other competing claims. The important public policy in the Torrens system of land titles was recently expressed to be that ‘the land title register should be sufficient of itself to inform those concerned about the nature and extent of any outstanding interest in relation to the land’. The forger harmed both Mr Solak and the mortgagee but, upon registration of the mortgage, the mortgagee’s title was secured and must have effect notwithstanding the impact against the interests of another innocent party [footnotes omitted].

5.65

If all the documentation referred to the same person, the real Tarik

Solak, how did Solak incur any liability under the forged loan contract, which was a nullity at general law?55 The reasoning in Solak was found ‘unpersuasive’ by the New Zealand Supreme Court in Westpac Banking Corporation v Clark [2009] NZSC 73, a case which involved similar facts and materially similar loan documentation. The court said (at [49]): It is erroneous to interpret the loan contract as addressing the imposter and then to work backwards by transferring that interpretation to the registered documents merely because the language is common to all. The fact that ‘you’ in the loan contract is the imposter cannot possibly affect what ‘you’ means in the registered documents … The registration of a forged mortgage and

the consequent indefeasibility of the charge cannot extend the scope of the intended linkage when the ‘you’ in the mortgage is the registered proprietor. The covenant to pay in the loan contract was not secured under the mortgage … its indefeasible charge secured nothing.

Their Honours said at [43]–[44] that the question had to be determined whether a particular unregistered document is one to which the mortgage document refers. A covenant in an unregistered loan agreement ‘should be treated as incorporated only if the mortgage and the memorandum, read together as one registered document, must be interpreted as so requiring’. Harding argues that there was no justification to support the finding in Solak that the parties to the mortgage intended to incorporate the terms of a loan agreement. He finds that Pagone J approached the question of incorporation as a property question, when cases such as Westpac v Clark and Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81 indicate that it is a contract question, which requires the court to construe the mortgage to determine the intention of the parties.56 Note that recent statutory reforms in Queensland, New South Wales and Victoria, which impose obligations on mortgagees to identify mortgagors should prevent mortgagees gaining indefeasible title in cases such as Solak, and Van Den Heuvel: see 5.84–5.85.

Relief for the ‘statutory mortgagor’ under the Consumer Credit Code 5.66

The National Credit Code, which applies to regulated credit

contracts made on or after 1 July 2010, is part of a national package which succeeds the uniform Consumer Credit

[page 462]

Codes in state legislation. Section 76 of the National Consumer Code empowers a court to re-open a contract, mortgage or guarantee if the court is satisfied that, in the circumstances at the time it was entered into or changed, it was unjust. If it reopens a transaction, the court’s powers include making an order to discharge a mortgage: s 77(d). A predecessor provision of the New South Wales Consumer Credit Code, s 70, was considered in Van Den Heuvel v Perpetual Trustees Victoria Ltd (2010) 15 BPR 28,647; [2010] NSWCA 171; 5.62C. The wife applied under s 70 to have a forged mortgage and loan agreement set aside on the grounds that as she did not enter into them, they were ‘unjust credit contracts’ within the meaning of the Consumer Credit Code (NSW) s 70. Young and Hodgson JJA found that the Code did not apply to the credit contract because the husband had declared for the purpose of s 11 that the credit was to be applied wholly or predominantly for business and investment purposes. Young JA expressed the view that an applicant who did not enter into a mortgage (because it was forged) is not entitled to apply under s 70. Hodgson JA thought it was arguable that a mortgage is entered into for the purposes of the Code when it is registered, but left the question open. Both judges expressed that even if such an application could be made, the contract or mortgage was not ‘unjust’ in the relevant sense, as the injustice of which the wife claimed arose from the consequences of registration rather than from the transaction. Basten JA, in his dissenting reasons, observed that ‘mortgagor’ is not defined in the Code, and saw no reason to limit the scope of s 70 to exclude an applicant who is

liable as a mortgagor and at risk of losing her land. The circumstance that the wife did not enter into the mortgage and had no opportunity to negotiate its terms was a relevant consideration in determining whether the transaction was unjust. 5.67

The approach of the majority to s 70 of the Code is consistent with

authorities on the scope of relief from unjust contracts under Pt 2 of the Contracts Review Act 1980 (NSW), which is also dependent on the existence of a contract entered into by the applicant for relief. A mortgage based on a contract that is void for forgery is not subject to review under the Act.57 5.68

Section 42 of the National Credit Code provides that a mortgage

must be in the form of a written mortgage document that is signed by the mortgagor and is not enforceable unless it complies with this requirement. The section has been held not to render unenforceable a mortgage signed by a forger and registered: Solak v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279; 5.147.

Volunteers 5.69

For present purposes, a volunteer is one who does not give valuable

consideration for his or her title, such as a donee under a gift or a devisee under a will. Under the general law a person who acquired a legal estate as a volunteer was subject to the equities which affected the donor or predecessor in title whether or not the donee had notice of those equities: Re Nisbet

[page 463]

and Potts’ Contract [1905] 1 Ch 391; Wilkes v Spooner [1911] 2 KB 473; 4.185. By contrast, the bona fide purchaser for value of the legal estate without notice had ‘an absolute, unqualified, unanswerable defence’ against the claims of a prior equitable interest holder: Pilcher v Rawlins (1872) 7 Ch App 259 at 269; 4.183C. There was no issue of conscience in such a case and equity declined to interfere with the rights of the bona fide purchaser. The position of a registered proprietor of Torrens title land which has been acquired as a volunteer has been the subject of some controversy in recent years. The Queensland and Northern Territory statutes expressly provide that a volunteer on registration obtains an indefeasible title: Qld, s 180; NT, s 183. In other jurisdictions, the matter has been decided as a question of statutory interpretation. The New South Wales Supreme Court has taken a different view to that of the Victorian and South Australian courts. Before the New South Wales Supreme Court’s decision in Bogdanovic v Koteff, (5.70C), it was generally accepted that the indefeasibility provisions did not protect a volunteer.58 The effect of denying indefeasibility to a volunteer is that the volunteer obtains a registered title that is as good as, but no better than that of the transferor. If the transferor’s title was subject to equities enforceable against the transferor in personam, for example, an interest arising under a resulting or constructive trust, the equity would survive the registration of the transfer and be enforceable against the volunteer. If the transferor’s registered title was defeasible for fraud, the volunteer would take only a defeasible title, with the result that a previous registered owner who had been deprived of land through the transferor’s fraud would still be able to set aside the transfers and

recover the land. The infirmities in the volunteer’s registered title would not affect a subsequent purchaser for value, who would obtain an indefeasible registered title free of any equities that bound the volunteer. Do the objects of Torrens system require extending the protection of indefeasibility to volunteers? A major object of the system is to facilitate market transactions by reducing the need for purchasers to make searches and inquiries to establish the quality of the title offered. To that end, the paramountcy and notice provisions provide that the registered owner takes free of prior equities. It is doubtful that volunteers rely on the register as a purchaser does, before accepting a gift. Baalman argued that the Torrens system is ‘predominantly a purchaser’s system’ and that there is no need to protect volunteers who do not bear the risks of financial loss faced by purchasers.59 Moore, Grattan and Griggs, 6th ed, [4.320] find no compelling reason for granting indefeasibility to volunteers. Tooher and Dwyer argue (116) that registered volunteers need security of title if they are to invest in improvements to their land.60

[page 464]

5.70C

Bogdanovic v Koteff (1988) 12 NSWLR 472 New South Wales Court of Appeal

Priestley JA: Young J dismissed a claim by Mrs Bogdanovic that she had a life interest in a house at 58 Annandale Street, Annandale. She has appealed to this Court against his decision. The appellant and her late husband were friendly with Mr S Koteff. When he lived in Leichhardt, they paid rent to him for living in part of his house there. When he bought a

house at 58 Annandale Street, Annandale, they moved with him and continued to pay him rent for the part of the house they used. The appellant’s husband died in 1977. The appellant continued to live in Mr Koteff’s house, as did he. Mr Koteff died in 1982. By his will he made Mr G Cklamovski his executor and his son Mr N Koteff his sole beneficiary. The house at 58 Annandale Street was subject to the provisions of the Real Property Act 1900. After probate of the will was granted to Mr Cklamovski a transmission application was duly registered pursuant to that Act, by which Mr N Koteff became the registered proprietor of the land. In May 1983, Mr N Koteff began proceedings by which he sought possession of the land from the appellant. She defended the proceedings, claiming that the property was held on trust for her on terms that she was entitled to reside there for the rest of her life, alternatively that she and Mr N Koteff were each beneficially entitled as tenants in common in the property in proportions to be determined by the court and alternatively again that she had a licence at law or in equity to remain living in the property until she died … For the respondent Mr N Koteff it was argued that if the Court found that the appellant had equitable rights in the land against Mr S Koteff, and if they were likewise enforceable against Mr S Koteff’s executor, nevertheless, upon the respondent’s becoming the registered proprietor of the land, without notice of those rights, then the Real Property Act 1900 operated so that the land was in his hands free of any such rights … The argument for the appellant recognised that on the face of s 42 and s 43 the respondent would hold his registered interest in fee simple free of any equitable rights of the appellant. It was submitted however that it appeared from other sections in the Act, and from various decisions, that s 42 and s 43 cannot be given the absolute force that in their isolation they appear to have. For this proposition Frazer v Walker [1967] AC 569 and King v Smail [1958] VR 273 were particularly relied on. It was then submitted that it had for many years been accepted by text writers of authority that although s 42 (and its equivalents in other jurisdictions which have Torrens System statutes) makes no express distinction between the measure of indefeasibility afforded to a volunteer and to a purchaser for value, the section was not intended (this being arrived at as a matter of construction) to give indefeasibility to the volunteer. A number of text writers, including Baalman in his Commentary on the Torrens System in New South Wales (1951) at 149– 50, have expressed that view, which is retained in the current descendant of Baalman, The Torrens System in New South Wales by Woodman & Nettle (1985) (looseleaf) at 347–8. Woodman & Nettle also retains (at those pages) Baalman’s comment (at 150): … The general result is that, on registration of a voluntary transfer, the transferee (as is the case of a volunteer under the general law) occupies no better position than did his transferor. But once registered, he occupies a position quite as good; his title is indefeasible against all claims except such as would have prevailed against his immediate predecessor. [page 465]

There are certainly authorities to support the appellant’s assertion. King decided in terms that the Victorian Torrens System Act, the Transfer of Land Act 1954, did not confer

upon a registered proprietor, being a mere volunteer, a title free from prior equities. Frazer also supports the appellant’s submission that there is some limitation upon the absoluteness of s 42 and s 43, but only in the sense that a person having rights in equity against a registered proprietor may procure orders against that registered proprietor which will bring about the result that the proprietor’s registered interest may be altered, as a result of equity, in acting upon his conscience, forcing him to submit to what in practical terms amounts to a correction of the register in favour of the person having the rights in equity against him. If, however, King represented the law in New South Wales at the times relevant to the present case, the appellant would be entitled to succeed. The reasoning in King, in summary, was that when the Victorian counterparts of ss 42, 43, 96, 124 and 135 were read together, the references in them to a purchaser for value (taking the New South Wales sections as examples, in ss 42(1)(c), 124(d), 124(e) and 135) showed a general intention not to confer the benefit of indefeasibility upon volunteers. King is the latest of the cases cited by Woodman & Nettle (at 347–8) in support of the view stated in the text. Frazer however, took the more limited view that the sections from which the general proposition was derived by those who said volunteers were not within the meaning of s 42, did not support such a general proposition, but created only such exceptions to the general operative part of s 42 as were specifically stated in the sections themselves. Speaking for the Privy Council, Lord Wilberforce said (at 580–1) that the indefeasibility of title concept: … is central in the system of registration. It does not involve that the registered proprietor is protected against any claim whatsoever; … there are provisions by which the entry on which he relies may be cancelled or corrected, or he may be exposed to claims in personam. These are matters not to be overlooked when a total description of his rights is required. But as registered proprietor, and while he remains such, no adverse claim (except as specifically admitted) may be brought against him. In New South Wales, at least two decisions at first instance have held the reasoning in Frazer applicable to the Real Property Act: see Mayer v Coe (1968) 88 WN (Pt 1) (NSW) 549; [1968] 2 NSWR 747 and Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497; [1969] 2 NSWR 146. In Breskvar v Wall (1971) 126 CLR 376 the High Court accepted Frazer as applicable to the Queensland Torrens System statute, the Real Property Act of 1877. Further, Barwick CJ, with whom Windeyer and Owen JJ both agreed, said that both Mayer and Ratcliffe correctly applied Frazer. None of the other four judges expressly mentioned the two New South Wales decisions, but it seems implicit in their discussion of the authorities that they were proceeding on the footing that the principles in Frazer would be likewise applicable to Torrens System statutes in other Australian States unless a particular statute happened to contain some special provision requiring a different conclusion. So far as I have been able to see there is no such significantly distinguishing provision in the Real Property Act. Thus, it seems to me, the central ideas of Frazer are required by the High Court’s decision in Breskvar to be applied by this Court in dealing with the present case. The broad proposition arrived at by Adam J in King, that a registered proprietor, being a mere volunteer does not obtain a title free from prior equities, must, following Breskvar, be replaced by a formulation based on what the High

Court said in that case. There is such a formulation in Windeyer J’s reasons. After referring to what Torrens himself said in his 1862 handbook on the Real Property Act of South Australia to the [page 466]

effect that his system left each freeholder in the same position as a grantee direct from the Crown, Windeyer J went on (at 400): … This is an assertion that the title of each registered proprietor comes from the fact of registration, that it is made the source of the title, rather than a retrospective approbation of it as a derivative right. I say that only to emphasise that the doctrine of an indefeasible title arising by registration was seen as the very essence of the Torrens system from its beginning. In the present case, the decision of the Privy Council in Frazer v Walker [1967] 1 AC 569 recognises that the registered proprietor has the legal property in the land, subject only to equities and such interests as the Act expressly preserves. Similar statements were made by other members of the court, see Barwick CJ (at 385), Menzies J (at 397), Walsh J (at 405) and Gibbs J (indirectly) (at 413). In the present appeal the appellant has not been able to point to anything in the New South Wales Act preserving the rights she had in regard to the land against the registered proprietor. She could have enforced those rights against Mr S Koteff and, I would assume, against his executor. But if knowledge of the appellant’s interest by Mr N Koteff before he became registered proprietor would enable her to assert her rights against him (a matter upon which it is unnecessary in this case to express any opinion) the materials earlier referred to show there is no basis for holding Mr N Koteff knew anything which would put him on notice of those rights. Thus there was no material upon which the appellant could attempt to found an argument of any personal right against Mr N Koteff, nor was there any provision in the Real Property Act on which she could rely to prevent s 42 so operating that Mr N Koteff held his interest in the land as registered proprietor of an estate in fee simple ‘absolutely free’ from any estate or interest in her. It seems to me that the provisions of the Real Property Act and the interpretations put on equivalent legislation by decisions which this Court should follow, lead to the result that the appellant’s appeal must be dismissed with costs. [Hope and Samuels JJA concurred in the judgment of Priestley JA.] Appeal dismissed.

5.71

In Bogdanovic v Koteff, the New South Wales Court of Appeal

declined to follow King v Smail [1958] VR 273, in which the Supreme Court

of Victoria held that an interest acquired as a volunteer by the registered proprietor was subject to the equities which affected the transferor. Adam J rested his reasoning partly on the paramount effect of s 43 and on the rationes in Gibbs v Messer [1891] AC 248 and Clements v Ellis (1934) 51 CLR 217; 23 ALR 62. The Court of Appeal concluded that following the High Court’s acceptance of immediate indefeasibility in Breskvar v Wall, the line of reasoning used by Adam J can no longer be supported as a basis for the decision: see 5.48C. The issue was further considered in Rasmussen v Rasmussen [1995] 1 VR 613 in which the Victorian Supreme Court, in its turn, rejected the New South Wales approach in favour of a broader contextual and purposive interpretation.

[page 467]

5.72C

Rasmussen v Rasmussen [1995] 1 VR 613 Supreme Court of Victoria

[The plaintiff, Ernest John Rasmussen, claimed a constructive trust in his favour over four blocks of farming land which were registered as belonging to his son, Harold Edgar Rasmussen, the defendant. The plaintiff claimed that the constructive trust arose out of the circumstances of a farming partnership involving members of the Rasmussen family and, in particular, the affairs of Paul Rasmussen, the plaintiff’s father who, upon his death, bequeathed the disputed blocks of farming land to his widow for life and then to Harold Rasmussen. Much of the judgment was concerned with whether there was a constructive trust. After detailed consideration of the evidence, Coldrey J held that there was a constructive trust in favour of Ernest Rasmussen over one of the four blocks and then considered the claim that even if a constructive trust existed it could not be enforced against Harold because of the indefeasibility provisions of the Transfer of Land Act 1958. It was accepted that there was no fraud within the meaning of the fraud exception to indefeasibility.] Coldrey J: … In King v Smail [1958] VR 273 Adam J had occasion to consider these provisions in relation to the indefeasibility of title accorded to a volunteer as distinct from a purchaser for value. In that case the registered proprietor made a gift of his interest in certain land to his wife prior to entering into an agreement in favour of the respondent as trustee for his creditors. The respondent lodged a caveat claiming an equitable estate in fee simple under the deed of arrangement in the land in question. The caveat having been lodged subsequently to the instrument of transfer did not prevent the registration of the wife applicant as transferee of the husband’s interest in the land and she became the registered proprietor of the entirety. The applicant applied to have the caveat removed. His Honour observed at 276: Although s 42 of the Transfer of Land Act 1954 in itself affords no ground for distinguishing between the volunteer and the purchaser for value and would appear to give paramount effect to registered title in either case, other sections in the Act draw a distinction between the volunteer and the purchaser for value and appear to justify the conclusion that upon the registration of dealings subsequent to initial

registration under the Act, it is purchasers for value only who were intended to have the benefit of s 42. Reference is made to s 44(2), s 52(4) and s 110(3). In discussing the operation of s 43 Adam J stated at 277–8: In the case of registration of title subsequent to initial registration … it is only registered proprietors who obtain protection from s 43 who gain indefeasible title under s 42 … If the position be that mere volunteers, though registered, gain no protection from s 43, by parity of reasoning they should be held to fall outside the indefeasibility provision of s 42. Are these mere volunteers then within the protection of s 43? In my opinion — clearly no. The protection given by s 43 to a registered proprietor, ie a legal owner of land, against the consequences of notice actual or constructive of trusts of equities affecting his transferor has point where the legal owner is a purchaser for [page 468]

value. A purchaser of a value has by virtue of this section immunity from prior equities of a bona fide purchaser of the legal estate without notice under the general law. On the other hand, to confer on a mere volunteer immunity from the consequences of notice would be illusory, for as already stated the volunteer was, on well-settled rules of equity, subject to equities which affected his predecessor in title whether with or without notice of such equities. Had it been intended by s 43 to relieve a mere volunteer from equities which affected his transferor, the section would have been differently worded as, for example, by providing the persons dealing etc with registered proprietors would not be affected by any trust or unregistered interest any rule of law or equity to the contrary notwithstanding. The decision of Adam J has attracted the approval of text writers … However in Bogdanovic v Koteff (1988) 12 NSWLR 472, the New South Wales Court of Appeal declined to follow King’s case. The court held at 480 that following the decision of the High Court in Breskvar v Wall (1971) 126 CLR 376 (in which the decision of the Privy Council in Frazer v Walker [1967] AC 569 was cited with approval): The broad proposition arrived at by Adam in King, that a registered proprietor being a mere volunteer does not obtain a title free from prior equities … was no longer good law. It is to be noted however that Breskvar and Frazer were each concerned not with the situation of a mere volunteer but with that of a purchaser for value. In neither case was the judgment of Adam J considered by the court. Moreover in the High Court decision of Bahr v Nicolay, which is not cited in Bogdanovic, there are passages in various of the judgments that appear to confine the protective operation of the relevant Transfer of Land Act sections to purchasers for value. (Again there is no reference to King v Smail.)

[In Bahr v Nicolay] At 613 Mason CJ and Dawson J commented upon ss 68 and 134. After quoting portion of the observations of the Privy Council in Gibbs v Messer [1891] AC 248 at 254, their Honours continued: Neither the two sections nor the principle of indefeasibility precludes a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself: Breskvar v Wall. Thus, an equity against a registered proprietor arising out of the transaction taking place after he became registered as proprietor may be influenced against him: [citation]. So also with an equity arising from conduct of the registered proprietor before registration [citation], so long as the recognition and enforcement of that equity involves no conflict with ss 68 and 134. Provided that this qualification is observed, the recognition and enforcement of such an equity is consistent with the principle of indefeasibility and the protection which it gives to those who deal with the registered proprietor on the faith of the register. [Emphasis added]. Wilson and Toohey JJ stated at 637: It is nearly a century since, in Gibbs v Messer, the Privy Council described the Torrens system in these terms: The object is to save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of their author’s title, and to satisfy themselves of its validity. That end [page 469]

is accomplished by providing that every one who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of the author’s title. That statement still stands as an exposition of the nature and purpose of the Torrens system, though ‘bona fide’ must be equated with ‘in the absence of fraud’ and ‘indefeasibility’ is a word that does not appear in all the Torrens statutes of this country. Nevertheless, in accepting the general principle of indefeasibility of title, the Privy Council in Frazer v Walker made it clear that ‘this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant’. [Emphasis added] Brennan J at 652–3 remarked (after quoting the classic statement of the Privy Council in Gibbs v Messer to which reference has already been made): The consequence is that, whereas equity would subject the interest of a purchaser of land to an antecedent unregistered interest of which the purchaser has notice, the

purchaser who takes with notice of an antecedent interest but who becomes registered under the Act without fraud takes free of that interest [cases cited]. Registration of the transfer is not fraudulent merely because the transferee knows that an antecedent interest of which he has notice will be defeated thereby … However, the title of a purchaser who not only has notice of an antecedent unregistered interest but who purchases on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation. In my view the reasoning in the High Court decisions does not destroy the principles enunciated in King’s case. That case is a carefully reasoned judgment and, with respect, I prefer it to that of the New South Wales Full Court in Bogdanovic. It is to be noted that Bogdanovic contains no discussion of the rationale for distinguishing between the indefeasibility of title of a purchase for value as distinct from a mere volunteer.

5.73

In a Queensland case, it was held by a trial judge that a caveator’s

rights would be unaffected by a transfer of the land to a volunteer. An appeal was allowed on another point, and the Court of Appeal made no comment on the volunteer issue: Washington Constructions Co Pty Ltd v Ashcroft [1982] Qd R 776. When the Queensland Real Property Acts were consolidated and re-enacted as the Land Title Act 1994 they included a new provision, s 180, which provides that the benefits of indefeasibility apply to an instrument whether or not valuable consideration was given. The reasons for the amendment, as recommended by the Queensland Law Reform Commission, were to minimise the number of exceptions to indefeasibility, and to avoid the question of whether a transferee was a volunteer in cases of sales at an undervalue.61

[page 470]

5.74

The question whether volunteers do or should obtain the benefits of

immediate indefeasibility upon registration continues to admit of no uniform answer. The divergence between the states may be partly due to differences in the wording of the statutes, although in all statutes some references to purchasers can be found. Section 69 of the South Australian Act (the paramountcy provision) refers to ‘a registered proprietor who has taken bona fide for valuable consideration’. In Adelaide Congregation Jehovah’s Witnesses Inc v Pegasus Leasing Ltd (SC(SA), Olsson J, 1996, No SCGRG of 1993, unreported), Olsson J affirmed earlier authorities that held that indefeasibility is not conferred on a mere volunteer. In Valoutin v Furst (1998) 154 ALR 119, Finkelstein J preferred the reasoning and the result in King v Smail and Rasmussen v Rasmussen.62 In Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) v Registrar of Titles [2001] WASC 201, Owen J rejected this approach and was persuaded by the reasoning in Bogdanovic v Koteff. A recent review in New Zealand recommended legislation to make it clear the registered title of a volunteer should be indefeasible to the same extent as a purchaser for value.63 The report suggests that the fraud exception to indefeasibility (which is of wider scope in New Zealand (5.98)) provides a safeguard against the transfer of land to a volunteer for the purpose of defeating an unregistered interest of which the volunteer is aware. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 236 ALR 209 at [198], the High Court heard argument on the status of the registered volunteer under the indefeasibility provisions. In a unanimous joint judgment, the court stated said that the registered proprietors would prevail over the appellants even if they were volunteers. No reasons for this

conclusion were given, and no authorities were cited. The statement was clearly obiter, as the registered proprietors were found to be purchasers for value. Tooher and Dwyer (at 116) suggest that the court’s remark was more likely directed to a different question, namely, the operation of the first limb of the rule in Barnes v Addy (1874) LR 9 Ch App Cas 224. More recently, in Arambasic v Veza (No 4) (2014) 17 BPR 33,101, where a transfer was made to the plaintiff for consideration of $1, it was held that the transferee was a volunteer without fraud, and following Bogdanovic v Koteff received an immediately indefeasible title. Despite acknowledging that the law in New South Wales was now clear, Sackville AJA added that ‘I think there is much to be said for the Victorian view’: at [164].

Exceptions to indefeasibility 5.75

There are important exceptions to the general principle that the

registered proprietor has an indefeasible title to land, subject only to the encumbrances notified on the register. Hinde identifies five main categories of exceptions to the indefeasible title of the registered proprietor: Hinde, ‘Indefeasibility of Title since Frazer v Walker’ in Centennial Essays, 38–40: express exceptions created by the Torrens legislation itself; the Registrar’s power to correct the register in certain circumstances: see 5.108; specific exceptions imposed by other statutes such as those authorising the

compulsory acquisition of land by public authorities and those dealing with encroachment of buildings;

[page 471]

overriding statutes, which on general principles of statutory interpretation affect the Torrens legislation by subjecting the registered proprietor to interests not noted on the register: see 5.150ff; and exceptions permitted by the courts, such as ‘the rights of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant’: Frazer v Walker [1967] 1 AC 569 at 585; [1967] 1 All ER 649 at 655. 5.76

Limitations inherent in the title of a registered proprietor may be

regarded as exceptions to indefeasibility or merely as defining the scope or ambit of indefeasibility. Consider, for instance, the status of covenants in a registered lease: see 5.55Cff. Similarly, the status of a volunteer in Victoria and South Australia could be seen as indicative of an exception to indefeasibility or of its ambit. 5.77

The most obvious exception to indefeasibility applies where the

registered proprietor has been guilty of fraud. The indefeasibility and notice provisions are so worded that the title of the registered proprietor cannot prevail against the interest of the person defrauded. Consistently with the spirit of the Torrens system and, in particular, the notice provision, the

equitable doctrines of constructive fraud have, at least until recently, had little impact on the judicial interpretation of the fraud exception to indefeasibility. In general, there must be something in the nature of ‘personal dishonesty or moral turpitude’: Butler v Fairclough (1917) 23 CLR 80 at 90 per Griffith CJ. However, the development of the modern constructive trust and the equitable concept of unconscionability have expanded the in personam exception to indefeasibility mentioned in Frazer v Walker [1967] 1 AC 569; [1967] 1 All ER 649. This development has the potential to blur the distinction between it and the fraud exception: Bahr v Nicolay (1988) 164 CLR 604; 5.101C. For this reason the in personam exception is discussed in 5.100 immediately following the discussion of the fraud exception and before discussion of other express statutory exceptions.

The fraud exception 5.78C

Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 Privy Council

[In 1894 the Sultan of Selangor, acting under the Selangor Land Code 1891, granted about 322 acres of land to Eusope. Subject to an annual rent in favour of the Sultan, Eusope became the registered proprietor of the land under the provisions of the Registration of Titles Regulations 1891, which established a Torrens system of land registration in Selangor. After a series of transactions Loke Yew became the owner of 58 of those 322 acres subject to the payment of an annual rent to Eusope. None of the Malay documents by which he acquired his interest was registered. In 1910 the respondents, who knew of these earlier transactions, negotiated with Eusope for

the purchase of the whole 322 acres comprised in the original grant. In June 1910 the respondents agreed to purchase from Eusope the whole 322 acres except

[page 472]

Loke Yew’s 58 acres. Eusope refused to sign unless the respondents undertook not to disturb Loke Yew’s possession. The respondents’ agent, Mr Glass, gave a verbal assurance to this effect and also signed a document stating that he would have to make his own arrangements as to Loke Yew’s land. The Privy Council found that this was a statement of present intention falsely and fraudulently made for the purpose of inducing Eusope to execute a transfer of the whole 322 acres. Eusope, upon receipt of the document, signed the transfer of the whole 322 acres and ultimately the respondents became registered as proprietors of the land. On 22 June 1910, the respondents offered Loke Yew a sum substantially less than the value of his land in return for his surrender of all rights to the land. The offer was declined. In August 1910, the respondents instituted this action, claiming possession of the land as registered proprietors of the whole 322 acres. Loke Yew claimed he was entitled to occupy the 58 acres by virtue of rights acquired under the Malay documents. He pleaded that the respondents had taken their transfer with full knowledge of his rights and, further, that their conduct amounted to fraud so that, under the Registration of Titles Regulations 1891 s 7 (fraud being an exception to indefeasibility) the certificate of title was not conclusive in their favour. Loke Yew claimed that the respondents’ registered title should be rectified and the land transferred to him by a properly executed transfer. The Judicial Commissioner found in Loke Yew’s favour and ordered the respondents to execute a transfer of the 58 acres to Loke Yew. On appeal, the Court of Appeal of Selangor made an order for possession in favour of the respondents. The court held that the respondents had an indefeasible certificate of title and the Malay documents were nullities which could confer no rights on Loke Yew. Loke Yew appealed to the Privy Council. The judgment of their Lordships was delivered by Lord Moulton:] Lord Moulton: … Their Lordships have no doubt that the true conclusion to be drawn from the evidence is that the above statement of Mr Glass to Haji Mohamed Eusope was intended to be and was a statement as to present intention as well as an undertaking with regard to the future, and that that statement was false and fraudulently made for the purpose of inducing Haji Mohamed Eusope to execute a conveyance which in form

comprised the whole of the original grant, and that but for such fraudulent statement that conveyance would not have been executed. At that time it is evident that Mr Glass intended to eject Loke Yew if he did not accept whatever sum he chose to offer, and that therefore he did not intend to purchase Loke Yew’s rights. It is also clear that it was understood, and intended by Mr Glass that it should be understood, that the document above set out was written (to use the words of one of the witnesses) ‘for the security of the vendor to show that he was not selling Loke Yew’s land’, and their Lordships are of opinion that the document carries out that intention. [The judgment then discussed the purchase price stated in the transfer. Their Lordships felt that it was clear from the amount actually paid that Loke Yew’s lands were not included in the sale.] Having thus possessed himself of a formal transfer of the original grant to himself as trustee for the Port Swettenham Rubber Co Ltd, Mr Glass procured its registration, and thereupon the solicitors for the plaintiff wrote to Loke Yew the following letter: Kuala Lumpur, Selangor Federated Malay States 22 June 1910 [page 473]

Dear Sir, On behalf of the Port Swettenham Rubber Co Ltd, we are instructed to inform you that our clients have bought the land comprised in Grant 675, and we are further instructed to ask you to give directions to your coolies to cease from entering on this land and tapping the trees thereon. We are informed that you have an agreement of some nature with the former owner of this land, and that though our clients do not admit, and in fact deny, that you have the right against any person whatsoever under this agreement, yet to prevent any unpleasantness our clients are willing to pay you the sum of $20,000 if you will surrender to them any rights you claim under the said agreement. Yours faithfully Hewgill and Day Towkay Loke Yew and on the defendants’ refusing to vacate the land the plaintiffs brought the present action for ejectment. Their Lordships therefore find that the formal transfer of all the rights under the original grant was obtained by the deliberate fraud of Mr Glass. He was aware that he could not obtain the execution of a transfer in that form otherwise than by fraudulently representing that there was no intention to use it until the plaintiff company was able to do so honestly by having acquired Loke Yew’s sub-grants by purchase, and he therefore fraudulently made such representation, and thereby obtained the execution of the

transfer. It is an important fact to be borne in mind that although this fraud was clearly charged in the defence, Mr Glass was not called at the trial, nor was his absence accounted for. The inference to be drawn from this is obvious and is entitled to great weight. The case of the plaintiffs as argued before their Lordships rested mainly on the effect of registration. At the date of the writ the transfer to the plaintiffs was registered while the sub-grants of Haji Mohamed Eusope held by Loke Yew were not. Counsel for the plaintiffs therefore argued that under the provisions of the Registration of Titles Regulation the plaintiffs possessed an indefeasible title to the land, and that under the provisions of s 4 all the sub-grants were ‘null and void and of none effect’. A memorial of the transfer had been made upon the duplicate grant under the provisions of s 28, and they contended that that was equivalent to a certificate of title under s 6 and that by virtue of s 7 this was ‘conclusive evidence that the person named therein as proprietor of the land is the absolute and indefeasible owner thereof’. The conclusion to which their Lordships have come as to the transfer having been obtained by fraud brings the case within the exception of s 7 and is therefore a sufficient answer to these arguments. But their Lordships are of opinion that for other reasons they are irrelevant and beside the mark. They take no account of the power and duty of a court to direct rectification of the register. So long as the rights of third parties are not implicated a wrong-doer cannot shelter himself under the registration as against a man who has suffered the wrong. Indeed the duty of the court to rectify the register in proper cases is all the more imperative because of the absoluteness of the effect of the registration if the register be not rectified. Take, for example, the simple case of an agent who has purchased land on behalf of his principal but has taken the conveyance in his own name and in virtue thereof claims to be the owner of the land whereas in truth he is a bare trustee for his principal. The court can order him to do his duty just as much in a country where registration is compulsory as [page 474]

in any other country, and if that duty includes fresh entries in the register or the correction of existing entries it can order the necessary acts to be done accordingly. It may be laid down as a principle of general application that where the rights of third parties do not intervene no person can better his position by doing that which it is not honest to do, and in as much as the registration of this absolute transfer of the whole of the original grants was not an honest act under the circumstances it cannot better the position of the plaintiffs as against the defendant and they cannot rely on it as against him when seeking to enforce rights which formally belong to them only by reason of their own fraud. It must be remembered that in the present case the defendant immediately on the bringing of the action applied to rectify the register and that such rectification only awaits the event of this suit. His right to it is set up in the defence, so that he has taken all the necessary steps to obtain the full relief to which he is entitled …

5.79

The Privy Council in this case reinstated the order of the Judicial

Commissioner at first instance, the order being that the company should execute a transfer of the 58 acres to Loke Yew, the relief he had asked for in his pleadings. In other words, the order was not one for the direct rectification of the register but rather was directed against the company itself — an in personam order in the manner of those issued by courts of equity. Harrison, 613–14, suggests that this order was made because the company’s fraud gave Loke Yew what would be, on general principles, an equity of rectification entitling him to an order against the company. If the fraud by which the registered proprietor became registered was one which made ‘the dealing void ab initio’ (as with a forgery) the appropriate order would have been one for direct rectification of the register since the registrant acquires ‘no interest’. Harrison argues that since the Act does not stipulate the precise consequences of fraud by the registered proprietor, it is necessary to look to general law principles for the answer. Was there any substantial objection in this case to an order for direct rectification of the register?64 5.80

In Assets Co Ltd v Mere Roihi [1905] AC 176 at 210, Lord Lindley,

delivering the advice of the Privy Council, made some observations on the meaning of fraud for the purposes of the Torrens legislation: [T]he fraud which must be proved in order to invalidate the title of a registered purchaser for value … must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly

ascribed to him. A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon.

What is meant by knowledge ‘brought home’ to the registered proprietor or his or her agents? What if the solicitor for the registered proprietor, at the time the land was being purchased, became aware of a fraudulent scheme perpetrated by the vendor on a third party who claimed

[page 475]

an interest in the land? If the solicitor fails to advise his or her client (the registered proprietor) of the fraudulent scheme, should that be enough to deprive the registered proprietor of the benefit of the indefeasibility provisions? 5.81

A bank officer forged the signature of an applicant for a mortgage on

an internal bank document which was used by a regional office of the bank in considering whether to approve the loan. The High Court dismissed the claim that the mortgage could be set aside for fraud by the bank accepting that the document ‘was not prepared for, and was not used for the purpose of, and did not have the effect of, harming, cheating or otherwise being dishonest’ to the mortgagor: Bank of South Australia v Ferguson (1998) 151 ALR 729. The fraud must be ‘operative’ in the sense that it operated on the mind of the person said to be defrauded and to have induced detrimental action by that person. In the course of their joint judgment, Brennan CJ,

Gaudron, McHugh, Gummow and Kirby JJ made the following observations about the nature of the fraud exception (at 732): Not all species of fraud which attract equitable remedies will amount to fraud in the statutory sense. The distinction may be illustrated as follows. In some circumstances, equity subjects the interest of a purchaser of unregistered land to an antecedent interest of which the purchaser has notice. However, in respect of land to which the Act applies, registration of a transfer is not fraudulent in the statutory sense required to qualify the operation of the doctrine of indefeasibility, merely because the transferee knows that registration will defeat an antecedent unregistered interest of which the transferee has notice. The points of significance for the present litigation are that (i) statutory fraud embraces less, not more than the species of fraud which, at general law, founds the rescission of a conveyance; and (ii) statutory fraud is not itself directly generative of legal rights and obligations, its role being to qualify the operation of the doctrine of indefeasibility upon what would have been the rights and remedies of the complainant if the land in question were held under unregistered title.

Fraud distinguished from carelessness 5.82

In Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1

VR 188, a mortgage was fraudulently executed by an improper affixation of the company seal by a person who was not a director of the company. The mortgagee had no knowledge of the irregularity and the mortgage was registered. It was held by the Court of Appeal of the Supreme Court of Victoria that the mortgagee was not guilty of fraud. The mortgagor had submitted that the mortgagee’s solicitor had acted with reckless indifference to the irregularity and further inquiries would have revealed the fraudulent activity. Hayne JA (with whose judgment Brooking and Tadgell JJA agreed) ruled that ‘reckless indifference’ and ‘wilful blindness’, although convenient

shorthand expressions to describe some cases of fraud, did not extend to embrace cases of negligence or want of due care in making inquiries. Consider the conduct of the mortgagees and their agents in Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202; Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; and Russo v Bendigo Bank Ltd; 5.92C. In each case, the mortgagee’s agents or employees might have detected the fraud and prevented the loss if they had taken reasonable steps to check the identity of the person purporting to deal as registered proprietor and that the mortgage was properly executed and attested. Due to immediate indefeasibility and the narrow scope of the fraud exception, the loss resulting

[page 476]

from the fraud fell on the registered proprietors rather than on the mortgagees. In MDN Mortgages Pty Ltd v Caradonna (2010) 15 BPR 29,145 the mortgagee took an indefeasible title because there was no evidence mortgagee knew that the documents were forged or irregular and had not refrained from enquiry at relevant times: at [255]–[259]. Do you think the mortgagees and their agents might have taken more care to prevent the fraud if the transaction had been at the mortgagee’s risk, rather than at the risk of the registered owner? Given the competitive pressures on mortgage lenders to cut their mortgage processing costs, is it realistic to expect them to adopt

standards of inquiry that are apt to prevent identify fraud in mortgage transactions? In Young v Hoger [2002] ANZ ConvR 237; [2001] QCA 453, the Queensland Court of Appeal overturned a finding of wilful blindness amounting to fraud on the part of the mortgagee’s solicitor, stating that ‘an unacceptable explanation that he was naïve is at least as consistent with a desire to explain away his lack of care or competence as with his being dishonestly involved in the fraud on the first respondent’: at [25].65 5.83

The registered proprietor who suffers loss through the registration of

a forged transfer or mortgage may be entitled to monetary compensation from the state; see 5.199ff. Where a forged mortgage has been registered, the compensation may not be paid in time to enable the registered owner to discharge the mortgage and avert a mortgagee’s sale. In Hilton v Gray [2007] QSC 401, the Registrar was willing to indemnify the registered proprietor if a forged mortgage was found to be indefeasible. The court gave the mortgagee an order for recovery of possession and judgment for the sum due under the mortgage, but stayed the orders to allow the registered owner a reasonable time to pay the sum. In Royalene Pty Ltd v Registrar of Titles (2008) Q ConvR ¶54-689; [2008] QSC 64, the court made orders by which the compensation payable by the state would allow the registered proprietor to redeem the mortgage.

Statutory provisions to impose a duty on mortgagees

5.84

In 2005, Queensland amended its legislation to address concerns

about lax identity-checking practices on the part of some mortgage lenders, that were contributing to the incidence of losses through fraud. Section 185(1A) denies indefeasibility to mortgagees who, in relation to a mortgage, transfer or mortgage or amendment, fail to take reasonable steps to check the identity of the person purporting to sign as mortgagor: Qld, s 185(1A). A mortgagee is deemed to take reasonable steps if it complies with the practices in the Land Title Practices Manual: Qld, s 11A(1)–(3). Similar requirements apply on transfer of a mortgage: s 11B(1)–(3). A mortgagee seeking the protection of indefeasibility bears the onus of proving that it complied with the provisions: Qld, s 185(5). A mortgagee who fails to comply and suffers loss or deprivation due to a forgery is not entitled to compensation from the State: s 189(1)(ab).66 5.85

Similar provisions were enacted in New South Wales in 2009, and

Victoria in 2014. From 1 November 2011, a mortgagee must before lodging a mortgage for registration take

[page 477]

reasonable steps to ensure that the person who, or on whose behalf, the mortgage was executed is or will become the registered proprietor: NSW, s 56C(1). A mortgagee is considered to have taken reasonable steps if the mortgagee has taken the steps prescribed by the regulations: NSW, s 56C(2). The Registrar-General is empowered to cancel the recording of the mortgage

in the register if the Registrar-General is of the opinion that the execution of the mortgage involved fraud against the registered proprietor and that the mortgagee has either failed to comply with s 56C(1), or had actual or constructive notice that the mortgagor was not the registered owner of the land: s 56C(6). A similar provision applies to the transferee of a mortgage: NSW, s 56C(8). The compensation provisions have been amended to provide that compensation is not payable in relation to any loss or damage suffered by a mortgagee or transferee of a mortgage arising from its failure to comply with s 56C or from the cancellation of a recording by the Registrar-General under s 56C(8): NSW, s 129(2)(j). In Victoria, the Transfer of Land Act 1958 was amended in 2014 by imposing a general duty on mortgagees to take reasonable steps to verify the authority and identity of the mortgagor in relation to the creation, variation or transfer of a mortgage: ss 87A(1), 87B(1). Reasonable steps are those which the registrar has specified pursuant to the requirements of s 106A, or which are set out in the participation requirements of Electronic Conveyancing National Law (Victoria), to be taken before registration will occur: ss 87A(2), 87B(1). Power is conferred on the Registrar to refuse to register, or remove from the register any mortgage which has been executed without the mortgagee having taken those reasonable steps: ss 87A(3), 87B(3).

Fraud and agency 5.86

In Assets v Mere Roihi [1905] AC 176 at 210, Lord Lindley, giving

the judgment of the Privy Council, stated that the fraud that will impeach the registered title must ‘be brought home to the person whose registered title is impeached or to his agents’. In Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576; 90 WN (NSW) (Pt 1) 529, in a case dealing with the registration of a forged mortgage and a forged discharge of mortgage, Street J discussed the scope of the agency principle (at 537–9): The essential question which must be determined in respect of the grant of the mortgage and its discharge respectively is whether the fraud associated therewith ‘… can be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it can be brought home to him and his agents’. In this extract from their judgment their Lordships encompass two alternative situations. The first is one in which the fraud is actually committed by (‘brought home to’) the person whose title is impeached or his agent. And the second is one in which he or his agents have knowledge that a fraud has been committed whereby the previous registered proprietor is being deprived of some or all of his interests. Each of these two concepts is capable of being applied in accordance with settled principles of law. The first, namely fraud on the part of the person whose registered title is impeached or his agents, involves the application of the ordinary principles governing the responsibility of a principal for the fraud of his agent. If the fraud in question is the immediate act of the person whose title is impeached, then the position is not open to doubt. If, however, the fraud is that of an agent for the person whose title is impeached, the principle of respondeat superior, with all its limitations and qualifications, is applicable. The matter is to be tested by investigating whether or not the principal is, in the particular circumstances under consideration, liable to the person who has been defrauded for the acts of the agent. On this topic one need not

[page 478]

delve more deeply than the general statement in Bowstead on Agency, 13th ed, 242: ‘An act of an agent within the scope of his actual or apparent authority does not cease to bind his principal merely because the agent was acting fraudulently and in furtherance of his own interests. This

principle is general, applicable to cases of actual and apparent authority; in tort, in the disposition of property; a similar result even appears in criminal cases. But the mere fact that the principal, by appointing an agent, gives that agent the opportunity to steal or otherwise to behave fraudulently, does not, without more make him liable; the agent must normally be acting within the scope of his actual or apparent authority for the principal to be responsible’. The second situation contemplated by the Privy Council in connection with the invalidating effect of fraud is one which involves the person whose title is impeached or his agents having knowledge of a fraud in the transaction under investigation. In this instance considerations of respondeat superior do not arise; it is knowledge that a fraud has been committed by someone for whom he is not responsible that exposes the title of the registered proprietor to challenge. Such knowledge in the registered proprietor, if existing in him prior to the consummation of the transaction under investigation, is squarely within the exception for fraud in s 42 to which their Lordships referred. The Privy Council have, however, also left open, as a basis for going behind the register, knowledge on the part of the agents of the registered proprietor that fraud has tainted the transaction from which the registered title is about to derive. But (and here I acknowledge I am putting a gloss on the words used by the Privy Council), the mere fact that the existence of a fraud is known to an individual who is, in the transaction under consideration, the agent for some purposes of the person whose title is impeached will not of itself affect the indefeasibility of the title when registered. It is not enough simply to have a principal, a man who is acting as his agent, and knowledge in that man of the presence of a fraud. There must be the additional circumstance that the agent’s knowledge of the fraud is to be imputed to the principal. This approach is necessary in order to give full recognition to (a) the requirement that there must be a real, as distinct from a hypothetical or constructive, involvement in the fraud by the person whose title is impeached and (b) the extension allowed by the Privy Council that that the exception of fraud in s 42 can be made out if ‘knowledge of it is brought home to him or his agents’. This line of reasoning takes one into the well-known field of vendor and purchaser law dealing with the effect on a purchaser of defects in his vendor’s title. Considerations of constructive notice are to be placed aside as not meeting the requirement of knowledge of fraud. If one finds knowledge in the person whose title is impeached, then that meets the requirements of the passage I have quoted from the judgment of the Privy Council. And if one finds, not express knowledge in the principal, but express knowledge in his agent, such that, within settled principles, that express knowledge is to be imputed to the principal, that is to say, the person whose title is impeached, then that also will fall within the exception enunciated by the Privy Council. Although the Privy

Council has advisedly, as it seems to me, used the word ‘knowledge’ and not the word ‘notice’, the ordinary principles of vendor and purchaser law relating to the imputation of notice to the purchaser will equally cover the imputation of knowledge for presently relevant purposes. The principle of imputed notice is stated in Williams on Vendor and Purchaser, 4th ed, 306, in the following terms: ‘The rule that a purchaser is affected by notice to his counsel, solicitor or other agent, seems to rest on this ground: When a man employs such agents to transact his business he holds them out to the world as standing in his own place and representing himself; in fact, as being identical for the purpose of the business which he has authorised them to transact, with his own person. He must therefore accept this representation of himself by another, which is the consequence of his own act in employing an agent, as complete for all the purposes of such business and

[page 479]

cannot justly be permitted to sever the identity of person created by him as to repudiate notice or knowledge given to or acquired by the agent, but not in fact communicated to the principal. It is therefore said that, where the relation of principal and agent and the duty of the agent to communicate any matter to the principal have been established, an irrebuttable presumption arises that the agent communicated the matter to the principal; hence evidence is not admissible to prove that the agent did not in fact communicate his knowledge to the principal’. To this rule there is an important exception that has particular relevance to the present case. The exception is stated by Williams immediately following the passage I have just quoted, namely: ‘The rule is, however, subject to the exception that if the matter, of which it is sought to affect the principal with notice, is the agent’s own fraud or fraudulent dealing or some equity arising thereout, or if the agent during his time of employment as such, and when he acquired the information in question, was a party to a scheme of fraud, then the principal is permitted to give evidence to rebut the above presumption and prove his ignorance of the matter; for the supposition that the agent communicated his fraud to the principal is too improbable to be entertained even by a court of equity’.

5.87

The reasoning in Schultz v Corwill Properties Pty Ltd was questioned

by a five-member bench of the New Zealand Supreme Court in Dollars &

Sense Finance Ltd v Nathan [2008] NZSC 20. A finance company agreed with Nathan to lend him a sum of money on the security of a mortgage over his parents’ home, and gave him the instruments to arrange execution by them. Nathan forged his mother’s signature on the instrument of mortgage, which the finance company registered without knowledge of the forgery. The court held that the finance company constituted Nathan as its agent for the purpose of obtaining the mortgagors’ signatures. The question was whether Nathan’s forgery of his mother’s signature was an act done within the scope of agency. Blanchard J, giving the judgment of the Supreme Court, said that the question was not whether the agent’s conduct was authorised, but whether it ‘fell within the scope of the task that the agent was asked to perform’: at [39]. A fraudulent act may still be within the scope of agency whether done by the agent entirely for his or her own benefit, or for the benefit of both the agent and the principal. The test for agency is whether the agent’s acts were so connected to the tasks he or she was asked to do that they could be regarded as a mode of performing them. The forgery was done to achieve the task that Rodney had been asked to undertake, namely, to obtain a registrable mortgage, and the mortgagee was therefore defeasible for his fraud. Blanchard J said that it was not relevant to ask whether the knowledge by Rodney of his own fraud should be imputed to the mortgagee: at [43]. 5.88

In Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 316 ALR 111

the registered proprietor’s husband was fraudulent by breaching his fiduciary duties as director. He acted on her behalf, giving instructions to his solicitor to register the transfer of the corporation’s land to himself and his wife as

joint tenants. The primary judge and High Court (at [38]), overturning the New South Wales Court of Appeal on this point, held that there was no evidence to establish that she had either made him her agent, or if so, what the scope of the agent’s authority was, or that knowledge of his fraud was to be imputed to her.67 In Rasch Nominees Pty Ltd v Bartholomaeus (2013) 115 SASR 473, a vendor contracted to sell land to two separate purchasers. The primary judge found that the vendors acted dishonestly, and in

[page 480]

a misleading and deceptive manner towards the first purchasers. The conveyancer acting for the second purchaser was aware that deposits had been taken for both contracts, and that both purchasers were keen to settle. It was held that he was entitled to act promptly to settle the second sale, and in the absence of evidence that he was aware of the deceptive and misleading conduct, he was not fraudulent, so his principals were not. 5.89

Institutional mortgagees are corporate entities which act through

servants, agents and contractors. The restrictive approach to the scope of agency in Schultz v Corwill makes it more difficult to ‘bring home’ to mortgagees the fraud of their agents. Moreover, changed mortgage processing practices have further insulated mortgagees from imputation of fraud. Lenders often rely on intermediaries such as introducers and mortgage brokers to pre-assess applicants for loans and arrange execution of documents. Courts have commonly held that such intermediaries are not,

without more, agents of the lender, even if the lender pays them a commission.68 Where mortgagees retain other persons or corporations to perform functions for them in the origination of loans and mortgages, they will be fixed with knowledge of what their contractor knows.69

False attestation of instruments 5.90

An issue that has arisen in a number of cases is whether it is fraud for

an employee or agent of the mortgagee to falsely attest the signature of the transferor on a transfer or mortgage and, if it is, whether the fraud is committed within the scope of the agent’s actual or apparent authority. In Grgic v ANZ Banking Group (1994) 33 NSWLR 202, the agent’s attestation of a forged signature was held not to be fraudulent. A bank officer witnessed the signature to a mortgage and certified to personal knowledge of the identity of a person who later was discovered to be impersonating the owner of the relevant land. It was held that the conduct of the officer did not amount to fraud within the meaning of NSW, s 42. The impersonator had the certificate of title and other documents relating to the land and had been introduced to the bank officer in the name of the registered proprietor by an established customer to whom the registered proprietor was known. The fact that the bank officer clearly believed that the impersonator was the person he purported to be meant that, in attesting the signature, the officer did not act with conscious knowledge of the falsity of what he had done nor with reckless indifference to the truth or falsity of what he had signed. Compare Westpac Banking Corporation v Sansom (1995) NSW ConvR

¶55-733. A wife mortgaged the marital home by forging her husband’s signature. An officer of the bank falsely attested that the husband had signed the mortgage in his presence and the bank registered the mortgage. It was held that the bank officer’s false attestation constituted fraud within the meaning of s 42 of the Real Property Act 1900 (NSW).70

[page 481]

5.91C

Russo v Bendigo Bank Ltd [1993] 3 VR 376 Court of Appeal of Victoria

[Mrs Russo’s son, Mr Halaseh, forged her signature on a mortgage on her home to secure a loan to a company controlled by him and his wife. A law clerk, Rita Gerada, working for the mortgagee’s solicitor Mr Reichman, falsely attested Mrs Russo’s signature on the mortgage. Ms Gerada had not seen Mrs Russo sign the mortgage, and had been instructed by Mr Reichman never to attest a person’s signature unless she saw the person sign. She was unaware of the forgery. Mr Reichman lodged the mortgage for registration without knowledge of the forgery or the false attestation. The bank obtained an order for possession of the property and Mrs Russo appealed, arguing that the bank’s registered mortgage was defeasible for fraud.] Ormiston JA: [F]rom early times it was both assumed and held that the concept of fraud referred to in the legislation derived from the Torrens Act was what was called ‘actual fraud’, from which I understand the courts were excluding equitable fraud of the kind which has come to be called ‘constructive fraud’. Such a limited view of the notion of fraud was no doubt consistent, in the broadest sense, with the purposes intended to be served by the new legislative scheme for registered title. Nevertheless in recent years it might appear that some qualification has been placed upon the original interpretation, in particular by observations of Mason CJ and Dawson J in Bahr v Nicolay (No 2) (1988) 164 CLR 604. (After reviewing the authorities his Honour continued.) Consequently, having regard to the manner in which the interpretation of the concept of fraud has changed over the years both in New Zealand and in Australia, I would respectfully suggest that the most satisfactory definition of the concept of fraud was given in 1923 by Salmond J in the Waimiha Sawmilling case when heard by the New Zealand Court of Appeal: [1923] NZLR 1137 at 1173:

The term ‘fraud’ is not here used in its most restricted sense as including merely deceit, nor in its widest sense as including the constructive or equitable fraud of the Court of Chancery. It means dishonesty — a wilful and conscious disregard and violation of the rights of other persons. I should add that I do not believe that anything stated above runs counter to any observation of this court expressed in recent decisions such as Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 191, 193, Macquarie Bank v Sixty-Fourth Throne at 142–6 and F & F Holdings Pty Ltd v Ridge Lane Pty Ltd [1998] VSCA 72 at [40]. (c) Whether Miss Gerada was guilty of ‘fraud’ The weakness in the appellant’s case is twofold: first, there was no direct evidence of dishonesty or moral turpitude on the part of Miss Gerada, unless one were able to rely solely on the untruth told by her in the attestation clause; secondly, there is not a scintilla of evidence to show that she was involved in Mr Halaseh’s dishonesty or that she would have any reason to do so. To support the first proposition (the second not being denied) it was said on behalf of the respondents that there was no evidence: (i) that Miss Gerada knowingly put the mortgage forward on the path to registration; (ii) that she did not believe that the mortgage was executed in her presence by Mrs Russo and (iii) that she appreciated that the lodging of the mortgage would convey a representation to the contrary. I cannot accept contention (ii) for, according [page 482]

to the learned judge’s findings, she had no belief that it was executed by the appellant in her presence, despite her later protestations to the contrary … It was found, indeed it was not disputed, that she was not present and Miss Gerada must have been aware of that fact when she added her signature as an attesting witness. Of course this conclusion says nothing to deny that she believed Mrs Russo had signed. The other two matters are far less easily answered and they go, in a significant way, to the issue of how Miss Gerada’s behaviour should be characterised. As to the question whether Miss Gerada knew that she was putting the mortgage ‘forward ‘on the path to registration’, there is surprisingly no evidence. One might think that that is a matter which could be inferred. If one was dealing with a person of professional training or long experience as a law clerk, the inference might well be irresistible. But there was no evidence as to Miss Gerada’s understanding of conveyancing procedures, nor any attempt to cross-examine her to show what her understanding was. The strongest point against her is her concession that Mr Reichman was adamant that signatures must be attested in the presence of the signatory, from which many would infer that something untoward might occur if that instruction were not followed … There was, of course, no evidence that she knew about the significance of attestation clauses so far as the registration of title was concerned … Other than that she would be aware that the document might be registered and enforced against the signatory, I do not believe

that there is sufficient evidence to show that she was aware of the significance of her attestation in the process of putting forward the mortgage ‘on the path to registration’. Likewise, as to her appreciation that the lodging of the mortgage would convey a representation to the contrary to the Titles Office, I see no basis for concluding that it had been proved that she was aware and appreciated the significance of her role. Certainly she would be aware that what she had said in the attesting clause was not strictly accurate but, bearing in mind that she had no knowledge at the time of the forgery by Mr Halaseh, she could well have been totally unaware of the difference her attestation made in the process leading to registration. It was not shown that she had any reason to doubt the signature and thus putting the mortgage forward might, for all the evidence shows, have been seen by her as no more than a formal step in the requisite legal chain of procedures. That, I believe, is the reason why the learned judge held that in the circumstances she had believed it merely to be a ‘formality’. Here she was mistaken but she was not shown to be a person of the training or sophistication to appreciate the legal consequences of a failure to comply with what may have seemed to her a legal technicality. Certainly, I would not on appeal infer that at the age of 19 or 20, with training effectively only as a clerk over some three years, she had the necessary appreciation of the consequences or significance of her false statement. In short, I believe that Miss Gerada knew that what she had said was false but I do not believe that she has been shown to be dishonest … She had nothing to gain from her false statement, except possibly some saving of time or trouble. She was not involved in Mr Halaseh’s dishonest schemes. She had no knowledge that Mrs Russo did not sign and no knowledge that she did not wish to sign the mortgage. In my view it would be a curious consequence that her behaviour should be characterised for this purpose as fraud, for the very essence of that concept is to relieve people from the consequences of indefeasibility only where their behaviour, or the behaviour of those for whom they are responsible, has that element of dishonesty, of conscious moral turpitude or wickedness such as would justify the intervention of a court to set aside the mortgage or other registered estate. Consequently I would reject the appellant’s argument that the learned judge was wrong in holding that Miss Gerada was not guilty of ‘fraud’ within the meaning of the Act. [page 483]

(d) Whether the respondent bank was otherwise guilty of ‘fraud’ [The appellant contended that] even if Miss Gerada was not personally guilty of fraud, then the respondent bank was guilty of it by reason of its own knowledge and in particular the knowledge and understanding of Mr Reichman for whom it was said that the bank was here responsible. As to the bank itself it was conceded that no specific act carried out by its officers was relevant to the consideration of this question. It was not aware of the forgery and it was not party to any scheme to obtain a mortgage from the appellant contrary to her wishes. If it were to be held responsible for the circumstances under which the appellant lost her interest in the land, then it could only be because the bank itself put the mortgage on the path to registration (a matter for which it could not otherwise be criticised) and because its solicitor, Mr Reichman, both by reason of Miss

Gerada’s acts and by reason of his own acts, knowledge and understanding should be treated as guilty of fraud for which the bank should be held responsible. It would seem that the only factor additional to those which had been found against Miss Gerada was that Mr Reichman had the knowledge and understanding of conveyancing law and procedures which could have resulted in his knowing that the consequences of allowing the improperly attested document to go forward were so serious as to amount to fraud. So it was said that, if he had known that the document had not been properly attested, then it would have been wrong of him to allow the signed mortgage to go to the bank in the expectation that it would be registered upon the faith of the attestation clause. Mr Reichman, a solicitor (and thus the bank), could not hide behind the misdeeds of his clerk if that clerk knew the statement in the attestation clause to be false. So it was said that the aggregation of these facts were sufficient to justify a finding of fraud against the solicitor (and thus the bank) even though the individual behaviour of each was not such as could be characterised as fraudulent. Again it must be said that, in this context and for these purposes, knowing or known falsity is not the same as fraud, for what the court is required to ascertain is whether there was actual fraud in the sense I have attempted to describe earlier. For the present it may be assumed that some accumulation or aggregation of matters or factors may be permitted for this purpose. Such an aggregation produced, in effect, the outcome in AGC v De Jager, although most of the matters there relied upon arose out of the acts or understandings of the employees of AGC itself. [Ormiston JA observed that in the AGC case, AGC’s employees admitted that they forwarded the documents for registration knowing that they were falsely attested. His Honour continued:] The present case is very different. Apart from the fact that the acts here relied upon were not acts of employees but only of persons engaged as solicitors and agents for the purpose, to which I shall briefly return, there was no combination of acts in the present case which could properly be held to amount to actual fraud. Despite attacks made on Mr Reichman in the course of the case, the judge rejected all allegations of impropriety, so that it was held that he was not party to any scheme to defraud the appellant and that he had no knowledge of either the forgery or the falsity of the attestation clause … Thus, even taking into account the acts of both Mr Reichman and Miss Gerada, there was no conscious dishonesty or moral turpitude or wickedness which would give a characteristic to the transaction which it did not otherwise have. False statement there may have been, fraudulent it was not. It is therefore strictly unnecessary to deal with the further argument that even if Miss Gerada or Mr Reichman in combination with Miss Gerada had been guilty of ‘fraud’ the bank could not be held responsible for that in the circumstances … To the extent that [page 484]

Mr Reichman’s acts were improper, such as would otherwise be characterised as amounting to fraud, then it was said that that of itself took his acts outside the course of his authority … If he had consciously gone forward and obtained registration of the mortgage in the knowledge of, or wilfully blind to, the fact only that it was not properly

attested, then I doubt that would have involved him doing something outside the scope of his authority. The same reasoning would apply if Miss Gerada were to be held (contrary to my opinion) to have been guilty of fraud on the same limited basis. It is not, however, necessary to reach any final conclusion on this aspect of the appeal. The answer to the case is that there was no such impropriety of a kind which should be characterised as fraud for the purpose of the Act for which the solicitor was either himself responsible or responsible indirectly by reason of the activities of his employee … In turn, the bank could not be held responsible for any of the acts alleged against it. For these reasons I would also reject the argument that the bank had been guilty of ‘fraud’ within the meaning of the Act. I would therefore dismiss the appeal. [Winneke P agreed with Ormiston JA. Batt JA agreed with Ormiston JA that the false attestation did not constitute fraud within the meaning of s 42(1). His Honour said that while he did not think it was honest to falsely attest a signature, more is required to establish statutory fraud: ‘(T)here must be an intention to affect adversely the rights of another person or at least recklessness as regards the affection of such rights’.] Order: Appeal dismissed.

5.92 Questions 1.

Do you agree with the distinction drawn by the court between making a false statement and acting dishonestly? If the law clerk’s false attestation of Mrs Russo’s signature, contrary to her employer’s instruction was not sufficient, what more would be required to amount to fraud under s 42(1)?

2.

What specific knowledge by the law clerk as to the consequences of her actions would need to be shown, to prove a case of fraud? If, while possessing the requisite knowledge, she had breached her employer’s instruction by attesting Mrs Russo’s signature, would that act be ‘brought home’ to the mortgagee bank on the basis of agency? If the solicitor had known of the false attestation, but not the forgery, when he lodged the transfer, would this have

amounted to a fraud ‘brought home’ to the mortgagee as principal?

5.93

Note the statement of Ormiston JA endorsing Salmond J’s

formulation of the test for fraud in Waimiha Sawmilling: ‘It means dishonesty — a wilful and conscious disregard and violation of the rights of other persons’. Is this formulation consistent with cases such as Australian Guarantee Corp Ltd v De Jager [1984] VR 483, where the knowing lodgment of a falsely attested mortgage by the mortgagee’s employees was characterised as a fraud on the Registrar?71

[page 485]

5.94

In Davis v Williams (2003) 11 BPR 21,313; [2003] NSWCA 371,

the New South Wales Court of Appeal considered whether a false representation to the Registrar could amount to fraud, where it was not done to deprive anyone of an interest in land. In order to save a small amount of stamp duty, a registration clerk made an unauthorised alteration to an executed transfer before lodging it for registration. The transfer as executed provided for transfer to a husband and wife ‘as joint tenants’. The clerk amended it by substituting ‘as tenants in common’. The effect of the amendment was that on the death of the husband, survivorship did not operate in favour of the wife. Hodgson JA and Young CJ in Eq (Gzell J dissenting) found that the clerk’s conduct lacked the element of actual dishonesty or moral turpitude required for fraud. Their Honours inferred that

the clerk knew that the Registrar-General would be misled into thinking that the altered transfer was in the same form as the transfer executed by the parties. However, they found that she did not understand that the misrepresentation was material rather than a mere formality, and did not intend to induce the Registrar-General to act in a materially different way. Nor did she intend to deprive anyone of an interest in land. As to what mental element would be required to establish fraud on the part of the registration clerk, see Hodgson JA at [26]: If the registration clerk made a representation to the Registrar-General, knowing it to be false in a material respect, and intending that the Registrar-General be induced by the representation to act in a way materially different from what otherwise would have been done, then I think that would be sufficient dishonesty or moral turpitude, irrespective of whether she had any intention that anyone be disadvantaged by this. If a lie is material in respects such as these and understood to be so, I do not think that lack of intent to harm can justify treating it as a ‘white lie’ and as excluding dishonesty or moral turpitude.

5.95

Even a knowing misrepresentation to the Registrar by a registered

proprietor’s solicitor may not render the proprietor’s title defeasible for fraud. In J Wright Enterprises Ltd (in liq) v Port Ballidu Pty Ltd [2010] QSC 213, the registered mortgagee’s solicitor knowingly altered the mortgage documents after they were executed, so as to make it appear to the Registrar that the documents had been executed in accordance with statutory requirements. The court said it would have been a simple matter to have them re-executed, and the solicitor ‘did not act in violation of any person’s rights’. While the acts of the solicitor amounted to fraud, it could not be brought home to the registered mortgagee because ‘the authorities do not support such exacting standards upon agents of mortgagees with respect to

registration’: at [92]. Is the decision in this case consistent with Davis v Williams and Russo v Bendigo Bank Ltd? In Credit Connect Pty Ltd v Carney; Credit Connect Pty Ltd v Smit [2010] NSWSC 910 the false attestation by a Justice of Peace appointed by the mortgagee to witness the mortgage was held to be fraud by an agent which would be imputed to the mortgagee: at [78]–[79].

Fraud against the holder of a prior unregistered interest 5.96

Fraud may be either against the holder of an unregistered interest (as

in Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491; 5.78C) or against a previous registered proprietor: see, for example, Breskvar v Wall (1971) 126 CLR 376; 5.48C. Fraud against the holder of an unregistered interest raises an issue as to the effect of the notice section; see 5.30. It is not fraud for a registered proprietor to merely acquire title with notice of an existing unregistered

[page 486]

interest or to take a transfer knowing that its registration will defeat such an interest.72 See, for example, R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100. In that case K, the registered proprietor of shop premises, sold to the plaintiff a shop that was subject to an unregistered lease, which contained an option to renew. At the time of the sale, the plaintiff was aware that the

premises were let, and before registration, it learned the full terms of the lease. After the plaintiff became registered owner, the tenant continued to pay rent, and in due course purported to exercise the option to renew. The plaintiff brought proceedings to recover possession of the premises. In this case the defendants could not rely on the exception to indefeasibility protecting a tenant in possession (SA, s 69(h)), since that was restricted to leases for a term not exceeding one year. Walters J held that the plaintiff, despite its knowledge of the unregistered lease, was not guilty of fraud. There was no evidence of actual dishonesty and to hold that ‘mere notice’ of an unregistered interest amounted to fraud would stultify the notice provision: SA, ss 72, 186, 187. A purchaser who knew of an unregistered lease was nevertheless entitled to complete his or her contract by registering a transfer. It followed that upon registration of its transfer, the plaintiff’s title prevailed over the defendants’ unregistered lease. Walters J followed the Queensland case of Friedman v Barrett; Ex parte Friedman [1962] Qd R 498. Is Barnes’ case consistent with Loke Yew’s case?73 5.97

Do cases like R M Hosking Properties Pty Ltd v Barnes [1971] SASR

100 suggest that a purchaser, on registration, receives too much protection against unregistered interests? Why should a purchaser take free of interests of which he or she has full knowledge?74 Commentators have noted that the different approaches of the Australian and New Zealand courts to the definition of fraud suggest that the Australian courts consistently taking a narrower view of fraud (that is, an interpretation more protective of the registered title). While mere knowledge of the existence of an unregistered

interest is not fraud, such knowledge in conjunction with other circumstances may amount to fraud. 5.98

There has long been a difference between Australian and New

Zealand authorities on the question of where to draw the line between fraud and mere notice. In Australia, it is not fraud for a purchaser to register with knowledge that a prior interest will be defeated by the registration: Mills v Stokman (1967) 116 CLR 61 at 78; Wicks v Bennett (1921) 30 CLR 80 at 91. New Zealand authorities apply the test stated by Salmond J in Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1923] NZLR 1137 (New Zealand Court of Appeal, not considered by the Privy Council on appeal). Salmond J said that while a purchaser is not affected by the mere knowledge of the existence of a trust or prior unregistered interest, knowledge that the registered owner is acting in breach of trust or is wrongfully destroying a prior interest does amount to fraud. Fraud will be established if the purchaser had actual and certain knowledge of the breach of trust or wrongful deprivation, or if ‘he knew enough to make it his duty as an honest man’ to make further inquiries before proceeding with the transaction: at 1173, 1177.

[page 487] This duty of inquiry has not been accepted in Australia.75 Australian courts maintain that the fraud exception requires personal dishonesty or moral turpitude.76 It is fraud for a purchaser to collude in transfer designed to cheat a person

out of a known existing right, or to engage in a deliberate and dishonest trick to cause the person not to register the interest: Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101 at 106 (Privy Council). For example, in Efstratiou v Glantschnig [1972] NZLR 594, a husband transferred his matrimonial home to a purchaser who did not inspect the house, bought the house at a considerable undervalue, and paid the purchase price within one day. The husband held the property on a resulting trust for his wife as to a one-half share. It was found that the husband had been guilty of a wilful breach of trust and the purchaser had been a party to a scheme designed to cheat the wife out of her half-share. Although the New Zealand Court of Appeal referred to Salmond J’s test in Waimiha Sawmilling, it is likely that fraud would also be found by an Australian court in these circumstances.77

Supervening fraud 5.99

Is it fraud for a purchaser, having agreed to honour the rights of a

prior interest holder, to undergo a change of mind after registration, and resile from the promise? (Note that these facts are different from Loke Yew where the purchaser’s promise to respect the prior unregistered rights was found to be falsely and fraudulently made.) The fraud which activates the exception to indefeasibility has generally been understood as temporally limited to the period leading up to registration. In Bahr v Nicolay (No 2) (1988) 164 CLR 604, the High Court was equally divided on the question of whether it was fraud for a registered owner dishonestly to repudiate a prior interest that the person had agreed to honour for the purposes of obtaining title: see extract below at 5.89C. Mason CJ and Dawson J answered the

question in the affirmative, while Wilson and Toohey JJ answered in the negative. Brennan J did not address the question, as he (along with all members of the court) held that the prior interest was enforceable against the registered owner in personam. The authorities in both Australia and New Zealand are unsettled.78

Rights in personam (the ‘personal equities exception’) 5.100

In Frazer v Walker [1967] 1 AC 569 (5.41C) Lord Wilberforce

stated that the principle of indefeasibility ‘in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant. Although Lord Wilberforce did not refer expressly to this right as an ‘exception’ to indefeasibility, courts and commentators have tended to call this the ‘in personam exception to indefeasibility’ or ‘the personal equities exception’. But these terms can mislead.79 The principle

[page 488]

to which Lord Wilberforce referred is not an exception created by the statutes, like the fraud exception, but arises outside the statutory scheme. Specifically it relates to how the statute intersects with common law and equitable doctrines. Claims in personam arise from a dealing or relationship between the plaintiff and the registered proprietor, as distinct from a claim in

rem, which is a property right that the plaintiff can assert against all the world. Low argues that the term ‘personal equities’ is misleading because it suggests that the claims are personal rights enforceable in equity. Lord Wilberforce’s words ‘a claim in personam, founded in law or in equity’, indicates that claims may arise from legal as well as equitable causes of action.80 5.101C

Bahr v Nicolay (No 2) (1988) 164 CLR 604 High Court of Australia

[The appellants, Mr and Mrs Bahr, were unable to raise funds to develop their land. They therefore decided to finance the development by selling the land to the first respondent, Nicolay, on terms that they might lease it for a number of years and then repurchase it for an amount specified in cl 6 of the contract of sale. Nicolay sold the land to Thompson, the second respondent. The contract of sale with Thompson included in cl 4 an acknowledgment of the agreement between Nicolay and Mr and Mrs Bahr. Thompson subsequently told Mr and Mrs Bahr that he ‘recognised’ cl 6 of their contract with Nicolay and would agree to sell the land for the agreed amount. When the Bahrs attempted to repurchase the land and paid the deposit, Thompson, now the registered proprietor, refused to sell. The Bahrs commenced an action in the Supreme Court of Western Australia against Nicolay and Thompson claiming an order that the land had vested in them on payment of the purchase price agreed with Nicolay. The action was dismissed by the trial judge and this decision was upheld by the Full Court.] Mason CJ and Dawson J: … By cl 4 of the agreement between the first respondent and the second respondents, the second respondents ‘acknowledge [sic] that an agreement exists’ between the appellants and the first respondent, that agreement being the undated 1980 agreement. The clause does not purport to create in favour of the appellants new rights over and above those previously existing. In terms it acknowledges the existence of the earlier agreement. Although the precise effect of the clause must be left for later consideration, it necessarily involves an acknowledgment of such rights as the appellants may have had under the earlier agreement. This characterisation of cl 4 lies at the heart of the second respondents’ case: namely that mere notice of a prior unregistered interest does not amount to fraud within the meaning of s 68. That section provides that, except in the case of fraud, the registered

proprietor holds the land subject only to incumbrances notified on the certificate of title, save for exceptions not material to this case. Section 134 provides that, except in the case of fraud, no person taking a transfer of the land shall be affected by actual or constructive notice of any trust or unregistered interest and that knowledge of any trust or unregistered interest ‘shall not of itself be imputed as fraud’. Sections 68 and 134 give expression to, and at the same time qualify, the principle of indefeasibility of title which is the foundation of the Torrens system of title. As the Judicial [page 489]

Committee observed in Gibbs v Messer [1891] AC 248 at 254: ‘The object is to save persons dealing with registered proprietor from the trouble and expense of going behind the register, in order to investigate the history of their author’s title, and to satisfy themselves of its validity’. Neither the two sections nor the principle of indefeasibility preclude a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself: Breskvar v Wall (1971) 126 CLR 376 at 384–5. Thus, an equity against a registered proprietor arising out of a transaction taking place after he became registered as proprietor may be enforced against him: Barry v Heider (1914) 19 CLR 197. So also with an equity arising from the conduct of the registered proprietor before registration (Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 563), so long as the recognition and enforcement of that equity involves no conflict with ss 68 and 134. Provided that this qualification is observed, the recognition and enforcement of such an equity is consistent with the principle of indefeasibility and the protection which it gives to those who deal with the registered proprietor on the faith of the register. There is no fraud on the part of a registered proprietor in merely acquiring a title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest: Mills v Stokman (1967) 116 CLR 61 at 78; Waimiha Sawmilling Co (in liq) v Waione Timber Co [1926] AC 101. The decision in Waimiha Sawmilling merely gives effect to s 134 by excluding from the statutory concept of fraud an acquisition of title with notice of any trust or unregistered interest. However, Lord Buckmaster in expressing the reasons for the decision went rather further when he reproduced (at 106) the following passage of the remarks of Lord Lindley in the earlier decision (Assets Co Ltd v Mere Roihi [1905] AC 176 at 210): ‘fraud … means actual fraud, dishonesty of some sort, not what is called constructive or equitable fraud …’. Lord Buckmaster went on (at 106–7) to instance, as examples of fraud, the transfer whose object is to cheat a man of a known existing right and a deliberate and dishonest trick causing an interest not to be registered. These comments do not mean all species of equitable fraud stand outside the statutory concept of fraud. Far from it. In Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 273–4, Kitto J held that a collusive and colourable sale by a mortgagee company to its subsidiary was a plain case of fraud. According to his Honour, ‘[t]here was pretense and collusion in the conscious misuse of a power’, this being a

‘dishonest course’; at 274. Likewise, in Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 at 504, Lord Moulton instanced the case of an agent who has purchased land on behalf of his principal but has taken the conveyance in his own name, and in virtue thereof claims to be the owner of the land, though he is in law a trustee for his principal. It seems that his Lordship did not intend to make this illustration as an example of the statutory concept of fraud. His Lordship had earlier dealt with the issue of fraud and indefeasibility and was, when instancing the acquisition of title by an agent, propounding another answer based on the power and duty of the court to rectify the register … Despite this, the example given by Lord Moulton is in our view an instance of fraud within the meaning of s 68. According to the decisions of this court actual fraud, personal dishonesty or moral turpitude lie at the heart of the two sections and their counterparts: see Butler v Fairclough (1917) 23 CLR 78 at 90, 97; Stuart v Kingston (1923) 32 CLR 309 at 329, 356. However, from the appellants’ point of view the examples may not travel quite far enough because the dishonesty which they exhibit is dishonesty on the part of the registered proprietor in securing his registration as proprietor … [page 490]

For our part we do not see the illustrations given and the statements made in the cases as amounting to definitive pronouncements that fraud is confined to fraud in the obtaining of a transfer or in securing registration. The statements, viewed in their context, merely express the reasons why particular circumstances fall within the statutory exception. Nor do we see anything in the language or purpose of s 68 which warrants such a restrictive interpretation. Indeed, we agree with Higgins J in Stuart v Kingston when his Honour said (at 345) that there was much to be said for the view, expressed by Stawell CJ on the equivalent Victorian provision, that the section should be ‘construed strictly’ and the exception ‘liberally’. The section restricts, in the interests of indefeasibility of title, rights which would exist otherwise at law or in equity. And granted that an exception is to be made for fraud why should the exception not embrace fraudulent conduct arising from the dishonest repudiation of a prior interest which the registered proprietor has acknowledged or has agreed to recognise as a basis for obtaining title, as well as fraudulent conduct which enables him to obtain title or registration? In the context of s 68 there is no difference between the false undertaking which induced the execution of a transfer in Loke Yew and an undertaking honestly given which induces the execution of a transfer and is subsequently repudiated for the purpose of defeating the prior interest. The repudiation is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer. For the same reason the subsequent repudiation by a transferee of property of a limited beneficial interest in that property is fraudulent, when the transferee took the property on terms that the limited beneficial interest would be retained by the transferor. It is immaterial that the transferee ‘may have been innocent of any fraudulent intent in taking the conveyance in absolute form’: Bannister v Bannister [1948] 2 All ER 113 at 136.

What then was the purpose and effect of cl 4 of the agreement between the first and second respondents? The matrix of circumstances in which the agreement was made throws up three significant factors. First, the making of an agreement between the first and second respondents which would result in the destruction of the appellants’ existing rights, or allow the destruction of those rights, by registration of a transfer in favour of the second respondents in circumstances whereby the rights became unenforceable would expose the first respondent to liability for breach of contract … Secondly, as we have seen, upon registration of such a transfer, the combined effect of ss 68 and 134 would, in the absence of fraud, bring about the destruction of the appellants’ rights. Thirdly, at least until registration of such a transfer, the appellants’ equitable interest under the 1980 agreement, being first in time, had priority over the interest of the second respondents as purchasers under their agreement with the first respondent. Viewed in this setting, cl 4 of the later agreement was designed to do more than merely evidence the fact that the second respondents had notice of the appellants’ rights. If that were the only purpose to be served by the acknowledgment it would achieve nothing. It would enable the second respondents to destroy the appellants’ interest and would leave the first respondent exposed to potential liability for breach of contract at the suit of the appellants. In the circumstances outlined it is evident that the purpose of cl 4 was to provide that the transfer of title to Lot 340 was to be subject to the appellants’ rights under cl 6 of the 1980 agreement in the sense that those rights were to be enforceable against the second respondents. At first glance it might seem that the words of cl 4 are inadequate to achieve this purpose. But an acknowledgment of an antecedent agreement in an appropriate context may amount to an agreement or undertaking to recognise rights arising under that antecedent agreement. And here the inferences to be drawn from the matrix of circumstances are so strong that they [page 491]

necessarily influence the interpretation of cl 4. These inferences provide a secure foundation for imputing an intention to the parties and reading cl 4 as a reflection of that intention … Granted that the purpose of cl 4 is as we have explained it, what is its legal effect? It is simply an undertaking to perform the 1980 agreement if called upon to do so by the appellants? Contract scarcely seems to give sufficient effect to what the parties had in mind. A trust relationship is a much more accurate and appropriate reflection of the parties’ intention. The appellants submitted that cl 6 creates a trust in favour of them as third parties, in accordance with the principles enunciated in cases such as Re Shebsman; Official Receiver v Cargo Superintendents (London) Ltd [1944] Ch 83, and Green v Russell; McCarthy (Third Party) [1959] 2 QB 226. However, in the absence of the manifestation of a clear intention to create a trust, the courts have been reluctant to hold that a trust exists … This reluctance to accept that the parties have created an express trust has induced the English courts to impose what has been described as a constructive trust in order to protect a prior interest from destruction on the registration of a later interest: see

Bannister [1948] 2 All ER 133; Binions v Evans [1972] Ch 359; Lyus v Prowsa Ltd [1982] 1 WLR 1044; [1982] 2 All ER 953. Bannister itself was not a third party trust. It was simply a case in which a transferee, who took the transfer as a trustee, repudiated his trust and asserted a beneficial title in himself. … If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then there is no reason in a given case an intention to create a trust should not be inferred. The present is just such a case. The trust is an express, not a constructive, trust. The effect of the trust is that the second respondents hold Lot 340 subject to such rights as were created in favour of the appellants by the 1980 agreement. Even if we had not reached this conclusion, we would not have regarded the registration of the transfer in favour of the second respondents as destroying the appellants’ rights. Having regard to the intention of the parties expressed in cl 4 of the later agreement, the subsequent repudiation of cl 6 of the 1980 agreement constituted fraud. The case therefore fell within the statutory exception with a result that the appellants’ prior equitable interest prevails over the second respondents’ title, the second respondents taking with notice of the interest. Wilson and Toohey JJ: … the real question is — having registered their interest under the provisions of the Act, did the second respondents acquire a title which was indefeasible in the sense that it was no longer open to attack by the appellants? The question may be further refined by asking — having regard to ss 68 and 134 of the Act, was there in any relevant sense fraud on the part of the second respondents? Unless there was such fraud, the second respondents hold their title free of any interest the appellants have by reason of cl 6, subject to any claim in personam that may lie against the second respondents. … Can it be said, using the language of Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101 at 106, that the designed object of the transfer to the second respondents was to cheat the appellants of a known existing right? Notwithstanding the various matters to which we have referred, we think the evidence falls short of establishing that case. The respondents agreed to buy Lot 340 in the hope, even the expectation, that the appellants would not be able to buy back Lot 340. But the evidence does not justify a finding that it was their intention to ensure that the appellants did not do so. However, it does establish that the second respondents took a transfer of Lot 340, knowing of cl 6, accepting an obligation to resell to the appellants and communicating that acceptance to Mr Callard, but banking on [page 492]

the appellants’ inability to find the $45,000 necessary to implement the clause. What are the consequences of that finding? [Their Honours then discussed the right of a plaintiff to bring an action for in personam relief as considered in Gibbs v Messer, Frazer v Walker and Breskvar v Wall and continued:]

This vulnerability on the part of the registered proprietor is not inconsistent with the concept of indefeasibility. The certificate of title is conclusive. If amended by order of a court it is, as Barwick CJ pointed out, ‘conclusive of the new particulars it contains’: Breskvar v Wall (1971) 126 CLR 376 at 385. Returning to Frazer v Walker the Privy Council said (at 585) of claims in personam: ‘The principle must always remain paramount that those actions which fall within the prohibition of ss 62 and 63 may not be maintained’. The reference to ss 62 and 63 is a reference to the Land Transfer Act 1952 (NZ), roughly corresponding with ss 68 and 199 of the Act. The point being made by the Privy Council is that the indefeasibility provisions of the Act may not be circumvented. But, equally, they do not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another. Such an equity may arise from conduct of the registered proprietor after registration: Barry v Heider (1914) 19 CLR 197. And we agree with Mahoney JA in Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 563, that it may arise from conduct of the registered proprietor before registration. The evidence leads irresistibly to the following conclusions. The second respondents understood through their agent Mr Callard that the first respondent would not sell Lot 340 unless they agreed to be bound by the obligation in cl 6 which required the first respondent to resell to the appellants. The second respondents bought Lot 340 on the understanding common to vendor and purchasers that they were so bound and cl 4 was included to give effect to that understanding. Clause 4 may have been, of itself, insufficient for that purpose but the second respondents’ letter of 6 January 1982 and their two offers of 8 January 1982 put beyond doubt their acknowledgment of their obligation to the appellants. By taking a transfer of Lot 340 on that basis, and the appellants’ interest under clause 6 constituting an equitable interest in the land, the second respondents became subject to a constructive trust in favour of the appellants: Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044; [1982] 2 All ER 953; Binions v Evans [1972] Ch 359 at 368. If it be the position that the appellants’ interest under cl 6 fell short of an equitable estate, they none the less had a personal equity enforceable against the second respondents. In either case ss 68 and 134 of the Act would not preclude the enforcement of the estate or equity because both arise, not by virtue of notice of them by the second respondents, but because of their acceptance of a transfer on terms that they would be bound by the interest the appellants had in the land by reason of their contract with the first respondent. Brennan J: … a purchaser who takes with notice of an antecedent interest but who becomes registered under the Act without fraud takes free of that interest: Oertel v Hordern (1902) 2 SR (NSW) (Eq) 37; Munro v Stuart; Friedman v Barrett; Ex parte Friedman [1962] Qd R 498. Registration of the transfer is not fraudulent merely because the transferee knows that an antecedent interest of which he has notice will be defeated thereby. As Kitto J said in Mills v Stokman (1967) 116 CLR 61 at 78, ‘merely to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest is not fraud’. However, the title of a purchaser who not only has notice of an antecedent unregistered

interest but who purchases on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation … Orders of that [page 493]

kind do not infringe the indefeasibility provisions of the Act. Those provisions are designed to protect a transferee from defects in the title of a transferor, not to free him from interests with which he has burdened his own title. … A registered proprietor who has undertaken that his transfer should be subject to an unregistered interest and who repudiates the unregistered interest when his transfer is registered is, in equity’s eye, acting fraudulently and he may be compelled to honour the unregistered interest. A means by which equity prevents the fraud is by imposing a constructive trust on the purchaser when he repudiates the unregistered interest. That is not to say that the registration of the transfer to such a proprietor is affected by such fraud as may defeat the registered title: the fraud which attracts the intervention of equity consists in the unconscionable attempt by the registered proprietor to deny the unregistered interest to which he has undertaken to subject his registered title. Appeal allowed.

5.102 Questions 1.

Personal equities are often pleaded as an alternative to the fraud exception in cases where a person has been deprived of their interest by the registration of a forged or invalid mortgage or transfer. In Bahr v Nicolay (No 2) (5.101C) all judges found that the conduct of Nicolay gave rise to a personal equity enforceable by the Bahrs, although only two judges (Mason CJ and Deane J) found that the same conduct amounted to fraud within the meaning of s 42. The personal equity exception is not confined to conduct on the part of the registered proprietor after having become registered but extends to equities arising as a result of conduct on the part of the registered proprietor or to which he or

she was privy prior to registration: Logue v Shoalhaven Shire Council [1978] 1 NSWLR 710 per Powell J and per Mahoney JA [1979] 1 NSWLR 537 at 563. As noted above (5.100) the authorities are unsettled on the question of whether conduct after registration can activate the fraud exception. The distinction may be very fine between a purchaser who takes an interest knowing that there is an unregistered interest affecting the land which will be defeated on registration of the purchaser as proprietor, and a purchaser who has undertaken to be bound by the unregistered interest. Can keeping silent be taken to signal assent to a condition, rendering the condition enforceable against the registered owner under the principle in Bahr v Nicolay (No 2)? See Bourseguin v Stannard Bros Holdings Pty Ltd [1994] 1 Qd R 231. 2.

In Hinds v Uellendahl (No 2) (1992) 112 FLR 222 it was held that mere knowledge of the existence of a prior contract of sale was not knowledge of some dishonest or fraudulent design. This question most commonly arises in relation to unregistered leases. Does an acknowledgment that the purchaser knows that there is a tenant in the premises amount to an undertaking to be bound by the lease? Or does it merely mean that, as between vendor and purchaser, the purchaser will not insist on vacant possession? Compare R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100 and Oertel v Hordern (1902) 2 SR (NSW) 37; see also Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198.

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5.103

In South Australia, the Act specifically provides for the enforcement

of contracts and trusts against the registered proprietor. Thus, s 71 states that nothing in the indefeasibility section shall affect: (d) the rights of a person with whom the registered proprietor shall have made a contract for sale of land or for any other dealing therewith; and (e) the right of a cestui que trust where the registered proprietor is a trustee, whether the trust shall be express, implied or constructive.

Section 249(1) provides that the Act shall not affect: … the jurisdiction of the Courts of law and equity in cases of actual fraud or over contracts or agreements for the sale or other disposition of land or over equities generally.

For interpretation, see R M Hosking Properties Ltd v Barnes [1971] SASR 100 at 106–7; Friedman v Barrett; Ex parte Friedman [1962] Qd R 498 at 511–12. Does the South Australian legislation add anything to the in personam exception to indefeasibility?81 The judicially recognised exception has also been given legislative sanction in Queensland where s 185(1)(a) provides a specific exception to indefeasibility for ‘an equity arising from the act of a registered proprietor’; see also NT, s 189(1)(a). The Act does not give any guidance as to what constitutes an equity and this is left for the courts to determine: see White v Tomasel [2004] 2 Qd R 438; 5.98. 5.104

Bahr v Nicolay (No 2) was followed in Balani Pty Ltd v Gunns Ltd

[2011] FCAFC 153, in which it was held that a registered mortgage was

subject to a purchaser’s unregistered interest under a prior contract with the mortgagor. The mortgagee had expressly agreed in writing to give effect to the contract. In Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295, a purchaser gave a contractual undertaking to be bound by the terms of an existing unregistered lease, which included an option to renew. After the transfer was registered, the purchaser claimed that it was entitled to rely on indefeasibility to defeat the option to renew. It was held that the purchaser was bound by a personal equity. In Aboody v Ryan (2012) 17 BPR 32,359 daughter and son-in-law transferees took advantage of an elderly, vulnerable and sometimes irrational transferor. This was held to be unconscionable conduct that gave rise to an in personam right to set aside the transfer.82 5.105

In Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25

NSWLR 32, a registered owner successfully asserted a personal equity to deprive a mortgagee of its interest acquired by the registration of a forged mortgage. The respondent’s husband forged her signature on a variation of mortgage instrument relating to her property. Acting without fraud, the appellant bank registered the variation, using the respondent’s certificate of title which it already held as mortgagee under the previously registered mortgage. The appellant was not in fact authorised by the respondent to use the certificate for the purpose of registering the variation. Mahoney JA (with whom Kirby P agreed) said that the respondent had a personal equity against the appellant bank requiring it to grant a discharge upon the payment of the moneys owing under the original, valid mortgage. In the view of Mahoney JA (at 48–9), the personal equity arose from the mortgagee’s breach of its obligations to the respondent as custodian of

[page 495]

her certificate of title. His Honour said that it is clear from the authorities that no personal equity arises from the bare fact that the instrument was forged: at 52. The decision in Gosper has been distinguished in later cases. In Ginelle Finance Pty Ltd v Diakakis [2002] NSWSC 1032, Studdert J distinguished Gosper on the ground that in the case before him, the first and second mortgages were registered one immediately after the other and there was no pre-existing relationship between the plaintiff, the defendant and the solicitors. In Gosper, by contrast, the mortgagee held the certificate of title for several years under a genuine mortgage but later produced it to enable registration of the forged variation of mortgage. In Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 at [380], Young CJ in Eq quoted with approval Butt’s view that the personal equity in Gosper arose because of the mortgagee’s unauthorised use of the certificate of title,83 Neave JA expressed doubt that Gosper would be followed in Victoria. Another argument is that the decision is wrong because the appellant’s claim against the mortgagee amounted to no known cause of action.84

The types of causes of action that can be asserted against a registered proprietor 5.106

In Grgic v ANZ Banking Group (1994) 33 NSWLR 202, Powell JA,

in a much-cited passage, made the point that the in personam exception to

indefeasibility embraced only known causes of action at law or in equity. At 223–4 his Honour said: I am of the view that the expressions ‘personal equity’ and ‘right in personam’ encompass only known legal causes of action or equitable causes of action, albeit that the relevant conduct which may be relied upon to establish ‘a personal equity’ or ‘right in personam’ extends to include conduct not only of the registered proprietor but also of those for whose conduct he is responsible, which conduct might antedate or postdate the registration of the dealing which it is sought to have removed from the Register.

The requirement that the plaintiff show a recognised legal or equitable cause of action has been followed in many other cases.85 5.107

In Breskvar v Wall (5.48C) Barwick CJ said that, apart from certain

forms of action expressly barred by the Act, proceedings may be brought against a registered owner in personam that ‘may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title’. In a case where a mortgagee has acted negligently but not fraudulently in acquiring its interest, does the registered proprietor have an action in negligence against the mortgagee that gives an equity to set aside the registered mortgage? In Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, Pyramid sought to enforce its rights as registered mortgagee against the registered proprietor, Scorpion Hotels. Having failed to establish fraud by reason of ‘wilful blindness’ or ‘reckless indifference’ on the part of the mortgagee’s agents (see 5.82), Scorpion argued that it had a personal equity against the mortgagee arising from negligence, based on the following acts and omissions. Pyramid’s

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solicitor had failed to read a company search that he had obtained before settlement, and failed to notice that one of the persons who attested the affixing of Scorpion’s common seal on the mortgage was not a director, as required by its articles of association. The solicitor had also failed to ask for a copy of the minutes of the meeting of Scorpion authorising the execution of the mortgage. (No such minute existed.) Hayne JA (with whom Tadgell and Brooking JJA concurred) disposed of Scorpion’s personal equity argument as follows (at 195–6): On the hearing of the appeal, counsel for Scorpion submitted that Scorpion had a claim against Pyramid for negligence and that this gave it a personal equity to set the mortgage aside. No such case was pleaded or advanced at trial and, in my view, Scorpion may not seek to establish such a case now. In any event, the case which it sought to raise for the first time on appeal is a case in which there are several difficulties — difficulties which I consider to be insurmountable. The essence of the argument was that Pyramid’s solicitor owed a duty to Scorpion to take care to ensure that it (Scorpion) had properly given authority for the transaction of loan and mortgage. I very much doubt that the solicitor for Pyramid owed Scorpion any such duty when Scorpion had a solicitor acting for it in relation to the transaction — a transaction that would see the obligation of Scorpion to the National Australia Bank discharged and replaced with an obligation to Pyramid. That is, I very much doubt that a solicitor confronted with another solicitor who claims to be acting for a borrower owes the borrower a duty to take care that the solicitor is right in the assertion that he or she has been properly retained by the borrower. What is the solicitor for the lender to do? Is the solicitor for the lender to meet the assertion that the borrower has retained a solicitor with the statement ‘prove it’ or is the solicitor for the lender to go behind the solicitor for the borrower and make his or her own enquiries about the retainer? Nor is there anything in the facts of this case which would suggest that in this case the solicitor for the lender should have taken any such step. But these are not the only difficulties in the argument. If contrary to my view, the solicitor for Pyramid did owe the borrower a duty to take care and if the solicitor breached that

duty, that may give rise to a claim for damages but it was not explained how it gave a right to have the mortgage set aside.

His Honour then cited the comments from Powell JA in Grgic (see above) and continued: I do not accept that the conduct of Pyramid or its solicitor in relation to procuring the execution and registration of the mortgage was such as to give rise to a personal equity in Scorpion sufficient to set the mortgage aside. Scorpion established no legal or equitable cause of action against Pyramid. As I say, the highest that the evidence went was to show that had Pyramid (or its solicitors) made further enquiries the defects which it is now said existed in Scorpion’s execution of the mortgage would have been revealed.

The requirement of an element of unconscionability 5.108C

Vassos v State Bank of South Australia [1993] 2 VR 316 Supreme Court of Victoria

[The plaintiffs were the registered proprietors as tenants in common of land that was subject to a registered mortgage to Sandhurst Trustees to secure the sum of $130,000. The third co-owner was authorised to refinance the mortgage at cheaper rates. The plaintiffs subsequently

[page 497]

discovered that their signatures had been forged to a registered mortgage in favour of the defendant bank, as well as to a guarantee and an indemnity to secure the sum of $500,000 advanced to an investment company, FHI Group. The defendant bank was not a party to the fraud and was unaware of it. The plaintiffs sought a declaration, inter alia, that they had an in personam right against the defendant bank.] Hayne J: I consider it of the first importance to recall that the bank’s title as mortgagee

here is not defeated by the fact of forgery. The bank acquired that title innocent of any fraud or knowledge of fraud. Its title is as mortgagee to secure all amounts owed by any of the mortgagors including amounts owed by any of the mortgagors as guarantors of FHI Group. Of course two of the three mortgagors never assented to become surety for FHI Group or to give the bank a mortgage as security for any such indebtedness but in no case where the signature of a mortgagor has been forged will that mortgagor have assented to pay the debt secured by the mortgage. If, as the plaintiffs contended, the fact of lack of assent of the mortgagor gives an in personam right to a discharge, then every mortgagor whose signature was forged would be entitled to compel the mortgagee to discharge the mortgage on the basis that the mortgagee was not entitled to demand any more than had been agreed to be paid and the ‘mortgagor’ had never agreed to pay anything. That flies in the face of indefeasibility of title for without any fault of any kind on the part of the mortgagee he could always be compelled to discharge his security and his title obtained by registration could always be set aside at the suit of the defrauded party. Such a conclusion again appears to hark back to the views expressed by Dixon J in Clements v Ellis — views which, as I have said, have been rejected by the High Court in Breskvar v Wall and later cases. The bare fact that a party has not assented to the transaction recorded in an instrument registered under Torrens system legislation does not, in my opinion, give that person a right enforceable by in personam action to have the transaction reversed. For my part I consider it is clear that more than the bare fact of forgery (and thus an absence of assent) must be shown to found any in personam action of the kind spoken of in Frazer v Walker and subsequent cases. As Mahoney JA points out in Gosper’s case there has been no comprehensive definition of ‘personal’ equity for these purposes: at 45. Again as his Honour points out it may be possible to discern in the authorities two suggestions about the content of the expression ‘personal equity’ in this context: that the interest must not be inconsistent with the terms or policy of the legislation and that ‘personal’ equities arise only from acts of the new owner: at 45; Breskvar v Wall, at 384 to 385. However whatever the limits may be on such ‘personal’ equities the very language used to describe the right and the reference to the remedies being ‘in personam remedies’ is a clear reference to the remedies being available in circumstances where equity would act, ie, in cases which equity would classify as unconscionable or unconscientious. In the present case, for reasons to which I will refer later, it may well be that the bank did not act without neglect but there is in my view no material which would show that the bank acted unconscionably. There was no misrepresentation by it, no misuse of power, no improper attempt to rely upon its legal rights, no knowledge of wrongdoing by any other party. It obtained a mortgage, apparently regular on its face but which was in fact forged. Even if by making reasonable enquiries the bank could have discovered the fact of the forgery I do not consider that that fact alone renders its conduct unconscionable. I do not consider that the plaintiffs have any in personam right against the bank; all that they have shown is the mere fact of forgery of the instrument. [page 498]

[Hayne J held that the defendant bank should have judgment against the plaintiffs for possession of the land and was entitled to sell the land and to realise it in satisfaction of the amount owing under the mortgage. The indemnity and guarantee was held to be unenforceable against the plaintiffs and the defendant was restrained from seeking to enforce it against them. The plaintiffs were given judgment against the Registrar of Titles for indemnity under s 110(3) of the Transfer of Land Act 1958 (Vic), being the assessed value of their interest in the land.] Orders accordingly.

5.109 Questions Hayne J’s view in Vassos, that a registered proprietor is not susceptible to an in personam action unless he or she is acting unconscionably or unconscientiously, has been endorsed by appellate courts in Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202; Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133; Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; McGrath v Campbell [2006] NSWCA 180 at [98]–[101]; LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517; Dollars & Sense Finance Ltd v Nathan [2007] NZCA 177. What is the source of this restriction on the scope of the personal equities exception? Hayne J treats it as implicit in the concept of in personam remedies. Are all equitable remedies that are granted against an owner in personam premised on the restraint of unconscionable conduct? Consider, for example, the requirements for enforcement against a registered proprietor of rights arising under a resulting trust (see, for example, Calverley v Green (1984) 155 CLR 242; 4.112), or under a constructive

trust arising at the point of entry into a specifically enforceable contract of sale (for example, Barry v Heider (1914) 19 CLR 197; 5.154C). Does Hayne J’s view leave room for in personam claims based on legal causes of action, such as contract?

5.110

The Queensland Court of Appeal has recognised a personal equity

against registered owners who had not acted unconscionably in acquiring their interest. In White v Tomasel [2004] 2 Qd R 438, the appellants had obtained registration of a transfer pursuant to orders of the District Court that the Court of Appeal considered to have been wrongly made. The respondents argued that they had an indefeasible title and could not be ordered to retransfer the land to the appellant, as they had simply acted in reliance on the court order and had done nothing unconscionable. The Court of Appeal held by a majority that the court could order the respondents to retransfer the land as part of the restitution in consequence of the orders being set aside. McMurdo J (Williams JA agreeing) held that the appellant’s right to restitution was an equity that fell within the scope of the in personam exception to indefeasibility in Qld, s 185(1)(a). McMurdo J said (at 456) that unconscionability should not be a universal requirement for enforcing a personal equity against the registered owner, as ‘otherwise, for example, the rights of a purchaser under an uncompleted contract for the sale of a registered interest would not be enforceable’. Williams JA, who agreed with McMurdo J, said (at [59]) that in

[page 499]

invoking the assistance of the court at first instance to obtain the order against the appellant, the respondents impliedly accepted that their title was subject to an order of the court, which included any reversal of the order on appeal. The obligation to which the respondents had submitted themselves was one enforceable against them in personam, and was not inconsistent with indefeasibility. Davies JA, in dissent, held that no equity can be enforced against the registered proprietor unless his acts make it unconscionable for him to retain title, and the circumstances did not give rise to such an equity. From one perspective, the view of the majority represents an unwarranted extension of the in personam exception,86 but from another, the majority position may be seen as not in any way impairing indefeasibility because in personam rights in general do not detract from the principle. They simply reflect rights that the registered proprietor is subject to by virtue of their own acts, or rights that the registered proprietor has become otherwise affected by, such as in this instance, overturned court orders. Moreover, most ‘claim[s] in personam, founded in law or in equity’ as referred to by Lord Wilberforce in Frazer v Walker, do not have an element of unconscionability as part of their requirements. There is a division of opinion in subsequent authorities. In Battenberg v Union Club (2005) 215 ALR 696; [2005] NSWSC 242 at [53], Campbell J said that the view of the majority in White v Tomasel ‘goes too far’ and expressed a preference for the minority view of Davies JA. In Harris v Smith [2008] NSWSC 545 at [55], Brereton J approved the broader view of the

majority in White v Tomasel, that a plaintiff should not in every case be required to prove unconscionability. His Honour said: ‘[I]n my view a plaintiff invoking a personal equity for these purposes does not have to establish a superadded element of unconscionability’. Wu argues that the requirement of unconscionability for the in personam exception should be abandoned.87 The ability of the court to order retransfer after registration may affect the court’s assessment of the ‘balance of convenience’ in an application for removal of a caveat that prevents registration, or in proceedings for an interlocutory injunction; 5.165ff. In Ardrey v Bartlett [2004] WASCA 256 at [25]–[36], Murray ACJ approved the reasoning of Williams JA in White v Tomasel, in considering the possible consequences of ordering removal of a caveat. Templeman and Steytler JJ did not find it necessary to consider the matter.

Special equity cases 5.111

A personal equity exception which does incorporate the requisite

element of unconscionability is the equity which a wife has to set aside a surety given to a third party to secure the debts of her husband. In Yerkey v Jones (1940) 63 CLR 649, the High Court accepted that it might in some circumstances be appropriate to give special protection to a wife who gives a surety. There has been a great deal of controversy about the status of the principle in Yerkey v Jones, the argument being that wives in this position are better protected by more general principles of equity. The special equity in

favour of married women was confirmed as part of the law when the High Court of Australia decided Garcia v National Australia Bank Ltd [1998] HCA 48. Yerkey v Jones was affirmed. The issue has been the subject of much

[page 500] academic comment.88 The High Court left open the possibility that the principle extended to ‘long term and publicly declared relationships short of marriage between members of the same or of opposite sex’: at [22]. Some authorities have observed that the High Court did not intend to confine the benefit of the Garcia principle to married women, and that it may extend to other relationships in which the lender can reasonably be taken to have understood that the guarantor may repose a requisite degree of trust and confidence in the debtor in business affairs.89 McCallum J suggested that such an expectation might arise with respect to a relationship between an elderly parent and an adult child: Australian Regional Credit v Mula [2009] NSWSC 325 at [138]–[139]. In Permanent Mortgages Pty Ltd v Vandenberg [2010] WASC 10, Murphy J declined to extend the Garcia principle to a relationship of aged parent and child: at [191]–[197].90 5.112

The promotion of the special equity in favour of married women

applied in Garcia v National Bank of Australia Ltd and the equity favouring those suffering from a special vulnerability or disability noted in cases such as Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Spina v Conran Associates Pty Ltd (2008) NSW ConvR ¶56-218; [2008] NSWSC 326 are

illustrative of an expanding scope of equitable remedies based on unconscionability. Unconscionability is not just a traditional concern of equity but now has a statutory basis in enactments such as the Contracts Review Act 1980 (NSW). If the person becoming registered is guilty of unconscionable conduct as the primary actor, the in personam exception to indefeasibility will answer to repel reliance by such a person upon a registered title. The position is more difficult when the person accused of unconscionability has a more passive role. This is most likely to arise where the registered proprietor is accused of unconscionable behaviour arising from having received notice of the unconscionable conduct of a third party. A not untypical situation in this context is where a credit provider who has a registered security has constructive notice of undue influence or unconscionable behaviour on the part of a third party against the borrower or notice of the possibility of the existence of a Yerkey v Jones equity in favour of the borrower. Is a personal equity based on concepts of notice reconcilable with the ‘notice’ provisions in the Torrens statutes, which provide that a registered owner is not affected by notice of a prior unregistered interest or trust and that mere notice is not of itself to be imputed as fraud? The issues raised by the conflict of two important cornerstones of the modern law of property, a vigilant and expanding equity and the preservation of the notion of indefeasibility of title, are difficult and complex and not easily resolved, as the following discussion indicates.91

[page 501]

Personal equity and breach of trust 5.113

A registered proprietor who obtains registration of a transfer in

breach of fiduciary duty to the transferor cannot set up his or her registered title to escape liability: Tataurangi Tairuakena v Mua Carr [1927] NZLR 688. The same applies where the registered proprietor acquired title under circumstances that give rise to a constructive trust: Bahr v Nicolay (No 2) (1988) 164 CLR 604; 5.101C. Breaches of trust or fiduciary obligations involve the element of unconscionability or equitable fraud required to bring an action against the registered owner in personam. In recent years, parties have sought to bring proceedings against registered owners under the rule in Barnes v Addy to land under the Torrens system. Barnes v Addy (1874) LR 9 Ch App 244 concerns the liability of a stranger who deals with assets as trustee or fiduciary in breach of trust. Under the ‘first limb’ of Barnes v Addy, a stranger who knowingly receives trust property in breach of trust holds the property subject to the trust. This is known as ‘recipient liability’. The ‘second limb’ arises where a stranger, although not receiving trust property, assists with knowledge in a fraudulent or dishonest design on the part of a trustee or fiduciary, and therefore takes the property as a constructive trustee. This limb is known as ‘accessory liability’. The scope of both limbs of Barnes v Addy, and their application to Torrens system land, was considered by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 81 ALJR 110. In a joint judgment (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ), the court held that the breach of trust or fiduciary duty required under the second limb must be dishonest and fraudulent. In relation to the requirement to prove that the registered

owner had knowledge of the breach, the court referred to the five categories of knowledge laid out by Peter Gibson J in Baden Delvaux & Lecuit v Societe Generale pour Favoriser le Development du Commerce [1992] 4 All ER 161: (i)

actual knowledge;

(ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable person; (v) knowledge of circumstances which would put an honest and reasonable person on inquiry.

The court said (at [170]–[178]) that categories (i)–(iv) would suffice to establish knowledge of a dishonest and fraudulent breach of trust that would make the accessory liable under the second limb, but category (v) would not. The court’s ruling on this confirms the views of the majority justices in LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291, and the majority view in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133, that dishonesty in the second limb of Barnes v Addy coincides with the concept of fraud as an exception to indefeasibility under the Torrens statutes.92 The cited cases were expressly approved by the High Court: at [196]. In Rasch Nominees Pty Ltd v Bartholomaeus (2013) 115 SASR 473 (see 5.88 for facts), in addition to imputed fraud (which the Court rejected) the first purchasers also claimed that the second purchasers came within accessory liability under Barnes v Addy. However, Gray J concluded (Sulan and Stanley JJ concurring) that ‘it was not established that Mount Barker Property was to be imputed with knowledge of the misleading

[page 502]

and deceptive conduct of the Bartholomaeuses. Accordingly, the Barnes v Addy contention is not made out’: (at [64]). The first limb of Barnes v Addy, which imposes a constructive trust on a person who acquires trust property with actual or constructive knowledge of the existence of a trust, is harder to reconcile with the indefeasibility provisions, particularly the ‘notice’ provisions, of the Torrens statutes; see 5.30. In Tara Shire Council v Garner [2002] QCA 232, a majority of the Queensland Court of Appeal held that a registered owner who took property knowing that it was held on trust for an earlier purchaser (the council) was subject to a personal equity which bound him to hold the property on trust for the council. The High Court in Farah Constructions preferred the view of the majority of the Victorian Court of Appeal in Macquarie Bank Ltd v SixtyFourth Throne Pty Ltd [1998] 3 VR 133 that a claim under Barnes v Addy was not a personal equity which could be asserted as an exception to indefeasibility.93 The High Court (at [193]) approved the following remarks of Tadgell JA ([1998] 3 VR 133 at 156): [T]o recognise a claim in personam against the holder of a mortgage registered under the Transfer of Land Act, dubbing the holder a constructive trustee by application of a doctrine akin to ‘knowing receipt’ when registration of the mortgage was honestly achieved, would introduce by the back door a means of undermining the doctrine of indefeasibility which the Torrens system establishes… In truth, I think it is not possible, consistently with the received principle of indefeasibility as it has been understood since Frazer v Walker and Breskvar v Wall, to treat the holder of a registered mortgage over property that is subject to a trust, registration having been honestly obtained, as having received trust property. The argument that the appellant is liable as a

constructive trustee because it had ‘knowingly received’ trust property should in my opinion fail [footnotes omitted].

One consequence of the ruling in Farah Constructions is that a purchaser who has been ‘gazumped’ by the registration of a transfer to another purchaser cannot compel the latter to transfer the land to him, even if the second purchaser took with knowledge that the vendor had already sold the land. What further circumstances might be required to give rise to a constructive trust? See Bahr v Nicolay (No 2) (1988) 164 CLR 604; 5.101C.

Personal equities and mistake 5.114

In the absence of fraud, common mistake does not make a

registered title defeasible: Merrell Associates Ltd v HL (Qld) Nominees Pty Ltd [2010] SASC 155 at [39]–[42]. In some circumstances a personal equity may arise against a registered owner who has acted unconscionably in taking advantage of the transferor’s unilateral mistake or a mutual mistake. See, for example, Majestic Homes Pty Ltd v Wise [1978] Qd R 225, where a lessee registered a lease knowing that it contained an option to renew which should not have been included. The lessor’s solicitor had inserted the option by mistake and the lessor did not realise the error when he executed the lease. It was held that registration of the lease did not prevent the lessor’s assignee taking proceedings to rectify the lease by deleting the option clause on the ground of

[page 503]

either unilateral or mutual mistake. The court characterised the lessee’s conduct as amounting to ‘sharp practice’. See also Tutt v Doyle (1997) 42 NSWLR 10, where the vendor, to the knowledge of the purchaser, transferred more land than contracted for, and was granted an order for retransfer as it would be unconscionable for the purchaser to retain it. In a case where more land has been transferred than was bargained for, relief under the personal equities exception will be available where the transferee either knew, or had reason to know, that the transferor was, or might well be, mistaken: Minister for Education and Training v Canham [2004] NSWSC 274. A personal equity can also arise where a transferee unconscionably retains land transferred under a mutual mistake. In Lukacs v Wood (1978) 19 SASR 520, the defendant received a more valuable lot with a dwelling upon it instead of the vacant lot he had contracted for. His refusal to retransfer was held to be unconscionable. Jacobs J said, at 531, that there was an ‘equity in the present case to preclude the defendant from retaining the windfall benefit, by reason of [common] mistake, of a highly advantageous bargain which he did not intend to make and for which he has paid a wholly inadequate consideration’.94 In some cases, courts have refused to find a personal equity.95 In State Bank of New South Wales v Berowra Waters Holdings Pty Ltd (1986) 4 NSWLR 398; (1986) NSW ConvR ¶55-281, a mortgage was discharged by mutual mistake before the debt had been paid. Needham J held that this gave rise to no personal equity, or if it did, the plaintiff’s claim fell within the class of actions prohibited by NSW, ss 42 and

124. There appears to be no clear and consistent explanation for the variable outcomes in this series of cases.96

Personal equity and unlawful action by public authorities 5.115

In Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537, a

council failed to observe strictly the statutory requirements in selling land for overdue rates. The council itself purchased the land which, apart from the irregularities, it was entitled to do. The executor of the previous proprietor argued that the irregularities gave him an equity which prevailed against the council notwithstanding its registration as proprietor. A majority of the Court of Appeal held that the irregularities did not invalidate the sale and, even if they did, the invalidity did not create a personal equity of a kind that could prevail against the registered proprietor. Mahoney JA dissented, contending that the council’s breach of its statutory duty gave rise to a personal equity in favour of the previous proprietor. He distinguished Boyd v Mayor of Wellington [1924] NZLR 1174 on the ground that the invalidity of the resumption in that case did not result from the acts of the defendants. 5.116

The South Australian Full Court refused to apply the in personam

exception to the facts that arose in Palais Parking Station Pty Ltd v Shea (1980) 24 SASR 425. Land was resumed (compulsorily acquired) in good faith by the Director-General of Medical Services. However, the resumption was unauthorised as the Director-General was not a competent authority. His title was nonetheless held to be indefeasible and the court refused to

recognise a personal equity in the former owner to have the land retransferred. The mere fact that the Director-General was registered for an interest to which he was not entitled under the Act did not give rise to a personal equity enforceable against him. King CJ (Williams J agreeing)

[page 504]

said (at 430) that to allow a personal equity against him would render indefeasibility ‘virtually meaningless’. The refusal of relief in cases involving the illegal and wrongful expropriation of property purportedly under statutory power has been the subject of critical comment.97

Personal equity and easements 5.117

In Golding v Tanner (1991) 56 SASR 482, the Full Court of the

Supreme Court of South Australia found that a prescriptive easement was enforceable against the registered proprietor who held title during the period of long user and was not inconsistent with the notion of indefeasibility of title. The easement was held to be enforceable against the registered proprietor under the rights in personam exception to indefeasibility, but would not have been enforceable against a successor in title to the servient tenement. In Williams v State Transit Authority of New South Wales (2004) 60 NSWLR 286, the New South Wales Court of Appeal distinguished Golding v Tanner on the basis that s 88 of the Real Property Act 1886 (SA) admitted the

possibility of easements by prescription, while s 42 of the Real Property Act 1900 (NSW) did not.98

Conclusions on the scope of the personal equities exception 5.118

In conclusion, the scope of the in personam exception has been

significantly narrowed in recent years. Although the High Court in Bahr v Nicolay (No 2) envisaged personal equities as broader in scope than the fraud exception, persons deprived of their land through forgery of a transfer or mortgage now have little chance of successfully asserting a personal equity against a careless transferee or mortgagee in circumstances that do not engage the fraud exception.99

THE REGISTER 5.119C Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73; [1971] ALR 551 High Court of Australia [Under s 42(1)(b) of the Real Property Act 1900 (NSW), the registered proprietor’s title was subject to an interest ‘notified’ on the certificate of title. The certificate of title to land acquired by Bursill in the city of Sydney included a notification of an encumbrance in the following terms: ‘Right of Way created by and more fully set out in … Transfer No 7922

[page 505]

affecting parcels (X) and (Y)’. The certificate of title to the neighbouring land, of which Berger

was the registered proprietor, stated that the right of way created by Transfer No 7922 was appurtenant to that land. Transfer No 7922 was executed in 1872. In that transfer Guy, who was Bursill’s predecessor in title, granted to Long, Berger’s predecessor in title, an extension of an existing right of way: … together with all buildings at present erected on the said road or gateway and the right to pull down such buildings and to rebuild others at the height of not less than 12 feet from the ground over such road … In the Supreme Court of New South Wales, McLelland CJ in Eq held that Transfer No 7922 created an easement over Bursill’s land, which although misdescribed on Bursill’s certificate of title, was protected by s 42(1)(b) of the Real Property Act 1900. Bursill appealed to the High Court and Berger cross-appealed against the refusal to make the third declaration sought.] Windeyer J: As I read the instrument of transfer, what Guy purported to convey to Long was a building occupying a horizontal stratum of part of the land of which he, Guy, was the registered proprietor. It seems that before the Conveyancing (Strata Titles) Act 1961, it was not possible in New South Wales to have a separate certificate of title under the Torrens system for a stratum of land above the surface of the earth. The provisions of the Real Property Act relating to subdivisions were, it seems, not thought to be applicable to such a case. But certificates of title for an estate in fee simple are always expressed to be subject to such incumbrances, liens, and interests as are notified thereon. The existence of a stratum interest could be effectively notified; for it is well established that such an interest is known to the law. The critical question, as I see the matter, is then whether the interest in respect of buildings that Guy conveyed to Long can be said to have been ‘notified on the folium of the register book constituted by … the certificate of title’ within the meaning of s 42 of the Act. If it was, then Bursill holds its land subject to it; and that involves no inroad upon an indefeasible title. The argument that the interest in the buildings is not notified on the certificate of title proceeded on the assumption that Bursill, when purchasing the land, could safely neglect to search Transfer No 7922, which was expressly referred to on the certificate of title. It is contended that this reference to the memorandum of transfer did not amount to constructive notice of its full operation, because it was described as creating an ‘Extension of the Right of Way’. Doubtless this description would have been better if it had read ‘extension of the right of way and rights in building above the way’. But it seems to me that what is ‘notified’ to a prospective purchaser by his vendor’s certificate of title is everything that would have come to his knowledge if he had made such searches as ought reasonably to have been made by him as a result of what there appears. I here use the words of s 164 of the Conveyancing Act 1919 (NSW). We are not concerned in this case with s 43, which gives a protection against unregistered instruments, for Transfer No 7922 was registered, and is noted on the certificate of title.

It seems to me that, at any time from 1872 till today, a prudent conveyancer acting for a purchaser of the land that is now Bursill’s would have ascertained what it was that Transfer 7922 referred to on the vendor’s certificate of title in law effected. True he might have been surprised to discover all that his search revealed. But surely no prudent person, seeing the reference to a right of way, would neglect to ascertain what exactly was the nature of the right of way, the land subject to it, the persons who could avail themselves of it, for what purposes in what matter and at what times. The need to make such a search seems the more obvious if, by an inspection or survey [page 506]

of the land, the intending purchaser had become aware that there was a building over part of the land which was in the occupation of his neighbour. And it seems unlikely that a purchaser of this land in a built-up area of the city of Sydney would not be aware of the existence of the passage way and of the building above it. Whether he was so or not the reference on the certificate of title to Transfer 7922 was I think constructive notice of what it provided, that is the land was subject not only to a right of way but also to an interest of the adjoining landowner in the building above the way. I think that the registered proprietor of the land that is now Bursill’s held his title subject to that interest. Therefore I consider that the owner of the land that is now Berger’s has, and has had, in law a right to the exclusive use and occupation of this building. This Berger’s predecessors in title have enjoyed for nearly a century. But no question of a right from adverse possession arises. The owners of Berger’s land have held the building as of right by documentary title. It follows from what I have said that, although I take a very different path from that which the learned Chief Judge in Equity took, and that I am unable to accept his reasons, I would uphold in substance the declarations that he made. I would therefore dismiss the appeal, but make some alterations in the form of the decretal order. Menzies J (dissenting): [His Honour agreed with the conclusion that Transfer No 7922 did not merely create an easement, but also granted rights in respect of the building above the right of way.] … It remains for consideration, however, whether the transfer of the building effected by transfer 7922 was itself notified upon the folium of the register book for the purposes of s 42 simply by reason of the notification of the rights of way created by the two instruments mentioned, including Transfer 7922 by which the transfer was also made. If so, the estate of the registered proprietor is subject to the interest claimed by Berger; otherwise it is not. The question, of course, is not whether a careful purchaser might be expected to inspect the instruments referred to and by so doing discover that, should it have been intended to notify the transfer of the interest in the land as well as the creation of the right of way, the notification actually made was incomplete. The question is rather whether the transfer of the property interest was itself notified by the reference to an instrument which, it was quite accurately said, created a right of way. It seems to me that the only interests notified were the rights of way and that that description cannot be regarded as covering the transfer of the interest in land constituted by the transfer of the building. I do not think that it would be conducive to the purpose of

the Act to establish indefeasibility of titles to regard what is clearly the accurate notification of the creation of rights of way as going further and notifying an unmentioned transfer of land by reason of the reference to the instrument by which the rights of way were said to have been created but which also effected the transfer. In my opinion the transfer of land was not notified upon the folium of the register book constituted by Bursill’s certificate of title and by reason of s 42 the registered proprietor holds the land free from the estate now claimed by Berger by virtue of Transfer 7922. My conclusions require the allowing of the appeal without consideration of the question whether or not, if there had been the omission of any right of way or other easement, s 42(1)(b) would have applied to a right of way or other easement created after the land had been brought under the Real Property Act. They also dispose of the cross appeal. It cannot succeed. [Barwick CJ delivered a judgment in which he agreed with Windeyer J.] Decretal order of the Supreme Court of New South Wales varied. Otherwise appeal and cross appeal dismissed.

[page 507]

5.120 Questions The cause of the misleading notification in this case was the lack of statutory authority at the relevant time for the issue of separate certificates of title for subdivided lots in airspace. The deficiency has been remedied by legislation in all jurisdictions. The more enduring problem is that a purchaser cannot rely on a notification on the certificate of title as to the legal effect of an instrument, but must assess the instrument itself. An instrument notified on the certificate forms part of the register, and it is the instrument which determines the legal effect.100 In Registrar-General (NSW) v Cihan (2012) 16 BPR 30,845 an easement noted on the certificate of title of burdened land referred to an earlier folio, which contained details of rights conferred by the

easement, but it contained no reference to the dominant tenement (that is, the land that had the benefit of the easement). However, there was a reference on that folio to a ‘Last Certificate Vol 1022 Folio 161’. That folio in turn did identify the dominant tenement. The New South Wales Court of Appeal held that the easement was ‘recorded’ on the register. Are the obligations imposed on searchers by such cases too burdensome? Is the reference to constructive notice by Windeyer J above appropriate in this context?

5.121

There would seem to be no reason why the approach in Bursill v

Berger would not apply in jurisdictions other than New South Wales, notwithstanding variations in the wording of the legislation.101 The form of s 42 has changed considerably since Bursill v Berger, but the reasoning in that case remains applicable in New South Wales: see now NSW, ss 3, 31B, 42.

Registrar’s powers of correction 5.122

All jurisdictions have conferred discretionary powers on the

Registrar to correct entries in the register and supply omitted entries, but the Registrar must not erase the original entry. An error in this sense occurs when information recorded in the register does not accord with the instrument on which the entry was based.102 In State Bank of New South Wales v Berowra Waters Holdings (1986) 4 NSWLR 398, when a registered mortgagee mistakenly discharged the mortgage, the resulting entry was held not to be an ‘error’ for purposes of NSW, s 12(1)(d). The correction has the

same effect as if the error or entry had not occurred, but without prejudicing any right that arose from any entry prior to the correction.103 The Privy Council in Frazer v Walker took the view that this type of provision is a mere ‘slip’ provision of no substantive importance; see 5.41C. Courts have interpreted such provisions narrowly.

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5.123

South Australia, Tasmania, New South Wales and Western

Australia have another ‘substantive’ provision which empowers the Registrar to cancel an entry or document on the basis of fraud or error.104 In Frazer v Walker the Privy Council said that a similar provision in the New Zealand legislation conferred powers that were ‘significant and extensive’. Lord Wilberforce said that the power ‘must be read with and subject to s 183 [the paramountcy provision] with the consequence that the exercise of the registrar’s powers must be limited to the period before a bona fide purchaser, or mortgagee, acquires a title under the latter section’; see 5.41C. The South Australian position may be affected by the special provision relating to forgery or disability in s 69(b); 5.50.105 As Registrars have exercised their powers of correction cautiously, direct authorities on the scope of the powers are sparse. A judge of the Supreme Court of Queensland, in taking a narrow construction of the correction power, has commented that the ‘extent of the registrar’s power to correct errors in the register is a largely unexplored area of the Torrens system. To recognise an unqualified power in that regard would have potentially destructive consequences … a discretionary power to detract

from indefeasibility of a registered title ought to be construed with the utmost strictness’: Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606 at 611 per McPherson J. In Sahade v Owners Corporation SP 62022 [2013] NSWSC 1791 the court considered an error committed by a surveyor who prepared the strata plan prior to registration and misdescribed the space to be occupied by an inclinator enjoyed by the lowest of three lots. Kunc J held that in this instance, correcting the error would not impinge on the titles of other lot owners or owners corporation, and so was justified. Also, the powers of correction ‘are not confined to errors and omissions attributable to the Registrar-General’: at [45]. 5.124

The Queensland and Northern Territory Registrars also have a

substantive power of correction, although in different terms. The Registrar is empowered to correct the register if satisfied that the register is incorrect and that the correction will not prejudice the rights of the holder of a recorded interest: Qld, s 15(1)(b); NT, s 17(1)(b). A person holding an interest in the register will not be prejudiced ‘if the holder acquired or has dealt with the interest with actual or constructive knowledge that the register was incorrect and how it was incorrect’: Qld, s 15(8); NT, s 17(5). The Queensland Registrar can also correct the register to show an omitted or misdescribed easement within the exception to indefeasibility in s 185(1)(c), even if the correction will prejudice the rights of a current interest holder: s 15(3)(a). The Queensland Registrar can correct the register if the register is incorrect because the Registrar has incorrectly recorded an interest, or the Registrar has held an inquiry under Div 4 and has concluded that the register is incorrect, including, for example, because there has been a fraud affecting the register: s

15(1), (2). If the Registrar is unwilling to exercise this power in case of fraud, application may be made to the Supreme Court for an order under s 187.106 The Northern Territory Registrar is also empowered to hold an inquiry into matters including whether a person has fraudulently or wrongfully procured an entry in the register, and may correct the register following the inquiry: NT, ss 20–26.

[page 509]

Other exceptions to indefeasibility 5.125

All states create exceptions to indefeasibility in cases where an

interest is asserted by a proprietor claiming under a prior certificate of title or where the land has been included in the register by wrong description of parcels or boundaries. When concurrent titles are issued covering the same land and neither has been cancelled, the holder of the prior certificate prevails: Medical Benefits Fund of Australia Ltd v Fisher [1984] 1 Qd R 606. The exception does not give priority to a bona fide purchaser for value who takes under a later certificate. In New South Wales, Tasmania, Western Australia and the Australian Capital Territory, the protection of purchasers section does not protect the registered proprietor against an action for ejectment or recovery of land by the holder of the prior certificate: see 5.33. 5.126

A registered proprietor’s title is not indefeasible in respect of a

portion of land which the original parties did not intend to be included in the certificate of title, and which was included due to a misdescription of the

physical parcel, its boundaries or area. The misdescription usually results from a surveying error when the land was first registered, but can arise on a subsequent transfer of part of the land: Michael v Onisiforou (1977) 1 BPR 9356. Except in Queensland, the Northern Territory and Tasmania, the legislation is framed so that a bona fide purchaser of land is not subject to the exception.107 The bona fide purchaser may receive further protection from the protection of purchasers section: see 5.33. 5.127

The exceptions for prior certificate of title and wrong description

can arise on the same set of facts, such as where a portion of land included in a certificate due to wrong description of boundaries is also included in an earlier certificate.108 While the exceptions for fraud, prior certificates of title and misdescription are couched in uniform language, the form of the remaining express exceptions to indefeasibility varies considerably from state to state. The Victorian section generally goes further in protecting unregistered interests than the legislation of the other states. Vic, s 42(2) provides that land which is included in any Crown grant, certificate of title or registered instrument shall be subject to: a)

the reservations exceptions conditions and powers (if any) contained in the Crown grant of the land;

b)

any rights subsisting under any adverse possession of the land;

c)

any public rights of way;

d)

any easements howsoever acquired subsisting over or upon or affecting the land;

e)

the interest (but excluding any option to purchase) of a tenant

in possession of the land; f)

any unpaid land tax and also any unpaid rates and other charges that can be discovered from a certificate [issued pursuant to certain named Acts] notwithstanding the same respectively are not specially notified as incumbrances on such grant certificate or instrument.

[page 510]

The following brief analysis takes the Victorian legislation as the starting point and makes some comparisons with the legislation elsewhere. The table at 5.160 shows the extent to which the state Acts have made express inroads into the principle of indefeasibility.

Reservations and exceptions in Crown grant 5.128

In states where there is no express statutory exception for

reservations in the Crown grant, the same result has been reached by administrative action. In New South Wales, for example, certificates of title have long been endorsed to the effect that they are issued subject to the reservations and conditions, if any, contained in the Crown grant. The terms of the Crown grant are not mentioned on certificates of title subsequently issued in respect of the land. A searcher therefore cannot ascertain from the register book (the original certificate of title) what reservations or exceptions were contained in the Crown grant. In practice, no serious problem is caused,

since the most common reservations or exceptions in the Crown grant relate to the Crown’s right of resumption (now governed by legislation) and the Crown’s retention of the right to minerals. It has always been known that the Crown’s practice was to reserve mineral rights. Furthermore, the reservations in Crown grants have now been superseded by a series of statutes providing that property in a variety of minerals shall remain in the Crown.

Short-term tenancies 5.129

The Torrens legislation contemplates the registration of leases, but

also creates specific exceptions to the principles of indefeasibility to protect certain unregistered leases. The form of the legislation governing registration of leases is broadly similar in each jurisdiction, although there are significant differences in wording. The New South Wales Act, for example, provides for the registered proprietor to execute a memorandum of lease in the approved form where land is ‘intended to be leased or demised for a life or lives or for any term of years exceeding three years’: NSW, s 53(1).109 Compare Qld, s 64; SA, ss 116–117 (permitting registration of a lease for life or any term of years exceeding one year); ACT, s 82. Legislation in this form specifically contemplates the registration of leases for life which at common law would not be regarded as creating leasehold estates for a term: see 8.14. The legislation in other jurisdictions refers only to leases for a term exceeding three years: Tas, s 64(1); Vic, s 66(1); WA, s 91. The wording of the legislation generally does not make it clear whether a lease for a term less than that specified (three years in all jurisdictions except South Australia) may be registered. However, in Tasmania it is expressly stated that a lease for

a term of three years or less is not registrable (Tas, s 64(2)), while elsewhere the legislation is interpreted this way: Robinson, 268. In Queensland, the Land Title Act 1994 (Qld) does not distinguish between short- and longterm leases; see Pt 6 Div 2 ss 64–71. In New South Wales the practice of registering short-term leases, although not expressly authorised, has been judicially sanctioned: Parkinson v Braham (1961) 62 SR (NSW) 663. The legislation may specifically authorise the registration of subleases (ACT, ss 88–91; Tas, s 69(1); Vic, s 71; WA, ss 99–102) but even if it does not the general provisions relating to leases achieve the same effect.

[page 511]

5.130

The duration of unregistered leases protected in jurisdictions other

than Victoria varies from one to five years: ACT, s 58(1)(d) (not exceeding three years) and see ss 58(1)(e), 85; NSW, s 42(1)(d) (protection confined to leases not exceeding three years); Qld, ss 4 and 185(1)(b), (2) (from year to year or a term not exceeding three years); SA, s 69(h) (one year); WA, s 68(1A) (not exceeding five years). In South Australia and Western Australia the provision relates only to tenancies where the tenant is in actual possession (or in New South Wales entitled to immediate possession) at the time of registration. The Western Australian provision specifically excludes options to purchase and options to renew unless protected by caveat: WA, s 68(1). Unless protected by caveat, an option to renew will be destroyed by the registration of a subsequent transfer to a purchaser, even if the purchaser took with notice: Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407. Tas, s 40(1)

(d) excepts from the indefeasibility provisions the interest of a tenant under a periodic tenancy; a lease taking effect in possession for a term not exceeding three years (whether or not the lessee has power to extend); an equitable lease but not as against a bona fide purchaser without notice who has lodged a transfer for registration; and a residential tenancy agreement to which the Residential Tenancy Act 1997 applies. 5.131

Victoria uniquely has an exception to indefeasibility for the interest

of a tenant in possession without any limitation as to the duration of the tenancy: Vic, s 42(2)(e). The phrase ‘interest of a tenant in possession’ is widely construed and includes the interest of a purchaser given possession before settlement.110 In Downie v Lockwood [1965] VR 257 it was held that a tenant’s equity of rectification of the original lease constituted part of the tenant’s interest in the land. 5.132C

Perpetual Trustee Co Ltd v Smith (2010) 186 FCR 566; 273 ALR 469; [2010] V ConvR 54-779 Federal Court of Australia (Full Court)

[The facts of this case are summarised at 5.194C.] Moore and Stone JJ: It is now commonplace for elderly people to use the equity in their home to generate an income stream during retirement. This appeal concerns arrangements of this type. A scheme ostensibly for this purpose was operated by Money for Living (Australia) Pty Ltd and Money for Living Property Holdings Pty Ltd (MFLPH). The scheme involved elderly retirees selling their homes to MFLPH in return for a lump sum, an annuity for a fixed period and a life tenancy over the property. A number of these transactions occurred before MFLPH ceased trading in late 2005 … Perpetual made a number of loans to MFLPH entities to finance the purchase of properties and took first registered mortgages over them. The retirees have claimed that the registered mortgages held by Perpetual were subject to their interests as lessees. Perpetual’s position was that it was an innocent third party mortgagee, and that upon registration of its mortgages it obtained indefeasible title. Middleton J gave a series of judgments in the matter generally in favour of the retirees …

[page 512]

The 2 December orders reflect his Honour’s conclusion that the retirees were tenants in possession for the purposes of s 42(2)(e) of the Transfer of Land Act 1958 (Vic) (the TLA), or s 40(3)(d) of the Land Titles Act 1980 (Tas) and each retiree held, as vendor, an equitable vendor’s lien in respect of the unpaid balance of the purchase price … Before the primary judge Perpetual argued that any lease which would otherwise have been granted to the Gainsfords would be void for uncertainty because it offended the rule that, to be valid, a lease must be for a term certain: Lace v Chantler [1944] KB 368; [1944] 1 All ER 305. His Honour rejected this submission for a number of reasons. His Honour said, at [23]: I see no reason to depart from the views expressed by Gobbo J in Greco v Swinburne Ltd [1991] 1 VR 304 that a lease for life or lives is not void for uncertainty. Whilst the essential characteristic of a fixed term lease is that it must be of a specified maximum duration, this rule may not apply to periodic leases or leases for life (see Re Midland Railway Company Agreement v British Railways Board [1971] Ch 725 at 731–2 … In addition his Honour said that the arrangement could be construed as creating a freehold life tenancy such as was accepted in Burke v Dawes (1938) 59 CLR 1; [1938] ALR 135 (Burke) as falling within the words of s 72 of the Transfer of Land Act 1928 (Vic), a predecessor to s 42(2)(e). See also Black v Poole (1895) 16 ALT 155. We agree with his Honour’s conclusions. The duration of the lease in question was for the lives of Mr and Mrs Gainsford albeit that it was determinable earlier if they vacated the property for more than 6 months. We are satisfied that there was a lease, albeit existing only in equity and in the circumstances it is not necessary for us to decide whether that interest was actually a determinable life estate or a lease for a term of years measured by the life of the survivor of Mr and Mrs Gainsford. See Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10 at 15; 3 ALR 97 at 97–8 where a similar approach was taken. Were the respondents tenants in possession before the appellant acquired its mortgages? Perpetual also submitted that the Gainsfords were not tenants at the time the mortgages were created. This submission relies on the primary judge’s finding, at [18] of the principal reasons, that the mortgages, including the mortgage of the Gainsford property, ‘were entered into and created on, and intended to be effective from and on, the date which each mortgage document bears’. In the case of the mortgage of the Gainsford property this was 9 December 2004, which was also the date of settlement. We agree with his Honour that, irrespective of settlement, there were binding contractual relations between MFLPH and Perpetual from the time they entered into the contract of mortgage. However, we would make two points in relation to this claim. First, the reasoning that leads Perpetual to claim that it acquired a mortgage from the time of contract, also leads to the conclusion that the Gainsfords acquired a lease from the prior date of their contracts with MFLPH. Moreover, in so far as the mortgage was intended to convey a proprietary interest in the Gainsford land to Perpetual, it depended on the contract with

Mrs Gainsford; without that contract, MFLPH could give Perpetual no more than a future interest in property to be acquired by MFLPH or, in other words, an interest commensurate with the specific enforceability of the contract between Perpetual and MFLPH: Chan per Mason CJ, Brennan, Deane and McHugh JJ at CLR 252; ALR 528 and per Toohey J at CLR 261; ALR 534–5. The contracts between MFLPH and Mrs Gainsford logically and chronologically preceded the mortgage contract and so any tenancy created before settlement was created before the mortgage. [page 513]

Issue 2: Priority as between the tenants in possession and the mortgagee We have concluded that all the persons concerned were tenants in possession at the time the appellant acquired its interest as a mortgagee of the relevant properties. It follows that, as provided in s 42(2)(e) of the TLA, the relevant land is subject to those tenancies. While it might be thought from the plain meaning of the section that this means that those tenancies take priority over the subsequent mortgages, the decisions of the High Court indicate otherwise. In Burke all members of the High Court other than Latham CJ proceeded on the basis that the effect of the statutory protection was to deprive the registered proprietor of the indefeasibility otherwise accorded to it, leaving the competition between the registered proprietor and the tenant in possession to be resolved by the application of common law principles as if between two unregistered interests. Burke was followed in Barba v Gas & Fuel Corporation of Victoria (1976) 136 CLR 120; 12 ALR 649 (Barba). In our view Barba and indeed, Burke, establish the following two propositions: (a) the interest of a tenant in possession does not, merely by virtue of the tenant being in possession, take priority over a subsequent registered proprietor; (b) a registered proprietor in competition with a tenant in possession, cannot rely on the indefeasibility of title that would, were it not for s 42(2)(e), otherwise accrue to the registered proprietor. Together, these two propositions must lead to the conclusion that the competition between the two interests can only be resolved by a comparison of the kind that his Honour rejected. For reasons given below our conclusion as to the priority of the retirees’ interests does not depend on whether the Perpetual’s interest is legal or equitable. In this regard we note that while s 40(1) of the TLA provides that ‘no instrument until registered … shall be effectual to create … any interest or encumbrance in on or over any land’ subject to the TLA, s 42(2)(e) does not invalidate registration, it merely deprives the registered proprietor of indefeasibility. Despite his view as to the operation of s 42(2)(e), the learned primary judge did in fact consider the respective merits of the two entities and, on that basis also, concluded that the retirees’ interests took priority over Perpetual’s mortgages. Understandably, his Honour’s observations are somewhat sparse presumably not only because his preferred view as to the operation of s 42(2)(e) but also because it is clear no issue was raised in

the pleadings concerning Perpetual having notice (actual or constructive) of the retirees’ interests. In this case the tenants were the vendors. It was a condition of the contracts of sale that there be an ‘irrevocable’ lease agreement between the parties prior to settlement. No right to create a mortgage that competed with the vendors’ rights as tenants was reserved in the contract. The only relevant provision in the transaction documents was cl 1.9 of the deed of agreement which merely referred to MFLPH using its best endeavours to obtain the consent of any mortgagees to the lease. As the primary judge commented at [52], ‘clause 1.9 did not refer specifically to Perpetual or to any existing mortgagee’. His Honour added that he did not consider that ‘cl 1.9 could be construed as a consent by the retirees that a later mortgage could override the interests of the retirees as tenants in possession’. We agree. The whole purpose of the arrangement was that the retirees could continue to live in their homes for the remainder of their lives. It would take very clear words indeed to indicate that they were prepared to subordinate their rights to remain in their homes to the interest of a mortgagee. Similarly, we are of the opinion that Burke should be distinguished from the present circumstances. The priority accorded to the mortgagees in that case critically depended on the fact that they dealt with an executor whom it was reasonable for them to believe was acting in [page 514]

the course of his duties. Moreover, the tenant had only a beneficial interest arising under the will of Mr Waller and consequently was a mere volunteer. No such complication exists here. In the case of all the respondents, the equitable interest of the tenants preceded the interests of the mortgagees. If the equities between the retirees and Perpetual were equal then the retirees’ interest, being first in time would take priority. That principle does not apply where the merits as between the parties are not equal. In this case it might be argued, although Perpetual made no such argument, that by giving MFLPH a registrable transfer and certificate of title, the retirees had armed MFLPH with the ability to enter into the mortgages, without Perpetual having any knowledge of their interests. Thus, it might be argued, although Perpetual did not, that the retirees had an obligation to correct the impression so created by lodging caveats to protect their interest. While Perpetual’s failure to raise the question of notice might be regarded as fatal to its claim (see Barclays Bank plc v Boulter [1997] 2 All ER 1002; [1998] 1 WLR 1) we propose to consider the question … In the present circumstances, it beggars belief that the appellant did not have notice, at the very least constructive notice, of the retirees’ interests. In the absence of clear evidence to the contrary (and there was none) the inescapable inference is that Perpetual did have notice. Perpetual entered into many mortgages with MFLPH and made extensive funds available to it. In the normal course of events a lender in Perpetual’s position would approve a loan facility on which MFLPH could draw in respect of the individual mortgages. Whether or not this was the case here, it is inconceivable that Perpetual would have agreed to make extensive funds available to MFLPH without having any idea

of the nature of their business. There were in the appeal book extracts from various affidavits which indicated that the personnel in charge of settlement of the mortgages were not aware of the retirees interests or even, as least in some cases, that they were in possession. This is hardly surprising given the comparatively mechanical nature of settlement procedures however no evidence was apparent or was drawn to our attention as to the arrangements pursuant to which the loan moneys were made available. The absence of evidence on the point suggests that there was no evidence that would have assisted Perpetual in this regard. In any event, the very name of the company granting the mortgages, Money for Living Property Holdings Pty Ltd, would or should have alerted the mortgagee to the need to make enquiries. Furthermore, the fact that the mortgaged properties were residential premises occupied by an elderly person or an elderly couple should have alerted a potential purchaser or mortgagee of the need to make enquiries. [Appeal dismissed. Dowsett J dissented.]

5.133

In a contest between a tenant in possession and a registered

mortgagee, the relevant time for assessing priority is the time of the creation of the mortgage in equity, not its registration: see also Balanced Securities Ltd v Bianco [2010] VSC 201 at [101]–[117]. Examples of interests protected by s 42(2)(e) are the equitable interest of a purchaser under a contract of sale (being at law a tenant at will of the vendor): Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329; the equitable life estate of a devisee under a will (the devisee being at law a tenant at the will of the trustee): cf Burke v Dawes, as well as the equitable leasehold interest of a person in possession under an agreement for a lease or an informal lease: Downie v Lockwood. What is the position where a tenant who holds under an unregistrable lease sublets the premises? Is the subtenant protected by s 42(2) (e)?

[page 515]

5.134

The effect of an unregistered lease which is in registrable form, or

which would be registrable if in proper form, is determined according to the general principles governing the enforceability of unregistered interests in land under the Torrens system. An unregistered lease may be enforceable against a registered proprietor of the land because it comes within one of the statutory exceptions to indefeasibility. It is not clear whether such a lease should be regarded as legal. A tenant holding under an unregistered lease, which is not within the statutory exceptions, has an equitable interest on the principle of Barry v Heider (1914) 19 CLR 197; 5.154C. Such an interest would be defeated by the later registration of a transfer from the lessor (R M Hosking Properties Pty Ltd v Barnes [1971] SASR 100), but would be protected by the lodging of a caveat. If the lease is unregistrable then, apart from the express exception to indefeasibility, it is enforceable between the parties: Josephson v Mason (1912) 12 SR (NSW) 249. It would be anomalous for the legislature to penalise the tenant for non-registration of an unregistrable lease. But the indefeasibility principle would presumably operate to prevent enforcement of the lease against a transferee of the reversion who obtains registration: Munro v Stuart (1924), reported (1941) 41 SR (NSW) 203. The problem of the unregistrable lease is largely theoretical because in some states a lease of any duration is registrable, while all states except the interest of a tenant under a short-term lease from the indefeasibility provisions. Nonetheless, the exceptions usually protect only the interest of a tenant in possession of the land, so that it may be possible in some jurisdictions for a tenant under a short-term lease to be unable to register his or her interest yet face the prospect of the interest being destroyed by the

registration of a transfer of the reversion. Can the tenant protect himself or herself by lodging a caveat in these circumstances? 5.135

In Burke v Dawes (1938) 59 CLR 1; [1938] ALR 135, a majority of

the High Court proceeded on the assumption that a person claiming the protection of what is now s 42(2)(e) of the Transfer of Land Act 1958 can have no greater rights than he or she would have under the general law. Why was this principle not a conclusive answer to the claim of the tenant in Downie v Lockwood? The principle was applied in Barba v Gas and Fuel Corp (1976) 136 CLR 120; (1977) 12 ALR 649; 51 ALJR 219. The facts are stated in the extract from the judgment of Crockett J at first instance (see 10.3C) and the short grounds for the High Court’s decision are set out in 10.4. It had been argued that the defendants were tenants in possession of the land as purchasers under a contract of sale (that is, they were tenants at will of the vendor) and consequently their rights prevailed under s 42(2)(e) against the subsequently registered creation of easement in favour of the corporation. Gibbs ACJ held that s 42(2)(e) would give the defendants no greater protection than they would have enjoyed under the general law. The effect of the special provisions in the contract of sale between the vendor and the defendants was to make the sale subject to the proposed easement in favour of the corporation so that the creation of easement prevailed over their equitable interest. The subsection could not alter this order of priority.

5.136 Questions 1.

How does the position of a purchaser of general law land differ

from the position of a purchaser of land under the Torrens system, with respect to the rights of a tenant in possession of the land? 2.

What is the effect of the decision on a purchaser of Torrens system land?

[page 516]

3.

How can such a purchaser protect himself or herself?

4.

Is the result of the decision compatible with the aims of the Torrens system?

5.

Would such a decision be made in any state other than Victoria?

5.137

The New South Wales approach is quite different, being closely

linked with s 43A: see 5.127, 5.185. NSW, s 42(1)(d) provides that the registered proprietor holds the land free from unregistered estates or interests except: … a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected: Provided that — (i)

The term for which the tenancy was created does not exceed three years; and

(ii) in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years.

United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331; [1968] 1 NSWR 134 deals with the interpretation of this provision and its relationship with s 43A. 5.138C United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne (1967) 68 SR (NSW) 331; [1968] 1 NSWR 134 New South Wales Court of Appeal Sugerman JA: The facts of these four applications, which are not in dispute, are stated at length in the reasons for judgment of the learned Chief Justice and need not be repeated. It is sufficient to recapitulate the essential circumstances in any one of the applications, these being identical in all four cases, which give rise to the question posed to us. One Clyne was the registered proprietor for an estate in fee simple under the Real Property Act 1900, as amended, of premises which were prescribed premises within the meaning of the Landlord and Tenant (Amendment) Act 1948, as amended. At all material times the applicant was the weekly tenant to Clyne of the premises; but there was no registered lease. By memorandum of mortgage duly registered under the Real Property Act, Clyne mortgaged the premises to the Starr-Bowkett Society to secure an advance. The StarrBowkett Society had actual notice of the existence of the tenancy at the time when it obtained a registrable memorandum of mortgage or a memorandum which, when appropriately signed by it or on its behalf, would be registrable. Clyne having made default under his mortgage, the Starr-Bowkett Society sued out a writ of ejectment in which he alone was named as defendant. Judgment of possession was signed by default for want of appearance and a writ of habere facias was issued. These proceedings first came to the knowledge of the tenant when he received notice to vacate the premises. He thereupon applied for and obtained leave to appear and defend the action of ejectment and now seeks to have the judgment and the writ of habere facias set aside. [page 517]

The question which has been referred to us is whether in these circumstances the Starr-Bowkett Society is entitled to judgment in ejectment against the tenant. But the answer to this question, or the question whether the existing judgment should be allowed to stand, resolves itself into two further questions: (1) Was the tenancy binding upon the Starr-Bowkett Society? (2) If Yes, was the Starr-Bowkett Society bound, in relation to it, by the Landlord and Tenant (Amendment) Act, and in particular s 62 thereof? It may be said that, if the first question is answered affirmatively, this second question does not of necessity arise. For in that event the Starr-Bowkett Society, being bound by the tenancy, was not at liberty to treat the tenant as a mere trespasser or tenant on sufferance and was obliged, in order to establish its title to possession as against him, first to determine his

tenancy by the appropriate notice even independently of the requirements of the Landlord and Tenant (Amendment) Act. This, so far as appears from the statement of the agreed facts, was not done. But it is desirable if the first question be answered affirmatively, to answer as well this second question, which is one of importance between the parties and generally and which, if answered favourably to the tenant, would provide a further reason — want of jurisdiction in this court — why the judgment in ejectment should not stand. The first of these two questions is dependent upon the effect of ss 42(d) and 43A of the Real Property Act, introduced therein by the Conveyancing (Amendment) Act 1930. A tenancy of land under the Real Property Act which is not for a term of years exceeding three years may be created without the necessity for registration of a memorandum of lease, and this includes the creation of a periodical tenancy such as one from week to week: Josephson v Mason (1912) 12 SR (NSW) 248. But a tenancy so created was liable to be defeated by registration of a memorandum of transfer of the subject land even though the transferee took with notice of the existence of the tenancy, and the tenant could be ejected by the transferee: Munro v Stuart (1924) 41 SR (NSW) 203. The same may be said of a registered memorandum of mortgage. The question which arises is whether this result has been affected, at least as regards a tenant in possession or entitled to immediate possession, by s 42(d) read in conjunction with s 43A, as seems to have been the intention underlying the enactment of those provisions. Their effect, and in particular the effect of s 43A, has been the subject of much discussion by learned writers in periodicals and textbooks, but does not seem to have come up for consideration in any reported case until IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; [1964] ALR 971. [Sugerman JA quoted with approval from the judgment of Taylor J, preferring his view as to the meaning of s 43A to that put forward by Kitto J. Then Taylor J went on to say:] Some light is, I think, thrown on this particular problem by the provisions of s 42(d) of the Act which, itself, was introduced into the Act at the same time as s 43A. That sub-section contains an exception from the conclusiveness of a registered proprietor’s title in respect of any tenancy ‘whereunder the tenant is in possession or entitled to immediate possession … of which … the registered proprietor before he became registered as proprietor had notice against which he was not protected.’ The italicised expression, it seems to me, is intended as a reference to the measure of protection afforded by s 43A. With this also I respectfully agree. The result, in combination, of ss 42(d) and 43A in my opinion is that, notwithstanding registration, the purchaser holds subject to a tenancy for a term not exceeding three years created by a previous registered proprietor (whereunder the tenant is in possession or entitled to immediate possession) if he had notice of that tenancy [page 518]

before he obtained a registrable instrument, or one which when appropriately signed by him or on his behalf would be registrable, ie before completion of his purchase.

That is the situation in these present cases. It follows, to revert to the illustration which I have taken, that the Starr-Bowkett Society took its mortgage subject to the outstanding weekly tenancy of the tenant. Although the registered mortgage describes the mortgaged land as the whole of the land comprised in the relevant certificate of title, and the recited title of the mortgagor, Clyne, is not expressed to be subject to the tenant’s interest, by force of s 42(d) the mortgage in substance was, as Mr Stuckey has graphically expressed it, a mortgage of the reversion only. It was, that is to say, in this aspect of it, the equivalent of a mortgage at common law of land which was subject to a lease by the mortgagor granted before the mortgage was given. In such a case the mortgagee is not entitled to eject the tenant as a mere trespasser or at most a tenant on sufferance. He must first await the termination of the tenancy or, if it is a periodical tenancy, terminate it, as he is entitled to do, by the appropriate notice. It has been suggested by ElseMitchell J in Parkinson v Braham (1961) 62 SR (NSW) 663 at 669, that it is not correct to regard a registered mortgagee’s right to ejectment as qualified by s 42 (d) because ‘that provision appears more apt to regulate the position of a tenant in possession vis-avis the registered proprietor of an estate in possession of the subject land’. The rights of a registered mortgagee to recover possession of land under the Real Property Act on default by the mortgagor are, his Honour pointed out, statutory (s 60), and: … it appears to me therefore that the appellants cannot resist ejectment at the suit of the mortgagees unless they are able to assert some right which prevails over the statutory right of the mortgagees. Moreover, I do not think it is consistent with the rights which the statute confers on registered mortgagees to treat those rights as qualified in any way by notice of matters not recorded in the register book … With all due respect, I am unable to agree with these views, which in any event appear to be obiter, since in Parkinson v Braham the lease under which the tenant sought to resist ejectment was granted after the mortgage and without the consent of the mortgagee. In these cases it is a matter not so much of qualifying the statutory rights of the mortgagee as of defining the subject to which those rights extend. For these reasons, in my opinion, the first of the two questions which I have postulated should be answered favourably to the tenant. The Starr-Bowkett Society, that is to say, having become registered subject to his tenancy, by force of s 42(d), could not bring an action of ejectment in order to recover possession against him without first terminating his tenancy by the appropriate notice to quit and that, so far as appears, was not done. For that reason alone the judgment should be set aside. It remains to consider whether in so terminating the tenancy, and in consequent proceedings for the recovery of possession against the tenant, the Starr-Bowkett Society is subject to the restrictions imposed by s 62 of the Landlord and Tenant (Amendment) Act, which is the second of the two questions which I have postulated. [His Honour held that a mortgagee of land under the Real Property Act who is bound by a preexisting tenancy is, or at the least becomes on default by the mortgagor, a ‘successor in title’ in the sense in which that expression is used in the definition of lessor in s 8(1) of the Landlord and Tenant (Amendment) Act 1948. Thus, the society was bound by s 62 of the Act and was unable

to determine the tenancies of the applicants except in accordance with the Act. Herron CJ and Walsh JA delivered judgments to the same effect.] Judgment in ejectment in the four actions set aside.

[page 519]

5.139

Mr Clyne was an intrepid foe of protected tenants in New South

Wales. In vol 68 of SR (NSW) there are two other reported decisions in which Mr Clyne was opposed (unsuccessfully) to protected tenants. What could have been a reason for Mr Clyne’s default? Would the result of the case have been the same had the New South Wales Court of Appeal accepted the interpretation of s 43A put forward by Kitto J in IAC (Finance) Pty Ltd v Courtenay? See 5.187C. 5.140

C purchased land under the Torrens system. The land had in fact

been occupied by L for some 33 years as a protected weekly tenant. The contract under which C purchased the land stated that the premises were sold subject to the existing tenancy, not of L but of the estate of L’s deceased brother. The vendors, in answers to requisitions on title, stated that the premises were sold subject to an existing tenancy in favour of the estate of L’s deceased brother and that the vendors were not aware that any person was in adverse possession of the land. There was no evidence that C had any actual knowledge of L’s possession or of any tenancy in her. Was C bound by L’s tenancy? See Clyne v Lowe (1968) 69 SR (NSW) 433; [1968] 2 NSWR 292.

The case was considered in CAC v ASC Timbers (1989) 18 NSWLR 577; see also Hayes v Seymour-Johns (1981) 2 BPR 9366.

Easements 5.141

There are two kinds of exceptions in the Torrens statutes for

unregistered easements: general and partial. General exceptions are found in Victoria and Tasmania. The Victorian provision, s 42(2)(d), excepts easements ‘howsoever acquired’. It is matched in scope by WA, s 68(1A) which excepts from the indefeasibility section ‘any easements acquired by enjoyment or user or subsisting over or upon or affecting such land’. Tasmania creates a partial exception for certain categories of easement. Under Tas, s 40(3)(e), protection is given to an easement either ‘arising by implication’ or created by statute, which would have given rise to a legal interest if the servient tenement had not been registered land. An equitable easement is also protected, but not as against a bona fide purchaser for value without notice who has lodged a transfer for registration. In the other jurisdictions, the exception is restricted to omitted and misdescribed easements: ACT, s 58(1)(b); Qld, s 185(1)(c), (3), (4); NT, s 189(1)(c); SA, s 69(d) (‘not described or misdescribed’). In New South Wales the exception has been clarified and now protects an omitted or misdescribed easement ‘subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act’: s 42(1)(a1). There is a separate exception ‘in the case of the omission or misdescription of any profit à prendre created in or

existing upon any land’: s 42(1)(b). The provisions of all jurisdictions and relevant authorities are discussed at 10.103ff. 5.142

The end result is that in all jurisdictions a purchaser of Torrens

system land is exposed to the risk of being bound by interests the existence of which cannot be ascertained from the register or, in some cases, from any other source at the time of the purchase. The risk to purchasers is greatest in Victoria and Western Australia, where the wide exception for easements reduces the incentive to register them: Vic, s 72ff; WA, ss 63A, 64, 65, 69; but see Riley v Penttila [1974] VR 547. The legal effect of the exception for unregistered easements may need to be reconsidered following Perpetual Trustee Co Ltd v Smith; 5.132C; 5.194C. It was held in that case that the effect of the exception in Vic, s 42(2)(e) is to deny the registered proprietor the ability to rely on the indefeasibility of registered title to defeat the prior interest of a tenant in possession. If the same reasoning is applied to the easements exceptions, such as

[page 520]

Vic, s 42(2)(b), the registered proprietor would be bound by an unregistered easement only if it had priority under general law priority rules.

Adverse possession 5.143

The general law of adverse possession and extinguishment of title

under limitations legislation is discussed at 2.79ff. In Australia, the problem

of accommodating the limitation of actions legislation within the framework of the Torrens system has produced a variety of solutions. The result is that a uniform approach has yet to emerge and some of the legislation presents difficult questions of interpretation. 5.144

Victoria and Western Australia each has a broad exception to

indefeasibility protecting the rights of a person in adverse possession of the land: Vic, s 42(2)(b); WA, s 68(1A). It seems that the wording of the provisions (‘any rights subsisting under any adverse possession of the land’) is wide enough to protect inchoate possessory rights, where the land is in adverse possession at the time of the registration and the limitation period has commenced to run against the registered owner but has not yet expired. The registration of a transfer to a new owner does not stop the limitation period running, so long as the land remains in adverse possession. The legislation in both states (Vic, ss 60–62; WA, ss 222–223A) permits squatters to apply for an order vesting them with registered title on proof that their period of adverse possession has barred the title of the registered proprietor. Even without registration, the squatter’s title will prevail against that of the registered proprietor once the latter’s title is extinguished by the operation of the limitation legislation. 5.145

Tasmania’s Land Titles Act 1980 was substantially amended in

2001. Rights acquired or in the course of being acquired (inchoate rights) under a statute of limitations are an exception to indefeasibility: s 40(3)(h). The Limitation Act 1974 applies to the title of the registered proprietor in the same manner as it does to the title of a proprietor of unregistered land: s

138W(1). However, the Act goes on to state that the estate of the registered proprietor is not extinguished by the Limitation Act, but that where the estate would have been extinguished had the land been unregistered, the registered proprietor holds the land in trust for the squatter, without prejudice to any interest which would not have been extinguished had the land been unregistered: s 138W(2). A squatter claiming the land is held in trust by virtue of his or her adverse possession may apply to the Recorder for an order vesting the legal estate in the squatter: s 138W(4). The right to apply is not affected by the registration of any dealing by the registered proprietor of the land: s 138W(6). While s 138X appears to give the Recorder discretion to reject the squatter’s application, presumably a claimant who established that his or her period of adverse possession would have barred the title of the registered proprietor under the general law is entitled to a vesting order. In determining an application, the Recorder is required by s 138V to consider all the circumstances of the case, including matters listed in paras (a)–(f), which are similar to the tests used by courts in determining whether a person has been in adverse possession. Section 138Y allows the Recorder to refuse to register an application that may result in the creation of a ‘subminimum lot’, unless the council consents. A major restriction on adverse possession is that time does not run during any period during which council rates are paid by or on behalf of the owner: s 138U. The registered proprietor who continues to pay the rates does not hold the land on trust for the squatter: Quarmby v Keating [2008] TASSC 71.

[page 521]

5.146

In New South Wales, the starting point is still the proposition that

no title adverse to that of the registered proprietor can be acquired by any length of possession, but this is subject to the provisions of Pt 6A: NSW, s 45C. Under Pt 6A, a person in possession of a ‘whole parcel of land’ may apply to the Registrar-General to be recorded as proprietor of the land. The application may be made if the title of the registered proprietor of the land would have been extinguished as against the squatter under the statutes of limitation: s 45D(1); Addison v Billion [1983] 1 NSWLR 586. The scheme of the legislation is that applications cannot be made in respect of sub-parcels of land, although encroachments by buildings may be dealt with under the Encroachment of Buildings Act 1922 (NSW). Nor can the squatter obtain a registered title as against a proprietor who has become registered without fraud and for valuable consideration, where the whole of the limitation period has not run against that proprietor: s 45D(4). It follows that unless the registered proprietor has been fraudulent, time begins to run afresh upon registration of that proprietor’s dealing. Presumably, knowledge of the squatter’s possession would not of itself constitute fraud. A person claiming an estate in land the subject of a possessory application may lodge a caveat and the caveator may take proceedings challenging the validity of the application: ss 45H, 45I. While Pt 6A provides an administrative procedure for establishing title by adverse possession without the intervention of a court in the absence of a dispute about the title, it was held by Hamilton J in Bartlett v Ryan (2000) 10 BPR 18,007 that there was no legislative intent to exclude the jurisdiction of the court where there was a real contest concerning

the rights of the paper owner and the adverse possessor. The provisions of ss 45E(2) and 45F clearly envisaged the role of a court.111 5.147

The Queensland legislation permits a person to apply to the

Registrar to be registered as owner of a lot: Qld, s 99. The possessory interest of a person who on application under s 99 would be entitled to be registered as an owner is an exception to the indefeasibility of a registered title: s 185(1) (d). The Registrar may refuse to register the applicant as owner of the lot if not satisfied that the applicant is an adverse possessor: s 108. For these purposes, an adverse possessor is a person against whom the time for bringing an action to recover the lot has expired and who, apart from the Land Title Act, is entitled to remain in possession: Sch 2. Before registering the applicant, the Registrar must give written notice of the application to all registered proprietors of the lot and adjoining lots, to anyone else who may have an interest in the land and to the public: s 103. Any person claiming an estate in the land may lodge a caveat at any time before the application is granted: s 104. If the Registrar is not satisfied that the caveator has an interest in the lot or that any interest has not been extinguished under the Limitation of Actions Act 1974, the Registrar must require the caveator to commence a proceeding in the Supreme Court: s 105. The caveat will lapse if the caveator fails to commence a proceeding within six months, the proceeding is withdrawn or judgment is given against the caveator and there is no appeal: s 105. If no caveat is lodged, or all caveats lodged lapse or are removed, then the Registrar may register the adverse possessor as owner of the lot: s 108. An adverse possessor cannot apply to be registered in respect of

an ‘encroachment’ or part only of a lot (s 98), although the Registrar can register an applicant as owner of all or part of a lot: s 108A. 5.148

The South Australian legislation on adverse possession is contained

in the Real Property Act 1886 (SA) s 251 and Pt 7A. Section 251 provides that title cannot be acquired by

[page 522]

adverse possession except under the provisions of the Act. The Act permits a person ‘who would have obtained a title by possession’ if that land had not been under the Torrens system to apply to the Registrar for the issue of a certificate of title: s 80A. The application may be rejected at the discretion of the Registrar-General: s 80C. Any person claiming an estate in the land may lodge a caveat at any time before the application is granted, forbidding the issue of a certificate of title. If the Registrar ‘is satisfied that the caveator is the registered proprietor of the land … or has an estate or interest in that land derived through, under or from the registered proprietor’ then the application will be refused: s 80f. The language of this section is by no means clear, but it appears to allow the registered proprietor to prevent the issue of a certificate of title to the squatter even where the registered proprietor’s title would have been barred had the land not been under the Torrens system: compare Re Kay [1969] SASR 1 at 4–5. If this is correct, the registered proprietor retains a right of veto over the issue of a certificate of title, provided he or she makes his or her objection known by way of a caveat.112

5.149

In the Australian Capital Territory and the Northern Territory, no

title to land adverse to that of the registered proprietor can be acquired by any length of possession, nor can the title of the registered proprietor be extinguished by the operation of a statute of limitations: ACT, s 69; Land Title Act 2000 (NT) s 198. The legislation provides no procedure to enable a squatter to obtain a certificate of title in his or her own name. Equivalent legislation, formerly in force in New South Wales, attracted a strict and literal interpretation: Van den Bosch v Australian Provincial Assurance Assoc Ltd (1968) 88 WN (NSW) (Pt 1) 357; [1968] 2 NSWR 550; Spark v Meers [1971] 2 NSWLR 1. It follows that under such legislation a squatter cannot hope to acquire an indefeasible title (except by purchase of the land), but must be content with possessory title of limited enforceability, which may be relied on only in an action against a third party.113

Rates and taxes 5.150

The exception relating to rates and taxes in the Victorian legislation

is a concession to the needs of government in its various forms. Victoria (s 42(2)(f)), Western Australia (s 68(1A)) and the Australian Capital Territory (s 58(1)(f)) specifically except liability for rates and other statutory charges from the indefeasibility of the registered proprietor’s title, and Tasmania excepts any money charged on land under an Act: s 40(3)(g). South Australia excepts charges for unpaid succession duty: s 69(i). In other states the position depends on the language of the legislation imposing charges or, in certain cases, on the application of the presumption that the Torrens legislation does not bind the Crown: Sykes and Walker, 498–502. It is sometimes difficult to determine whether statutes imposing charges are intended to bind Torrens system land and to override the principles established by the Torrens legislation: South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603; [1940] ALR 1. The exception for liability for rates and

[page 523]

taxes, whether created expressly or otherwise, represents no serious threat to a purchaser because the nature and amount of the charges can be ascertained from a certificate issued by the relevant authority and adjusted between vendor and purchaser at settlement of the sale of land.

Overriding statutes 5.151

The indefeasibility of registered titles derives from provisions of the

Torrens statutes which can be repealed, in whole or in part, by a later statute. In South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603, the High Court held that certain unregistrable drainage charges took priority over registered mortgagee, as a result of provisions in the Drainage Acts that made them a first charge upon land. Latham CJ J stated at 6: The Drainage Acts are subsequent to the Real Property Act 1886, and, according to ordinary principles of construction, effect must be given to their provisions, notwithstanding any contrary provisions in the Real Property Act 1886. If there is an inconsistency between one statute and a later statute, the later statute prevails. In the present case it is plain that the Drainage Acts were intended to apply to all the lands which were improved by drainage schemes under the Drainage Acts. There is nothing to support an argument that lands under the Real Property Act 1886 were excluded. The result, therefore, is that the charges imposed by the later Acts take priority over the mortgages registered under the Real Property Act, whenever those mortgages were so registered. In no other way can effect be given to the clear enactments that the amount of construction costs and maintenance rates is to be a first charge upon the land. If there is inconsistency between one statute and a later statute, the later statute prevails.

5.152

Implied partial repeal may arise where a later statute overrides a

registered interest, or creates an interest in land or a charge which is enforceable against the registered proprietor: Miller v Minister of Mines [1963] AC 484. If the later statute is irreconcilably inconsistent with the indefeasibility provisions of the Torrens statute, the later statute is said to effect an implied repeal pro tanto of the Torrens provisions, although it is more naturally understood as modifying their operation. For example, in

Pratten v Warringah Shire Council (1969) 90 WN (NSW) (Pt 1) 134; [1969] 2 NSWR 161, a portion of land shown on the folio of the register as owned by the vendor was referred to on the registered plan as a ‘drainage reserve’. Legislation then in force provided that whenever land was described as a drainage reserve in a registered plan, the title to the land by force of the statute (since repealed) vested in the local council. Street J concluded that the provisions of the Real Property Act 1900 in relation to conclusiveness of the register had to give way to the clear terms of the inconsistent later enactment. Notwithstanding registration of the plaintiff purchaser’s transfer, title to the subject land was vested at all times in the defendant council. See also Quach v Marrickville Council (No 2) (1990) 22 NSWLR 55, where the same statute was held to have vested land in the defendant council as a drainage reserve. Young J upheld the plaintiff’s claim to have subsequently acquired title to the land by adverse possession, subject to appropriate rights of easement in respect of the council’s drainage pipe. Young J observed that overriding statutes represent ‘the weakest point in the Torrens system’: at 61. They detract from the ‘mirror principle’ of the Torrens system as they are effective without recording in the title register and therefore impose significant burdens on purchasers.

[page 524]

Legislation has been passed in New South Wales which is designed to prevent the situation in the Pratten and Quach cases recurring, by ensuring

the recording of all resumptions: NSW, s 31A(3) and Conveyancing Act 1919 s 196A.114 5.153

Pratten’s case was followed in Calabro v Bayside City Council [1999]

3 VR 688, another resumption case arising under a different statute. The appellant’s registered title included a strip of land that was marked as a ‘road’ on a registered plan of subdivision, and was held to be a ‘public highway’. Section 203 of the Local Government Act 1989 (Vic) provided that a public highway vested in fee simple in the council, and did not require that the council’s title be registered. The Supreme Court of Victoria ruled that s 203 operated to vest land in fee simple in the council without reference to s 42 (the paramountcy provision) of the Transfer of Land Act 1958 (Vic). Since it dealt with the same subject matter in a manner inconsistent with the latter provision, it must therefore prevail over it as the later statute.115 The later statute overrides the indefeasibility provisions only if the two statutes are unable to stand together. The assessment of whether the statutes can be reconciled is a question of statutory interpretation. 5.154C

Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 Supreme Court of Victoria (Court of Appeal)

[In 1987 the appellant, then a child aged 15 years, bought a property together with his parents. He suffered judgment in the Supreme Court in favour of the respondent bank for possession of the land over which he had joined with his parents during his minority to give a mortgage. On appeal, the appellant argued that the mortgage was unenforceable against him, relying on the minor’s relief provision in s 49(a) of the Supreme Court Act which provided that loan contracts entered into by a minor are void. The latter Act was re-enacted more recently than the relevant Victorian Torrens statute.]

Ormiston JA: After considering the effect of the minor’s relief provision I would conclude that, unless registration of the mortgage in the present case has preserved the respondent’s rights, then it was not entitled to sue on or otherwise enforce the mortgage itself … [T]he second principal question is whether the relief provision conflicts with the sections relating to indefeasibility of title in the Act to the extent that the latter cannot apply, thereby denying the respondent any rights under the mortgage. This will be resolved by determining whether the relief provision overrides the indefeasibility provisions of the Act, in particular ss 42 and 43. It must be remembered that in the present case the respondent’s mortgage has been registered, with the accepted legal consequences which flow from the present interpretation of the Act, ie, those consequences which would follow unless the relief provision prevails … Thus the issue is whether the relief provision in s 49(a) of the Supreme Court Act would deny the conclusive nature of the respondent bank’s title as mortgagee. Is it so inconsistent with the essential provisions of the Act that it must prevail? For this purpose an anterior question must be resolved. Inconsistency would only be relevant and prevalent in its consequences if it works an implied repeal pro tanto of some [page 525]

statutory provision. Omitting certain presently irrelevant circumstances, one must find that the legislature has later passed some inconsistent provision with which the earlier provision cannot stand. Ordinarily, if there be an inconsistency, the later passed statute or section will prevail … Of course, the rule that later statutory provisions repealed earlier inconsistent statutory provisions requires for practical purposes that one must find an earlier and a later statute, and a relevant inconsistency, to which the rule might apply … Assuming therefore the relief provision in the Supreme Court Act to be the later passed enactment, what ought one to conclude as to its effect on the earlier passed critical provisions of the Act, being those relating to indefeasibility of title? It must be remembered that what the court is here dealing with is not the creation of some new interest by virtue of the relief provision but what is asserted to be the statutory denial of the validity and enforceability of the respondent’s mortgage. The issue is whether the mortgage when registered gave an indefeasible interest in the land to the respondent or whether the avoidance of the mortgage instrument by virtue of the relief provision denied forever the consequences of registration under the Act. Nevertheless, in order to answer that question, one must ascertain whether there was true inconsistency between the relevant provisions. If the relief provision can be given effect to without the need to conclude that there has been an implied repeal pro tanto of the indefeasibility provisions of the Act, then the problem is resolved without the need to set at nought those earlier provisions which would otherwise apply… The answer to the question posed, as I would understand it, flows from a correct characterisation of the two statutes as consistent or inconsistent one with the other. There is a strong presumption that Parliament does not intend to contradict itself but rather intends both relevant Acts to operate within their given spheres: Butler v Attorney-

General (Vic) at 276 and 290. No earlier statutory provision is to be treated as repealed or derogated from by a later enactment unless an intention to do so must necessarily be implied, and ordinarily there must be a very strong basis supporting any such implication, for the Parliament is generally presumed to intend both provisions to operate without there being any such implicit repeal or derogation: cf Saraswati v R (1991) 172 CLR 1 at 17. Here, although there can be no doubt that, if not registered, the mortgage would have been unenforceable by the respondent because it was void by reason of the relief provision, that provision says nothing as to the effect of registration or the operation of any of the indefeasibility provisions of the Transfer of Land Act. It is directed to the enforceability of certain contracts. The respondent bank has conceded that it cannot enforce the loan agreement against the appellant. Nevertheless the better view seems to be that the word ‘void’ was never intended to mean that the contract in question was totally ineffective: cf Pearce v Brain [1929] 2 KB 310 and Woolf v Associated Finance Pty Ltd [1956] VLR 51 and see Greig and Davis, Law of Contract (1987), pp 779–80. Whether or not a different construction of the word ‘void’ may have had other consequences (and the forgery cases suggest otherwise), the fact is in this case that the mortgage was registered in the conventional way under the Act. Whatever may have been the position before such registration, the legislature must be treated, subject to the presently irrelevant exceptions as to fraud and the like, as having given an immediately indefeasible title in the land to the respondent bank as mortgagee unless the relief provision should prevail as being relevantly inconsistent. In my opinion the relief provision is not inconsistent in that sense. The Act deals relevantly with the effect and consequences of registration of any document lodged purporting to deal with the title to land under the Act. The relief provision deals with the binding nature of certain agreements reached with minors. Neither deals directly with the subject matter in [page 526]

law of the other. They can be both left to operate within their respective spheres, unless it can be said that the latter plainly intended to repeal by implication the Act’s provisions as to indefeasibility to the extent necessary to give effect to the ‘avoidance’ of contracts with minors pursuant to that provision. If properly an attempt is to be made to read the two statutes together, then the later relief provision may be seen as confined to controlling in the relevant manner the contractual rights of the parties and the indefeasibility provisions of the earlier Act may likewise be confined to the consequences of registration of instruments under the Act. Subject to one line of authority relating to leases, there is no difficulty in identifying the broad spheres of effect of each set of provisions, which ought to be seen as mutually exclusive or at least as capable of having effect without any necessary repugnancy or contradiction. In every case where indefeasibility arises as an issue, it is because the means chosen by the parties seeking registration has been a transaction which had what is alleged to be a vitiating element of some description. The party seeking to rely on a registered title or interest has been met with a challenge that the transaction which was registered or which led to registration of such title or interest was ineffective to pass title or create the

interest. Where the vitiating element is ‘fraud’, then that is recognised in the Act (see ss 42, 43 and 44) as allowing the other party to go behind the record of registration. Otherwise, but subject to the exceptions set out in s 42, the concept of immediate indefeasibility as spelled out in Frazer v Walker and Breskvar v Wall is ordinarily recognised as defeating any claim that the transaction giving rise to the registered interest was void, voidable, unenforceable, illegal or otherwise ineffective, unless that party has a ‘personal equity’ of a kind which would entitle that person to an order requiring the registered holder to transfer or surrender up the interest so acquired. As Barwick CJ expressed it in Breskvar v Wall at 386: Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void … It is that critical characteristic which demonstrates why there is no relevant inconsistency in the present case. The only inconsistency which would be relevant would arise from a provision which directly or by implication denied the consequence of indefeasibility to registration either generally or in a specified circumstance. The fact that another statute declares a class of contract ‘void’ is ordinarily of no significance once the instrument is registered. Before registration, as in the present case both contract and instrument (here the mortgage) may be taken to be void, as the relief provision requires. But, except in the case of fraud, or of any of the other relevant exceptions, that does not preserve the instrument (here the mortgage) from the consequences of registration. The relief provision says nothing as to that and one may envisage many transactions where that section operates in accordance with its terms. Before registration the appellant could have set aside both contract of loan and mortgage and restrained the respondent from registering the latter. In terms of the law of contract to which the relief provision (and the related provisions in the Supreme Court Act) were directed, both contract of loan and mortgage were void in the relevant sense and, if nothing more had occurred, the latter could not have been enforced against the appellant. Once registered, however, the mortgage took on the characteristics and had the effect of a duly executed mortgage, not because of its original contractual effects, but because as a matter of policy the Act created an immediately indefeasible interest in the land by way of [page 527]

mortgage in favour of the respondent. Of course registration has a number of consequential effects in that it makes the mortgage easier, or at least more certain, of enforcement but, for the purposes of the present appeal, the object of the relevant provisions of the Act is directed to certainty of title and they relate solely to the question of indefeasibility. About this latter question the relief provision had nothing to say. In those circumstances there was no relevant inconsistency for the relief provision never purported and was never intended to deny indefeasibility to a mortgage or other document once it becomes registered in the manner prescribed by the Act. I would therefore conclude that the mortgage given to the respondent and registered

under the Act was valid in that it bound the appellant’s interest in the land … [T]he judge’s order should stand and the appeal be dismissed. [Tadgell and Phillips JJA gave separate judgments agreeing that the appeal should be dismissed.] Order: Appeal dismissed.

5.155 Questions The Court of Appeal in Horvath applied a ‘sequential’ approach to the assessment of inconsistency, in which each Act operates within its own sphere in temporal sequence. The effect is that the minor’s relief provision operates to invalidate the mortgage before registration, but the indefeasibility provision operates to make the mortgage indefeasible after registration. The ruling is consistent with authorities following Breskvar v Wall, which hold that registration is effective to vest an indefeasible title even if the instrument used to procure registration is void; see 5.48C. It is also consistent with the general approach to conflict of statutes as expounded by Fullagar J in Butler v Attorney General (Vic) (1961) 106 CLR 268 at 276. His Honour observed that ‘there is a very strong presumption that the State legislature did not intend to contradict itself, but intended that both Acts should operate’. The result in Horvath was that the registered mortgage was enforceable against the appellant, notwithstanding that the loan contract which it secured was void because he was a minor when it was made. Does the court’s interpretation of the minor’s relief provision in s 49(a) obstruct its purpose? Is the court’s approach to interpreting the provisions of other statutes consistent with the rule (enacted in all jurisdictions

subsequently to Breskvar v Wall) which provides that a construction that would promote the purpose of the statute shall be preferred to a construction that would not promote the purpose? (See, for example, Interpretation of Legislation Act 1984 (Vic) s 35(a).)

5.156

The sequential approach entails reading the provisions of later

statutes in a restrictive manner so as to avoid abrogating the indefeasibility provisions. Hepburn finds a dichotomy of approaches in the decided cases. The sequential approach is generally associated with a more narrowly textual interpretation of the later statute and an emphasis on the primacy of the indefeasibility provisions. The cases in which courts have found that a later statute conflicts

[page 528]

with and impliedly repeals the indefeasibility provision are generally premised on a broader and more purposive interpretation of the later statute.116 The following cases are examples of the sequential approach. In City of Canada Bay City Council v Bonaccorso (2007) 156 LGERA 294; [2007] NSWCA 351, the Court of Appeal considered s 45(1) of the Local Government Act 1993 (NSW) which provided that a council had no power to sell, exchange or otherwise dispose of community land. The court said that ‘on any reasonable construction of s 45’ the provision could stand together with the indefeasibility provision in s 42 of the Real Property Act. The

statutes could be reconciled by reading s 45 as operating to invalidate the transfer of community land up to the point of registration, while the indefeasibility provision operated to confer a ‘new clean title’ upon registration of the transfer: at [81]. The sequential approach was applied again by the Court of Appeal in Koompahtoo Local Aboriginal Land Council v KLALC Property & Investment Pty Ltd [2008] NSWCA 6. A disposal of land in breach of the Aboriginal Land Rights Act 1983 (NSW) is declared by s 40(2) of that Act to be void. It was held that s 40(2) could stand together with the indefeasibility provisions because it declares the transaction, not the title obtained by registration of the transaction, to be void.117 The Consumer Credit Code (Vic) s 38 provides that a mortgage that is not signed by the mortgagor is unenforceable. It was argued that a registered mortgage on which the mortgagor’s signature had been forged was unenforceable. Inconsistency with the indefeasibility provisions was avoided by construing s 38 as applying only to unregistered mortgages.118 5.157

Another way in which a later statute may be restrictively construed

to avoid modifying the indefeasibility provisions is to interpret it as creating rights that operate only in personam, and do not run with the land. In Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004) 220 CLR 472; 211 ALR 588; [2004] HCA 59, the High Court considered whether a condition as to construction of a right of way in a council development consent could be enforced against a subsequent registered proprietor of the burdened land under s 123 of the Environmental Planning and Assessment Act 1979 (NSW). The High Court held by a majority (McHugh ACJ, Hayne and Heydon JJ) that the issue of overriding statute did not arise because the

statement of intent to create a right of way in the plan of subdivision did not amount to the imposition of a condition by the council. Their Honours added obiter that even if such a condition existed, it would be a condition on subdivision that bound only the developer, not any successor in title. In his dissenting reasons, Kirby J observed that the restrictive interpretation of the provisions of the later planning Act tends to obstruct its purpose: at [70]– [75]. From one perspective, the restrictive interpretation of later statutes in Hillpalm privileges the Torrens regime of private property rights over the public rights created by planning and environmental

[page 529] statutes.119 The narrow reading of the planning statute by the majority does seem to indicate a robust approach to what Griggs calls ‘the paramountcy of indefeasibility’.120 The New South Wales Court of Appeal applied the interpretive approach of the majority in Hillpalm in Kogarah Municipal Council v Golden Paradise Corporation (2005) 12 BPR 23,651. The council had transferred land to a company in breach of s 45(1) of the Local Government Act 1993 (NSW), the same provision considered in City of Canada Bay City Council v Bonaccorso; 5.147. The Court interpreted s 45(1) to mean that the restriction on the transfer of community land could be enforced against the council in personam, but could not be enforced against the transferee. In Epworth Group v Permanent Custodians [2011] SASCFC 32, s 20B of the Retail and

Commercial Leases Act 1995 (SA) extends the minimum term of a retail shop lease to five years. The registered proprietor granted an unregistered lease for a term of two years and subsequently mortgaged the property. It was held that s 20B operated to extend the lease as between the landlord and tenant, but did not give the tenant rights enforceable against the registered mortgagee. 5.158

Even though the above cases create a ‘very high bar’ to a finding of

inconsistency, New South Wales legislated in 2009 to entrench the indefeasibility provision in s 42 by inserting a new subsection (3): (3) This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.

This subsection is similar to the Real Property Act 1886 (SA) s 6, which was considered by the High Court in South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603; 5.141. The laterenacted Drainage Acts provided for unregistrable drainage charges to be a first charge on land. The High Court majority said that while a provision such as s 6 was relevant to the question of whether a later statute was intended to effect an implied repeal, it was not conclusive. If the later statute, considered as a whole, indicates an intention to operate notwithstanding the indefeasibility provisions and is inconsistent with those provisions, it must be given effect according to its terms. Arguably the New South Wales provision will be no more effective than the South Australian provision.121

Insuring the risk of unrecorded statutory charges 5.159

The categories of interests, charges and restrictions that may be

imposed by overriding statutes are so numerous that it is impractical for purchasers to make searches for them all. At one time there were some 250 provisions in Victorian statutes that authorised the creation of rights over land, or the imposition of charges or obligations on registered owners, which run with the land whether registered or not: O’Connor, ‘Public Rights and Overriding Statutes as Exceptions to Indefeasibility of Title’ (1994) 19 MULR 649 at 652, fn 18. The risks posed

[page 530]

by statutory overriding interests to purchasers of land may be the subject of cover in title insurance policies. Title insurance is a specialty insurance line that has been marketed in Australia since 1998. It developed in the United States, where the Torrens system failed to take root, and where insurance emerged as an alternative method of assuring the security of a real estate transaction. Purchasers of land in Australia can now purchase an owner’s policy, which may provide cover against the risk of unknown interests that were not disclosed in the contract of sale or actually known to the purchaser at the date of settlement: see O’Connor, ‘Title Insurance: Is There a Catch?’ (2003) 10(2) AJPL 120. In Australia, most title insurance policies issued are lenders’ policies, which insure mortgagees against risks including the unenforceability of the mortgage through the operation of exceptions to

indefeasibility (such as in personam claims) or limitations on the scope of indefeasibility as discussed in Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567; [2007] NSWCA 240; 5.62C. They are most often used in conjunction with securitised mortgages. Unlike the position in the United States, owners’ policies have not been popular in Australia122 Some jurisdictions prevent an insurer being subrogated to an insured’s entitlement to compensation under the Act: Qld, s 188D; NSW, s 133(1).

Recording of statutory charges etc 5.160

Various legislative attempts have been made to encourage the

recording of statutory charges, rights and obligations to aid their discovery by purchasers. The Queensland Registrar must record in the freehold land register anything required to be recorded by an Act: s 28. Section 29 empowers the Registrar to record in the freehold land register anything that an Act permits to be recorded, and anything else the Registrar considers should be recorded to ensure that the register is an accurate, comprehensive and useable record of freehold land in the state: Qld, s 29. In addition, the Registrar may keep separately from the freehold land register information that the Registrar considers necessary or desirable for the efficient operation of the register, including information provided by another entity: Qld, s 34.123 In Victoria, any charge or easement acquired under another Act may be noted by entry on the register: Vic, s 88(2), (3). In New South Wales, s 43B(2) provides that the registered proprietor holds free of statutory restrictions unless the statutory restriction is recorded in a folio of the register. ‘Statutory restriction’, however, is defined narrowly to include

restriction on alienation of land imposed by certain Acts relating to the alienation of Crown land: s 43B(1). Rights, obligations and restrictions that run with land are now so many and various that it is impractical to maintain an up-to-date record of all of them on title registers. Australian and overseas jurisdictions are now collaborating on the development of spatial data infrastructure projects that link the Torrens register with the databases of the authorities responsible for creating the rights, obligations and restrictions.124 5.161

Table 5.1 below shows the main exceptions to indefeasibility found

in the Torrens legislation of all jurisdictions.

[page 531]

Table 5.1: Exceptions to indefeasibility in the statues of each jurisdiction

[page 532]

[page 533]

[page 534]

Equitable interests and unregistered instruments 5.162

Although the Torrens system is based upon the registration of

dealings, the legislation recognises that unregistered or equitable interests can continue to exist with respect to registered land. For example, while the Registrar is forbidden to record in the register notice of any trust, whether express, implied or constructive, the legislation provides a procedure for depositing declarations of trust with the Registrar for safekeeping.125 The statutory procedure is rarely used because of the caveat provisions, referred to below, but the legislation clearly acknowledges that trusts of Torrens system land may be declared, although they may not be registered. The accommodation of equitable interests within the framework of the Torrens system raises difficult issues. 5.163C

Barry v Heider (1914) 19 CLR 197; 21 ALR 93 High Court of Australia

[The appellant, Barry, was registered proprietor of land in New South Wales. He signed a memorandum of transfer to Hector Schmidt in consideration of a sum of £1,200, the receipt of which was acknowledged in the transfer. In the same month of October, Schmidt, through Peterson, who acted as his solicitor, applied to Messrs Gale & Gale, who were solicitors for the respondent Mrs Heider, for a loan of £800 on the security of the land comprised in the transfer from the appellant to Schmidt, which Peterson produced. On the faith of these documents, Messrs Gale & Gale paid over the £800 and Schmidt executed a memorandum of mortgage in favour of Mrs Heider. On 3 December Schmidt executed another mortgage for £400 in favour of the respondent Gale. All the instruments remained unregistered, the delay having apparently been caused by the

retention by the Registrar-General of the certificate of title for adjustment of the boundaries of the land. The appellant Barry commenced proceedings for a declaration that the transfer was void for fraud and should be cancelled. He alleged that Schmidt or his agent cheated him into executing the transfer, and moreover, that the purchase money mentioned in the transfer had not been paid to him. Simpson CJ in Eq declared that the transfer was void and should be cancelled, but that the respondent was entitled as against the appellant to charges upon the land in terms of her mortgages.] Griffith CJ: The substantial ground of appeal is that upon a proper construction of the provisions of the Real Property Act the transfer was inoperative for any purpose until registration, so that no claim could be founded upon it of any kind, except, perhaps, a personal right of action by Schmidt himself … The main contention for the appellant is that an unregistered instrument is inoperative to create any right with respect to the land itself. This argument is founded upon the provision in s 2(4) of the Act that: All laws, Statutes, Acts, ordinances, rules, regulations and practice whatsoever relating to freehold and other interests in land and operative on [1 January 1863] are, so far [page 535]

as inconsistent with the provisions of this Act, hereby repealed so far as regards their application to land under the provisions of this Act, or the bringing of land under the operations of this Act; and upon s 41 … In my opinion the only relevant words of s 2, ‘All laws … rules … practice’, are not of themselves sufficient to embrace the body of law recognised and administered by courts of equity in respect of equitable claims to land arising out of contract or personal confidence. But it is said that the words of s 41, ‘No instrument until registered … shall be effectual to pass any estate or interests in land under the provisions of this Act’, have that effect. It is now more than half a century since the Australian colonies and New Zealand adopted, in substantially the same form but with some important variations, the system, sometimes called the ‘Torrens’ system, which is now in New South Wales embodied in the Real Property Act 1900. With the exception of one decision in South Australia, soon afterwards overruled, the contention of the appellant has never been accepted in any of them. I proceed to consider the other provisions of the Act bearing on the question for the purpose of discovering whether equitable rights or claims with respect to land are recognised by it.

Part IX of the Act deals with trusts. By s 82 the Registrar-General is forbidden to make any entry of any notice of trusts, whether expressed, implied or constructive, in the register book. The section goes on to provide that trusts may be declared by any instrument, and that a duplicate or attested copy of the instrument may be deposited with him for safe custody and reference. The instrument itself is not to be registered, but the Registrar-General is required to enter on the register a caveat forbidding the registration of any instrument not in accordance with the trusts and provisions contained in the instrument so deposited. This is, in my opinion, an express recognition of the equitable rights or interests declared by that instrument. Section 86 provides that whenever any person ‘interested in land’ under the Act appears to be a trustee within the meaning of any Trustee Act then in force, and a vesting order is made by the court, the RegistrarGeneral shall enter the vesting order in the register book and on the instrument evidencing the registered title to the land, and that upon entry being made, the person in whom the order purports to vest the land shall be deemed to be the registered proprietor. No restriction is made as to the cases in which the court may declare a trust. The jurisdiction recognised by this section clearly includes any case in which the court can make a vesting order under the Trustee Acts. That jurisdiction has always included cases in which specific performance of a contract to sell land has been decreed by the court. This, again, is an express recognition of an equitable claim or title to land as existing before and irrespective of registration. The provisions of the Act relating to caveats embody a scheme expressly devised for the protection of equitable rights. The caveat required by s 82 to be entered by the RegistrarGeneral is one instance of the application of that scheme. Section 72 provides that any person ‘claiming any estate or interest’ in land under the Act ‘under any registered instrument’ may by caveat forbid the registration of any interest affecting such land, estate or interest. This provision expressly recognises that an unregistered instrument may create a ‘claim’ cognisable by a court of justice, and the caveat is the means devised for the protection of the right of the claimant pending proceedings in a competent course to enforce it. Section 44 deals with the case of suits for specific performance brought by a registered proprietor against a purchaser without notice of any fraud or other circumstances which would affect the vendor’s right, which can only be circumstances creating an equitable right in a [page 536]

third person. I cannot think that the jurisdiction of the court to grant specific performance as against a registered proprietor vendor is not equally recognised. [The Chief Justice then referred to Cuthbertson v Swan (1877) 11 SALR 102, which affirmed the jurisdiction of the court to award a decree of specific performance in such a case. He also referred to opinions to the same effect in cases decided in Victoria, New Zealand and New South Wales.] In my opinion equitable claims and interests in land are recognised by the Real Property Acts.

It follows that the transfer of 19 October, if valid as between the appellant and Schmidt, would have conferred upon the latter an equitable claim or right to the land in question recognised by the law. I think that it also follows that this claim or right was in its nature assignable by any means appropriate to the assignment of such an interest. It further follows that the transfer operated as a representation, addressed to any person into whose hands it might lawfully come without notice of Barry’s right to have it set aside, that Schmidt has such an assignable interest. The respondent Heider’s case is mainly based upon this representation, but does not entirely rest upon it. Barry’s letter on 23 October authorising the delivery of the certificate of title to Messrs Gale & Gale, and delivered to them upon their request to Schmidt for its production, was, in my opinion, an even more emphatic representation that Schmidt had such an interest as entitled him to possession of the certificate of title. Mrs Heider thereupon became in a position to register the transfer from Barry to Schmidt, and consequent upon it to register Schmidt’s mortgage to herself. Her right to do so was complete, although actual registration was formally impended by the delay in the preparation of the new certificate. So far, therefore, as she is concerned, I think that Barry is not entitled to any relief against her except upon the terms of making good his representations … [The Chief Justice then held that the mortgage to Gale was in a different position and was subject to Barry’s lien for the purchase price of £1,200. This was because Barry’s solicitor (who had also acted for Schmidt) had, on 30 October, lodged a caveat claiming an interest on behalf of Barry as unpaid vendor. Although the caveat had been withdrawn by the solicitor prior to Gale handing over the mortgage loan, Gale, because of his previous contacts with the relevant parties, was obliged to inquire further to ensure that Barry had in fact received the full price due to him. The caveat had qualified the earlier representations made by Barry (in the transfer and letter authorising delivery of the certificate of title) and the withdrawal of the caveat did not amount to a further representation by Barry that Schmidt’s interest was free of any prior equitable interests. In these circumstances the usual rule, that the equitable interest earlier in time prevails, was to apply. The end result was that the transfer to Schmidt was cancelled, but Barry’s fee simple estate was subject to the mortgage to Heider. Gale was also entitled to a mortgage over the land in respect of his loan of £400, but this was subject to Barry’s unpaid vendor’s lien for £1,200.] Barton J: I have read the judgment just delivered by the Chief Justice, and think it sufficient to express my agreement. Isaacs J: … The transfer being voidable only, and now avoided, as against Schmidt for the gross fraud undoubtedly perpetrated by him in connection with the transaction, the next question is what is the effect of such avoidance?

[page 537]

Mr Loxton argued very strenuously that s 41 of the Real Property Act was decisive in his favour … His point was that the provision applied to both legal and equitable estates, interests, and liability. I agree with him so far as to the meaning of that provision. ‘Estate’ and ‘interest’ as used in the Act, include both legal and equitable estates and interests. The interpretation section, s 3, defines ‘Proprietor’ as ‘any person seised or possessed of any freehold or other estate or interest in land at law or in equity in possession in futurity or expectancy’, and ‘Transfer’ as ‘the passing of any estate or interest in land under this Act whether for valuable consideration or otherwise’. But what follows? Mr Loxton contended that the consequence was that until registration no person can acquire any interest in land legal or equitable. He said that whatever personal liability existed might be enforced as ‘a chose in action’ against the person liable, but not against the land, for the Act recognises no interests legal or equitable except in the registered proprietor. Such a contention is absolutely opposed to all hitherto accepted notions in Australia with regard to the Land Transfer Act. They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which courts of equity have enforced, as against registered proprietors, conscientious obligations entered into by them … The Land Transfer Act does not touch the form of contracts. A proprietor may contract as he pleases, and his obligations to fulfil the contract will depend on ordinary principles and rules of law and equity, except, as expressly or by necessary implication modified by the Act. Section 43, for instance, makes provision with respect to the case of a bona fide purchaser without notice, and the section says ‘any rule of law or equity to the contrary notwithstanding’. Consequently, s 41, in denying effect to an instrument until registration, does not touch whatever rights are behind it. Parties may have a right to have such an instrument executed and registered; and that right, according to accepted rules of equity, is an estate or interest in the land. Until that instrument is executed, s 41 cannot affect the matter, and if the instrument is executed it is plain its inefficacy until registered — that is, until statutory completion as an instrument of title — cannot cut down or merge the pre-existing right which led to its execution. The basis of the contention therefore fails, and we have to consider the position as to equitable remedies as if the land were not under the statute. This raises the question of the effect of Barry’s conduct. Distinctions have been drawn as to whether such a case is to be solved by the doctrine of estoppel, or by the doctrine that, where one of two innocent persons has to suffer by the fraud of a third, he who, by what Lord Halsbury, in adopting the language of an American judge, calls ‘an indiscretion’, has enabled the third person to commit the fraud, shall bear the loss. I see no real distinction in principle. I call them both estoppel, because the second principle simply compels the person who enabled the fraud to be committed to stand by the consequences of his own conduct and precludes him from asserting his really superior title. And I am strengthened in that view by the fact that the doctrine of estoppel in pais [by conduct] does not rest on the fraud or moral misconduct of the person estopped, but on the effects of his conduct upon the party claiming the estoppel …

I apprehend, therefore, the facts so far bring the case absolutely both within the principle of estoppel and the innocent person doctrine if there is really any difference between them. Mrs Heider lent her money believing and trusting to the accuracy of Barry’s own statements in the transfer, and Barry must be held to the truth of those statements as to her … [page 538]

I attach no importance to the letter signed by Barry dated 23 October and addressed to the Registrar of Titles. It is doubtful how that came into existence, and for what purpose, and I think Mrs Heider’s rights quite well established without it, and not increased by it. Mrs Heider, in my opinion has a good equitable claim against Barry to have her loan secured in some way on his land … [Isaacs J agreed with the Chief Justice that Gale’s mortgage was to be postponed to Barry’s lien. The lodging of the caveat negated the previous representation by Barry that he had received the purchase price from Schmidt and the withdrawal of the caveat did not amount to a fresh representation by him. No express authority to withdraw the caveat had been given by Barry to his solicitor and a mere instruction to a solicitor to lodge a caveat does not carry with it implied authority to withdraw it and thereby represent that purchase money has been received when it has not.] Appeal dismissed.

5.164 Questions 1.

Was Barry v Heider (1914) 19 CLR 197; 21 ALR 93 a case of competition between equitable interests or of competition between a legal interest and a subsequent equitable interest?

2.

Did the High Court in 1914 appreciate the significance of the concept of indefeasibility of the registered proprietor’s title?

3.

If the issue arose before the High Court today, would it be decided the same way?

What conduct on the part of the registered proprietor would 4.

5.165

justify the title being postponed?

The Privy Council approved Barry v Heider and specifically, the

judgment of Griffith CJ in Great West Permanent Loan Co v Friesen [1925] AC 208, a case dealing with the Saskatchewan Torrens system.126 5.166

A person who acquires an unregistered interest in Torrens system

land, whether pursuant to a registrable dealing or otherwise, cannot be described as having an ‘equitable interest’ in precisely the same sense in which that term is used under the general law. An unregistered interest in land under the Torrens system is liable to be defeated by the registration of an inconsistent dealing by a good faith purchaser, even if that purchaser has notice or indeed knowledge of the unregistered interest. This conclusion flows from the indefeasibility section, which gives the purchaser a conclusive title subject only to the interests recorded on the register and those protected by recognised exceptions to indefeasibility. Moreover, the notice provision absolves the purchaser, upon registration, from the need to investigate trusts or other outstanding unregistered interests, even if he or she is aware of them. It follows that the sphere

[page 539]

of enforceability of an unregistered interest in Torrens system land is different from that of an equitable interest in old system land. Nonetheless, the use of

the term ‘equitable interest’ in relation to the Torrens system is well established and the error in terminology, if it is one, has been sanctioned by long usage. 5.167

There is a divergence of views between Griffith CJ and Isaacs J as to

the basis of the equitable interest of a person in the position of Schmidt. Griffith CJ attributes the equitable interest to the possession by Schmidt of a duly executed transfer from the registered proprietor. Isaacs J, on the other hand, regards the equitable interest as deriving, not from the transfer, but from the contractual transaction that lay behind the transfer. On general principles it would seem that Isaacs J’s view is preferable. Under the general law a purchaser of an interest in land acquired an equitable interest by virtue of entering into a specifically enforceable agreement — the execution of the conveyance passed the legal estate — but was not the source of the equitable estate. Furthermore, Cuthbertson v Swan (1877) 11 SALR 102, on which the Chief Justice relies, clearly regarded the equitable interest of a purchaser of the fee simple estate in Torrens system land as deriving from the contract of sale. Indeed, suits for specific performance of contracts of sale necessarily arise before the transfer is executed. That is the point of the purchaser’s suit: to compel execution of a registrable transfer. The divergence of views is particularly important in the case where a volunteer obtains a transfer from the registered proprietor, which transfer is not yet registered: see Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 (4.56ff), where the view of Isaacs J seems to be adopted, although without careful examination of the issue.

The caveat provisions 5.168

The vulnerability of equitable interests to registered dealings

presents a significant problem to the holder of such an interest, particularly in view of the prohibition against entering notice of any trust on the register. If a beneficiary under a trust, or the holder of any other unregistered interest, has no means of protection he or she is at the mercy of a person registering a transfer from the registered proprietor, even if that person is aware of the unregistered interest. The necessary protection is provided by the system of caveats against dealings.127 While the statutory language differs, in general, any person claiming an estate or interest in land under any unregistered instrument or otherwise may lodge a caveat with the Registrar forbidding the registration of any person as transferee, or proprietor, or of any instrument affecting the estate or interest. A memorandum of the caveat is entered on the relevant Crown grant, certificate of title or folio of the register. Notice of the caveat is given to the registered proprietor, who may commence proceedings to secure removal of the caveat. In most states the procedure is that when a transfer or other dealing is lodged for registration, the Registrar must notify the caveator, who then has a specified period in which either to consent

[page 540]

to registration or to take proceedings to show cause why the dealing should be registered. If the caveator takes no action within this time the caveat lapses

and the Registrar must register the dealing. A lapsed caveat cannot be renewed. In Queensland, the Northern Territory and South Australia, the provisions work somewhat differently. In Queensland and the Northern Territory, once a caveat is lodged, then, unless it has been lodged by or in some other limited circumstances, the caveator must take legal proceedings to establish the validity of the claim. If the caveator does not commence proceedings within three months, the caveat lapses and cannot be relodged on the same or substantially similar grounds without the leave of the court: Qld, s 129; NT, s 142. In other words, the onus is on the caveator to establish the claim from the beginning: Qld, s 126. This contrasts with the situation in most states where the caveator does not have to begin proceedings until some dealing which would defeat the claim is lodged for registration. In fact, caveats are rarely used in Queensland. The South Australian Act does not establish a specific procedure to be followed where a dealing is lodged for registration and a caveat has already been noted on the register: SA, s 191. However, the registered proprietor or other interested party (caveatee) may apply to remove the caveat and the Registrar-General is thereupon to give the caveator 21 days’ notice, after which the caveat will be discharged. The caveator may apply to the court for an order extending the caveat. The principles to be applied in such cases are discussed in Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176 and Van Reesema v Giameos (1978) 17 SASR 390. The principles which courts apply in deciding whether to remove or extend a caveat are discussed below; 5.164ff. The court may require, as a condition of allowing a caveat to remain, that the caveator give an undertaking as to damages.

Caveatable interest 5.169

A caveat may only be lodged in respect of an estate or interest in

land: Valerica Pty Ltd v Global Minerals (2001) NSW ConvR ¶55-963. The case law on the interests that will or will not support a caveat is vast.128 Examples include: Simons v David Benge Motors Pty Ltd [1974] VR 585 (agreement to share profits on resale of land not caveatable); Jessica Holdings v Anglican Property Trust (1992) 27 NSWLR 140 (interest of purchaser under a conditional sale caveatable if the court would protect by injunction); Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 645–6; Jacobs v Platt Nominees Pty Ltd [1990] VR 146 (interest arising under an enforceable option to purchase); Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630 and Rising Developments Pty Ltd v Hoskins (1996) 39 NSWLR 157 (the interest of a builder during construction on the land if the contract provides for a charge); Permanent Trustee Aust Ltd v Shand (1992) 27 NSWLR 426 (an unregistered profit à prendre); Avco Financial Services v White [1977] VR 561; Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202 (borrower under a contract of loan agrees to charge a specific property as security for payment of the loan, thereby creating an equitable charge which is sufficient to support a caveat); Deanshaw v Marshall (1978) 20 SASR 146 (oral agreement for the extension of an easement supported by acts of part performance sufficient to justify a caveat on the title to the servient tenement); claim for a property settlement under the Family Law Act 1975 or the Property (Relationships) Act 1984 (NSW) is not an interest in land so not caveatable: Hayes

[page 541]

v O’Sullivan [2001] WASC 55; Ryan v Kalocsay [2009] NSWSC 1009. However, an equitable interest on which the cause of action is based, such as the interest under a constructive trust of a spouse who has contributed to the purchase price, improvement and maintenance of the property, is caveatable: Hayes v O’Sullivan (2001) 24 WAR 40; Young v Young [2011] VSC 188. A claim to an interest as a result of carrying out work on the land is not a caveatable interest: Dolroy Pty Ltd v Civilco Constructions Pty Ltd [2007] NSWSC 1263; Perpetual Nominees Ltd v Karamakis [2010] NSWSC 10. In Parker v Glenninda Pty Ltd (1998) Q ConvR 54-499 the removal of a caveat was ordered where there was no sufficient memorandum in writing, and no consideration for giving of security over the relevant property. Similarly, in Verebes v Verebes (1995) 6 BPR 14,408 it was held that once a claim is statute-barred the claimant ceases to have an interest in land which is capable of supporting a caveat. A mere personal right is not caveatable and the law is no different in this regard in Western Australia despite the arguably broader language of s 137 (WA): Midland Brick Co Pty Ltd v Welsh [2002] WASC 248. A claim to set aside a transfer on the ground of fraud is a claim in personam which may result in a proprietary interest but is not caveatable until such claim is successfully established: Valerica Pty Ltd v Global Minerals Australia Pty Ltd (2000) 10 BPR 18,463; [2000] NSWSC 1144; see also Re Pile’s Caveats [1981] Qd R 81 (prima facie equity to set aside transaction for fraud not the same as a prima facie interest in land, hence not caveatable). A caveat to protect an option to acquire a lot in an

unregistered strata plan was upheld as valid thus approving Brownie J’s analysis in Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140: Forder v Cemcorp Pty Ltd (2001) 10 BPR 18,615; Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd [2009] SASC 311. 5.170

A caveatable interest need not be a registrable interest, nor one that

gives the holder a right to compel the registered proprietor to deliver a registrable interest, so long as the interest is one in respect of which equity will give specific relief against the land.129 In Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V Conv R 54-506, Batt J held that to lodge a caveat, the caveator must have either a registrable instrument or the right to call for one. His Honour’s view was based on dicta in Miller v Minister of Mines and the Attorney General of New Zealand [1963] AC 484 at 497 that the purpose of the caveat is to freeze the register to allow the caveator to register the instrument. The restrictive view of the caveat in Classic Heights is against the weight of authority and has not been followed in later cases.130

Does a registered proprietor have a caveatable interest? 5.171

Legislation in Queensland and the Northern Territory permits the

registered proprietor of land to lodge a caveat against dealings: Qld, ss 122(1) (c), 126(1)(a); NT, s 138(1) (c). New South Wales allows this action where the registered proprietor fears an improper dealing because of the loss of a certificate of title or for some other reason: NSW, s 74F(2). In the absence of express provision, some authorities indicate that the registered proprietor

must have an interest that is separate and distinct from his or her registered title in

[page 542] order to lodge a caveat.131 The question usually arises in a case where a mortgagee has exercised a power of sale fraudulently or in breach of statute. In such a case, the mortgagor has an equity to set aside the sale. Does this equity afford a caveatable interest? The question has been frequently answered in the affirmative.132 However, the Appeal Division of the Supreme Court of Victoria gave a negative answer to the question in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672. Brooking J (with whom Teague and Southwell JJ agreed) held that until the court makes an order setting aside a voidable sale by a mortgagee, the registered proprietor has a ‘mere equity’, which is not a caveatable interest. Brooking J said that the judgments of Kitto and Menzies JJ in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 (4.165C) supported the characterisation of the mortgagor’s interest as an equity, not an equitable interest in the property: at 676–7. The court’s reliance on Latec is problematic. Latec is distinguishable on the ground that the subsequent purchaser had become registered by the time that the mortgagor sought to set the sale aside. The case was not concerned with whether the mortgagor had a caveatable interest. The judgment in Swanston has been criticised for inaccurately equating ‘characterisation for the purpose

of resolving a priorities conflict with its characterisation for the purpose of determining caveatability’.133 In Vasiliou v Westpac Banking Corporation [2007] VSCA 113 at [121], a three-member bench of the Victorian Court of Appeal declared itself bound to apply Swanston Mortgage until such time as the ruling was overruled by a five-member panel. In Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 at [17], Warren CJ queried the correctness of the ruling in Swanston Mortgage while distinguishing it on the facts. In Stone v Leonardis [2011] SASC 153 at [42]–[48], White J reviewed the criticisms of Swanston Mortgage and declined to follow it, as did Patmore v Upton (2004) 13 Tas R 95 at [61], and Capital Finance Australia Ltd v Bayblu Holdings Pty Ltd [2011] NSWSC 24 (at [24]). It therefore seems the case is authority only in Victoria. Registrars will in practice allow registered proprietors to caveat their own titles in circumstances such as loss of a certificate of title or apprehension of a fraudulent dealing. Alternatively, the Registrar may be willing to enter a caveat on behalf of the Crown to prevent fraud or improper dealing with the title.134 Mortgagors may also apply for an interlocutory injunction to restrain a voidable sale: see Forsyth v Blundell (1973) 129 CLR 477; 11.99C. The court will normally require that the mortgagor pay into court the amount owing under the mortgage.

Requirements for caveats 5.172

While the Registrar does not scrutinise caveats to determine

whether there is evidence to support the factual basis of the claimed interest, the registered proprietor may apply to have

[page 543]

the caveat removed and the Registrar is generally empowered to require the caveator to show cause why the caveat should not be removed. The statutes establish formal requirements for caveats.135 The caveator must specify the nature of the estate or interest claimed in the land, a description of the land and the facts on which the claim is based.136 Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 affirmed the need to specify the quantum of the estate claimed by the caveator and the facts on which the claim is founded. Amendments to the Real Property Act 1900 (NSW) in 1986 entrenched the reasoning in Kerabee Park. The legislation now requires the caveatable interest to be specified and verified by statutory declaration: s 74F(5). In Ultra Marine Pty Ltd v Misson (1981) ANZ ConvR 229, Wootten J made a valiant attempt to give a more flexible interpretation to the requirements. However, in Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459, Clarke JA stated that the line of authority commencing with Palmer v Wiley (1906) 23 WN (NSW) 90, which required ‘a degree of particularity in the statement of the estate or interest in a caveat’ should be followed. Nevertheless, his Honour regarded a caveat which identified the caveator’s interest as that of a lessee for a five-year lease pursuant to the exercise of an option, as satisfying the section. It is not inevitable that the New South

Wales approach will be followed in all other states, since the statutory language varies.137 5.173

Section 74L of the New South Wales Act provides that if, in any

legal proceedings, a question as to the form of a caveat is raised, the court shall disregard any failure of the caveator to comply strictly with the formal requirements. The ambit of s 74L is not quite clear. Presumably, the section is designed to prevent an order being made by the court for the removal of a caveat which is defective in form only. In Hooper v Australia & New Zealand Banking Group Ltd (1996) 5 Tas R 398, it was held that technical deficiencies in the form and content of a caveat should not be allowed to deprive a bona fide claimant from the advantage that prompt notification to the Registrar is intended to achieve. The court should not destroy or impede a bona fide claim either by declining to amend an arguably deficient caveat or by removing it from the register: (Tas) ss 135, 136.138

Application for removal of caveat 5.174

Most jurisdictions provide for the registered proprietor to apply to

the court for the removal of a caveat.139 The provision for removal on application of the registered proprietor is necessary as the vendor’s obligation under a contract for the sale of land to make good title requires it to remove all caveats on the title: Zanee Pty Ltd v CG Maloney [1995] 1 Qd R 105. A court may remove a caveat because the prohibition on registration of dealings is stated too widely. Where a dealing has been lodged for registration and an application is made for removal of caveat, the court will

order removal of the caveat if the claimed interest would not entitle the caveator to the assistance of the court. In Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222, a second mortgagee lodged a caveat which purported to forbid registration of

[page 544]

any dealing. The caveator had no right to prevent the registration of a transfer by the registered mortgagee to a purchaser where the registered mortgagee’s power of sale had been properly exercised. Kerabee Park Pty Ltd v Daley was cited with approval by O’Bryan J in Lewenberg and Pryles v Direct Acceptance Corp Ltd [1981] VR 344, where the facts were similar to those in Kerabee Park in which the caveat prohibited all dealings. This prohibition was wider than the caveator’s claim justified.140 Other examples are: a caveator claimed ‘an equitable interest in the land’. It was held that because no particulars were included, the caveat was invalid: Choi v Kim [2013] NSWSC 1774. In Perpetual Trustee Company Ltd v English [2011] NSWSC 264 the claimed ‘equitable interest’ was alleged to originate in ‘property purchase payment deposit and lease’. This was held to be an invalid caveat. In Schibaia v Elias [2013] NSWSC 1485 claims of ‘equitable interests’ were held to defective, but leave was granted to lodge fresh caveats; see also Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240. Where an ‘[e]quitable interest pursuant to a constructive trust’ was alongside rights claimed as ‘mortgagee’, it was held that because a person reading the caveat

would have ‘no idea’ of the interest claimed, it was invalid: Ron Medich Properties Pty Ltd v Mcgurk (2010) 15 BPR 28,399 at [8]. 5.175

The power of the court to order the removal of a caveat is not

confined to cases where the caveat is bad in form: Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222. An application for removal of a caveat is considered according to the principles applied on an application for an interlocutory injunction: namely, first, whether there is a serious question to be tried; and second, whether the balance of convenience favours the removal of the caveat. The principles were stated by Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 336–7: So far their Lordships have deliberately refrained from speaking of ‘onus of proof’. It is an expression which, if it is used in relation to proceedings which are interlocutory in their legal character, is liable to lead to confusion. Their Lordships have already noted the analogy between the effect of a caveat and that of an interlocutory injunction obtained by the plaintiff in an action for specific performance of a contract for the sale of land restraining the vendor in whom the legal title is vested from entering into any disposition of the land pending the trial of the action. The court’s power to grant an interlocutory injunction in such an action is discretionary. It may be granted in all cases in which it appears to the court to be just and convenient to do so … This is the nature of the onus that lies upon the caveator in an application by the caveatee under s 327 for removal of a caveat: he must first satisfy the court that on the evidence presented to it his claim to an interest in the property does raise a serious question to be tried; and, having done so, he must go on to show that on the balance of convenience it would be better to maintain the status quo until the trial of the action, by preventing the caveatee from disposing of his land to some third party.

5.176

In ABC v O’Neill (2006) 227 CLR 57, the High Court clarified the

burden of proof imposed on an applicant for injunctive relief under the first limb of the test in Eng Mee Yong v Letchumanan, which requires ‘a serious

issue to be tried’. Gummow and Hayne JJ, with whom Gleeson CJ and Crennan J agreed on this point, decided that the first limb of the test requires that an applicant must show a prima facie case. The applicant for injunction is

[page 545]

not required to show that it is more probable than not that he or she will succeed at trial. It is enough to show ‘a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending trial’: at [13]. The formulation of the test in ABC v O’Neill has been applied in applications for removal of caveat in Piroshenko v Grojsman [2010] VSC 240; Stone v Leonardis (2011) 110 SASR 503; and in an application under Qld, s 129 for leave to lodge fresh caveats over land in Queensland: Cini v Pets Paradise Franchising (SA) Pty Ltd [2009] SASC 7 where, at [20], Bleby J formulated the first limb of the test as follows: ‘[The applicant] must show a sufficient likelihood of success to justify, on the present state of the evidence, the preservation of its right to a caveatable interest in order to preserve that status quo pending the trial’. So expressed, there is some overlap between the second limb relating to the balance of convenience.

Caveats lodged without reasonable cause 5.177

Caveats are examined by the Registrar to ensure that a caveatable

interest is claimed and the caveat satisfies formal requirements, but it is not

the role of the Registrar to test the validity of the claimed interest. To deter abuse of the caveat provisions, several jurisdictions provide that a person who lodges a caveat without reasonable cause is liable to pay compensation to another person who suffers loss or damage as a consequence.141 South Australia provides for compensation for a caveat lodged ‘wrongfully and without reasonable cause’: SA, s 44. Usually it is the plaintiff who bears the onus of proving that the caveator acted without reasonable cause.142 5.178

To have ‘reasonable cause’ the caveator must have believed on

reasonable grounds that he or she had the interest claimed. The fact that a caveator fails to sustain the caveat at full trial must not be equated with an absence of reasonable grounds for lodging the caveat in the first place: per Tipping J in Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 at 288. In Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106, the defendant, Surgo Pty Ltd, had lodged a caveat forbidding registration of any dealing affecting the plaintiff’s property. Bedford, the plaintiff, claimed that the caveat delayed the settlement of a contract of sale of the property with the result that it had to pay substantial sums in interest to a mortgagee of the property and additional sums by way of rates and charges. The court found that, contrary to the claim made in the caveat, there had never in fact been any promise or agreement to give a registrable mortgage. In considering the plaintiff’s claim for compensation, Wootten J made the following comments: I think the foundation for reasonable cause must be, not the actual possession of a caveatable interest, but an honest belief based on reasonable grounds that the caveator has such an interest. That, of course, may not be enough. In Young v Rydalmere Credits Pty Ltd (1963) 80 WN (NSW) 1463, a caveator was held to have acted without reasonable cause when he lodged a caveat not for

the protection of his interest but for an ulterior motive and without regard to its effect on transactions to which the caveator had agreed. Macfarlan J found that

[page 546]

the caveator had been entitled to lodge the caveat, but he treated the question of whether or not he had the interest he claimed as irrelevant (at 1472). On the facts as I have found them, the defendant did not have any reasonable grounds for believing that it had what it claimed in the caveat, namely, an agreement giving it the right to an instrument of mortgage. I think that Mr Richards, who for the purposes of the transaction represented the defendant, was motivated simply by a desire to force Mr Quinn to pay, or at least formally acknowledge, the debt to Surgo by holding up the settlement of the subject land … The drastic nature of the power is relevant in considering what is ‘reasonable cause’ for its use, just as the dangerous character of a thing is relevant to deciding what is reasonable care in handling it. Before exercising such a power, a person can reasonably be expected to get proper advice, and be reasonably sure of his ground. If he does not, he may find that he has acted at his peril. This is all the more so when he knows, as Mr Richards knew, and indeed intended, that action will prevent an important transaction involving a large sum of money. I therefore hold that the caveat was lodged by Surgo without reasonable cause.

Bedford Properties Pty Ltd v Surgo Pty Ltd was followed in Hooke v Holland [1984] WAR 16. In Re Brooks’ Caveat [2014] QSC 76 the caveator held no interest in the land, but had a right under the Trustee Act 1973 (Qld), s 98 to apply for an order as beneficially interested. The Court held the caveat was not lodged without reasonable cause. It appears, however, that a caveat lodged in ‘deliberate infringement of the rights of the registered proprietor or interested person’ may render the caveator liable: Dykstra v Dykstra (1991) 22 NSWLR 556. Similarly, a caveat lodged solely to place pressure on the registered proprietor to give something to which the caveator was not entitled

cannot be maintained: Wildshut v Borg Warner Acceptance Corp (Aust) Ltd (1987) 4 BPR 9453. Bedford Properties Pty Ltd v Surgo Pty Ltd was applied in Lee v Ross (No 2) (2003) 11 BPR 20,991; [2003] NSWSC 507, where compensation for wrongful lodgment of a caveat was awarded in circumstances where the caveator was honest but the solicitor for the caveator was neglectful and lacking in diligence in failing to advise the client that the vendor’s termination of a contract for the sale of land (the alleged caveatable interest) was valid. It was held in Lee v Ross (No 2) (2003) 11 BPR 20,991; [2003] NSWSC 507 that the test of foreseeability, highly developed in the law of tort and contract, should not be applied in assessing the caveat’s role in consequent loss or damage, as a caveator must accept the risk of liability to compensate the registered proprietor for loss realistically attributable to the wrongful lodgment.143 Examples of compensable loss are: reduced sale price in a falling market: RDN Developments Pty Ltd v Shtrambrandt [2011] VSC 130; additional interest payable under a mortgage over the land for the time that the caveat delayed completion of a sale: Carroll v Azolia Pty Ltd [2000] WASC 95; Lee v Ross (No 2) (2003) 11 BPR 20,991; and rent payable by vendor who had vacated property, but did not receive the purchase monies until much later because of the delayed sale: Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176. Exemplary damages can be awarded in an extreme case, as where caveators, members of the same family, lodged a number of caveats knowing they had no interest in the land in order to punish registered proprietor and her husband: Deutsch v Rodkin [2012] VSC 450. 5.179

If a caveat has been lodged with reasonable cause, is it possible that

the maintenance of the caveat may become unreasonable so as to attract the compensation provisions? The problem was adverted to by Macfarlan J in Young v Rydalmere Credits Pty Ltd [1964–65]

[page 547]

NSWR 1001 at 1014 and by Brinsden J in Hooke v Holland [1984] WAR 16 at 20 without resolution. In the latter case, Brinsden J was of the opinion that it was doubtful whether the maintenance of a caveat which was lodged reasonably was compensable.144

Competing equitable interests 5.180C

Abigail v Lapin [1934] AC 491; [1934] All ER Rep 720; (1934) 51 CLR 58 Privy Council

Lord Wright: On 5 December 1923, Mr and Mrs Lapin executed two memoranda of transfer, duly witnessed by a solicitor in the statutory form required by the Real Property Act 1900 of New South Wales, of two properties, in respect of which they were then respectively registered as proprietors of an estate in fee simple, to Mrs Heavener; in the one case the consideration money was expressed to be £1800, and in the other case £1200; the receipt of these sums respectively was acknowledged on the transfers. The titles of the Lapins were at the time subject to a registered mortgage of £1320 to the Union Bank, which was discharged on 7 December 1923. On 18 December 1923, Mrs Heavener or Heavener on her behalf, lodged these transfers and the certificate of title, which she had received from the respondents, at the land registry, where the transfers were entered in the land registry books, and particulars were endorsed on the certificate of title which the Heaveners held and which accordingly showed Mrs Heavener as the proprietor in fee simple of the estates. On 14 March 1924, Mrs Heavener mortgaged the properties in statutory form to the English, Scottish and Australian Bank; this mortgage was duly registered, as appears on endorsements on the certificates of title, which the mortgagee bank held. On 2 September 1925, as appears from further endorsement on the certificates of title, these mortgages were discharged, as is sufficiently clear, out of

moneys lent by Abigail to the Heaveners on or about 2 September 1925; these moneys, which amounted in all to £5500, were secured by a statutory mortgage dated 2 September 1925, granted by Mrs Heavener in terms as ‘being the registered proprietor of an estate in fee simple’ in the specified properties, including the two properties in question; the mortgage was also signed by Abigail as being correct. Abigail thereafter held the certificates of title. On 4 September 1925, Abigail as mortgagee lodged a caveat under the Act in respect of these two properties. On 24 February 1926, Abigail lodged the mortgage for registration, but it was referred back by the registrar for the correction of some minor formal defects; before it was finally reloaded the respondents lodged caveats and in due course brought the present action. The respondents claimed as against the Heaveners that the register should be rectified by registering them as full proprietors of the lands and that the certificates of title should be delivered up to them; they alleged that they had handed over the certificates of title solely as collateral security for a loan in respect of another transaction, but the loan had since been discharged; they further alleged as regards the transfers that they did not sign them at all, or, if they did, were induced to do so by Heavener’s fraud in the belief that they were by way of further security for the other transaction. Heavener by way of answer alleged that the lands were transferred absolutely in order to discharge the Union Bank mortgage and in payments [page 548]

of costs due to him. Abigail was joined as defendant by the respondents, as having no better title than the Heaveners because he did not take bona fide as a purchaser for value and without notice. It was also alleged that the security was void because Abigail was acting as a moneylender in the transaction without being registered as such. The trial before Long Innes J took a somewhat unusual course: after evidence had been given and closed on these issues, the respondents were allowed to amend as against the Heaveners, though not in terms as against Abigail, by alleging that, if they knowingly signed the transfers, they did so on the terms that Heavener would hold the transfers as security for his professional costs and not otherwise, and that he registered the transfers in fraud of that understanding and without their knowing what he had done until October 1925. This was a new case, contrary to the evidence given by both parties. By his judgment delivered on 22 March 1929, Long Innes J did not accept the evidence of the respondents, but found that they did sign the transfers, and signed them, moreover, knowing that they were signing transfers of the properties, that they were signing as transferors and that the transferee was Mrs Heavener; he did, however, further find that they understood the transfers were to be by way of security only for Heavener’s costs and for repayment of the mortgage debt to the Union Bank. In so finding the judge took a midway course, disbelieving the sworn evidence of both parties. As to Abigail, who gave, so the judge said, his evidence with great frankness and whose evidence the judge accepted, he found that it was not established that he was a moneylender within the meaning of the Moneylenders and Infants Loan Act 1905: the judge also found that Abigail, as regards the mortgage in question, discharged the onus of establishing that he was a bona fide purchaser for value without notice: he further found that Abigail made

the advance in question on the faith of the transfers of 5 December 1923, and of the certificate of title in Mrs Heavener’s name and of the mortgage executed by Mrs Heavener as registered proprietor. He accordingly held in regard to the mortgage of 2 September 1925 that the respondents were estopped by their representations from asserting as against Abigail that their equity was prior in point of time to that of Abigail … This judgment was on appeal affirmed by the Full Court of the Supreme Court of New South Wales. The court agreed with the findings of the fact of the trial judge: in effect, the court held that the case was covered by the decision of the High Court of Australia in Butler v Fairclough (1917) 23 CLR 78; 23 ALR 62; that Abigail’s equity, though subsequent in time, was the better equity; that the respondents’ conduct ‘in executing a memorandum of transfer on the face of it clear and unfettered’, and the failure to place on the register any embargo which would prevent the Heaveners from using those transfers at their face value, is such unreasonable and negligent conduct as to make their equity ‘inferior’ to Abigail’s. They also agreed with the judge’s finding that Abigail was not carrying on business as a moneylender. They accordingly dismissed the appeal. The respondents then appealed to the High Court of Australia, the judges of which by a majority (Knox CJ, Isaacs and Dixon JJ) allowed the appeal, Gavan Duffy and Starke JJ dissenting. It is difficult fairly to summarize these carefully reasoned judgments; but taking the crucial issue to be whether the equitable interest of the respondents was to be postponed to that of Abigail, the conclusion on that point of the late learned Chief Justice, Sir Adrian Knox, long a distinguished member of the Judicial Committee, may be found in substance in the following passage from his judgment ((1930) 44 CLR 166 at 183; [1930] ALR 178 at 181): The registration of Mrs Heavener as proprietor in fee simple was consistent with the existence of an equitable interest outstanding in some other person, and not [page 549]

inconsistent with the whole beneficial title to the land being in the appellants. Mrs Heavener was in a fiduciary relation to the appellants, and was entitled under the arrangement between them and Heavener to become registered as proprietor and to hold the documents of title until the debt intended to be secured was paid off. The [authorities] seem to me to indicate that the possessor of the prior equity is not to be postponed to the possessor of a subsequent equity unless the act or omission proved against him has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it, that the prior equity was not in existence. On the evidence as it stands no such act or omission on the part of the appellants has, in my opinion, been proved. The transfers did not amount to such an act, for there is no evidence that Abigail saw them. The certificates of title showing Mrs Heavener as registered proprietor were consistent with the beneficial ownership of the lands being in the appellants or any other persons, and did not indicate that she held the beneficial as well as the legal interest. The omission to lodge a caveat

can have had no effect in inducing Abigail to advance the money, for it is not proved that any search was made before the money was advanced. Isaacs J, dealing with the same issue, said: The Full Court’s concurrence on that point is open, as I think, to the observation that too great significance is attached to the single fact of Heavener’s registration, and too little both to the lack of evidence as to Abigail’s conduct being in part influenced by the absence of a caveat, and to the silence of Harris.145 Dixon J lays emphasis on the fact that: … although the appellants did not caveat, it does not appear that any search for caveats was made on Abigail’s behalf, or that he acted in the belief that there was no caveat. The default of the appellants — if default it be — therefore did not contribute directly to any assumption upon which Abigail may have dealt with the Heaveners. On the other hand, the final conclusion of Gavan Duffy and Starke JJ is summed up in the following words: In our opinion, the Lapins are bound by the natural consequences of their acts in arming Olivia Sophia Heavener with the power to go into the world as the absolute owner of the land and thus execute transfers or mortgages of the lands to other persons, and they ought to be postponed to the equitable rights of Abigail to the extent allowed by the Supreme Court. In this conflict of eminent judicial opinion their Lordships find themselves in agreement with Gavan Duffy and Starke JJ in regard both of their reasoning and their conclusion. The Real Property Act 1900 of New South Wales embodies what has been called, after the name of its originator, the Torrens system of the registration of title to land. It is a system which is in force throughout Australasia and in other parts as well. It is a system for the [page 550]

registration of title, not of deeds, the statutory form of transfer gives a title in equity until registration, but when registered it has the effect of a deed and is effective to pass the legal title; upon the registration of a transfer, the estate or interest of the transferor as set forth in such instrument with all rights, powers and privileges thereto belonging or appertaining is to pass to the transferee. No notice of trusts may be entered in the register book, but it has long been held that equitable claims and interests in land are recognized under the Real Property Acts. This was held in Barry v Heider (1914) 19 CLR 197; 21 ALR 93, for the protection of such equitable interests or estates, the Act provides that a caveat may be lodged with the registrar by any person claiming as cestui que trust, or under any unregistered instrument or any other estate or interest; the effect of the caveat is that no instrument will be registered while the caveat is in force affecting

the land, estate or interest until after a certain notice to the person lodging the caveat. Thus, though the legal interest is in general determined by the registered transfer, and is in law subject only to registered mortgages or other charges, the register may bear on its face a notice of equitable claims, so as to warn persons dealing in respect of the land and to enable the equitable claimant to protect his claim by enabling him to bring an action if his claim be disputed. In the registry all statutory transfers are filed and duplicate certificates of title are kept and noted up from to time with all registered dealings; the other duplicate certificate of title is held by the registered proprietor. The register is open to inspection and search. Provision is made by the Act for mortgages in statutory form, and for their registration; in such a case the legal estate remains in the registered proprietor of the fee simple, and the mortgage constitutes a charge of debt on the land; hence it may not be technically correct, though it is common, to speak of the mortgagor as having the equity of redemption, though the legal title remains in him. But a practice has sprung up of [effecting] what amounts to a mortgage by registering an instrument of transfer of the legal title from the mortgagor, and at the same time executing a document certifying that it was by way of security only. This is no doubt done for the purpose of facilitating dealings with the land by the transferee. Such a practice has been recognized in various decisions of the courts, and in particular in Currey v Federal Building Society (1929) 42 CLR 421; [1929] ALR 320. In the present case the same result was effected as the judge found as between the parties by an oral agreement; but all that appeared in the registry was the absolute grant of transfer as for full consideration paid and received; no document of qualification was executed and no caveat was lodged. In the result the public register showed to all the world, that is to anyone who cared to inspect, that the fee simple was in the two estates vested in Mrs Heavener; the equity of redemption (if it is so to be called for convenience) was in no way indicated to any searcher of the register. The Full Court of New South Wales regarded the present case as governed in principle by Butler v Fairclough, already mentioned, where there was a conflict of equities between a prior equitable incumbrancer who had lodged no caveat and a subsequent transferee who had, after a search of the register and without notice of the unregistered equitable charge, paid the purchase consideration. It was held that the former was to be postponed: Griffith CJ thus summed up the position ((1917) 23 CLR 78 at 91; 23 ALR 62 at 67): It must now be taken to be well settled that under the Australian system of registration of titles to land the courts will recognise equitable estates and rights except so far as they are precluded from doing so by the statutes. This recognition is, indeed, the foundation of the scheme of caveats which enable such rights to be temporarily protected in anticipation of legal proceedings. In dealing with such equitable rights the courts in general act upon the principles which are applicable to equitable interests in [page 551]

land which is not subject to the acts. In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. But all

other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to his prejudice. Thus, if an equitable mortgagee of lands allows the mortgagor to retain possession of title deeds, a person dealing with the mortgagor on the faith of that possession is entitled to priority in the absence of special circumstances to account for it. Under the Australian system a clear title on the register is, for some purposes at any rate, equivalent to possession of the title deeds. A person who has an equitable charge upon the land may protect it by lodging a caveat, which in my opinion operates as notice to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat. In the present case the plaintiff might, if he had been sufficiently diligent, have registered his charge of 30 June on that day. The defendant, having before parting with the purchase money to Good found on searching the register that Good had a clear title, and relying on the absence of any notice of defect in Good’s title, paid the agreed price. Their Lordships think that case was rightly decided, though it may be that the statement as to retention of the title deeds needs some qualification. But the only distinction between Butler v Fairclough and the present case appears to be that in the present case it was not proved that (though he had no notice of the prior charge) Abigail made any search before lending the money: he said he instructed his conveyancing clerk Harris to examine the title and left it to him. Though there is no reason why Harris should have neglected his duty, Harris was not called, it seems, because of the unfortunate course taken at the trial of raising fresh issues after the evidence was closed. That the question whether or not a search of the register had been made might be regarded as of decisive importance, does not emerge on the record or in any of the judgments until those in the High Court. The question is whether in such a case as this, where the title on the register was clear, the failure to prove a search by the second incumbrancer can make any difference. There is no reason to think that Heavener would have ventured to claim that Mrs Heavener was proprietor in fee simple unless she was so registered, and in that sense the grant of the transfer by the respondents to her did cause or contribute to Abigail’s lending the money. A search by or on behalf of Abigail would merely have shown that the transfer purported to be for full consideration, thus excluding any idea of it being by way of security. The case is closely parallel to that of Honeybone v National Bank of New Zealand (1890) 9 NZLR 102, where the second incumbrancer’s equity was preferred, on the ground that the act of the plaintiff in falsely representing the transaction with the first incumbrancer to have been a sale and not a mortgage, and in placing him in a position to obtain a title as registered proprietor and so obtain an advance from the bank the second incumbrancer, disentitled him to put his equity in competition with the later equity. No question is raised in that case whether the second incumbrancer made any search or inquiries: the emphasis is placed on the conduct of the mortgagor. This is in accordance with the judgment of Kindersley V-C in Rice v Rice (1854) 2 Drew 73; 61 ER 646, where the question was whether the equity of the plaintiff in respect of his lien as unpaid vendor should be preferred to that of a subsequent equitable mortgagee, who had lent his money to the purchaser against a deposit of the title deeds and of an assignment showing payment of the purchase money in full. The opinion of the Vice-Chancellor no doubt has

not been approved in so far as he says that priority in time is only taken as the test where the equities [page 552]

are otherwise equal: it is now clearly established that prima facie priority in time will decide the matter unless, as laid down by Lord Cairns LC in Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496, that which is relied on to take away the preexisting equitable title can be shown to be something tangible and distinct having grave and strong effect to accomplish the purpose. The Vice-Chancellor did not treat the possession of the title deeds as necessarily decisive: he said that the conduct of the parties having the equitable interests and all the circumstances must be taken into consideration in order to determine which has the better equity. He held that the second incumbrancer was not bound to go and inquire of the vendors whether they had received all the purchase money: he then describes the conduct of the vendors in this language: They voluntarily armed the purchaser with the means of dealing with the estate as the absolute legal and equitable owner, free from every shadow of incumbrance or adverse equity. In truth it cannot be said that the purchaser in mortgaging the estate by the deposit of the deeds has done the vendors any wrong, for he has only done that which the vendors authorised and enabled him to do. These words can aptly be applied to the present case if ‘for deposit of the deeds’ there is substituted that the respondents had authorized and enabled Mrs Heavener to register herself as owner in fee simple. Apart from priority in time, the test for ascertaining which incumbrancer has the better equity must be whether either has been guilty of some act or default which prejudices his claim; in the present case the respondents on the one hand enabled the Heaveners to represent themselves as legal owners in fee simple, while on the other hand it cannot be said that Abigail did or omitted to do anything which he should have done in lending the money on the security, though he might, by registering the mortgage, have secured the legal title; it may be that he accepted Heavener’s word that he or his wife were registered as having the legal title, but that was a true statement, and no search or inquiry that could have been made would have displaced it. [Lord Wright then referred to English cases which held that the equitable interest of a beneficiary under a trust was not in general to be postponed to that of an encumbrancer who took for value from the trustee without notice that the trustee was committing a breach of trust. It was unnecessary to consider whether this rule, perhaps ‘induced by the partiality of courts of equity for their protege, the cestui que trust, applied to the Torrens system, since the rule related only to trusts and not to equitable estates such as those of unpaid vendors or equitable mortgagees, nor to equities such as the equity to set aside a conveyance for fraud. His Lordship also rejected an argument that there had to be something in the nature of a direct representation by the respondents to Abigail to warrant the postponement of their interest.]

It is true that in cases of conflicting equities the decision is often expressed to turn on representations made by the party postponed … But it is seldom that the conduct of the person whose equity is postponed takes or can take the form of a direct representation to the person whose equity is preferred: the actual representation is in general, as in the present case, by the third party, who has been placed by the conduct of the party postponed in a position to make the representation, most often, as here, because that party has vested in him a legal estate or has given him the indicia of a legal estate in excess of the interest which he was entitled in fact to have, so that he has in consequence been enabled to enter into the transaction with the third party on the faith of his possessing the larger estate. Such is the position here, which in their Lordships’ judgment entitles the appellants to succeed in this appeal. [page 553]

In the High Court, Gavan Duffy and Starke JJ also relied on a further or supplementary reasoning, based on the principle of an authority being acted upon to create the later equity contrary to or in excess of the authority actually intended to be given. As they point out, the form of actual transfer was adopted ‘so that Olivia Sophia Heavener might deal with the lands as if they were her own and without restrictions created by an instrument of mortgage under the Act of New South Wales’; she was thus necessarily trusted by the respondents as to the time and method of realisation (that is, in order to pay the cash due to her husband) and not to exceed the limits of her security. On this view the case falls within the general principles laid down in Brocklesby v Temperance Permanent Building Society [1895] AC 173 at 180. Lord Herschell LC thus sums up the rule: Where a person has thus been entrusted with the possession of title deeds with authority to raise money upon them, the owner of the deeds cannot take advantage of any limitation in point of amount which he has placed upon the authority as against a lender who had no notice of it. The same principle, it was held, had been applied in equity in the case of Perry-Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895. This decision of the House of Lords was followed in the later case of Rimmer v Webster [1902] 2 Ch 163 … The foundation of the rule is that there has been an authority to deal with the property, as Gavan Duffy and Starke JJ in the High Court have here found that there was; no doubt they have so found as an inference from all the facts, but their Lordships accept the finding. The case then becomes one of an agent exceeding the limits of his authority but acting within its apparent indicia. Rimmer v Webster has been approved by this Board … Their Lordships agree with Gavan Duffy and Starke JJ that on this ground also the appellants should succeed. In the result their Lordships are of opinion that the appeal should be allowed, the order of the High Court should be set aside and the order of the trial judge, as varied by the order of the Full Court, should be restored; the cross appeal should be dismissed … Appeal allowed; cross appeal dismissed.

5.181

At first sight it would seem that what is now s 43 of the Victorian

Act (the notice provision) provided the complete answer to the Lapins’ claim. Abigail was proposing to take a transfer from the registered proprietor (Mrs Heavener) and was therefore not to be affected by notice of any unregistered interest. However, it was held in Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; 28 ALR 95, that a purchaser only gains statutory protection from prior unregistered interests when he or she becomes registered. Knox CJ (at 54–5) cited with approval the following passage: Before becoming registered it is open to any adverse claimant to step in and assert a claim, and for the purpose of trying that claim registration may be stayed — by caveat or otherwise … The doctrine of notice is not, in fact, affected by these enactments except as regards registered interests, and any questions of priority between unregistered interests that depend on that doctrine will have to be decided on general principles of equity jurisprudence.146

[page 554]

In IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; [1964] ALR 971 (5.187C) two members of the court expressly accepted the principle of Templeton v Leviathan Pty Ltd. Taylor J said it was ‘unthinkable’ that the High Court should ‘unsettle’ a point authoritatively decided 30 years earlier.147 The influence of the judgment of Griffiths CJ in Butler v Fairclough (1917) 23 CLR 78; 23 ALR 62, referred to by Lord Wright, has been considerable in this area of the law. In that case, Good, the registered proprietor of a Crown lease subject to a registered mortgage, executed an agreement on 30

June 1915, by which he agreed to charge the lease with a debt then due by him to the plaintiff and agreed, if required, to execute ‘a proper and legal mortgage’. On 2 July 1915, only two days later, Good agreed to sell the lease to the defendant, subject only to the registered mortgage. The defendant on the same day searched Good’s title, paid the purchase price and obtained a transfer in registrable form. The defendant had no notice of the plaintiff’s charge. The plaintiff did not lodge a caveat claiming an estate as equitable mortgagee until 7 July 1915. The three members of the High Court to consider the question held that the plaintiff’s equitable charge was postponed to the equitable interest of the defendant. What was the principle applied by Griffith CJ, in the passage quoted by Lord Wright in Abigail v Lapin, to reach the conclusion that the plaintiff’s equitable charge was postponed to the later equitable interest? What should be the effect of a failure to lodge a caveat in a contest for priority between two equitable interests? Is it proper to postpone an interest because the holder has delayed, by two days, the lodging of a caveat?148

5.182 Questions Why, precisely, was the interest of the Lapins postponed to that of Abigail? How was the Privy Council able to conclude that Abigail had been misled, notwithstanding that he had not been proved to have searched the title before taking the mortgage from Mrs Heavener? Was it simply because the Lapins had failed to lodge a caveat? If not, what part did the Lapins’ omission to lodge a caveat play in the ultimate

postponement of their interest? See Sackville, ‘Competing Equitable Interests in Land under the Torrens System’ (1971) 45 ALJ 396 at 405– 7.

5.183

The general principles relating to priority between competing

equitable interests were applied in Avco Financial Services v White [1977] VR 561. In Cash Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576 the same principles were applied to a competing interests in shares. In Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 no caveats were lodged by the earlier unregistered interest holders but there was no evidence that later interest holders had searched the register. Accordingly, the earlier interest holders prevailed.

[page 555]

5.184

In Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326, the

appellant, Heid was registered proprietor of certain land registered under the Real Property Act 1900 (NSW). He agreed to sell this land to Connell Investments Pty Ltd, one of a group of companies controlled by a firm of mortgage brokers, Newman, McKay & Co. The appellant was content to accept the advice of the principal of Newman, McKay & Co that one Gibby, an employee of Newman, McKay & Co, should act as solicitor for the appellant in the conveyancing transaction. In fact, unknown to Heid, Gibby was unqualified. Heid duly signed a contract and a transfer and left these

documents, together with the certificate of title, in the hands of Gibby. On settlement of the matter, Heid was to place a substantial part of the proceeds of sale on investment with a company controlled by Newman, McKay & Co and another sum by way of mortgage secured on the subject land. Heid then left for a holiday in the United States. Newman, McKay & Co lodged the transfer for registration and immediately set about raising much-needed finance by way of mortgage on the subject land. One such mortgage was to the respondent which advanced money before the transfer to Connell was registered. After registration of Connell’s transfer, but before registration of the respondent’s mortgage, Heid discovered the fraud and took proceedings claiming an equitable interest in the land paramount to that of the respondent. Heid’s principal argument was that he was entitled to trust his solicitor and to leave signed documents with his solicitor in anticipation of the settlement. This accorded with normal conveyancing practice. Heid claimed that he was entitled to believe that Gibby was a solicitor. The High Court was not persuaded by the appellant’s submission. The court applied Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58; [1934] All ER Rep 720 (5.180C) and Rice v Rice (1858) 2 Drew 73; 61 ER 646, and held that the appellant armed Gibby and Connell with the ability to represent to third persons that Connell was the unencumbered owner of the land in fee simple. The appellant was thus estopped from denying that the respondent’s interest took priority. The court took the view that it was not reasonable for the appellant to believe that Gibby would act honestly in the best interest of the appellant when the appellant knew that Gibby was an employee of a company which controlled the purchaser. Mason and Deane JJ commented (at 342)

that the failure to lodge a caveat is ‘just one of the circumstances to be considered in determining whether it is inequitable that the prior owner should retain his priority’. 5.185C

J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 High Court of Australia

[In 1961 Josephson, the registered proprietor of residential land in Sydney, executed a memorandum of mortgage in registrable form in favour of the defendant bank. The bank received the mortgage and duplicate certificate of title, but lodged neither a caveat nor the mortgage for registration. In May 1964, Josephson executed a mortgage in registrable form in favour of the plaintiff company. This transaction was completed very quickly and, in order to save expense, it was decided not to register the mortgage. The plaintiff company did not receive the duplicate certificate of title, its governing director being satisfied with Josephson’s explanation that his bank held the title for safekeeping. The company’s solicitor searched Josephson’s title and found no encumbrances recorded thereon. No inquiry was made at the bank as to the terms on which it held the certificate of title. In June 1964 the company’s solicitor lodged a caveat with the Registrar-General. In August 1964 the

[page 556]

bank lodged its mortgage for registration. The Registrar-General duly notified the plaintiff company which commenced proceedings claiming a declaration that its equitable mortgage was entitled to priority over the bank’s interest. The company also sought a declaration that its mortgage ought to be registered by the Registrar-General in priority to that of the bank. Subsequently, a sequestration order was made against Josephson by the Federal Court of Bankruptcy.] Barwick CJ: Upon the appellant’s appeal to the Court of Appeal Division of the Supreme Court (1970) 92 WN (NSW) 803 Jacobs JA, with whose reasons Mason and Moffitt JJA agreed, held that a failure to give notice by lodging a caveat should not be regarded as entitling any person subsequently dealing with the registered proprietor to regard the title

as clear of any outstanding equitable interest. He thought it unheard of that one who proposes to become a first mortgagee should dispense with either production or delivery of the duplicate certificate of title upon the faith of a clear register. In this respect he accepted the evidence of the solicitor which I have quoted. He therefore found no ground for postponing the memorandum of mortgage given to the bank. He further found that, because of its gross carelessness in not sighting or obtaining the duplicate certificate of title, the appellant could not claim any benefit from s 43A. Much has been said in the course of this case about the failure of the bank to lodge with the Registrar-General a caveat against dealings. It is important in this connection to observe the nature and purpose of what is sometimes called an ‘unofficial caveat’, distinguishing a caveat lodged by a private person from a caveat lodged by the RegistrarGeneral a caveat against dealings. It is important in this connection to observe the nature and purpose of what is sometimes called an ‘unofficial caveat’, distinguishing a caveat lodged by a private person from a caveat lodged by the Registrar-General, eg under ss 12(1)(f) or 83 of the Act. Its form is scheduled to the Act. See Sch 16. It is directed to the Registrar-General and may properly be given by a person claiming an estate or interest in the land, against dealings with which it is lodged. It must describe the estate or interest claimed. But it is not a registrable instrument: nor is the Registrar-General required by the Act to enter a notation of it on the relevant certificate of title, though the form of the caveat provided in the schedule of the Act does make provision on its reverse side for a record to be made of the entry of its particulars in the register book. Now by s 8(1)(a) of Act No 30 of 1938, however, the Registrar-General is authorised to place ‘notifications’ on the Register. In practice, however, the caveat is given a number: and a note of its lodgment and of the estate or interest claimed, is made on the relevant certificate of title, but not necessarily at the time of the lodgment of the caveat. Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title it may operate to give such notice. If the caveator does not take proceedings in due time against the person who had lodged a dealing for registration, and the dealing is registered, awareness of the existence of the caveat, and through it, that an estate or interest is claimed by the caveator, will be irrelevant except possibly as an element in establishing fraud in the procurement of the registration. But of itself such awareness will not vitiate the registration. In Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58, husband and wife, the respondents, each the registered proprietor of a separate parcel of land each executed a memorandum of [page 557]

transfer in favour of a nominee of a solicitor. The memoranda were executed as security for certain costs and for the payment of a sum due to a bank. As the matter was ultimately viewed, the respondents in executing and handing over the memoranda of

transfer had authorized the solicitor to deal with the property but not for his own benefit or for that of his nominee otherwise than as mortgagee. The transfers were subsequently registered in breach of that authority. The transferee became the registered proprietor of the fee simple in each parcel of land. After other dealings, the appellant lent money on the security of registrable memoranda of mortgage of the land executed by the registered proprietor and of the deposit with him of the duplicate certificates of title. Caveats by the respondents prevented registration of these memoranda of mortgage. The respondents sued the appellant and others claiming that they were entitled to an order that the registered proprietor should transfer the land to them free of incumbrances. Thus the case was one in which the equitable interest of the appellant was derived from a registered proprietor who had come to the place on the register by the misuse of his authority from the respondents and possession of the duplicate certificate of title. That interest was in competition with the equitable interest of the respondents, as mortgagors. The lodgment of a caveat by the respondents even whilst they were still registered proprietors might well have been thought appropriate, once the duplicate certificates of title and executed memoranda of transfer had been given to the mortgagee. This would be a means of safeguarding themselves against an abuse of the authority which they had given their mortgagee. The respondents in this respect were in a very different situation to that of the bank. The holder of the executed memoranda of transfer and the duplicate certificate of title was in a position to have the transferee registered as proprietor. Once that person was registered the legal estate in the land would vest in the transferee. But in the case of the bank no change in the register could properly take place without its concurrence. The difference in the need of the parties for protection against the registration of dealings is thus quite clear. But it was the respondents’ conduct in thus arming the mortgagee with the capacity to become the registered proprietor and able to deal with others as such and not any failure by them to lodge a caveat that was decisive in Abigail v Lapin. Their Lordships’ decision was an application of Kindersley VC’s judgment in Rice v Rice (1854) 2 Drew 73; 61 ER 646, from which Lord Wright quotes a passage. A passage from the judgment of Knox CJ in the case was adopted as setting out the relevant principles for resolving the competition of the parties’ interest in the land. Ultimately ‘the case then becomes one of an agent exceeding the limits of his authority but acting within its apparent indicia’ per Lord Wright. I emphasise these aspects of the decision Abigail v Lapin by the Privy Council because, once it is recognized that the respondents’ conduct in handing over the memoranda of transfer and the duplicate certificates of title provided the ratio decidendi, much of what Lord Wright says about the consequences of a failure by a claimant to an equitable interest to lodge a caveat and particularly his comments on Butler v Fairclough (1917) 23 CLR 78 became, in my opinion, obiter. Whilst it may be true in some instances that ‘the register may bear on its face a notice of equitable claims’, this is not necessarily so and whilst in some instances a caveat of which the lodgment is noted in the certificate of title may be ‘notice to all the world’ that the registered proprietor’s title is subject to the equitable interest alleged in the caveat this, in my opinion, is not necessarily universally the case. To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not

merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be [page 558]

subversive of the well recognised ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon’s remarks in Lapin v Abigail (1930) 44 CLR 166 at 205, with which I respectfully agree, point in this direction. Of course, there may be situations in which such a failure may combine with other circumstances to justify the conclusion that ‘the act or omission proved against’ the possessor of the prior equity ‘has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it that the prior equity was not in existence’: cf per Knox CJ in Lapin v Abigail. This is the relevant principle to apply if it is claimed that the priority of a prior equitable interest has been lost in competition with a subsequent equitable interest: In general an earlier equity is not to be postponed to a later one unless because of some act or neglect of the prior equitable owner. In order to take any pre-existing admitted title, that which is relied upon for such a purpose must be shown and proved by those upon whom the burden to show and prove it lies, and … it must amount to something tangible and distinct, something which can have the grave and strong effect to accomplish the purpose for which it is said to have been produced: per Lord Cairns LC in Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496 at 507. The act or default of the prior equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he should retain his initial priority. This in effect means that his act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity. In my opinion, the failure to lodge a protective caveat cannot properly be said necessarily to be such an act or default. It could not properly be said to be so in the present case. Mention should now be made of a second reason why in this case the failure to lodge a caveat could not be held to be privative of the bank’s priority. The bank held the certificate of title and a memorandum of mortgage in registrable form. Whilst there is no express provision of the Act which forbids the registration of a dealing without the production of the duplicate certificate of title, it is the practice of the Registrar-General’s office to refuse to accept an instrument of transfer or mortgage for registration without production of the duplicate certificate of title, unless the certificate is already in the Registrar-General’s hands … Thus a person in the situation of the bank could reasonably rely upon this practice and his possession of the duplicate certificate of title as a reasonably sufficient protection. In any case the failure by such a person to lodge a protective caveat cannot of itself properly be held to be an act fulfilling the requirements to which I have referred of conduct which will deprive a prior equity of its priority. As I have said, the purpose of the caveat is protective: it is not to give notice. The holder of the subsequent equity in my

opinion could not properly rely upon the absence of any notification in the register book of the lodgment of a caveat as a representation or as the basis for a conclusion that no equitable interest in the land existed in any person. In my opinion the conclusion and the reasoning of the Court of Appeal Division were correct on this aspect of the case. In my opinion, the appeal should be dismissed. Windeyer J: I agree entirely in the judgment of the Chief Justice. Merely to emphasize my agreement I shall briefly state my view of the effect of the Bank’s not lodging a caveat against dealings, the matter in the forefront of the appellant’s argument … A caveat noted in the register book is no doubt a notice, to anyone who searches at the RegistrarGeneral’s Office, [page 559]

of the caveator’s claim. I understand that the Registrar-General records all documents as they are lodged and that he lists caveats as if they were dealings and that this record is available for inspection. It is perhaps a register kept under the Act within the meaning of s. 43(2). However, the fact that a caveat discoverable by a search of the title is ‘notice to all the world’ of the interest claimed does not mean that the absence of a caveat is a notice to all and sundry that no interest is claimed. To say that would, it seems, be to equate the noting of a caveat in the register book with the registration of a dealing: it would make competing equitable interests depend not upon priority of creation in time and other equitable considerations, but upon priority of the lodgment of caveats. After all, the primary purpose of a caveat against dealings is not to give notice to the world of an interest. It is to warn the Registrar-General of a claim. The word caveat has long been used in law to describe a notice given to an official not to take some step without giving the caveator an opportunity to oppose it … But a caveat is not the only way in which a purchaser from the registered proprietor can be made aware of the prior equitable claims of another person. It is merely one way, and no doubt a very sure way, in which such a claimant may protect his interest against its subversion by the registered proprietor in favour of another person … [McTiernan, Menzies and Owen JJ agreed with Barwick CJ to dismiss the appeal.]

5.186

In Black v Garnock (2007) 230 CLR 438; 237 ALR 1; [2007] HCA

31, Gleeson CJ at [7] cited with approval the view of Barwick CJ in Just’s case as to the purpose of the caveat, while Callinan J (at [76]–[78]) expressed strong disagreement. Callinan J said that the caveat served both as an injunction to the register, and to give notice to anyone searching the register

that another dealing or transaction was on foot. In the following passage (at [80]), his Honour rejected the view of Barwick CJ that it would be subversive of the system of registered title to hold that failure to caveat a prior interest necessarily results in postponement: I must respectfully disagree. What is much more likely to be subversive of the whole of the scheme of the Torrens system is that a person interested in, or entitled to deal with, land, who has not acted fraudulently, might suddenly and unexpectedly be saddled with, or postponed to, an equitable estate or interest in land which could have been, but was not made the subject of protection by prompt lodgment of an instrument or the filing of a caveat pending the lodgment.149

5.187 Questions What are the implications of the different views of the purpose of the caveat? Is it possible to reconcile Just’s case with Butler v Fairclough and Abigail v Lapin? After Just’s case, in what circumstances will a failure to lodge a caveat ever lead to the postponement of an equitable interest in Torrens system land in favour of an equitable interest in the same land created subsequently? Compare Breskvar v Wall (1971) 126 CLR 376; 5.48C. Consider Australian Guarantee Corporation (NZ) Ltd

[page 560]

v CFC Commercial Finance Ltd [1995] 1 NZLR 129 in which the Court of Appeal of New Zealand (Richardson Gault and Tompkins JJ) held that a failure to lodge a caveat may justify a reversal of priority between equitable interests. The relevant facts were that the first mortgagee

delayed about nine days after acquiring interest before lodging its caveat. By the time the caveat was lodged the second mortgage had been created. In addition, the first mortgagee failed to take possession of the certificate of title. The second mortgagee had no knowledge of the first mortgage at the time it acquired its interest. The court cited with approval the views of Mason and Deane JJ in Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326; 5.194. It held that the combination of the delay in registering the caveat and the failure to obtain the title justified the conclusion that it was just and fair that the priorities should be reversed. However, because the second mortgagee had delayed in asserting its rights and in challenging the first mortgagee’s position, the court held that it had a discretion to require as a condition of granting that interest, that an allowance of over $50,000 be made to the first mortgagee.150

5.188

The failure by a person entitled to an equitable interest to lodge a

caveat and the effect of Butler v Fairclough, Abigail v Lapin and Just’s case have been considered in a number of cases. In Victoria, much concern was prompted by Osmanoski v Rose [1974] VR 523, in which Gowans J held that a failure to caveat a purchaser’s interest under a contract of sale warranted the postponement of a prior to a later purchaser. Gowans J cited the observations of Barwick CJ as to the nature and purpose of caveats. He distinguished these (at 528) on the ground that the Victorian provisions (ss 89, 89A) meant that a caveat was not merely directed to the Registrar-General:

… The lodging of a caveat under the Victorian Act operates, whether a ‘cloud’ or a ‘blot’ or by whatever name it is called as an obstacle to a registered proprietor making title to a purchaser and to a purchaser obtaining title from the registered proprietor.

This view was rejected in Jacobs v Platt Nominees Pty Ltd [1990] VR 146, although Osmanoski v Rose was not specifically overruled. In a joint judgment, the full bench of the Victorian Supreme Court (Crockett, King and Gobbo JJ) observed (at 151) that ‘the Victorian legislation is not so different that it provides a necessary reason for distinguishing Just’s case. This is particularly evident in the judgment of Windeyer J who described the practice in New South Wales in provisions’. The court also considered that the other basis on which Gowans J had distinguished the two cases, the fact that the party which had failed to caveat had possession of the certificate of title in Just’s case and not in Osmonoski, was determinative: ‘It does not bear out a proposition that the holder of the prior equitable interest is expected to give notice to the world’: at 151. The court added that ‘the practice of lodging caveats is at best that and not a duty, much less a duty to the world at large’: at 159. Their Honours took into account a number of factors in deciding that, in fairness and in justice, the appellant’s failure to caveat her equitable interest acquired by exercise of an option to purchase should not deprive her of her prima facie priority as the holder of the earlier interest. The relevant circumstances included that it was not the practice of Victorian conveyancers in

[page 561]

all cases to lodge a caveat to protect an interest under an option, and that there was no settled practice for purchasers to search the title for prior interests before entry into contract. It was also significant that the appellant had been granted the option by a company controlled by her parents in circumstances where it was ‘inconceivable’ that the company would sell to another in breach of the option. In Handberg v MIG Property Services Pty Ltd [2010] VSC 388, ANZ Bank had failed to caveat its earlier unregistered mortgage before Velos and Davis acquired their subsequent unregistered charge. Robson J held that on either an estoppel basis or under the broader approach of Mason and Deane JJ in Heid v Reliance preference be given to the better equity — the earlier interest of ANZ Bank should be postponed. His Honour said that failure to caveat ‘by itself may be sufficient to defer priority if the circumstances otherwise make it fair and just to do so’: at [198]. ANZ Bank’s failure to caveat its interest had led the chargees to act to their detriment in acquiring their later interest upon the supposition that the earlier interest did not exist. The detriment consisted of the incurring of additional legal fees and expenses. Robson J distinguished Jacobs v Platt Nominees on the facts. Mrs Jacobs had good reason to expect that her father would not prejudice her interest. In the present case, there was no explanation for ANZ’s failure to follow usual practice and lodge a caveat. As a major banking corporation, it was deemed to be aware of conveyancing practice and the function of caveats. 5.189

Jacobs v Platt Nominees was also distinguished on the facts in Mimi v

Millennium Developments Pty Ltd [2003] VSC 260. The plaintiff had entered into a contract to purchase land from the first defendant but did not lodge a

caveat for some months. The first defendant sold the land to the third defendant who entered into a building contract with the first defendant for the construction of a home. The plaintiff noticed construction works upon the land but did not lodge a caveat until after settlement of the contract with the third defendant. In these circumstances, Nettle J held that the failure by the plaintiff to lodge a caveat justified the plaintiff’s postponement to the interest of the third defendant. The arm’s length commercial relationship between the plaintiff and the first defendant and the total lack of communication between the plaintiff and the first defendant where there was reason to suspect a subsequent equitable interest might have been created were significant matters of difference from the facts in Jacobs. The third defendant had established detriment in that loss of priority would result in deprivation of the land, the house built upon the land and the money laid out to acquire the land and house. 5.190

In AG(CQ) Pty Ltd v A&T Promotions Ltd [2010] QCA 83 two

successive unregistered mortgages were created, but no caveat was possible because the mortgagor’s lot was in a proposed subdivision and so could not be allocated a folio. It was held that the first mortgagee was nonetheless postponed because it had not been ‘prudent’ in not taking the only steps they could take, namely, notifying the second mortgagee of their mortgage who was known to them as the developer of the proposed subdivision: at [44].151 These cases show that a failure to caveat is significant if it contributes to a later interest being acquired in the supposition that the earlier interest does not exist. It is relevant to consider whether the failure to caveat is inconsistent with usual conveyancing practice: see, for

[page 562]

example, Person-to-Person Financial Services v Sharari (1984) NSW ConvR ¶55-187, in which McLelland J declined to follow Needham J’s decision in Ryan v Nothelfer (1983) NSW ConvR ¶55-119, that a second mortgagee who had failed to caveat had priority over a third mortgagee as there was ‘no feature in this case … which may be added to the failure of the plaintiff to lodge a caveat so as to effect a postponement of his interest’. His Honour found that it was the settled practice of competent lawyers acting for second mortgagees in New South Wales either to register the mortgage or lodge a caveat promptly. The failure of the second mortgagee to follow this practice would naturally lead anyone searching the register, such as the plaintiff, to assume that no second mortgage was in existence.152

The significance of notice in equitable priorities 5.191

The proper application of the maxim qui prior est tempore, potior est

iure to a resolution of competing equitable interests in land is not without uncertainty. In Rice v Rice (1854) 2 Drew 73; 61 ER 646 (4.196C) the ViceChancellor was of the view that the maxim was applied as a device of last resort. As he put it: ‘As between persons having only equitable interests, if their equities are in all other respects equal, priority of time gives the better equity …’. This statement invites a court to examine the conduct of both parties with a view to weighing their respective merits and according priority

by time only if the merits are in all respects equal. Some later authorities have not endorsed this approach but rather favour the view that priority will be determined in accordance with time unless the first equitable encumbrancer is guilty of some conduct deserving of postponement and reversal of the ‘natural’ order. This conduct has been variously described as ‘estoppel’, ‘negligence’ or ‘gross negligence’. However described, the focus is upon the conduct of the first equitable encumbrancer. Thus, in Abigail v Lapin (5.180C), Lord Wright, in speaking for the Privy Council, said: ‘The opinion of the Vice-Chancellor [Kindersley in Rice v Rice] no doubt has not been approved in so far as he says that priority in time is only taken as the test where the equities are otherwise equal: it is now clearly established that prima facie priority in time will decide the matter unless, as laid down by Lord Cairns LC in Shropshire Union Railways and Canal Co v R (1875) LR 7 HL 496, that which is relied on to take away the pre-existing equitable title can be shown to be something tangible and distinct having grave and strong effect to accomplish the purpose’. And in J&H Just (Holdings) Pty Ltd v Bank of New South Wales (5.185C), Barwick CJ stated: ‘As I have pointed out, unless the priority which time gives to the bank’s [the first encumbrancer] equitable interest in land is to be lost by reason of the bank’s own conduct, there is no need in my opinion, to consider the conduct of the appellant [the second encumbrancer]. That conduct might be relevant if, after the bank’s priority derived simply from earlier creation of its interest had been lost, a further question of the comparative claims of the holders of the equitable interest should arise’. The distinction between the two approaches and the proper role of time in resolving a competition between two conflicting

equitable interests were analysed by Brooking and Ormiston JJA in Moffett v Dillon. Although there is some common ground in the views expressed in their separate judgments, there is a significant difference in emphasis in relation to the role of notice as a decisive factor.

[page 563]

5.192C

Moffett v Dillon [1999] 2 VR 480 Supreme Court of Victoria (Court of Appeal)

[The plaintiff entered into a terms contract of sale of his land to the defendant. The contract was later rescinded. The parties agreed that moneys owing under this contract be secured by a charge given by the defendant to the plaintiff over the subject property. The plaintiff lodged a caveat. At a later date, the defendant gave a mortgage to a bank. The bank took its mortgage with notice of the plaintiff’s earlier charge. When the bank lodged its mortgage for registration, the plaintiff took proceedings for an injunction. By mistake, the bank’s mortgage was registered but the dispute between the parties was conducted on the footing of a competition between unregistered interests.] Brooking JA: It is conceded that at the time the bank took its mortgage it had full actual knowledge, not casually acquired, of the creation and continued existence of the charge. At least in the circumstances of the present case, this is fatal to the contention that the later equitable interest should prevail over the earlier. I know of no decision in which a later equity has been held to prevail where its holder acquired it with knowledge of the creation and continued existence of the earlier equity. [After considering the authorities his Honour continued:] The authorities use language suggesting that a later equitable interest can never prevail over an earlier one where the holder of the later interest had at the time of its acquisition notice of the earlier interest. (I exclude the case where although there was notice of the coming into existence of the earlier interest the holder of the later interest had by the time of its acquisition a belief that the earlier interest no longer existed.) The rule is correctly stated in terms of ‘notice’ of the earlier interest. The present case is one of admitted actual and full knowledge. This is either to be regarded as actual notice or,

according to the analysis of Pomeroy, Equity Jurisprudence, paras 591 et seq, to be treated as having the same consequences as notice. The best known doctrine of equity regarding the effect of notice on priorities concerns the bona fide purchaser for value of the legal estate … The rule applies whether the estate or interest taken by the purchaser is legal or equitable and whether the equity held by a third person in relation to the same subject matter does or does not amount to an equitable interest according to the distinction that has been drawn between ‘mere equities’ and equitable interests … I have said that there are two rules or principles at work in cases like the present, the rule that a person taking with notice of an equity takes subject to it and the rule where the equities are equal the first in time prevails. As regards the second rule, I have referred to the wide view taken by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 341 that broad principles of right and justice will guide the court in determining whether the equities are equal. As what I have already written should make plain, I do not regard the question whether a person who acquired an equity did so with notice of a prior equity as no more than a consideration to which regard is to be had in determining whether one of the equities is better than the other. I regard the rule about notice as a distinct and fundamental one and I do not consider that Mason and Deane JJ intended to question its existence or to subsume this particular matter of notice under a broad question so as to make it no more than a consideration bearing upon which was the better equity. The judge was right in this case to hold that the charge had not lost its priority over the subsequent mortgage. [page 564]

Ormiston JA: I have had the benefit of reading the judgment of Brooking, JA in draft form and, subject to what appears below, I agree both in the reasoning and in the conclusions which he has reached. In my opinion the learned judge was correct in concluding that the appellant’s charge had priority over the bank’s equitable mortgage inasmuch as it was the security and interest first created … As to the other basis upon which Brooking JA would dismiss the cross-appeal and give priority to the appellant’s charge, I have greater difficulty and, for the present, I feel obliged, regrettably, to withhold my concurrence with it … I have preferred to conclude, as was held below and as the appellant has argued, that Moffett as holder of the equitable interest first in time should be preferred unless and until the bank established that it had the better equity in the sense of a better equitable interest, and that is what the bank failed to do … What the bank would have had to do is to show that it took its interest for value without notice or had the better equity for some other reason, or that is what I believe is the essence of the present difference of opinion. The better view, although I would not wish to resolve it in present circumstances, seems to be that the principle favouring the bona fide purchaser without notice has been one not ordinarily applied (except in circumstances which have been criticised) as

between competing equitable interests … Perhaps the solution lies in Lord Westbury’s analysis which would allow of the second interest holder to take an interest but only subject to the earlier equity. If that be so, that later holder of an equitable interest would have to show why he or she should be preferred over the earlier equitable interest holder. This might involve some nice balancing of competing equities of the kind contemplated by the High Court in Heid’s Case but, as a generalisation only, such an enquiry may be cut short by it being demonstrated that the later holder knew of the earlier interest when he or she took. So, subject to the possible existence of rights under a prioritisation or subordination deed or other contract or by reason of a common assumption created by the holder of the prior interest at the time the later holder acquired his or her interest (or the like), there would be little reason for further examination as to which party held the ‘better equity’, the later holder facing an effectively insuperable hurdle at that stage. However, without resolving all these difficulties, I would prefer to reiterate that Mr Moffett’s interest was created first in time and nothing had been demonstrated in this case to show that the bank’s later interest should be preferred in equity. [Buchanan JA, in a short separate judgment, agreed with the reasoning in the judgment of Brooking JA.]

5.193

Brooking and Ormiston JJA agree that the holder of a later

equitable interest who has notice of an earlier interest takes subject to it, but differ in the reasons. According to Brooking JA, if there is notice, there is no need to apply the test in Heid v Reliance Finance Co Pty Ltd; 5.184. Ormiston JA doubts that the doctrine of notice applies where the later interest is equitable rather than legal. In his Honour’s view, notice is an important consideration in determining whether there is postponing conduct on the part of the holder of the later interest.153 In Commonwealth Bank of Australia v Psevdos [2015] SASC 66, the failure to caveat

[page 565]

by the earlier mortgagee was held to be not postponing where the later

interest holder, who did lodge a caveat, already had notice of the earlier interest: at [21]–[24]). Moffett v Dillon was a case of actual notice, but equity regards a purchaser as having imputed notice of facts known to his or her agent, and constructive notice of facts that would have come to his or her notice if proper inquiries had been made. The definition of notice in the Property Law Act 1958 (Vic) s 199 (4.187E), which includes constructive and actual notice, applies to registered land, and was applied in IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440.154 5.194C

Perpetual Trustee Co Ltd v Smith (2010) 186 FCR 566; 273 ALR 469; [2010] V ConvR 54-779 Federal Court of Australia (Full Court)

[Pursuant to a scheme whereby retirees and other elderly persons used their equity in their homes in Victoria to generate an income stream, the respondents sold their homes to Money for Living Australia Property Holdings Pty Ltd (MFLPH) in consideration of a lump sum, an annuity and a lease for life over the property. The retirees handed over at settlement of their contracts an instrument of transfer and their certificates of title, and did not lodge caveats. Perpetual made a number of loans to MFLPH entities to finance the purchase of the properties and took first registered mortgages over the homes as security. After MFLPH ceased trading, the respondents brought representative proceedings on behalf of the retirees to protect their leasehold interests in their homes. Perpetual appealed the trial judge’s ruling that its mortgage was subject to the retirees’ interest as tenant in possession, and the retirees cross-appealed his Honour’s ruling that Perpetual’s mortgage was not subject to their equitable vendor’s liens for the unpaid balance of purchase moneys. On appeal, the Full Federal Court held that the statutory exception to indefeasibility in Vic, s 42(2)(e) operated to deprive the registered proprietor of the indefeasibility it would otherwise enjoy, leaving a competition between the retirees’ equitable leases and Perpetual’s equitable mortgage to be resolved under common law principles as a competition

between unregistered interests. The following extracts relate to the principles for resolving that competition.] Moore and Stone JJ: In the case of all the respondents, the equitable interest of the tenants preceded the interests of the mortgagees. If the equities between the retirees and Perpetual were equal then the retirees’ interest, being first in time would take priority. That principle does not apply where the merits as between the parties are not equal. In this case it might be argued, although Perpetual made no such argument, that by giving MFLPH a registrable transfer and certificate of title, the retirees had armed MFLPH with the ability to enter into the mortgages, without Perpetual having any knowledge of their interests. Thus, it might be argued, although Perpetual did not, that the retirees had an obligation to correct the impression so created by lodging caveats to protect their interest. While Perpetual’s failure to raise the question of notice might be regarded as fatal to its claim (see Barclays Bank plc v Boulter [1997] 2 All ER 1002; [1998] 1 WLR 1) … [page 566]

We disagree with the primary judge’s comment that the failure to caveat was ‘of no moment’ because the only purpose of a caveat would have been to prevent registration. His Honour’s comment overlooks the capacity of a caveat to give notice ‘to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat’: Butler v Fairclough (1917) 23 CLR 78 at 91; 23 ALR 62 at 67 per Griffith CJ. This purpose is not inconsistent with the capacity of a caveat to give notice as the following comment of Barwick CJ in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 552; [1972] ALR 323 at 325–6 (Just), indicates: Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator … The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator’s estate or interest though if noted on the certificate of title, it may operate to give such notice. [Emphasis added.] The conduct of the retirees in giving MFLPH the ability to create the subsequent mortgages to Perpetual would indicate that the merits would be with Perpetual unless Perpetual had, at the very least, constructive notice of the retirees’ interests. While a caveat may give notice of an unregistered interest there is no obligation to caveat. To hold otherwise would be to convert a facility that the TLA provides into an obligation. If the circumstances are such as to give notice in some other way, so that the later interest holder is, or ought to be, aware of the prior interest, the failure to caveat, in so far as notice is concerned, will be immaterial. In the absence of a caveat it is necessary to consider all the relevant circumstances in determining the issue of notice: Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; 49 ALR 229 per Mason and Deane JJ. In the present circumstances, it beggars belief that the appellant did not have notice,

at the very least constructive notice, of the retirees’ interests. In the absence of clear evidence to the contrary (and there was none) the inescapable inference is that Perpetual did have notice. Perpetual entered into many mortgages with MFLPH and made extensive funds available to it. In the normal course of events a lender in Perpetual’s position would approve a loan facility on which MFLPH could draw in respect of the individual mortgages. Whether or not this was the case here, it is inconceivable that Perpetual would have agreed to make extensive funds available to MFLPH without having any idea of the nature of their business … In any event, the very name of the company granting the mortgages, Money for Living Property Holdings Pty Ltd, would or should have alerted the mortgagee to the need to make enquiries. Furthermore, the fact that the mortgaged properties were residential premises occupied by an elderly person or an elderly couple should have alerted a potential purchaser or mortgagee of the need to make enquiries. The situation here is quite different from that pertaining in cases such as Caunce v Caunce [1969] 1 All ER 722; [1969] 1 WLR 286 (Caunce) and Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; [1980] 2 All ER 408 (Williams and Glyn’s Bank). In both these cases the prior unregistered interest in the matrimonial home being claimed was that of the wife whose husband had created the later interest. In Caunce it was held that the wife’s occupation was not notice of her unregistered interest (arising from her contributions to the purchase price) because it was consistent with the title offered to the bank by the husband. In Williams and Glyn’s Bank the issue was whether the wife was ‘in actual occupation’ of the matrimonial home within the meaning of s 70(1)(g) of the Land Registration Act 1925 (UK). The court rejected the view that the wife’s occupation should be regarded as a ‘shadow’ of her [page 567]

husband’s and held that because the wife was physically present on the land she should be regarded as being in actual occupation. Occupation by the retirees cannot be so explained in relation to title offered by a company such as MFLPH. It was not necessary for the retirees to caveat their interests in order to alert any future purchaser or mortgagee to their interest in the property. The fact of their occupation was constructive notice of their interest which would thus prevail even against a bona fide purchaser of the legal interest: Barnhart v Greenshields (1853) 9 Moo PCC 18; 14 ER 204; Hunt v Luck [1902] 1 Ch 428. Irrespective of whether Perpetual’s interest is regarded as legal or equitable the result is the same. In the absence of an obligation to caveat and in the light of their actual possession, there was no postponing conduct on the part of the retirees. As such the merits did not lie with Perpetual and therefore, in a competition between the two equitable interests the prior interest of the retirees would prevail: Rice v Rice (1853) 2 Drew 73; 61 ER 646; Lapin v Abigail (1930) 44 CLR 166 at 204; [1930] ALR 178 at 189 per Dixon J, quoted with approval by Barwick CJ in Just at 555. The protection afforded by s 42(2)(e) strips the registered mortgagee of the indefeasibility that would otherwise protect it. In the competition between Perpetual and the tenants in possession the interests of the tenants must take priority over those of Perpetual. …

It is not in contention that a vendor’s lien is an equitable interest. More to the point in the present circumstances, it is an unregistered interest. In this case the unregistered interests are competing with Perpetual’s registered mortgages. There is no suggestion that these mortgages were acquired and registered other than in good faith; there was no fraud. There is no suggestion that any other exception to indefeasibility applied. In the absence of any such exception (as for instance the exception that s 42(2)(e) provides in favour of a tenant in possession) the registered interest must prevail. Section 42(2)(e) does not apply to the vendors’ liens as it is independent of the retirees’ tenancies. As the primary judge observed: A vendor’s lien does not grow out of, and is severable from, the retiree’s right to continue in occupation as a tenant; it is not an interest to which the retiree’s occupation as a tenant is incident. In this regard the vendor’s lien may be contrasted with the claim for rectification considered in Downie v Lockwood [1965] VR 257. The plaintiff’s unregistered lease included rates and insurance premiums as outgoings to be paid by the tenant. The court accepted that, as against the lessor, the tenant was entitled to have the lease rectified by deleting the reference to rates and premiums. The issue was whether the tenant could exercise this remedy against a purchaser for value of the lessor’s reversionary interest. The court held that although the tenant’s equity of rectification did not touch and concern the land and thus under general law principles would not be enforceable against a purchaser of the legal estate for value and without notice, the interest fell within the exception in s 42(2)(e) of the TLA. It was an interest to which his occupation as a tenant in possession was incident … [Their Honours dismissed the appeal and cross-appeal.] Dowsett J (in dissent): … I have read the reasons prepared by Moore and Stone JJ. I gratefully adopt their Honours’ statement of the relevant facts. In so far as their reasons deal with the operation of s 42(2)(e) of the Transfer of Land Act 1958 (Vic) (the TFL Act) I am in general agreement with them. However there are a number of areas in which I have reservations which I should express. [page 568]

The operation of s 42 deprives the appellant (Perpetual) of the benefit of registration of its mortgages. As a result we must consider the respective priorities of each of the interests held by the relevant respondents (the retirees) as against the respective competing interests held by Perpetual pursuant to its notionally unregistered mortgages … … As I understand it, an enquiry as to the respective merits of competing equities arises only where the holder of the later equity took without notice of the former. If the later equity holder took with notice of the former equity, he or she would take subject to that equity, and no reference to the merits would generally be appropriate … … As I have said his Honour concluded that the effect of s 42(2)(e) was to give

absolute priority to the interests of a tenant in possession so that any consideration of conflicting equities was irrelevant. We have rejected that view … On the question of conflicting equities, Perpetual focusses primarily upon the failure to caveat. However that conduct must be seen in light of the fact that the various retirees supplied MFLPH with the indicia of title and memoranda of transfer necessary to put itself in the position of registered proprietor and to charge the land in favour of Perpetual. There can be little doubt that Perpetual made advances in the expectation that it would receive the benefit of those charges … In my view reliance on failure to caveat inevitably raises for consideration the retirees’ conduct in equipping MFLPH with their indicia of title and memoranda of transfer. The points are inextricably connected. Much depends upon whether Perpetual knew, or ought to have known that the respective retirees were to remain in possession of the premises after settlement (as opposed to their being in possession prior to settlement). The distinction between possession by an owner who has agreed to sell, and possession by a third party may also be important. While there is substantial authority for the proposition that knowledge that a tenant is in possession may fix a purchaser with knowledge of the terms of the tenancy, that proposition says nothing about the possession of a vendor under an uncompleted contract of sale. See Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 at 504–5; [1980] 2 All ER 408 at 412–13. The distinction reflects common sense. While occupation by somebody other than the owner may suggest a tenancy, presence of the owner suggests occupation pending completion of the contract of sale, which almost invariably provides for vacant possession on completion. I am unable to discern from the reasons for judgment the factual basis upon which it was asserted that Perpetual had any relevant knowledge as to occupation or the extent of that knowledge … … Had the retirees established that Perpetual took with notice, it would not have been necessary to consider the respective merits of the competing equities. However the case seems not to have been decided on the basis that Perpetual took with notice, but rather upon comparison of the merits. In my view the primary judge failed to address the true significance of the retirees’ failure to caveat. Given that if the equities are equal, the first in time will prevail, Perpetual bore the burden of establishing that its interests should have priority. However I am unable to determine from the facts, as they are presently before the court, how the question of priority should be resolved. It is difficult to identify the facts which were raised and relied upon by the parties as being relevant to its resolution. However my views concerning the learned primary judge’s conclusions lead me to conclude that he erred. The appeal should be allowed and the relevant orders set aside, the matter being remitted for further consideration, limited to the question of priority. However, as I am in dissent, the actual orders which I favour are of no importance. In all other respects I agree with the reasons of Moore and Stone JJ and with their conclusions.

[page 569]

5.195 Questions 1.

Do the judgments in this case support the view of Brooking JA or Ormiston JA in Moffett v Dillon as to the role of notice in determining the priority of unregistered interests?; 5.201C.

2.

Why was the mortgagee bound by the retirees’ leases, but not by their equitable liens for the balance of the purchase moneys, according to Moore and Stone JJ? Would Dowsett J have found that the mortgagee was affected by notice of the retirees’ leases if the retirees were not also vendors in possession?

3.

What are the implications of the decision for the protection of tenants under the short-term tenancies exception to indefeasibility in each jurisdiction? 5.127ff.

5.196

What priority rule applies as between the holder of a prior equity

and a subsequent equitable interest?155 Note that the principles discussed in these cases apply also to unregistered interests in land registered under the Torrens system. There is in fact a significant range of interests which could be classified as equities rather than equitable interests for purposes of resolving their priority in relation to a later-acquired interest. For example, consider the interest of a person claiming under a common intention constructive trust before the claimant has obtained the assistance of a court of equity.156

Statutory protection for the purchaser between

settlement and registration 5.197

Legislative measures have been introduced in some states to

improve the position of the purchaser in the ‘registration gap’ between settlement of the transaction and registration of the dealing. Part 7A of the Queensland Act provides for a system of settlement notices. The deposit of a settlement notice by a purchaser or mortgagee will prevent registration of an instrument affecting the relevant lot until the notice lapses, is withdrawn, cancelled or removed: Qld, ss 138, 141(1). The settlement notice does not prevent registration of an instrument that was lodged before the notice was deposited: s 141(2). An instrument which is lodged after the settlement notice and which is prevented from being registered by the settlement notice is deemed to be lodged after the instrument specified in the settlement notice: Qld, s 150. Since instruments are registered in the order in which they are lodged (Qld, s 177(1)), the effect is to ensure that the instrument specified in the settlement notice is the first to be registered. Tasmania provides for lodgment of a priority notice which preserves priority for a dealing specified in the notice: s 52. The priority notice expires after 60 days if no specified dealing is lodged: s 52(4), (5A). See also WA, ss 148–50, which provides for an administrative procedure under which a purchaser may obtain a ‘stay order’, staying registration of any instrument affecting the land for 48 hours. It has been suggested that provisions for settlement or priority

[page 570]

notices are cheaper and easier for purchasers to use than the caveat provisions, and should be more widely adopted.157 5.198

New South Wales has a unique provision which may affect priority

in the registration gap. Section 43A was introduced into the Real Property Act in 1930 and was designed to overcome, at least in part, the established interpretation of the notice section (NSW, s 43) whereby the purchaser is protected against unregistered interests only after registration of the dealing.158 The section states: 5.199E

Real Property Act 1900 (NSW)

43A Protection as to notice of person contracting or dealing in respect of land under this Act before registration (1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing be deemed to be a legal estate. (2) No person contracting or dealing in respect of an estate or interest in land under the provisions of this Act shall be affected by notice of any instrument, fact, or thing merely by omission to search in a register not kept under this Act. …

The section was the subject of divergent interpretations in the following case. 5.200C

IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; [1964] ALR 971 High Court of Australia

[Miss Austin (the vendor) contracted to sell the relevant land to the Courtenays (the purchasers), to be partly financed by a mortgage back to the vendor. In accordance with usual practice, the

Courtenays allowed the vendor’s solicitor to lodge the transfer and mortgage, and did not lodge a caveat to protect their interest. Since the sale involved only part of the land owned by Miss Austin, the duplicate certificate of title was retained by the Registrar-General so that a new duplicate certificate could be issued for the residue of the land. Upon settlement of the sale, the vendor’s solicitor lodged the transfer and mortgage for registration, but subsequently withdrew them before they were registered, without the Courtenays’ knowledge. On the following day, the vendor contracted to sell the land to Denton Subdivisions Pty Ltd. At settlement of the ‘sale’, Denton’s solicitor learned that a transfer from the vendor, Miss Austin, to the Courtenays, together with a mortgage back, had previously been lodged for registration but then withdrawn. However, he accepted the explanation of Miss Austin’s

[page 571]

solicitor that this was the means of settling the resale from the Courtenays to Miss Austin. To confirm this story (which was untrue) Miss Austin’s solicitor produced the contract of sale executed by the Courtenays. However, Denton’s solicitor did not ask whether the contract had been completed or the purchase money paid, but accepted that the Courtenays’ interest in the land had ceased. The ‘purchase’ by Denton was being financed by IAC (Finance) Pty Ltd. At settlement, IAC received the transfer from Miss Austin to Denton and the mortgage from Denton. The documents were duly lodged for registration and were awaiting registration when the plaintiffs, the Courtenays, commenced their action. The Courtenays claimed to be entitled to have their transfer from the vendor, Miss Austin, registered in preference to the transfer to Denton and the mortgage to IAC. The trial judge, Hardie J, upheld the claim and made the necessary orders to give effect to his determination. Denton and IAC appealed to the High Court, relying on three arguments: The transfer to the Courtenays having been withdrawn, the only candidate for registration was the transfer to Denton, as well as the mortgage to IAC. Further, under NSW, ss 43 and 43A they could gain registration of their instruments notwithstanding any notice that may have been received of the Courtenays’ unregistered interest. The Courtenays had resold the land to Miss Austin and they could not, therefore, have their transfer registered.

The Courtenays, by their conduct in leaving the transfer with the vendor’s solicitor and failing to lodge a caveat, had lost their priority to the subsequent equitable interests of Denton.] Taylor J: [After outlining these facts, his Honour proceeded:] … So far I have not attempted to traverse or to refer to the whole of the facts relevant to all of the contentions advanced by the appellants. But what has been said is sufficient to enable us to deal with two fundamental submissions which they made. The first of these was based upon s 43 of the Real Property Act and it is asserted that Denton’s dealings with Austin as the registered proprietor of the subject land had resulted in the acquisition by the former of an indefeasible title. In other words, it was contended that the protection given by that section to a person contracting or dealing with a registered proprietor does not await the registration of the appropriate instrument but is afforded from the time when the contract is made with the registered proprietor or, perhaps, from the time when a registrable instrument is obtained. The contention, however, is directly contrary to law which has been settled for a great many years … Alternatively, it was contended that the effect of s 43A was such to enable Denton to assert that its interest in the subject land should be held to prevail over that of Courtenays. [His Honour quoted the terms of s 43A and proceeded.] Clearly enough, the section was designed to deal with the position of the holder of a registrable instrument between the time of its receipt and the time of its registration. But its effect is by no means clear … It is, however, not unreasonable to assume that the section was intended to achieve some object. And that object, it seems, was to make some appropriate provision for ‘filling’ what has been called the ‘gap’ left in s 43 by the ‘settled law’ concerning that section. Does the section then go further than merely to avoid a so-called protection against notice and operate to give to the holder of a registrable memorandum of transfer priority over an earlier equitable interest where he has, without notice thereof, paid his purchase money and obtained his registrable instrument? The suggestion that it does is based upon the contention that the holder of a registrable instrument in such circumstances is enabled to assert, as against the prior equitable interest, that he has by virtue of the section a legal estate in the land acquired without notice of the earlier interest and that he is, therefore, entitled to perfect his title by registration. Such a [page 572]

construction, it is said, does some violence to the terms of the section but it is, it seems to me, the result, which notwithstanding its ‘ungainly approach’ to the subject, the section was intended to produce. A further suggestion is that the section was intended to advance in point of time the protection afforded by s 43 upon registration. That is to say, that the concluding words of the section — ‘legal estate’ — should be understood to mean ‘the estate of a registered proprietor’. But if it was intended so to advance the unqualified protection given by s 43 upon registration it would have been a simple matter to say so. To my mind the expression ‘a legal estate’ was used advisedly and with a view to affording, at the most, the same measure of protection as that given at common law to a person who has acquired a legal estate in land without notice of some prior equitable interest. Some light

is, I think, thrown on this particular problem by the provisions of s 42(d) of the Act, which, itself, was introduced into the Act at the same time as s 43A. That sub-section contains an exception from the conclusiveness of a registered proprietor’s title in respect of any tenancy ‘whereunder the tenant is in possession or entitled to immediate possession … of which … the registered proprietor before he became registered as proprietor had notice against which he was not protected’. The italicised expression, it seems to me, is intended as a reference to the measure of protection afforded by s 43A. So read, the provision acknowledges that the protection afforded by s 43A is not unqualified and provides some indication that the expression in sub-s (1) of the section — ‘legal estate’ — is not to be understood as synonymous with ‘the estate of a registered proprietor’. Further, if the other view as the meaning of the expression ‘legal estate’ were to be entertained, it would have been unnecessary for the purposes of the section to make the specific provisions contained in sub-s (2) and (3). Under the stated hypothesis notice either before or after the acquisition of a registrable instrument would be quite irrelevant. Once the contention that the expression ‘legal estate’ in s 43A(1) is synonymous with ‘the estate of a registered proprietor’ be rejected — as I think it must — it is unnecessary for us to express any positive view as to the meaning of the sub-section. I say this because it is clear upon the facts that Denton had express notice of Courtenay’s interest before the contract of sale between Austin and Denton was carried to completion. This will appear from the facts to which I shall presently refer. In the circumstances of the case, therefore, the rights of the parties must, subject to one matter, be determined according to the ordinary principles upon which a court of equity would proceed … [In relation to the appellant’s third argument, his Honour concluded that there was no neglect on the part of the Courtenays and no grounds to postpone the Courtenays’ interest to that of Denton, which had taken with express notice of their interest. IAC was not protected by s 43A which speaks of ‘the estate or interest in land under the provisions of this Act, taken by a person under an instrument registrable … under this Act’. IAC’s mortgage would become registrable only once Denton became registered proprietor. Kitto and Dixon JJ agreed that the appeals should be dismissed. Kitto J offered a different interpretation of s 43A(1), concluding that it conferred on the purchaser at settlement the same protection against notice that he or she would have on registration, namely, that they would receive s 43 protection against notice of any outstanding unregistered interests at that time. It followed that s 43A(a) afforded Denton protection against the interest of Courtenay of which they had notice at settlement. However, Kitto J went on to hold that because Courtenay’s transfer had been wrongfully withdrawn, it remained on foot, and was entitled to registration.] Appeals dismissed with costs.

[page 573]

5.201 Questions 1.

Why was the equitable interest of the Courtenays not postponed to that of Denton in this case? Apart from any question raised by s 43A, what is the distinction between IAC v Courtenay, Butler v Fairclough (5.200C) and Abigail v Lapin (5.180C)? Do any of the judgments in IAC v Courtenay imply a retreat from the principles enunciated in Abigail v Lapin?

2.

Independently of s 43A, why was it significant that Denton had notice of the interest of the Courtenays at or before settlement of the sale from Miss Austin to Denton? Compare Lynch v O’Keefe [1930] St R Qd 74; Taddeo v Catalano (1975) 11 SASR 492; Moffett v Dillon; 5.192C. What should Denton’s solicitor have done before proceeding with settlement of the transaction?

3.

The Real Property Act 1900 (NSW) now makes specific provision for the redelivery of instruments by the Registrar-General to persons who lodge them. The Act provides that the RegistrarGeneral may assume that the person lodging the dealing has authority to withdraw it and that an uplifted dealing shall be deemed not to be in registrable form until relodged in registrable form: NSW, ss 33A(5)(b), 36(6)(a). Would IAC v Courtenay be decided in the same way after these amendments? What role did NSW, s 36 (as it then was) play in the decision in IAC v

Courtenay? In the face of such a statutory direction is there any room for the operation of the judicial doctrines concerning competition between equitable interests where an instrument has been lodged for registration? 4.

The protection afforded by s 43A is to ‘a dealing registrable’. However, the only definition in the Act is restrictive in that s 36(6) (b) refers to when a dealing is not in registrable form and does not state the positive. Consideration of cases such as IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550; [1964] ALR 971 (5.200C), Just’s case (1971) 125 CLR 546 (5.175C) and Finlay v R & I Bank of Western Australia (1993) 6 BPR 13,232 indicate that a dealing is in registrable form when it is formally in order, executed by and received from the registered proprietor and accompanied by the certificate of title or appropriate authorisation to obtain the certificate of title. However, where this is not the case, whether the dealing is registrable may depend on the practice of the Land Titles Office and, in particular, on the practice concerning the use of the Registrar-General’s power under s 39(2) and (3) to correct patent errors and omissions. In Taleb v National Australia Bank Ltd [2011] NSWSC 1562, it was held that an instrument of mortgage was not a registrable dealing until it had been duly stamped. In IAC v Courtenay, Kitto and Taylor JJ put forward different interpretations of s 43A. What is the significance of the difference between the competing interpretations? What does the discussion of the meaning of s 43A demonstrate about the position of a

purchaser of Torrens system land after settlement and before registration independently of such a section? What should be done to improve the position of the purchaser during that interval? Which of the competing

[page 574]

interpretations of s 43A does more to advance the goals of the Torrens system? The interpretation of Taylor J has been adopted in preference to that of Kitto J.159 5.

Refer to the facts in Heid v Reliance Finance Corp Pty Ltd (1983) 154 CLR 326; 5.174. That case came on appeal to the High Court from the Supreme Court of New South Wales. Consider whether the respondent could have pleaded the benefit of NSW, s 43A. The respondent’s mortgage came under requisition from the Registrar-General after lodgment. It will be recalled that the respondent had no notice of Heid’s interest at settlement although, at the time of settlement, the transfer to Connell had not been registered. Why was s 43A of no avail to the respondent at the time of settlement? Before the respondent became aware of Heid’s interest, the transfer to Connell was registered. Could the respondent have pleaded the benefit of s 43A at that time? See Rossiter, (1983) 57 ALJ 360.

6.

A, the registered proprietor of an estate in fee simple in Blackacre

(vacant land), sells to B. The purchase price of $500,000 is to be satisfied by payment of $50,000, the balance to be secured by a mortgage back to the vendor, A. On settlement A’s solicitor retains the duplicate certificate of title, the transfer and the mortgage all of which he is to lodge at the Titles Office. In fact, the documents are never lodged, as A and his solicitor fraudulently plan to resell the land. Accordingly, A contracts to sell the land to C for $600,000. C searches the register and finds that A is the registered proprietor. On settlement he pays the purchase price in return for a transfer from A. What is the position in the following circumstances? a.

C lodges the transfer and becomes registered. Does it matter if, prior to receiving the transfer, he hears in casual conversation with B that B has previously purchased the land?

b.

Before C can lodge his transfer B, realising his transfer has not been lodged for registration, lodges a caveat which prevents C obtaining registration. Again, does it matter if C, before settlement, learns of B’s prior purchase of the land but deliberately makes no further inquiries? In either case does s 43A of the New South Wales Act affect the issue?

5.202

The two major questions underlying s 43A, namely 1) what is a

‘dealing registrable’, and 2) who can get the protection of it, were raised in Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (NSW) (Pt 1) 568; [1969] 1 NSWR 621. In that case M contracted to sell land to J. At the date of the contract M was not the registered proprietor, but was the purchaser under a contract of sale from A, the land being subject to a mortgage in favour of B. To settle the sale to J, M proposed to hand over a transfer of the land to J, executed by A at the direction of M, together with a discharge of mortgage executed by the mortgagee, B. The proposal was in accordance with common conveyancing practice, transfers by direction often being used where the vendor sells land before becoming the registered proprietor. J refused

[page 575]

to accept M’s proposal, insisting that it was entitled to receive a transfer directly from the registered proprietor and that therefore M should, at the date of settlement, be registered as proprietor free from encumbrances. It followed on J’s argument that the discharge of mortgage should be registered before settlement. The case therefore raised two questions central to the operation of s 43A: first, what is a ‘dealing registrable’, and in this context, whether a transfer by direction is one, so that a purchaser of Torrens system land can be compelled to accept it; second, whether a person with whom the purchaser deals is covered by it; in other words, is the purchaser bound to accept on settlement a discharge of mortgage or whether the purchaser can insist on the discharge being registered before settlement.

5.203

Registrable dealing As to the first question, the Court of Appeal held

that, while the Act did not specifically refer to transfers by direction, the mere presence in a transfer of a directing party did not affect the operation of the instrument as a registrable dealing and the Registrar could accept it as such. There was no significant disadvantage to the purchaser in receiving such a transfer and thus J’s objection to the form of the transfer could not be sustained. A purchaser taking a transfer from the registered proprietor at the direction of the vendor was entitled to the benefits of ss 42 and 43 on registration and would receive the benefits of s 43A, to the extent that it was applicable, before settlement. In other words, the purchaser would not lose the benefit of any protection afforded by the Act by accepting a transfer by direction. The court indicated its preference for the view of Taylor J in IAC v Courtenay (1963) 110 CLR 550; [1964] ALR 971, so that s 43A would protect a purchaser taking a transfer by direction from unregistered interests provided he or she had no notice of them before settlement. The views of the Court of Appeal on these matters were followed by the High Court in Meriton Apartments Pty Ltd v McLaurin & Tait Developments Pty Ltd (1976) 133 CLR 671. The purchaser in that case argued that the vendor could not impose the burden of verifying the signature of a person who was not a party to the contract, pointing out that this would be required in the case of a transfer by direction — that is, the purchaser would be exposed to the risk of the transfer being a forgery. However, the High Court did not consider this to be a sustainable objection, observing that the appropriate conveyancing procedures had to be decided in the light of ‘practical considerations’. The court also specifically approved Taylor J’s interpretation of s 43A.

5.204

Who gets the s 43A benefit? The second issue in Jonray’s case posed

difficult questions because of the risk to which the purchaser would be exposed between settlement, when the discharge of mortgage would be accepted, and registration of the discharge. On registration there would be no difficulty, since the purchaser would gain the protection of s 42 in relation to prior interests and would be protected against any defect in the discharge itself. It was argued, however, that because the purchaser did not deal directly with the mortgagee executing the discharge (that is, the registered proprietor of the mortgage), the purchaser was denied the benefit of s 43A. The court held that, on Taylor J’s interpretation of s 43A, the purchaser could claim the protection of the section by relying on its ‘successive effect’. This effect followed from the application to the section of the general law principle that a successor in title to a bona fide purchaser for value without notice takes free of outstanding equities even though that successor has notice of the equities: Wilkes v Spooner [1911] 2 KB 473; 4.185. Thus, while the purchaser could not claim the benefit of s 43A directly, he could rely on the immunity enjoyed by the vendor/mortgagor under the section. If the vendor/mortgagor had no notice of outstanding equities at the time he received the registrable discharge he would be protected against them

[page 576]

by s 43A, and the purchaser would be entitled to the same protection. The court concluded that the purchaser was therefore obliged to accept a registrable discharge of mortgage.160

5.205

A recent example of the operation of the successive effect is Barlin

Investments Pty Ltd v Westpac Banking Corporation (2012) 16 BPR 30,671. The purchasers from the vendor who was not yet registered due to a prior mortgagee’s caveat had notice of that earlier interest. However, their vendor did not have notice of that interest at time of his purchase; held, vendor had s 43A protection, and so too did purchasers: at [40]–[41]. In Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489, a first chargee lodged a caveat after settlement of later mortgage, but before presentation of documents for registration. The court held that there could be no s 43A protection for the second mortgage because of the caveat, which rendered the documents unregistrable: at [49]. But the first chargee was postponed nonetheless because the caveat was not lodged prior to settlement, misleading the later mortgagee as to its existence: at [38]. Other cases have assumed that such a caveat would not prevent the dealing being registrable, eg Barlin Investments Pty Ltd v Westpac Banking Corporation (2012) 16 BPR 30,671, which seems the better view as the purpose of s 43A is to allow registration once the transfer received from the registered proprietor is complete. Actions by a third party, such as a caveator, should have no bearing on this question. 5.206

The approach of the Court of Appeal on the second issue in Jonray’s

case has not been accepted without qualification. In Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, the High Court held that a purchaser was justified in rejecting a proffered surrender of a lease apparently executed by a lessee who was still in possession of the land. The purchaser was entitled to require the vendor to register the surrender of lease before proceeding to

completion of the transaction. In their joint judgment Barwick CJ and Jacobs J (at 304) emphasised that the position differed from Jonray’s case in that: … The execution of the surrender had clearly been an execution conditional upon receipt of the consideration and if that consideration were not paid either before or at the time of settlement the surrender would not be effective on settlement even though it might be made so by lodgment and registration. On all these matters the purchaser was in the dark, and in these circumstances it was entitled to claim that the certificate of title be clear … But certainly the mere offer from the possession of the vendor of a form of surrender of lease purporting to be signed by the lessee, when it was known that the lessee was still in possession of the land, was not a sufficient protection to the purchaser.

5.207

Refer to Diemasters Pty Ltd v Meadowcorp Pty Ltd; 5.211C. It will

be recalled that the discharge of mortgage had been procured by the mortgagor through fraud. The innocent purchaser receiving the signed discharge of mortgage upon settlement of the contract did not get the benefit of the ‘successive’ operation of s 43A. This was for the reason that the transferee — the mortgagor — was not bona fide for value without notice of the rights of the mortgagee. The mortgagor did not have the benefit of s 43A to pass on to the purchaser.

[page 577]

COMPENSATION FOR LOSS 5.208

At the time Torrens title was introduced, it was generally accepted

that if the goals of the system were to be attained, the state should compensate all persons who sustained a loss by relying on the register where

it proved to be inaccurate, and should also compensate those who were wrongfully deprived of a registered interest: see generally Sim, ‘The Compensation Provisions of the [Land Transfer] Act’ in Centennial Essays, 138. Ruoff identified ‘the insurance principle’ as one of the three key principles of the Torrens system (Ruoff, An Englishman Looks at the Torrens System, Sydney, 1957), although not all title registration systems on the Torrens model have provision for statutory compensation (for example, Malaysia and Fiji do not).161 In a joint discussion paper, the Law Reform Commission of Victoria and the New South Wales Law Reform Commission questioned the purpose of the compensation provisions: NSWLRC, DP 19 and LRCV, DP 16, 1989, paras 36–40; NSWLRC and LRCV, Torrens Title: Compensation for Loss Issues Paper, December 1989. The issues paper prompted debate on the benefits that a compensation scheme provides. See, for example Cooper, ‘The Versatility of State Indemnity Provisions’ in M Dixon (ed), Modern Studies in Property Law Vol 5, Hart, 2009, 35. In its final report, the New South Wales Law Reform Commission recommended retention of the state guarantee of title, but without offering any clear conclusion on the purpose of the compensation provisions: NSWLRC, Report 76, Torrens Title: Compensation for Loss, 1996, paras 4.2– 4.10. The state guarantee means that ‘a man is to have either his interest in the land or adequate monetary compensation therefor’: Whalan, 346. A key feature of the Torrens system is that the vesting and divesting of title is no longer effected by the parties, but by an entry on the register made by the Registrar. A person may suffer losses through an error or omission of the

Registrar, for example, failure to register a lodged instrument. A person may also suffer loss through the operation of a rule of the Torrens system. For example, if a forged transfer to an innocent purchaser is registered, the purchaser gains an indefeasible title, and the former registered owner is deprived of an interest in land. The latter’s loss would not have occurred but for the Torrens rule that registration of a forged instrument by a transferee acting without fraud gives an indefeasible title. If the Torrens system is not to operate in a confiscatory fashion, there must be provision to compensate a person who suffers a loss due to a Registrar’s error or through the operation of the rules of the system. All Australian jurisdictions provide for compensation to be paid on an indemnity basis: that is, to compensate the claimant for losses suffered. Compensation was originally paid from an assurance fund which was intended to be accumulated from contributions levied on applicants seeking to bring old system land under the Torrens system. Partly because of the size of the funds’ accumulated reserves, they have not always been preserved as separate entities and in some states contributions to the fund have been abolished. The statutes generally provide that if the balance in the assurance fund is inadequate to meet a claim, it is to be paid from Consolidated Revenue, the Consolidated Fund or the Consolidated Account.162 The Australian Capital Territory legislation does not

[page 578]

provide for an assurance fund, the Commonwealth being liable to pay

compensation in defined circumstances.163 Similarly, in Queensland the compensation provision takes the form of an entitlement to be indemnified by the state: ss 188–190. The term ‘Assurance Fund’ is still used to refer to these schemes.

Last resort or first resort 5.209

In South Australia, Western Australia, Tasmania and the Australian

Capital Territory, compensation from the assurance fund is a remedy of last resort. In most cases, a claimant who has been deprived of an interest in land must first exhaust his or her remedies against the ‘person liable’ for the loss.164 If action against the person liable would be futile or impossible for reasons such as the death or bankruptcy of the defendant, the claimant may bring an action against the Registrar as nominal defendant.165 Victoria, Queensland, New South Wales and the Northern Territory use a ‘first resort’ model. In these states, action may be taken directly against the Registrar as nominal defendant.166 In all jurisdictions, the Registrar may recover any amount paid out of the assurance fund from the person liable for the loss.167 5.210

The requirement in the ‘last resort’ jurisdictions to sue the Registrar

in order to make a claim for compensation adds to costs and creates an adversarial relationship between the claimant and the Registrar. Accordingly, all states (but not the territories) now allow claims to be settled administratively without the need for court proceedings.168 In New South Wales, the Registrar-General’s power to settle claims administratively is limited as to the amount of compensation that he or she may award: NSW, s

135(3). Court action will still be necessary if the Registrar does not settle the claim. New South Wales abandoned the ‘last resort’ model in 2000, following recommendations from the New South Wales Law Reform Commission in its Report 76 (1996).169

Circumstances giving rise to claim 5.211

The loss for which compensation is claimed must have occurred in

one of the limited circumstances specified in the legislation. The list of specified circumstances differs in each jurisdiction. Apart from losses incurred in bringing land under the Act, the most important grounds are those relating to fraud and error or misdescription in the register. As a result of

[page 579]

amendments introduced in 2000, s 129(1) of the New South Wales Act adds the requirement that the loss or damage must have been ‘a result of the operation of this Act’.170

Loss resulting from error or omission 5.212

Recent authorities have recognised that the Torrens compensation

provisions are remedial legislation that should be interpreted and administered in a beneficial manner: Registrar-General v Harris (1998) 45 NSWLR 404; Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572; Solak v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279 at [88].

The judicial interpretation of the compensation provisions has tended to be restrictive. An example of what might be regarded as an unduly restrictive approach is Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98. In that case, a portion of the land comprised in the plaintiff’s certificate of title was subject to an unregistered resumption order. The plaintiff’s title to this portion of the land was not indefeasible because of the overriding effect of the statute pursuant to which the land was resumed. The plaintiff claimed damages from the Registrar-General on the ground that his certificate of title contained an error, omission or misdescription. Herron CJ and Nagle J held that, as there was no duty on the Registrar-General to note the resumption order on the certificate of title, it could not be said that the title contained an ‘error or omission’. Ferguson J, who dissented, adopted the straightforward view that liability to pay compensation was not dependent on a breach of duty by the Registrar-General. The fact that the certificate of title misdescribed the true situation, in his opinion, gave rise to the claim in the person sustaining loss by reliance on the register. Subsequent authorities have preferred the broader view of Feguson J. In Voudouris v Registrar General (1993) NSWLR 195, it was held that even though the Registrar-General was not responsible for the incorrect information on the certificate of title, it did not prevent it from amounting to an ‘error … or misdescription in the Register’ within the meaning of s 127.171

Loss resulting from fraud 5.213

A more liberal approach has been taken to the scope of

compensation for fraud. In Parker v Registrar-General [1977] 1 NSWLR 22,

the New South Wales Court of Appeal held that ‘fraud’ in the (since repealed) NSW s 126(1)(a) was not limited to fraud practised on the registration system, such as the forgery of a registrable transfer. The court held that a person could be deprived of land in consequence of ‘fraud’ where he or she was induced by fraud to execute a valid, albeit voidable, transfer in favour of the fraudulent party. Mahoney JA made the following comment (at 30): It is submitted that s 126(1)(a) should only apply to those consequences of fraud which have resulted from the operation of the system of title registration … I do not think that the context of the paragraph requires that the phrase be so limited. As I have said, the section provides a remedy primarily against the person who acquired title to the land through the fraud: s 126(2)(c). There is, in my opinion, no reason either in the terms or purpose of the section which would require that right of recovery against such a person should be so limited. The categories of fraud are not closed; frauds may take on many different forms. There is

[page 580]

no reason why a right of recovery should be limited as against the person responsible for the fraudulent deprivation of land according to whether; eg the fraud involves the voluntary signing of a transfer induced by fraud, the signing of it by mistake, or the forgery of a document.

5.214

The fraud that causes the loss must be one for which the person

who became registered thereby is responsible. In Registrar of Titles (WA) v Franzon (1975) 132 CLR 611, a solicitor forged the Franzons’ signatures to a mortgage of their land in favour of a finance company and misappropriated the proceeds of the mortgage. Having discovered the fraud and paid out the mortgage, the Franzons claimed damages against the Registrar of Titles or, in

the alternative, the finance company. The High Court held that the Franzons had been deprived of an estate by reason of registration of the mortgage, but that they had not been deprived ‘in consequence of fraud’ since the term ‘fraud’ referred to conduct for which the person being registered is responsible. Section 201 was complementary to the indefeasibility provisions and had to be read consistently with the interpretation of them in Frazer v Walker [1967] 1 AC 569; [1967] 1 All ER 649. The approach in Registrar of Titles (WA) v Franzon is consistent with that taken earlier in New South Wales.172

Loss resulting from registration of another person 5.215

In all jurisdictions, a claim of compensation may be made for losses

sustained by the registration of another person as proprietor: NSW, s 129(1) (b); WA, s 205; SA, s 208; Qld, s 188(1)(b); ACT, s 155; Tas, s 153(1)(b); NT, s 192(1)(b); Vic, s 110(1)(c). This category often overlaps other grounds such as fraud and erroneous registration, but does have its own sphere of operation. In Registrar of Titles (WA) v Franzon, the Franzons failed to show that their loss occurred through fraud or an erroneous registration within WA, s 201, but were held entitled to compensation from the Registrar under WA, s 205 because they had sustained loss by ‘the registration of any other person as proprietor’. 5.216

The Victorian section (s 110) takes a different form from the

compensation provisions of the other states. The claimant does not have to establish deprivation of an estate or interest in land. Victoria has no

equivalent to Qld, s 188(1)(a) which provides a statutory compensation remedy where the claimant has been deprived of land or an interest in land because of the fraud of another person. While fraud is not specifically mentioned, the loss of an interest through fraud may fall within other paragraphs of s 110(1), notably (b) ‘an amendment of the Register Book’, or (c) ‘any error, omission or misdescription in the Register Book or the registration of any other person as proprietor’: Vassos v State Bank of South Australia [1993] 2 VR 316 at 333–6. In Fairless v Registrar of Title [1997] 1 VR 404, damages were payable by the Registrar where a registered owner was induced by fraud to execute a valid, albeit voidable, transfer in favour of the fraudulent party. Cf the broad interpretation of the previous New South Wales provision (s 126) in Parker v Registrar-General [1977] 1 NSWLR 22.

[page 581]

Restrictions on claims 5.217

The legislation in all jurisdictions imposes restrictions and

exclusions on claims for compensation from the fund. For example, Vic, s 109(2) provides that the Consolidated Fund shall not be liable for losses occasioned by a breach of trust, for a case in which the same land has been included in two or more Crown Grants, or for a case in which loss has been occasioned by misdescription of parcels or boundaries unless it is proved that the person liable is dead or bankrupt or has absconded or is certified by the Sheriff as unable to pay the full amount. See also ACT, s 147; NT, s 195;

SA, ss 211, 212 (no exemption for liability where the same land has been included in two or more grants.173 There are other exclusions on claims that apply in certain jurisdictions, particularly in Queensland and New South Wales. For example, NSW, s 129(2)(l) excludes claims for loss or damage arising from the execution of an instrument by an attorney acting outside the authority conferred by a power of attorney. Queensland excludes claims for losses arising from the omission or misdescription of an easement in the register: s 189(1)(j), (k). 5.218

Recent amendments have narrowed the scope of the Torrens

indemnity through fault-based exclusions or reduction of payments. Queensland excludes indemnity if the claimant, a person acting as agent for the claimant, or a solicitor covered by indemnity caused or substantially contributed to the loss by fraud, neglect or wilful default: Qld, s 189(1)(b) and (2); see also NT, s 136.174 In 1983, South Australia introduced an amendment providing for adjustment of compensation in case of contributory negligence on the part of the claimant or a person through whom he or she claims: SA, s 216.

5.219

Under amendments made in 2000, compensation is not payable in

New South Wales to the extent of loss or damage caused by the claimant’s own acts or omissions: NSW, s 129(2)(a). Compensation is also excluded to the extent that the loss is a consequence of any fraudulent, wilful or negligent act or omission by any solicitor, licensed conveyancer or real estate agent and is compensable under an indemnity given by a professional indemnity insurer: s 129(2)(b). The fund is not liable where loss is sustained as a consequence of the failure of the claimant to mitigate loss: s 129(2)(c). The New South Wales provisions were considered in Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675; [2007] NSWSC 694. Bryson AJ said that s 129(2)(a) operates only where the act or omission requires fault. The relevant act or omission must be that of the claimant personally or possibly that of the claimant’s servant or agent acting within authority. Moreover, there was no indication that the legislation intended an apportionment regime. Therefore, the claimant’s loss or damage was to be deemed to be, or not to be, wholly due to the act or omission of the claimant or agent, whether or not there were other causes operating (at [52]–[60]).175 5.220

In Victoria, no indemnity is payable if the claimant or the claimant’s

solicitor or agent caused or substantially contributed to the loss by fraud, neglect or wilful default: s 110(3). The Victorian provision expressly places on the claimant the onus of negativing such

[page 582]

fraud, neglect or wilful default. The potentially draconian limitation has been significantly cut down by the Victorian Supreme Court, Court of Appeal in Fairless v Registrar of Title [1997] 1 VR 404. Fairless, an elderly man, was duped by a trusted neighbour, Doran, into signing a transfer to Doran and Doran’s wife. The transfer was registered, and the Dorans promptly mortgaged the land. The registered mortgagee, who was innocent of fraud, sold the land after the Dorans defaulted. When Fairless sought to be indemnified for his loss, the Registrar argued that no indemnity was payable under s 110(3). The Registrar contended that Fairless had himself been guilty of relevant ‘neglect’ in signing the transfer to the Dorans, and alternatively, that Fairless’ claim was precluded by the fraud of Doran, who acted as his agent in the transaction. Phillips JA (with whom Tadgell and Callaway JJA agreed) said that where the neglect or default on the part of the claimant, his solicitor or agent was a contributing rather than a sole cause of the loss, its contribution to the loss must be ‘considerable, large or big’. What ‘caused or substantially contributed to’ Fairless’ loss was not his neglect but Doran’s deliberate deception. The Registrar’s argument based on fraud by Fairless’ agent also failed, the court holding that Doran’s actions were unauthorised and quite beyond any agency relationship. 5.221

Since 2006, Queensland denies indemnity to a mortgagee (or any

transferee of a mortgage) whose loss can fairly be attributable to the mortgagee’s failure to take reasonable steps to confirm the identity of the person who purported to execute the mortgage as mortgagor: s 189(1)(ab). New South Wales legislated in 2009 to deny compensation for losses arising from the claimant’s failure as mortgagee or transferee of a mortgage to

comply with the provisions in s 56C (which requires steps to verify the identity of the person signing as mortgagee) or from the cancellation of the recording of the mortgage in the register: NSW, s 129(2)(j).176

Limitation period 5.222

All states, except Queensland and South Australia, require a claim

against the assurance fund to be brought within six years of the date the cause of action accrues, regardless of when the claimant becomes aware that he or she has a claim: Tas, s 158(1); WA, s 211; Limitation of Actions Act 1958 (Vic) s 5(1)(d). The limitation period in South Australia is 20 years: SA, s 215. Since 2000, New South Wales imposes a six-year time limit to make a claim for compensation with the Registrar-General: s 131(2). The limitation period is either six years after the act or omission causing the loss occurred or six years after the date on which the compensable loss arose: NSW, s 131(2). Court proceedings for the recovery of compensation from the fund are to be commenced against the Registrar-General as nominal defendant (s 132(1)) but only if administrative proceedings have been commenced and determined and it is not more than 12 months after such a determination: s 132(2)(a), (b). The limitation section in the usual form may produce extreme hardship, since it is quite possible for a person to be unaware for a considerable period that he or she has been deprived of an estate in land. Queensland now allows 12 years after the person became aware, or ought reasonably to have become

aware, of the circumstances giving rise to the cause of action, although the court has a discretion to grant a longer period if it thinks just: Qld, s 188C. If

[page 583]

the limitation provisions are to be retained, the limitation period should commence only when the claimant becomes (or should become) aware of the loss of his or her interest or when the claimant becomes entitled to proceed directly against the assurance fund: see Beardsley v Registrar of Titles [1993] 2 Qd R 117.

Measure of damages 5.223

If the registered proprietor is deprived of his or her estate, for

example, by the registration of a forged transfer to a bona fide purchaser, damages should place the claimant in the same position as if the wrongful act had not occurred: Registrar of Titles v Spencer (1909) 9 CLR 641; RegistrarGeneral v Behn [1980] 1 NSWLR 589. Where the deprivation consists of the registration of a mortgage, prima facie, the damages are equivalent to the amount required to discharge the mortgage: see Registrar of Titles (Q) v Crowle (1947) 75 CLR 191. In Registrar-General v Behn [1980] 1 NSWLR 589 at 596, Holland J said that where the land had special value to the owner, the measure of damages may be the sum that was required to place him or her in the same position as if the fraud had not occurred (reversed without comment on this point). In Keddell v Regarose Pty Ltd [1995] 1 Qd R 172,

the amount secured by the mortgage was approximately double the market value of the land. The Queensland Court of Appeal held that it was proper to award damages in an amount that might be required to purchase the land from the mortgagee and to cover the costs of the purchase. The court assumed that a prudent mortgagee would be willing to sell the land for its market value. All states now specifically limit the amount of damages recoverable: see, for example, SA, s 209; Tas, s 153(2); Vic, s 110(4); WA, s 201; NSW, s 129A. New South Wales and Queensland have also amended their legislation to limit excessive claims against the fund for losses resulting from the registration of mortgages obtained by fraud: Qld, s 189A; NSW, 129B.177 5.224

The Victorian legislation contains restrictions, not found elsewhere,

that are difficult to justify. The legislation (Vic, s 110(4)) stipulates that any indemnity paid in respect of the loss of an estate or interest shall not exceed: a)

where the Register Book is not amended, the value of the estate or interest at the time when the error … which caused the loss was made;

b)

where the Register Book is amended, the value of the estate or interest immediately before the time of amendment.

These stipulations could cause hardship where the value of an estate in land increases significantly after the error is made but before it is discovered and action brought. The joint discussion paper of the Victorian and New South Wales Law Reform Commissions, June 1989, recommended that compensation be an amount equal to the value of the land at the date of the loss or at the date of the claim, whichever is the greater: 17. New South Wales limits recovery to the market value of the land at the date the

compensation is awarded, plus the claimant’s reasonable costs of claim: NSW, s 129A.

[page 584]

5.225C

Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572; 10 BPR 18,769 Supreme Court of New South Wales

[The plaintiff mortgagee had a registered security over land of the defendant. The defendant was controlled by Tooth, a convicted fraudster, who was the sole director. Tooth procured a discharge of the mortgage using stolen and forged bank cheques. Before the discharge could be registered, the fraud was discovered and the plaintiff lodged caveats. The defendant had entered into a contract to sell the land to Chelliah and Jain as joint tenants. The contract could not be completed due to the plaintiff’s caveats and undischarged mortgage. Chelliah was aware of Tooth’s fraud but Windeyer J refused to draw an inference of fraud against Jain personally. Jain claimed compensation from the assurance fund. Windeyer J was of the view that the fraud of one joint tenant infected the other but ruled on the assurance fund claim on the assumption that Jain was innocent of fraud.] Windeyer J: The claim of Jain is made under s 129(1) of the Act which is as follows: 129 Circumstances in which compensation payable (1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from: (a) any act or omission of the Registrar-General in the execution or performance of his or her functions or duties under this Act in relation to the land, or (b) the registration (otherwise than under section 45E) of some other person as proprietor of the land, or of any estate or interest in the land, or (c) any error, misdescription or omission in the Register in relation to the land, or (d) the land having been brought under the provisions of this Act, or (e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud, or

(f)

an error or omission in an official search in relation to the land,

is entitled to payment of compensation from the Torrens Assurance Fund. Jain had earlier obtained leave under s 132(2) of the Act to bring the claim for compensation. The claim is under s 129(1)(e) … The compensation provisions in the Torrens legislation caused difficulties for many years and the new provisions incorporated in Pt 14 by the Real Property Amendment (Compensation) Act 2000 are in some respects an attempt to overcome those difficulties, although it is not certain they do so. I approach this part of the judgment on the assumption that one joint tenant is not bound by or affected by the fraud of the other of which the first is unaware. As I have explained I do not consider that to be the correct position and I consider the claim against the fund fails. Nevertheless I should consider the matter on the basis Jain is not affected by his co-owner’s fraud. Counsel for Jain based his claim to entitlement through reasoning that the discharge was obtained by fraud of the mortgagor/vendor; that the handing over of the discharge of mortgage on settlement was fraudulent and that settlement would not have proceeded without such discharge; and that as a result of this Jain has suffered damage through being deprived of an interest in land, although Counsel did not put it this way because he argued Chelliah was innocent and seemed to accept Jain could not recover if Chelliah was party to the fraud. [page 585]

The interest of which he was deprived was an unencumbered estate in fee simple as joint tenant with Chelliah whose interest was encumbered, as opposed to an estate in fee simple subject to the registered mortgage to the plaintiff. This would or could follow from Myers v Smith (1992) 5 BPR 11,494. The pleaded defence of the Registrar-General and the argument of counsel for the Registrar-General was: (a) Jain has not suffered any loss or damage ‘as a result of operation of the Act’; and (b) Jain has not been deprived of the land or any estate or interest in it as a consequence of fraud. The words ‘as a result of the operation of the Act’ which appear in s 129 did not appear in the earlier s 126 which was its predecessor. That section provided as follows: 126 Compensation for party deprived of land (1) Any (a) (b) (c)

person deprived of land or of any estate, or interest in land; in consequence of fraud, or through the bringing of such land under the provisions of this Act, or by the registration of any other person as proprietor of such land, estate, or interest, or (d) in consequence of any error, omission, or misdescription of the Register,

may bring and prosecute in any Court of competent jurisdiction an action for the

recovery of damages. It is, I think, clearly established that an interest in land referred to in the prior s 126 included an unregistered interest and it would do so under s 129: see Robinson v The Registrar-General [1983] NSW ConvR ¶55-128. It is also established that deprivation can extend, in the words of Professor Butt: to ‘being outranked in priority by other interests’: Land Law 3rd ed. paragraph 2085. Heid v Connell Investments Pty Limited (1987) 9 NSWLR 628 at 637; and Robinson. This is a difficult matter. In general the compensation provisions of the Act were introduced because, in the absence of fraud on the part of a person obtaining title by registration, the act of registration conferred an indefeasible title on the transferee. This left the person subject to the fraud with only a claim for compensation or damages from the Fund or, under the old s 126, from the fraudster. It follows that in the ordinary case deprivation is the result of some interest lost as a result of the doctrine of indefeasibility, through registration of a subsequent dealing obtained by reason of fraud of a party or of mistake on the part of the Registrar-General, although such lost interest can be an unregistered prior interest such as an unregistered mortgage or a mortgage by deposit of title deeds, defeated by fraudulent application for a new certificate of title and subsequent registered mortgage. In the instant case, however, the interest of the mortgagees, which prevents Jain from obtaining an unencumbered title, is not a subsequently acquired registered interest. It is a right or an interest to retain priority as registered mortgagee by having the discharge delivered up for cancellation. The interest of Jain on the other hand arises under contract to purchase an estate in fee simple free from encumbrance and transfer pursuant thereto it being the obligation of Meadowcorp to deliver a clear title. Had the land been under Old System title Jain, as bona fide purchaser for value without notice, would have taken a clear title had he received a re-conveyance from the mortgagees to Meadowcorp or a statutory discharge operating as a re-conveyance and a conveyance from Meadowcorp. It follows from this that it is because the land is under the Act that the mortgagees have maintained their priority. Thus the fact that Jain has not obtained unencumbered title [page 586]

is because the land is under the Act. The question is whether this failure, which has almost certainly caused damage to Jain, arises as a result of the operation of the Act through Jain having been deprived of an unencumbered title as a consequence of fraud. The words ‘as a result of the operation of the Act’ are new. It is quite unlikely that they were intended to make access to the Assurance Fund more restrictive than under the old s 126, which it replaced. That is apparent from the report of the Law Reform Commission: Report 76 (1996) Torrens Title: Compensation for Loss; and the second reading speech of the Minister: Hansard NSW LA 3 May 2000 p 5187. It was submitted by counsel for Jain on the authority of Robinson’s case that if the additional words were not present then the claim of Jain would certainly have been successful. I do not accept this follows. In Robinson’s case the interest of the Robinsons under their contract for purchase was defeated by fraudulent transfer and mortgage

procured by a legal clerk, the mortgagee obtaining an indefeasible title to its mortgage on registration. That interest was lost by subsequent registration not because some prior interest remained. However, it may well be the case that Robinson’s case would be decided differently under the new legislation, because the innocent mortgagee as bona fide purchaser without notice would have got a good title irrespective of the operation of the Act, so that the words ‘as a result of the operation of this Act’ may result in a reduction of available claims against the Registrar-General. It is, I think, quite unlikely this would be an intended result. The argument of senior counsel for the Registrar-General is that the Act has not operated or been brought to bear on the transaction so as to cause damage as the loss has arisen through fraud, not by reason of the Act. The question however is whether or not the loss has arisen as a result of both. The argument of counsel for the RegistrarGeneral seems to be based upon the assumption that loss as a result of the operation of the Act can only occur by reason of some dealing, later in time to the interest lost or reduced, having achieved priority by registration, thus giving an indefeasible title to the holder of such registered interest. It also seems to assume that loss which would not have arisen had the land been under Old System title is not necessarily loss resulting from the operation of the Act. As I have said this is a matter of considerable difficulty. Nevertheless the purpose of compensation by access to the Fund is to balance disadvantage which can otherwise be brought about by indefeasibility of title. In principle I can see no reason to restrict access to the Fund to persons claiming that their interest has been lost through the registration of some subsequent dealing as a result of fraud. There is no particular logical reason why compensation should not be available to persons suffering damage as a result of fraud which has enabled the proprietor of a registered interest to maintain an indefeasible title to such interest based upon its continued registration. Such damage seems to me to arise out of the operation of the Act. [His Honour concluded on this question that the claim of Jain, if he had been a sole purchaser, would have fallen within s 129(1(e)), but that the amount of compensation could not be assessed until the outcome of the mortgagee’s sale was known.]

Strata titles legislation 5.226

An important challenge to the adaptability of the Torrens system

has been created by the demand for secure title to residential flats or units purchased on an ‘own-your-own’ basis. Purchasers of home units have sought the benefits of indefeasible title under the Torrens system and of a full statutory scheme regulating the respective rights and obligations of unit

[page 587]

owners in a particular development. This has resulted in the introduction of ‘strata titles’ legislation, designed to permit and control the horizontal subdivision of land and buildings for residential use, as well as for commercial and industrial purposes. More recently, the legislation has provided for mixed use developments which enable one building to accommodate a number of different uses. These changes have been made in response to increasing demand for residential property in the central business districts, particularly in capital cities. For instance, the one structure might contain a retail department store at the ground level, a hotel above the department store and residential apartments above that, or perhaps some commercial office space. The legislation is detailed and often quite complicated, but represents a distinctive attempt to cope with some of the legal problems associated with high density living and the need to make the best economic use of scarce resources. Before the introduction of modern strata titles legislation, several techniques were used to meet the needs of purchasers of residential units or, more precisely, the needs of developers who constructed blocks of flats or units and wished to sell them to individual buyers. (The issue of whether Torrens title land could be subdivided horizontally before the introduction of strata titles legislation was discussed in a number of cases: see, for example, Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73; 5.25C.) The three most important schemes used in Australia were the leasehold scheme, the tenancy in common arrangement and the home unit

company. None of these schemes was entirely satisfactory to all parties involved in the development and sale of residential units. However, they were the best available responses to the strong community demand in the absence of specific legislation providing for horizontal subdivisions: see Rath, Grime and Moore, Strata Titles, 1962, xi–xiii.

Leasehold scheme 5.227

One method of conferring title on a purchaser of a home unit was to

grant the purchaser a lease for a long term (say, 999 years) at a nominal rental, the purchase price comprising a premium for the grant of the lease paid to the vendor (initially the developer of the block of units). The lease, of course, could be registered under the Torrens system. Obviously, this scheme did not give the purchaser a freehold title to the premises, an important psychological factor in Australia, but it did give many of the advantages and some of the security of a freehold title. The lease regulated the purchaser’s (lessee’s) use of the premises and governed such matters as payment of rates, taxes, insurance and repairs. Usually, the lease also provided for forfeiture in the event of breach, a provision which constituted a potential threat, albeit remote, to the security of the purchaser’s title. However, the terms and conditions of the lease varied from development to development and some documents imposed onerous conditions on purchasers of units. On the other hand, despite the terms of the lease, individual unit owners (lessees) had no ready means of checking the annoying or improper behaviour of their neighbours, at least without the assistance of the lessor. The position was unsatisfactory from the developer’s point of view, since the developer was not

released entirely from the enterprise after ‘selling’ all units, but remained as lessor with active duties to perform.

Tenancy in common 5.228

An alternative approach was to transfer a freehold title to purchasers

acquiring units within the development, with the result that all unit ‘owners’ took a fee simple estate in the premises as tenants in common. The problem with this approach arose from the rule that each tenant in common is entitled to possession of the whole of the premises subject to

[page 588]

co-ownership and not to exclusive possession to a defined portion of the premises. Thus, although a purchaser was able to receive a certificate of title covering his or her interest as a tenant in common of the premises, the title did not confer rights of exclusive possession in relation to a particular unit. This difficulty was often tackled by an agreement between all unit owners, whereby each was granted rights of exclusive occupation of their ‘own’ unit. Such an agreement was not enforceable against subsequent purchasers, nor registrable under the Torrens system, unless executed in the form of a lease. If it did take the form of a lease, some of the problems of the leasehold scheme applied to the development and a sale by one of the unit owners was more than usually complicated.

Home unit companies 5.229

The most common scheme in operation prior to the introduction of

strata titles legislation involved the use of home unit companies. This scheme required the incorporation of a company which became the registered proprietor of the residential building. The purchaser of a unit acquired a block of shares in the company carrying with it the right to occupy a defined portion of the building. The memorandum and articles of association of the company contained restrictions on the holding of blocks of shares and the use of the unit similar to those imposed by the leases employed in the leasehold scheme. The major disadvantage of the company scheme was the fact that each shareholder did not acquire an interest in the land or building, but merely contractual rights arising from ownership of the shares in the company. Thus, the shareholder was unable to take advantage of the usual legal remedies of a landowner to protect his or her unit, but had to rely on the company taking proceedings on their behalf: H H Halls Ltd v Lepouris (1964) 82 WN (NSW) (Pt 2) 87. In theory, it was possible to alter the articles of association of the company against the will of a particular shareholder by a vote of 75 per cent of all shareholders even to the extent of depriving that shareholder of the rights of occupation of the unit, although such an amendment might have been regarded as a fraud on the minority shareholder or in breach of the company’s contractual duty: Fischer v Easthaven Ltd (1963) 80 WN (NSW) 1155. For these reasons, lending institutions were (and still are) reluctant to advance a loan on the security of a company title unit.

5.230

The inadequacies of the various schemes eventually resulted in the

enactment of strata titles legislation, the first legislation being the Transfer of Land (Stratum Estates) Act 960 (Vic). This provided for the subdivision of a building into stratum estates and for the formation, under the (now repealed) Companies Act 1958 (Vic), of a service company to hold title to all common parts of the building and its curtilage. The term ‘stratum estate’ was defined as ‘an estate in fee simple in an allotment in a building subdivision above or below or between certain levels corresponding spatially with a part or parts of a building or buildings which part or parts are intended for separate occupation’. The service company entered into service agreements with the proprietor of each stratum estate, covering such matters as the maintenance of the common parts of the property, insurance of the premises as a whole and payment of necessary outgoings. Service agreements could be registered with the Registrar of Titles and, if registered, were enforceable as between the service company and its successors and the registered proprietor from time to time of each stratum estate: see Transfer of Land Act 1958 (Vic) s 98C (3). The purchaser of each flat or unit received a block of shares in the service company specifically attached to his or her stratum estate and which could be transferred only with that estate: Transfer of Land Act 1958 (Vic) s 98A(1)(b). Provision was made for the

[page 589]

notification of easements on the plan of subdivision in favour of the registered proprietors of the stratum estates who became entitled to the

benefit (and subject to the burden) of such easements: Transfer of Land Act 1958 (Vic) s 98. 5.231

The sophistication of the strata title legislation was carried further

by the Conveyancing (Strata) Titles Act 1961 (NSW). The 1961 Act, which has since been replaced first by the Strata Titles Act 1973 and now by the current legislation (see 5.209), adopted the basic principle of the Victorian legislation but introduced some important changes and extensions. For example, under the 1961 New South Wales legislation, the body corporate (equivalent to the Victorian owners’ corporation) was automatically formed on registration of the strata plan and given certain powers and functions without the need for formal incorporation or the making of service agreements with individual lot owners: ss 14, 15. The common property was not held by the body corporate, but by the proprietors as tenants in common in shares proportional to the ‘unit entitlement’ of their respective lots: s 9. The unit entitlement of each lot in relation to the aggregate unit entitlement of all lots was specified in the original strata plan and determined the voting rights of the proprietor, the share of the proprietor in the common property and the proportion of contributions levied by the body corporate to cover administrative and other expenses: s 18. The certificate of title issued by the Registrar-General in respect of each lot in the strata plan specified the share of the common property held by the proprietor: s (9)(2). This share passed automatically following any dealing with the lot to which it was appurtenant, without the necessity for any specific mention in the transfer: s 9(3). The Real Property Act 1900 (NSW) applies to land which has been subdivided by

registration of a strata plan: Rochester Investments Pty Ltd v Couchman (1969) 90 WN (NSW) (Pt 1) 371. 5.232

The 1961 Act covered many other matters related to strata

subdivisions. There were extensive provisions for cross-easements of support and shelter and the passage of services such as water, sewerage and drainage: ss 5–8. The legislation, of course, required strata plans lodged with the Registrar-General to indicate that the necessary local government approvals had been obtained, as well as provided detailed plans and informations concerning the subdivision: s 4. The Act sought to regulate the behaviour of lot owners by setting out by-laws providing for the control, management, use and administration of the lots and common property: s 18; Schs 1 and 2. The by-laws in Sch 1 could not be altered except by unanimous resolution, while those in Sch 2 might be altered by the body corporate. The by-laws might not have been amended, however, to restrict the assignability of lots within the subdivision: s 13(3). The Act covered the contingency of destruction of the building by providing that upon registration of a notification by the body corporate that the building had been destroyed, the lot proprietors shall be entitled to the parcel as tenants in common in shares proportional to the unit entitlement of their respective lots: s 11. In addition, the court had broad powers to effect an adjustment between the proprietors in cases of substantial destruction of the building: s 19. 5.233

Following the enactment of the 1961 New South Wales Act, the

other Australian jurisdictions also passed strata titles legislation. Although the legislation was originally based on that in New South Wales, increasingly

there is very great variation between the different jurisdictions, both in the detail and the form of the legislation. There have been many changes over the years and it is beyond the scope of this book to explore them in any detail. The increasing demand for mixed use developments has greatly increased the variety and complexity

[page 590]

of legislation in this area and in some jurisdictions the provisions dealing with development and management have been split into separate statutes.178 5.234

Since the original strata titles legislation, the flexibility which this

type of subdivision allows has been progressively exploited to permit a strata development to proceed in stages. This procedure considerably benefits the developer who may use the proceeds of sale of units in the completed stage to finance the development of the next stage. An example is Part 5 of the Strata Schemes Development Act 2015 (NSW). On lodging an application for approval of a strata development scheme, the developer must complete a strata development contract which includes a concept plan and a description of the land identifying the lot to which it relates and any land which is proposed to be added to the parcel at a later time: ss 76, 77. The concept plan must illustrate the sites proposed for buildings, the nature of the buildings and works which would result from the development. The strata development contract has effect as a deed between the developer, the proprietors of lots (both present and future), mortgagees, lessees and occupiers. It may not be

excluded, modified or varied by contract and does not merge on transfer of a lot: s 81. There are provisions for amendment of the strata development contract in certain circumstances: s 84.

1.

Christensen, O’Connor, Duncan and Ashcroft, ‘Early Land Grants and Reservations: Any Lessons from the Queensland Experience for the Sustainability Challenge to Land Ownership?’ (2008) 15 JCULR 44, 50–51.

2.

Historical Records of Australia, Series 1, Vol 3, 473–474; Edgeworth, Butt’s Land Law, (Thomson Reuters, 7th ed, 2016), [1.23]–[1.33], [12.31].

3.

Enid Campbell, ‘Conditional Land Grants by the Crown’ (2006) 25 University of Tasmania Law Review 44.

4.

Christensen, O’Connor, Duncan and Ashcroft, ‘Early Land Grants and Reservations: Any Lessons from the Queensland Experience for the Sustainability Challenge to Land Ownership?’ (2008) 15 JCULR 44–66. The first grant made in the colony, to James Ruse on 22 February 1789 contained both conditions and reservations in these terms: see id, at 50–51. See also, generally, Bruce Kercher, Debt, Seduction and Other Disasters: The Birth of Civil Law in Colonial New South Wales, Federation Press, Leichhardt, 1996, ch 6.

5.

Enid Campbell, ‘Promises of Land from the Crown: Some Questions of Equity in Colonial Australia’ (1994) 13 University of Tasmania Law Review 1, 25–33; Stefan Petrow, ‘Discontent and Habits of Evasion: the Collection of Quit Rents in Van Diemen’s Land 1825–1863’ (2001) 117 Australian Historical Studies 240; Shaunnagh Dorsett, ‘The Court of Claims and the Resolution of Informal Land Claims in New South Wales 1833–1835’ (2014) 4 Prop L Rev 5.

6.

See 5.10.

7.

NSW, s 53(1); Qld, s 237(1); Tas, s 35(1) (20 years); Vic, s 44(1); Sale of Land Act 1970 (WA) s 22. In this chapter (except in the section dealing with the deeds registration system and the section dealing with the Torrens system), the following Acts are referred to by the abbreviation of the state enacting them: Conveyancing Act 1951 (ACT); Conveyancing Act 1919 (NSW); Property Law Act 1974 (Qld); Law of Property Act 1936 (SA); Conveyancing and Law of Property Act 1884 (Tas); Property Law Act 1958 (Vic); Property Law Act 1969 (WA). The legislation relevant to the section dealing with the deeds registration system is specified in fn 13 below and that

relevant to the section dealing with the Torrens system is specified in fn 17 below. 8.

NSW, s 54(1); Qld, s 238; Tas, s 3(2); Vic, s 45(1).

9.

NSW, s 53(3); Qld, s 237(6); Tas, s 35(5); Vic, s 44(6).

10. NSW, s 54(10); cf Qld, s 238(12); Vic, s 45(11). See generally Stonham, 365–83. 11. Registration Act 1827 (Tas); Registration of Deeds, Wills, Judgments, Conveyances and Other Instruments Act 1841 (SA); Registration of Deeds, Wills, Judgments and Conveyances Affecting Real Property Ordinance 1832 (WA). 12. NSW, s 184G; Qld, ss 241, 246; Tas, s 9. In South Australia and Western Australia the position is more complex: SA, s 10(2); WA, s 3. 13. The legislation currently in force is as follows: Conveyancing Act 1919 (NSW) Pt XXIII; Property Law Act 1974 (Qld) ss 241–249; Registration of Deeds Act 1935 (SA); Registration of Deeds Act 1935 (Tas); Property Law Act 1958 (Vic) Pt I; Registration of Deeds Act 1856 (WA). In this part of the chapter, these Acts are referred to by the abbreviation of the state or territory enacting them. 14. Edgeworth, Butt’s Land Law, (Thomson Reuters, 7th ed, 2016), [12.04]; Victorian Law Reform Commission, Review of the Property Law Act 1958, Report 20, 2010, 19. 15. Whalan, ‘The Origins of the Torrens System and its Introduction into New Zealand’ in Centennial Essays, 3–12; Robinson, 1–25; Taylor, ‘Cancel That Hamburger (the Torrens System was not German)’ (2015) 23 APLJ 167. 16. M Raff, ‘Torrens, Hübbe, Stewardship and the Globalisation of Property Law Systems’ (2009) 30 Adel L Rev 245; Esposito, ‘A New Look at Anthony Forster’s Contribution to the Development of the Torrens System’ (2006–07) 33 UWALR 251. See also Lucke, ‘Ulrich Hobbe and the Torrens system: Hübbe’s German Background, His Life in Australia and His Contribution to the Creation of the Torrens System’ (2009) 30(2) Adel L Rev 213; Fox, ‘The Story Behind the Torrens System’ (1950) 23 ALJ 489; Taylor, ‘Is the Torrens System German?’ (2008) 29 Jo Leg Hist 253; Taylor, ‘The Torrens System: Definitely Not German’ (2009) 30 Adel Law Rev 195; Pike, ‘Introduction of the Real Property Act in Australia’ (1961) 1 Adel LR 169; Whalan, ‘Immediate Success of Registration of Title to Land in Australasia and Early Failures in England’ (1967) 2 NZULR 416. 17. The current legislation is: Land Title Act 1994 (Qld) s 47; Real Property Act 1886 (SA) s 26; Land Titles Act 1980 (Tas) s 9; Transfer of Land Act 1958 (Vic) s 8(1); Transfer of Land Act 1893 (WA) s 18; Land Titles Act 1925 (ACT) s 17; Land Title Act (NT) s 48; but compare Real Property Act 1900 (NSW) Pt 3. In this part these Acts are referred to by the abbreviation of the state or territory enacting them.

18. Vic, s 10; NSW, s 14(2), (3); SA, s 27; Tas, s 11; WA, s 20. 19. NSW, s 121; SA, s 221; Tas, s 144; Vic, s 116; WA, s 203; Riley v Nelson (1965) 119 CLR 131; [1966] ALR 663. 20. Vic, s 26S; cf NSW, ss 17(2), 23(2); SA, ss 32–34, 36; Tas, ss 12(1), (2); WA, ss 21–23, 25. 21. See generally Robinson, 430–1; Stein and Stone, 39–44. 22. Harrison, ‘The Transformation of Torrens’ System into the Torrens System’ (1962) 4 UQLJ 125 at 129. 23. NT, s 39; Qld, ss 37–41; SA, s 69; and Tas, s 40. 24. Hinde, ‘The Future of the Torrens System in New Zealand’ in Northey (ed), The A G Davis Essays in Law, 1965, 78. 25. See further, Arrieta-Sevilla, ‘A Comparative Approach to the Torrens Title System’ (2012) 20 APLJ 203; O’Connor, ‘Registration of Title in England and Australia: A Theoretical and Comparative Analysis’ in Cooke (ed), Modern Studies in Property Law Vol 2, Hart, Oxford, 2003, 81 at 84–9. 26. Cf ACT, s 52; NSW, s 40; NT, s 47; Qld, s 46; SA, s 80; Tas, s 39; WA, s 63. 27. Vic, s 42; cf ACT, s 58; NSW, s 42; NT, s 188; Qld, s 184; SA, s 69; Tas, s 40; WA, s 68. 28. Vic, s 43; cf NSW, s 43 (see also s 43A); SA, ss 72, 186, 187; Tas, s 41; WA, s 134. Compare Qld, s 184(2)(a); NT, s 188(2)(a), which provide that ‘a registered proprietor is not affected by actual or constructive notice of an unregistered interest affecting the lot’. 29. Vic, s 44(2); cf ACT, ss 152, 159; NSW, s 45; Qld, s 184(2)(b); NT, s 188(2)(c); SA, s 207; Tas, s 42; WA, ss 199, 202. 30. See also ANZ Banking Group Ltd v Barns (1994) 13 ACSR 592 (registered proprietor’s title not indefeasible because it had dealt with a non-existent person: that is, a company which had been dissolved). The case is discussed in Butt, ‘Fictitious Proprietors’ (1994) 68 ALJ 751. 31. Taylor, ‘Scotching Frazer v Walker’ (1970) 44 ALJ 248 at 253. 32. Property and Equity Law Reform Committee, Report on the Decision in Frazer v Walker, 1977, para 23. 33. A New Land Transfer Act, Report 116, 2010, paras 2.11–2.16. See also Low and Griggs, ‘Immediate Indefeasibility: Is It Under Threat?’ (2011) 19 APLJ 222. 34. cf ACT, s 159; Qld, ss 184, 187; SA, s 207; Tas, s 42; Vic, s 44(2); WA, s 202. 35. LRCV, Rep No 12, The Torrens Register Book, 1987, para 18. For a review of the views of law

reform bodies in other jurisdictions, see New Zealand Law Commission and Land Information New Zealand, Review of the Land Transfer Act 1952: Issues Paper 10, 2008, 29–40. See 5.84–5.85 below for recent reforms in relation to mortgages which in part adopt this preference. 36. O’Connor, ‘Registration of Invalid Dispositions: Who Gets the Property?’ in Cooke (ed), Modern Studies in Property Law Vol 3, Hart Publishing, 2005, 45 at 52–60. 37. See Teo, ‘All Because of a Proviso — A Nine Year Wait to Right the Wrong’ in Carruthers, Mascher and Skead (eds), Property and Sustainability: Selected Essays, Lawbook Co, 2011, 161; Loh and Tang, ‘“A Law Which Favours Forgers”?: Land Fraud in Two Torrens Jurisdictions’ (2011) 19 APLJ 130. 38. See O’Connor, ‘Deferred and Immediate Indefeasibility: Bijural Ambiguity in Registered Land Title Systems’ (2009) 13 Edin L Rev 194; Harding and Hickey, ‘Bijural Ambiguity and Values in Land Registration Systems’ in Bright (ed), Modern Studies in Property Law Vol 6, Hart, 2011, 285; Harding and Bryan, ‘Responding to Fraud in Title Registration Systems: A Comparative Study’ in Dixon (ed), Modern Studies in Property Law Vol 5, 2009, 3; L Griggs, ‘Resolving the Debate Surrounding Indefeasibility Through the Eyes of a Consumer’ (2009) 17(2) APLJ 259. 39. See O’Connor, ‘Immediate Indefeasibility for Mortgagees: A Moral Hazard?’ (2009) 21 Bond LR 133; Griggs, ‘Resolving the Debate Surrounding Indefeasibility Through the Eyes of a Consumer’ (2009) APLJ 260; Carruthers, ‘Indefeasibility, Compensation and Anshun Estoppel in the Torrens System: The Solak Series of Cases’ (2012) 20 APLJ 71; Peterson, ‘Are all Torrens Transactions Equal? A Focus on the Efficiency of the Indefeasibility Accorded to Torrens Mortgages’ (2011) 19 APLJ 280. 40. See Toomey, ‘Fraud and Forgery in the 1990s: Can Our Adherence to Frazer v Walker Survive the Strain?’ (1995) 4 Canterbury Law Rev 424; Mason, ‘Indefeasibility: Logic or Legend?’ in Grinlinton, 17–19; Greenwood and Jones, ‘Automation of the Register: Issues Impacting on the Integrity of Title’ in Grinlinton, 323. 41. See, for example, Conlan v Registrar of Titles at [158], [163], [196]; Black v Garnock [2007] HCA 31 at [72]; Solak v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279 at [39]; Perpetual Ltd v Barghachoun [2010] NSWSC 108 at [25]; see further, Low and Griggs, ‘Immediate Indefeasibility: Is It Under Threat?’ (2011) 19 APLJ 222. For an illuminating policy analysis regarding deferred and immediate indefeasibility, see Harding and Hickey, ‘Bijural Ambiguity and Values in Land Registration Systems’ in S Bright (ed), Modern Studies in Property Law Vol 6, Hart, 2011, 285.

42. See Wikrama-Nayake, ‘Immediate and Deferred Indefeasibility’ (1993) 67 Law Inst J 393. The Full Court’s decision was followed in Tsirikolias v Oakes (1993) 169 LSJS 249 and Public Trustee v Paradiso (1995) 64 SASR 367. 43. See Vassos v State Bank of South Australia [1993] 2 VR 316; Eade v Vagiozopoulos [1993] V ConvR 54-458; Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188. 44. Teh, ‘Deferred Indefeasibility of Title in Victoria?’ (1991) 17 Mon LR 77; MacCallum, ‘Return to Immediate Indefeasibility of Title’ (1992) 66 Law Inst J 970; Schultz, ‘Judicial Acceptance of Immediate Indefeasibility in Victoria’ (1993) Mon LR 327. 45. Compare Fels v Knowles (1906) 26 NZLR 604; Davis, ‘Options in Leases — A Further Exegesis’ (1977) 9 Well LR 77; see also Whalan, The Torrens System in Australia, 1982, 114–19; Carruthers and Skead, ‘Rights to Renew and to Purchase in Registered Leases: Part 1 — A Case of Bad Timing’ (2016) 25 APLJ 1. 46. Harding, ‘Under the Indefeasibility Umbrella: The Covenant to Pay and the ‘All Moneys’ Mortgage’ (2011) 19 APLJ 231 at 243–5. 47. See also Conlan v Registrar of Titles (2001) 24 WAR 299 at 311–13; Parker v Mortgage Advance Securities [2003] QCA 275 at [6]; Hilton v Gray [2007] QSC 401 at [55]; Clairview Developments Pty Ltd v Law Mortgages Gold Coast Pty Ltd [2007] QCA 141 at [40]; Small v Gray [2004] NSWSC 97 at [75]–[80]; Public Trustee v Paradiso (1995) 64 SASR 387 at 388. 48. See also J Stoljar, ‘Mortgages, Indefeasibility and Personal Covenants to Pay’ (2008) 82 ALJ 28 at 37. 49. See also Chandra v Perpetual Trustees Victoria Ltd (No 1) (2007) 13 BPR 24,675; ANZ ConvR 481; [2007] NSWSC 694 at [29]; Provident Capital Ltd v Printy (2008) 13 BPR 25,199; [2008] NSWCA 131 at [32]; Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567; [2007] NSWCA 240 at [13]; Perpetual Trustees Victoria Ltd v English [2010] NSWCA 32 at [68]; Van Den Heuvel v Perpetual Trustees Victoria Ltd (5.62C) at [140]. 50. Harding, ‘Property, Contract and the Forged Registered Mortgage’ (2010) 24 NZULR 21 at 30– 3. 51. Grattan, ‘Recent Developments Regarding Forged Mortgages: The Interrelationship Between Indefeasibility and the Personal Covenant to Pay’ (2009) 21 Bond LR 43 at 52–4. 52. Peterson, ‘Are All Torrens Transactions Equal? A Focus on the Efficiency of the Indefeasibility Accorded to Torrens Mortgages’ (2011) 19 APLJ 280 at 314; Carruthers, ‘Indefeasibility, Compensation and Anshun Estoppel in the Torrens System: The Solak Series of Cases’ (2012) 20

APLJ 71. 53. See also Provident Capital Ltd v Printy (2007) 13 BPR 24,603; NSW ConvR ¶56-810; [2008] NSWCA 131; Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675; [2008] NSWSC 173. 54. See, for example, Yazgi v Permanent Custodians (2007) 13 BPR 24,567; (2007) ANZ ConvR 566; (2007) NSW ConvR ¶56-195; [2007] NSWCA 240; Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343; (2008) NSW ConvR ¶56-221; [2008] NSWSC 505. The question of what amounts to incorporation is discussed in J Stoljar, ‘Mortgages, Indefeasibility and Personal Covenants to Pay’ (2008) 82 ALJ 28; Grattan, ‘Recent Developments Regarding Forged Mortgages: The Interrelationship Between Indefeasibility and the Personal Covenant to Pay’ (2009) 21 Bond LR 43. 55. See Harding, ‘Under the Indefeasibility Umbrella: the Covenant to Pay and the “All Monies” Mortgage’ (2011) 19 APLJ 231 at 251. The reasoning in Solak has been criticised by commentators: Harding, ‘Property, Contract and the Forged Registered Mortgage’ (2010) NZULR 2; Lane, ‘Indefeasibility for What? Interpretive Choices in the Torrens System’ in Moses, Edgeworth and Sherry, Property and Security: Selected Essays, Lawbook Co, 2009, 149, 161–3; Schroeder and Lewis, ‘Indefeasibility of Title and Invalid All-Moneys Mortgages: Determining Whether Invalid Personal Covenants to Pay Are Protected Under the Indefeasibility Umbrella’ (2010) 18 APLJ 185. 56. Harding, ‘Property, Contract and the Forged Registered Mortgage’ (2010) NZULR 21 at 39–41. 57. Permanent Trustee Co Ltd v Frazis [1999] NSWSC 319; Perpetual Trustees Victoria Ltd v Cipri [2008] NSWSC 1128; Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; Permanent Custodians Ltd v Yazgi [2007] NSWSC 279 (appeal allowed without submissions on this point in Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567; [2007] NSWCA 240); Credit Connect Pty Ltd v Carney; Credit Connect Pty Ltd v Smit [2010] NSWSC 910; Perpetual Trustees Victoria Ltd v Van Den Heuvel [2009] NSWSC 57. The ruling of Price J on the Contracts Review Act argument was not appealed in Van Den Heuvel v Perpetual Trustees Victoria Ltd (2010) 15 BPR 28,647; [2010] NSWCA 171. 58. See Crow v Campbell (1884) 10 VLR (Eq) 86; Chomley v Firebrace (1879) 5 VLR (Eq) 57; Re the Land Tax Act; Ex parte Finlay (1884) 10 VLR (E) 68; Biggs v McEllister (1880) 14 SALR 86; on appeal, 8 AC 314; Hogg, Australian Torrens System, 823; King v Smail [1958] VR 273; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 572 per Kitto J.

59. Baalman, The Singapore Torrens System, Singapore, 1961, 86. Baalman’s Singapore Torrens Act specifically denies the protection of indefeasibility for volunteers: Land Titles Ordinance 1956 s 28(30). 60. For an overview of the arguments for and against indefeasibility attaching to volunteers, see Croucher, ‘Inspired Law Reform or Quick Fix or “Well, Mr Torrens, What Do You Reckon Now?”: A Reflection on Voluntary Transactions and Forgeries in the Torrens System’ (2009) 30 Adel L R 291; Histed, ‘Fraud and the Volunteer: Harmonisation of Principle in Australia’ (2007) 11 J South Pacific L 116; Atherton, ‘Donees, Devisees and Torrens Title: The Problem of the Volunteer Under the Real Property Acts’ (1998) 4 Aust J Leg Hist 121; Radan, ‘Volunteers and Indefeasibility’ (1999) 7 APLJ 197. 61. QLRC, A Working Paper of the Law Reform Commission on a Bill in Respect of an Act to Reform and Consolidate the Real Property Act of Queensland, WP 32, 1988, 72. See also Land Title Act (NT), s 183 (volunteers protected). 62. See also Official Receiver v Klau; Ex parte Stephenson Nominees Pty Ltd (1987) 74 ALR 67 at 74; Peck v Peck [2010] SASC 258. 63. New Zealand Law Commission and Land Information New Zealand, A New Land Transfer Act, Report 116, 2010, 16; see also Regal Castings Ltd v GM and GN Lightbody [2009] 2 NZLR 433. 64. See ACT, s 162; NSW, s 138; NT, s 191; Qld, s 187; SA, ss 220(4), 221 (not a precise equivalent); Tas, s 141; Vic, s 103; WA, s 200. 65. For other cases in which the conduct of those for whom the mortgagee was responsible were characterised as carelessness, incompetence, disorganisation or stupidity not amounting to fraud, see Hilton v Gray [2007] QSC 401 at [47]; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 at [383]; Royalene Pty Ltd v Registrar of Titles (2008) Q ConvR ¶54-689; [2008] QSC 64. 66. See Weir, ‘Indefeasibility — Queensland Style’ (2007) 15 APLJ 79; Backstrom and Christensen, ‘Qualified Indefeasibility and the Careless Mortgagee’ (2011) 19 APLJ 19. 67. Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [158]; Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 305 ALR 612. See further Acland, ‘Joint Tenancy, Fraud, Agency and Volunteers under the Torrens System: Cassegrain v Gerard Cassegrain & Co Pty Ltd’ (2015) 4 Prop L Rev 186. 68. Octapon Pty Ltd v Esanda Finance Corp Ltd (SC(NSW), 3 February 1989, Cole J, unreported); Permanent Custodians v Yazgi [2007] NSWSC 279 at [86]–[95]; Steel-Smith v Liberty Financial Pty Ltd [2005] NSWSC 398; Perpetual Trustees Victoria Ltd v Ford [2008] NSWSC 29 at [98]–

[101]. 69. Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41; Permanent Custodians v Yazgi [2007] NSWSC 279; Permanent Trustee Co Ltd v O’Donnell [2009] NSWSC 902 at [343]. 70. See also Australian Guarantee Corp Ltd v De Jager [1984] VR 483; National Commercial Banking Corp of Australia Ltd v Hedley (1984) 3 BPR 9477; Beatty v ANZ Banking Group Ltd (1995) V ConvR 54-517; [1995] 2 VR 301; ANZ ConvR 478; State Bank of New South Wales v Yee (1994) 33 NSWLR 618; Baker v Australia and New Zealand Banking Group (SC(NSW), Cohen J, 5 May 1995, unreported). 71. For comment on the judgments in Russo, see Rodrick, ‘Forgeries, False Attestation and Imposters: Torrens System Mortgages and the Fraud Exception to Indefeasibility’ (2002) 7 Deakin Law Review 97. 72. Bahr v Nicolay (No 2) (5.101C); Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 40. 73. See also Munro v Stuart (1924) 41 SR (NSW) 203 (n); Achatz v De Reuver [1971] SASR 240. 74. See generally McMorland, ‘Notice, Knowledge and Fraud’ in Grinlinton, 67; Blanchard, ‘Indefeasibility under the Torrens System in New Zealand’ in Grinlinton, 29; Thomas, ‘Land Transfer Fraud and Unregistered Interests’ [1994] NZ Recent Law Review 218; Whalan, ‘The Meaning of Fraud under the Torrens System’ (1975) 6 NZULR 207; Butt, ‘Notice and Fraud in the Torrens System; A Comparative Analysis’ (1977) 13 UWALR 355; Whalan, 313–17; Cooke and O’Connor, ‘Purchaser Liability to Third Parties’ (2004) 120 LQR 640; Hepburn, ‘Concepts of Equity and Indefeasibility in the Torrens System of Land Registration’ (1995) 3 APLJ 41. 75. Mason, ‘Indefeasibility: Logic or Legend’ in Grinlinton, 3 at 10. 76. See, for example, Russo v Bendigo Bank Ltd [1999] VR 376; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 81 ALJR 110 at [192]; Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 273–4. 77. Blanchard, ‘Indefeasibility under the Torrens System in New Zealand’ in Grinlinton, 29 at 36, 43. 78. Moore, Grattan and Griggs, 6th ed, [4.230]; Hinde, Campbell and Twist, Principles of Real Property Law, 2007, 327–35; Tooher, ‘Muddying the Torrens Waters with the Chancellor’s Foot? Bahr v Nicolay’ (1993) 1 APLJ 1. 79. Low, ‘The Nature of Torrens Indefeasibility: Understanding the Limits of Personal Equities’ (2009) 33 Melb Uni LR 205; Bennett Moses and Edgeworth, ‘Taking it Personally: Ebb and Flow in the Torrens’ System’s In Personam Exception to Indefeasibility (2013) 35 Syd L Rev 107.

80. Low, at 679–81. See also Grgic v ANZ Banking Group (1994) 33 NSWLR 202 at 223–4. 81. The reason for the South Australian express exception is due to early case law in that state that refused to recognise any in personam rights: Taylor, ‘Cancel That Hamburger (the Torrens System was not German)’ (2015) 23 APLJ 167, 172–173. 82. See also Executive Seminars Pty Ltd v Peck [2001] WASC 229. 83. See Butt, ‘Indefeasibility and Sleights of Hand’ (1992) 66 ALJ 596. In Paradise Constructors & Co Pty Ltd (2007) 20 VR 294 at [39]. 84. Wu, ‘Beyond the Torrens Mirror: A Framework of the In Personam Exception to Indefeasibility’ (2008) 32 MULR 672. 85. See, for example, Conlan v Registrar of Titles (2001) 24 WAR 299; Garafano v Reliance Finance Corp Pty Ltd (1992) NSW ConvR ¶55-640; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133. 86. Christensen and Duncan, ‘Is Indefeasibility a Bar to Restitution after Reversal of Judgment on Appeal?’ (2005) 11 APLJ 81. See also Young, ‘Torrens Title: Indefeasibility Affected by “Equities” — What is an Equity? — Case Note: White v Tomasel’ (2005) 79(1) ALJ 30; Papamatheos, ‘What are the Juridical Bases of Reversal of Judgment Restitution?’ (2004) 25 ABR 268. 87. Wu, ‘Beyond the Torrens Mirror: A Framework of the In Personam Exception to Indefeasibility’ (2008) 32 MULR 672 at 679–82. 88. Cockburn, ‘Some More Nails in the Coffin of Yerkey v Jones’ (1997) 11 APLB61; Duggan, ‘Till Debt Us Do Part: A Note on National Australia Bank Ltd v Garcia (1997) 19 Syd LR 220; Scott, ‘Yerkey v Jones Upheld or Just Explained Away?’ (1998) 6 APLJ 275; Riley, ‘Special Equity of Wives’ (1999) 73 ALJ 170; Stone, ‘Infants, Lunatics and Married Women: Equitable Protection; Garcia v NAB’ (1999) 62 MLR 604; Kiefel, ‘Guarantees by Family Members and Spouses: Garcia and a German Perspective’ (2000) 74 ALJ 692; Griggs, ‘In Personam, Garcia v NAB and the Torrens System — Are They Reconcilable?’ (2001) 1 QUTLJJ 76; Stone, ‘The Distinctness of Garcia’ (2006) 22 JCL 170; Wilson, ‘Unconscionability and Fairness in Australian Equitable Jurisprudence’ (2004) 11 APLJ 1. 89. Kranz v National Australia Bank Ltd (2003) 8 VR 310 at [24], [31]; Alierzai v ANZ [2004] QCA 6; Q ConvR 54, 60 at [39], [82]. 90. See Brown, ‘Undue Confusion over Garcia’ (2009) 3 J Eq 72. 91. Some of these issues are explored by Griggs, ‘In Personam, Garcia v NAB and the Torrens System

— Are They Reconcilable?’ (2001) 1(1) QUTLJJ 76; Butt, ‘Equity, Restitution and In Personam Claims under the Torrens System’ (1998) 72 ALJ 258. 92. See Butt, ‘Knowing Receipt of Trust Property as an Exception to Indefeasibility’ (2007) 81 ALJ 713. 93. For comment on the case, see Bryan, ‘Recipient Liability Under the Torrens System: Some Category Errors’ (2007) 26 UQLJ 83; Harding, ‘Barnes v Addy Claims and the Indefeasibility of Torrens Title’ (2007) 31 MULR 343; Low, ‘The Nature of Torrens Indefeasibility: Understanding the Limits of Personal Equities’ (2009) 31 MULR 205; Wu, ‘Beyond the Torrens Mirror: A Framework of the In Personam Exception to Indefeasibility’ (2008) 32 MULR 672; Atkin, ‘“Knowing Receipt” Following Farah Constructions Pty Ltd v Say-Dee Pty Ltd’ (2007) 29 Syd LR 713. 94. See also Pacer v Westpac Banking Corporation (SC(NSW), No 3615 of 1995, Santow J, unreported); Harris v Smith [2008] NSWSC 545. 95. Medical Benefits Fund of Aust Ltd v Fisher [1984] 1 Qd R 606; Tanzone Pty Ltd v Westpac (1999) 9 BPR 17,287; [1999] NSW ConvR ¶55-908; [1999] NSWSC 478. 96. See Griggs, ‘Indefeasibility and Mistake — the Utilitarianism of Torrens’ (2003) 10 APLJ 108. 97. Hughson, Neave and O’Connor, ‘Reflections on the Mirror of Title: Resolving the Conflict Between Purchasers and Prior Interest Holders’ (1997) 21 MULR 460 at 492–4; Moore, Grattan and Griggs, 6th ed, 259. 98. See further 10.121–10.123. 99. See, in particular, Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 (5.94); Vassos v State Bank of South Australia (5.98C); and Farah Constructions v Say-Dee (5.102) (but see the limited and much criticised exception in Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 (5.106)). See generally Stevens, ‘Indefeasibility in Decline: The In Personam Remedies’ in Grinlinton, 141; Griggs, ‘In Personam, Garcia v NAB and the Torrens System — Are They Reconcilable?’ (2001) 1(1) QUTLJJ 76; Stevens, ‘The In Personam Exceptions to the Principle of Indefeasibility’ (1969) 1 AULR 29; Moore, ‘Equity Restitution and In Personam Claims under the Torrens System’ (1998) 72 ALJ 258; and ‘Equity, Restitution, and In Personam Claims under the Torrens system: Part Two’ (1999) 73 ALJ 712; Hughson, Neave and O’Connor, ‘Reflections on the Mirror of Title: Resolving the Conflict Between Purchasers and Prior Interest Holders’ (1997) 21 MULR 460. 100. See also Ex parte Property Unit Nominees (No 2) Pty Ltd [1981] Qd R 178 at 181; NSW, s 40(1B)

(inserted after Bursill v Berger). 101. ACT, ss 47, 49: NT, s 47; Qld, s 46; SA, ss 50, 51, 57; Tas, ss 33(1), (4), 40(1); Vic, ss 27, 33; WA, ss 48, 52. 102. Registrar of Titles v Franzon (1975) 132 CLR 611 at [13]; Equitiloan Securities Pty Ltd v Registrar of Titles [1997] 2 Qd R 597; Quach v Marrickville Municipal Council [No 2] (1990) 22 NSWLR 65 at 71. 103. NSW, s 12(1)(d), (3); Qld, s 15; SA, s 220(f); Tas, s 139; Vic, s 103(2), (3); WA, s 188(ii); ACT, ss 14(1)(e), 160; For analysis of the provisions in all jurisdictions, see Skead and Carruthers, ‘The Registrar’s Power of Correction: “Alive and Well”, Though Perhaps “Unwelcome”?: Part I: The Slip Provision’ (2010) 18 APLJ 32. 104. NSW, ss 136, 137; SA, ss 60–63; WA, ss 76–77; Tas, ss 163, 164. 105. See also, Skead and Carruthers, ‘The Registrar’s Power of Correction: “Alive and Well”, Though Perhaps “Unwelcome”? Part II: The Substantive Provision’ (2010) 18 APLJ 132; Scott, ‘Indefeasibility of Title and the Registrar’s “Unwelcome” s 81 Powers’ (1999) 7 Cant L J 246. 106. See Weir, ‘Registrar’s Power of Correction — Queensland Reforms’ (1998) 6 APLJ 101. 107. ACT, s 58(1)(c); NSW, ss 42(1)(c), 124(e); SA, s 69(c); Vic, s 42(1)(b); WA, s 68. 108. As to which exception applies in cases of overlap, see Carruthers and Skead, ‘The Prior Certificate of Title and Wrong Description of Land Exceptions to Indefeasibility: Resolving the Overlap’ (2009) 17 APLJ 240. 109. In this section dealing with the Torrens system, the following legislation is referred to by the abbreviation of the state or territory enacting it: Land Titles Act 1925 (ACT); 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). 110. Robertson v Keith (1870) 1 VLR (E) 11. See also Burke v Dawes (1938) 59 CLR 1, 17–18; McMahon v Swan [1924] VLR 397; Bradbrook, ‘The Scope of Protection for Leases Under the Victorian Transfer of Land Act’ (1988) 16 MULR 837. 111. Woodman and Butt, ‘Possessory Title and the Torrens System in New South Wales’ (1980) 54 ALJ 79 at 85–8. 112. See generally Duncan, ‘Adverse Possession under the Real Property Act (Qld)’ (1975) 4 Qld Lawyer 19. 113. See the related cases of Spark v Whale Three Minute Car Wash (Cremorne Junction) Pty Ltd (1970)

92 WN (NSW) 1087; and Spark v Meers [1971] 2 NSWLR 1; Refina Pty Ltd v Binnie [2010] NSWCA 192; 2.57. For articles discussing the differences between the provisions and the options for reform, see O’Connor, ‘The Private Taking of Land: Adverse Possession, Encroachments by Buildings, and Improvement Under a Mistake’ (2006) 33(1) UWALR 31; Griggs, ‘Possessory Titles in a System of Title by Registration’ (1999) 21 Adel LR 157; Park and Williamson, ‘An Englishman Looks at the Torrens System: Another Look 50 Years On’ (2003) 77 ALJ 117. 114. As to whether compensation is available for the non-recording of a resumption or statutory charge or interest that the Registrar has power to record, see 5.152; and NSW, s 31A(4); Vic, s 56; Tas, s 127; Qld, s 189(1)(l). 115. See also Burton v Arcus [2006] WASCA 71. 116. Hepburn, ‘Interpretive Strategies in the Overriding Legislation Exception to Indefeasibility’ (2009) 2 Bond L Rev 86. See also, Lewis and Schroeder, ‘The Indefeasibility of Title and Overriding Statutes: Determining Which Prevails in the Event of an Inconsistency’ (2008) 16 APLJ 147. 117. See Edgeworth, ‘“Very High Bar to Clear”: Implied Repeal of Torrens Legislation After City of Canada Bay Council v Bonaccorso Pty Ltd’ (2008) 82 ALJ 436. See also Solak v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279. 118. See Carruthers, ‘Indefeasibility, Compensation and Anshun Estoppel in the Torrens System: The Solak Series of Cases’ (2012) 20 APLJ 71. 119. Edgeworth, ‘Planning Law v Property Law: Overriding Statutes and the Torrens Systems after Hillpalm v Heaven’s Door and Kogarah v Golden Paradise’ (2008) 25 EPLJ 82; see also, Edgeworth, ‘Overriding Statutes and the Torrens System (Again)’ (2007) 81 ALJ 713. 120. Griggs, ‘Hillpalm Pty Ltd v Heaven’s Door Pty Ltd’ (2005) 11 APLJ 244. 121. Edgeworth, ‘Indefeasibility and Overriding Statutes: An Attempted Solution’ (2009) 83 ALJ 655. See also Lane, ‘Indefeasibility for What? Interpretive Choices in the Torrens System’ in Moses, Edgeworth and Sherry, Property and Security: Selected Essays, Lawbook Co, 2009, 149 at 150–5. 122. See O’Connor, ‘Double Indemnity — Title Insurance and the Torrens System’ (2003) 3(1) QUTLJJ 141. 123. See Bell and Christensen, ‘Use of Property Rights Register for Sustainability — A Queensland Case Study’ (2009) 17 APLJ 86. 124. See O’Connor, Christensen and Duncan, ‘Legislating for Sustainability: A Framework for

Managing Rights, Obligations and Restrictions Affecting Private Land’ (2009) 35 Mon U L Rev 233; Christensen and Duncan, ‘Aligning Sustainability and the Torrens Register: Challenges and Recommendations for Reform’ (2012) 20 APLJ 112. 125. ACT, s 124; NSW, s 282; NT, ss 125–126; Qld, ss 109–110; SA, s 162; Vic, s 37 (but see s 47(2)); WA, s 55; cf Tas, s 132 (recorder may describe registered proprietor as trustee). 126. See also Premier Group Ltd v Lidgard [1970] NZLR 280; noted (1971) 4 NZULR 290. For equivalent provisions to NSW, s 2(4), referred to in the judgment of Griffith CJ (now s 6(1) of the Conveyancing Act 1919), see SA, s 6; Vic, s 3(1); WA, s 3; see also Francis, Torrens Title in Australasia, 1972, 1 at 20–7. 127. The caveat provisions are contained in: ACT, ss 104–108; NSW, ss 74F–74R; NT, ss 137–147; Qld, ss 121–131; SA, s 191; Tas, ss 133–138; Vic, ss 89–91; WA, ss 136K–142. See further Boyle, ‘Caveatable Interests: the Common Lore Distinguished’ (1995) 69 ALJ 237; Babie, ‘Is Native Title Capable of Supporting a Torrens Title Caveat?’ (1995) 20 MULR 588; Butt, ‘Does the Registered Proprietor Have a Caveatable Interest?’ (1995) 69 ALJ 935; Jackson, ‘Caveats — Limited Extensions Effectively Unlimited’ (1996) APLJ 259; McPhee, ‘Building Contracts — Charge Clauses and Caveats’ (1995) 69 ALJ 484; ‘Griggs, ‘Curial Discretion in the Drafting of Caveats: Is it Preserving the Integrity of the Register?’ (2009) 21 Bond LR 68; Aitken, ‘Current Issues with Caveats: A Pan-Australian Conspectus’ (2010) 84 ALJ 22; Aristei, ‘Recent Developments in the Law of Caveats’ (2008) 16 APLJ 62. 128. Robinson, 357–64; Baalman, 504–11; Stein and Stone, 116–41; Whalan, The Torrens System in Australia, 1982, 230–2; Butt, 764–8; Moore, Grattan and Griggs, 6th ed, 294, 299; Aristei, ‘Recent Developments in the Law of Caveats’ (2008) 16 APLJ 62. 129. Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 at 287; Valerica v Global Minerals Australia Pty Ltd (2000) 10 BPR 18,463; [2000] NSWSC 1144. 130. Crampton v French (1995) V ConvR 54-529, at 66,291; Chiodo v Murphy (1995) V Conv R 54531 at 66–307; Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 at [19]; Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 at 287. 131. Re an Application by Haupiri Courts Ltd (No 2) [1969] NZLR 353; Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672; Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd (2000) 9 Tas R 444. 132. Sinclair v Hope Investments Pty Ltd [1983] 2 NSWLR 870; Re McKean’s Caveat [1988] 1 Qd R 524; Re Cross and National Australia Bank Ltd [1992] Q ConvR 54-433; Capital Finance Australia

Ltd v Bayblu Holdings Pty Ltd [2011] NSWSC 24: and Patmore v Upton (2004) 13 Tas R 95. 133. Hughson, Neave and O’Connor, ‘Reflections on the Mirror of Title: Resolving the Conflict Between Purchasers and Prior Interest Holders’ (1997) 21 MULR 461 at 475; Rodrick, ‘The Response of Torrens Mortgagors to Improper Mortgagee Sales’ (1996) 22 Monash UL Rev 289 at 336; Wright, ‘Does the Registered Proprietor have a Caveatable Interest?’ (1995) 69 ALJ 935; Moore, Grattan and Griggs, 6th ed, 299–300; Heydon, Leeming and Turner, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis, 5th ed, 2015), [4-205]. 134. Vic, s 106(1)(a)(iii); Tas, s 160(3); SA, s 220(g); WA, s 188(7). 135. Qld, s 121; SA, s 191(a); WA, s 137; Vic, s 89(1); NSW, s 74F(5); ACT, s 104(2); NT, s 137; Tas, s 133(1). 136. George v Biztole Corp Pty Ltd (1995) V ConvR 54-519; Sullivan v McMahon [1999] WASC 84; McCourt v National Australia Bank Ltd [2010] WASC 12. 137. See Doherty, ‘Caveat Caveator’ (1993) 67 Law Inst J 598 at [23]. 138. See also Four Oaks Enterprises Pty Ltd v Clark [2002] TASSC 39; Griggs, ‘Curial Discretion in the Drafting of Caveats: Is it Preserving the Integrity of the Register?’ (2009) 21 Bond LR 68 at 75. 139. ACT, s 105(2), (3); NSW, s 74MA; NT, s 143; Qld, s 127; SA, s 191(d); Tas, s 135; (Vic), s 90(3); WA, s 138. 140. See also Commercial Bank of Australasia Ltd v Schierholter [1981] VR 292; Mir Brothers Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907; McCourt v National Australia Bank Ltd [2010] WASC 121; Brogue Tableau Pty Ltd v Binningup Nominees Pty Ltd [2007] WASCA 179. 141. Vic, s 118; NSW, s 74P; Tas, s 138; WA, s 140; ACT, s 108; Qld, s 130; NT, s 146. 142. See, for example, Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106; Hooke v Holland [1984] WAR 16; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589. The Queensland and Northern Territory provisions reverse the onus of proof: Qld, s 130; NT, s 146; Weir, ‘Land Title Act 1994 — Statute for a New Millennium’ (2000) 4 FLJR 185. 143. See Butt, ‘Caveats without Reasonable Cause’ (2005) 79 ALJ 18. 144. On the issue of removal of caveats and compensation, see generally Jackson, ‘Compensation for Removal of a Caveat Without Reasonable Cause’ (1995) 3 APLJ 95; Jackson, ‘Removal of a Caveat — How Convenient?’ (1996) 4 APLJ 1; Jackson, ‘Caveat in Queensland: Getting it Off!’ (1996) 16 Qld Lawyer 204. 145. Harris was Abigail’s clerk; his connection with the case appears later.

146. Hogg, Registration of Title to Land Throughout the Empire, 1920, 125–7. See also per Higgins J (1921) 30 CLR 34 at 69–70; 28 ALR 95 at 107–8. This view was accepted by the High Court in Lapin v Abigail (1930) 44 CLR 166 at 182, 188, 196, 203, and although challenged in the Privy Council, no ruling was made on the point: see the third last paragraph in the judgment of Lord Wright. 147. (1963) 110 CLR 550 at 582; [1964] ALR 971 at 985; see also Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (NSW) 568; [1969] 1 NSWR 621. 148. See Sackville, ‘Competing Equitable Interests in Land under the Torrens System’ (1971) 45 ALJ 396 at 403. Compare Lapin v Abigail (1930) 44 CLR 166 at 205; [1930] ALR 178 at 190 per Dixon J; J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 (5.185C) per Barwick CJ. 149. See also, Sackville, ‘Competing Equitable Interests in Land under the Torrens System — A Postscript’ (1972) 46 ALJ 344; Stubb, ‘Equitable Priorities and the Failure to Caveat’ (1989) AULR 199; McCrimmon, ‘Protection of Equitable Interests Under the Torrens System: Polishing the Mirror of Title’ (1994) 20 Mon LR 300. 150. See also Swan v Secureland Mortgage Investment Nominees Ltd (1992) 2 NZLR 144. 151. But cf Milenkovic v Belleli [2015] VSC 349 (no lodgment of caveat by earlier interest holder; held, not postponed, though later interest holder searched register): at [233]. 152. Finlay v R & I Bank of Western Australia Ltd (1993) 6 BPR 13,232; Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210. See also Taleb v National Australia Bank Ltd [2011] NSWSC 1562. 153. See further, Rodrick, ‘Resolving Priority Disputes Between Competing Equitable Interests in Torrens System Land — Which Test?’ (2001) 9 APLJ 172. See also McConvill, ‘Equity in the Torrens System’ (2001) 8 APLJ 191; Butt, ‘Priority Between Unregistered Torrens Title Interests’ (1999) 73 ALJ 538. 154. See Commonwealth Bank of Australia v Platzer [1997] 1 Qd R 266 (4.193) and the discussion of the doctrine of constructive notice at 4.183C. 155. See Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 (4.203C); Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793; [2003] NSWCA 56 (4.210C); Double Bay Newspapers v AW Holdings Pty Ltd (1996) 42 NSWLR 409. 156. See questions and discussion at 4.50ff. See also Wright, ‘The Continued Relevance of Divisions in Equitable Interests to Real Property’ (1995) 3 APLJ 163; Hepburn, ‘Reconsidering the Benefits of

Equitable Classification’ (2005) 12 APLJ 157. 157. Griggs, ‘Curial Discretion in the Drafting of Caveats: Is it Preserving the Integrity of the Register?’ (2009) 21 Bond LR 68. 158. For a general discussion of s 43A and its interpretation, see Gray, 2nd ed, 380–4. 159. See, for example, Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (NSW) (Pt 1) 568; [1969] 1 NSWR 621; Meriton Apartments Pty Ltd v McLaurin & Tait Developments Pty Ltd (1976) 133 CLR 671; Black v Garnock (2007) 230 CLR 438 at 450; Weller v Williams [2010] NSWSC 716. See Giles, ‘Protection to a Purchaser Before Registration’ (1965) 5 Syd L Rev 108. 160. See, in particular, (1969) 89 WN (NSW) (Pt 1) 568 at 577; [1969] 1 NSWR 621 at 628. 161. For a general comment on the assurance fund provisions, see O’Connor, ‘Double Indemnity — Title Insurance and the Torrens System’ (2003) 3(1) QUTLJJ 141; McCrimmon, ‘Compensation Provisions in Torrens Statutes: The Existing Structure and Proposals for Reform’ (1993) 67 ALJ 904; Stein, ‘The Torrens System Assurance Fund in New South Wales’ (1981) 55 ALJ 150. For an overview of compensation for deprivation, see Moore, Grattan and Griggs, 4.420–4.475; Griggs, ‘The Assurance Fund: Government Funded or Private?’ (2002) 76 ALJ 250–7. 162. See, for example, Tas, s 157(3); Vic, s 109(4); WA, s 210; cf NSW, s 134(2), (5); SA, ss 201(4)(a), 213(h). 163. ACT, ss 154, 155. See also NT, ss 192–196. 164. SA, ss 203, 205; WA, s 201; Tas, s 152(2)(b); ACT, ss 154, 155. 165. SA, ss 205, 208; WA, ss 201, 205; Tas, ss 152(8)(b), (c), 153(1)(b); ACT, s 143. 166. Vic, s 110(2); Registrar-General: NSW, s 120(2); against the state: Qld, s 188(2); or against the territory: ACT, s 194(1); NT, s 194. 167. ACT, ss 145, 146; NSW, ss 133, 134(2)(b); NT, s 196; Qld, s 190; SA, ss 217–219; Tas, s 159; Vic, s 109(3)(a), (4); WA, ss 195–196. See Carruthers and Skead, ‘150 Years On: The Torrens Compensation Provisions in the ‘Last Resort’ Jurisdictions’ (2011) 19 APLJ 174. 168. NSW, ss 131, 135; SA, s 210; Tas, s 155; Vic, s 111; WA, s 208. 169. See Sherry, ‘Torrens Title Compensation for Loss — Recommendations for Reform’ (1996) 4 APLJ 251; Mitchell, ‘Torrens Title Compensation for Loss — the Real Property Amendment (Compensation) Act 2000’ (2001) 9 APLJ 40. 170. For consideration of the effect of this requirement, see Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572; 5.225C.

171. See also Cirino v Registrar General (1993) 6 BPR 13,260 at 13,263; Challenger Managed Investments v Direct Money Corp Pty Ltd (2003) 59 NSWLR 452 at [72]–[75]. 172. Mayer v Coe [1968] 2 NSWR 747; (1968) 88 WN (NSW) (Pt 1) 549; see also Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; 93 ALR 385; Cirino v RegistrarGeneral (1993) 6 BPR 13,260; Registrar-General v Cleaver (1996) 41 NSWLR 713; 7 BPR 15,040. Franzon’s case, in so far as it dealt with the interpretation of WA, s 201, was distinguished by the High Court in Saade v Registrar-General (1993) 118 ALR 219. 173. SA, s 214; NSW, s 129(2); Tas, s 151; Vic, s 109(2); WA, s 196. The Queensland provision (s 189) is more detailed and specifically refers to breach of a fiduciary duty as well as a trust: s 189(1) (a). 174. See also, Selnes, ‘Who Should Pay When Lawyers are Rogues? Queensland’s Real Property Act Assurance Fund or the Legal Practitioners’ Liability Fund?’ (1994) 20 APLJ 21. 175. Grattan, ‘Forged But Indefeasible Mortgages: Remedial Options’ in B Moses et al (eds), Property and Security: Selected Essays, Lawbook Co, 2010, 171 at 184–9. 176. See Grattan, ‘Forged But Indefeasible Mortgages: Remedial Options’ in B Moses et al (eds), Property and Sustainability: Selected Essays, Lawbook Co, 2010, 171 at 177–98. 177. The provisions are compared and evaluated in Grattan, ‘Forged But Indefeasible Mortgages: Remedial Options’ in B Moses et al (eds), Property and Sustainability: Selected Essays, Lawbook Co, 2010, 171 at 193–8. 178. However, the main Acts now in force are as follows: Unit Titles Act 2001 (ACT); Strata Schemes Development Act 2015 (NSW), Strata Schemes Management Act 2015 (NSW); Unit Titles Act (NT); Body Corporate and Community Management Act 1997 (Qld) (largely replacing the Building Units and Group Titles Act 1980) and the Mixed Use Development Act 1993 (Qld); Land Title Act 1994 (Qld); Community Titles Act 1996 (SA); Strata Titles Act 1998 (Tas) (as per s 3 of the Strata Titles Act 1998 (Tas), this Act repealed Pt XIA of the Conveyancing and Law of Property Act 1884 (Tas) and as per Sch 2, a plan registered under the old Act is taken to be a plan under the Strata Titles Act 1998 (Tas)); Subdivision Act 1988 (Vic) Pts 1 and 5 and the Owners Corporations Act 2006 (Vic); Strata Titles Act 1985 (WA).

[page 591]

Co-ownership

CHAPTER

6

INTRODUCTION 6.1

All legal systems provide for more than one person to have an interest

in the same object at the same time. In common law systems, the two modern forms of co-ownership are the joint tenancy and the tenancy in common. They apply to realty as well as personalty. In general, the relevant legal principles allow for joint enjoyment of the property, give rights of free alienation to each co-owner, impose duties in relation to the use of the common property and fair dealing with co-owners, and provide for the termination of co-ownership. Yet the tenancy in common and the joint tenancy have not been adequate to regulate the rights of parties in more recent multi-occupancy urban developments. In particular, the common law rules (even when supplemented by equitable principles) that govern the rights of co-owners between themselves in the absence of specific agreement, are insufficiently detailed to distribute rights and responsibilities in ‘vertical’ communities in the most effective manner. One early attempt to deal with the problem was by means of the corporations law, via what became known as ‘company title’. In the typical

case of company title, a corporation would own a block of apartments or units. Each person who wanted to ‘own’ a unit would buy shares in the corporation. The articles of association of the corporation would entitle the shareholder to occupation or possession of a unit until those shares were sold, and would require payment of annual sums so that the corporation could carry out repairs and refurbishment of the premises. One problem with this model is that the shareholders do not actually own ‘their’ units. This arrangement makes it more difficult for the occupier/shareholder to use the premises as security for a loan. In addition, there were usually restrictions on the right to sell shares; for instance, the consent of other shareholders to the transfer might be required, and sometimes the right to lease was similarly restricted. The solution to these problems was strata title. The essential element of strata title is that the owners collectively own the common property, as a ‘body corporate’, or ‘owners’ corporation’, while at the same time each owner individually has title in his or her own unit.1 The unit owners do not have the right to place restrictions on the sale of individual units. The effect of

[page 592]

this distribution of rights is to allow owners to mortgage, lease or otherwise deal with their property quite freely. Moreover, the legislation imposes significant duties on the body corporate in terms of insurance, maintenance and repair. Bodies corporate must also levy owners to create and maintain a

sinking fund to provide for more extensive repairs and restoration work. Bylaws specific to each strata development may restrict what individual owners can do with their units and may be changed by resolution of the owners for the time being. The legislation also provides for alternative forms of informal dispute resolution. In contrast, disputes between common law co-owners are more likely to be resolved in the courts. The more recent elaborate statutory regimes are beyond the scope of this text. The balance of this chapter will focus only on the fundamental common law concepts of joint tenancies and tenancies in common.

JOINT TENANCY — ESSENTIAL FEATURES 6.2E

Unilateral Severance of a Joint Tenancy, Report No 73 New South Wales Law Reform Commission, 1994 (footnotes omitted)

JOINT TENANCY WHAT IS A JOINT TENANCY? 2.1 Where two or more persons simultaneously hold an interest in the same parcel of land or item of personalty, they do so either as joint tenants or tenants in common. Joint tenancy as a form of co-ownership has two distinguishing features: the right of survivorship and the four unities. The right of survivorship 2.2 The right of survivorship (or jus accrescendi) is the most significant incident of a joint tenancy. When one joint tenant dies the whole of the estate remains with the surviving joint tenant(s). The survivor is not regarded as succeeding to the deceased joint tenant’s interest, as the survivor acquired that interest at the time of transfer. The effect of the death is simply to free the property from the control of one of its owners. The interest of a joint tenant in the subject property cannot be bequeathed or disposed of by will. As long as co-owners remain joint tenants this right to survivorship cannot be defeated. A joint tenant is free, however, to sever the joint tenancy during his or her

lifetime. If severance does take place during the lifetime of the joint tenant, thereby creating a tenancy in common, the interest in the property will devolve in accordance with the provisions of that person’s will or be otherwise distributed in accordance with the rules of intestacy. [See tenants in common: 2.4 below.] The four unities 2.3 The following four unities must be present for a joint tenancy to exist. Unity of Possession: Each co-owner is entitled to possession of the whole of the property, not exclusively for himself or herself but to be enjoyed together with the other joint tenants. Unity of Interest: The interest of each joint tenant must be the same in nature, extent and duration. [page 593]

Unity of Title: All the joint tenants must derive their interests from the same document or the same act. Unity of Time: The interests of all joint tenants must vest at the same point in time. There are two exceptions to this: any conveyance executed to a trustee for beneficiaries or any disposition in a will may give rise to a joint tenancy in the grantees, even where unity of time does not exist. See for example, M’Gregor v M’Gregor (1859) 1 De G F & J 63 at 73; 45 ER 282 at 286. JOINT TENANCY DISTINGUISHED FROM A TENANCY IN COMMON 2.4 Tenants in common each have a distinct yet undivided share in the property, which can generally be dealt with by each tenant in common at their liberty. There is no right of survivorship. Upon his or her death, the share of a tenant in common passes to the beneficiary or beneficiaries nominated in his or her will, or descends to the persons entitled to his or her property under the rules governing intestate succession. The only unity which is essential for there to be a tenancy in common is unity of possession. DEVELOPMENT OF JOINT TENANCY 2.5 Co-ownership is common to many developed systems of law. However, joint tenancy as a means of co-owning property does not appear to have any exact counterpart in systems which are not modelled on English law. Position at common law 2.6 At common law there is a presumption that an interest given to two or more persons either by way of legacy or otherwise is joint unless there are words of severance: Morley v Bird (1798) 3 Ves Jun 629; 30 ER 1192. 2.7 Viewed in its historical context it is clear how this presumption arose. From the perspective of feudal lords, a joint tenancy was preferable because the right of survivorship made it more likely that the land would vest in one tenant from whom feudal dues could be more conveniently exacted. From the point of view of feudal tenants, a joint tenancy was preferable because certain feudal services which would otherwise be due separately from each tenant in common could be avoided. For example, feudal

incidents of tenure connected with inheritance could be avoided through the operation of the right of survivorship. Finally, from the perspective of purchasers of real property a joint tenancy was preferable because it made the investigation of title much easier. Joint tenants hold a single title whereas each tenant in common has a separate title. If a joint tenant died there remained only one title whereas if a tenant in common died, his or her share might be left to a number of persons thereby proliferating the number of titles to be searched before the land could be sold as a whole. 2.8 By the eighteenth century the courts had developed a distinct preference for tenancies in common but were constrained to follow the ‘ancient law’ whereby joint tenancies were favoured. To overcome this constraint the courts tended to interpret the words used in a disposition in a liberal fashion. The slightest indication that a tenancy in common was intended was seized upon. If this was not possible the courts would be ‘… driven to rely on minute grounds for holding a severance to have taken place.’ Williams v Hensman (1861) 1 J&H 546; 70 ER 862 at 866. 2.9 Equity’s preference was always for the certainty and equality of a tenancy in common. Thus, even though the legal estate might have passed by survivorship, if there were [page 594]

circumstances indicating a distinct severalty of interests, the survivor was regarded in equity as holding the legal estate in trust for himself or herself and the legal personal representative of the deceased co-owner. … HOW POPULAR ARE JOINT TENANCIES? 2.14 The benefits accruing from this form of co-ownership, in terms of smooth transition of ownership, make joint tenancies an attractive arrangement for couples purchasing property together. This convenience is reflected in the high proportion of coowners preferring to adopt this arrangement. The Land Titles Office estimates that in NSW joint tenancies outnumber tenancies in common by a factor of 11 to 1.14.

6.3

Joint tenants are said to hold per my et per tout (for nothing and for all)

meaning that no joint tenant has any individual share, but that each has a right, with the other joint tenant, to the whole of the property.2 According to Blackstone, each joint tenant is bound to the other/s in a ‘thorough and intimate union of interest and possession’.3 Despite the fact that a joint tenant, strictly speaking, does not have an individual ‘share’, joint tenants can

freely dispose of their interests to another person by ‘severing’ their shares. Traditionally, a joint tenant who wished to convey his or her interest to another joint tenant did so by release of that interest, rather than by conveyance. As indicated in the above extract, the right of survivorship (otherwise known as the jus accrescendi) is the most important feature of a joint tenancy. The right of survivorship prevents a joint tenant from disposing of his or her interest in the property by will. This is because the right of survivorship precedes the operation of the will. At common law, a corporation was incapable of being a joint tenant because a corporation does not ‘die’. Most jurisdictions now provide that a corporation can hold any real or personal property in joint tenancy, as if it were an individual.4 For the purposes of survivorship, dissolution of the company is equated to death. This provision was introduced to allow corporations (for example, banks) to hold property as trustees. Trustees normally hold property as joint tenants, so that if one trustee dies it is unnecessary to arrange for transfer of property from the personal representative of that trustee to another trustee. 6.4

The right of survivorship makes it necessary to determine the order in

which joint tenants died. Legislation in some jurisdictions provides that where two or more persons die in circumstances which make the order of their deaths uncertain, the deaths are presumed to have occurred in order of seniority, if there is no evidence to the contrary.5 The Australian Capital Territory, Western Australia and the Northern Territory deal with the problem differently,

[page 595]

by providing that where there is uncertainty as to the order of deaths, the property devolves as if the joint tenants had held the property as tenants in common in equal shares: Administration and Probate Act 1929 (ACT) s 49Q; Property Law Act 1969 (WA) s 120(d); Law of Property Act (NT) s 216(2)(d).

6.5

Questions

A, aged 40 years, and B, aged 50 years, are joint tenants of Blackacre. They die in the same car accident, in circumstances where their order of death is uncertain. A’s will leaves all her property to C. B dies intestate, leaving D as his only relative. Who is entitled to Blackacre? Under the first of the two mechanisms outlined in 6.4, B, as the older of the two is presumed to have died first and A would take the whole of the interest in Blackacre by survivorship. As a result, C would be entitled to Blackacre. Under the second mechanism A and B would be treated as having held as tenants in common rather than as joint tenants and therefore C and D would be entitled to Blackacre as tenants in common in equal shares. Which of the two mechanisms outlined for dealing with the uncertainty of the order of deaths of joint tenants is fairer?

TENANCY IN COMMON — ESSENTIAL FEATURES 6.6E

Co-ownership under Victorian Land Law M Da Costa, (1961) 3 MULR 137 at 166–8

… [I]t may today be said that if two or more persons hold an estate as co-owners, and are not joint tenants, they are necessarily tenants in common. Tenancy in common is a seemingly curious blend of co-ownership and several ownership. Each tenant in common is entitled to the possession of the whole of the land, and yet, unlike a joint tenant, is entitled only to a distinct share thereof, a combination of concepts possible only because the physical boundaries of his share, called an undivided share, have not been determined. This entitlement to only an undivided share is the basis of tenancy in common. As a result, the appropriate method of transfer by one tenant in common of his interest to another has always been by way of conveyance … In a tenancy in common, unity of possession must exist (for if this unity does not exist, co- ownership itself does not exist), but it is fortuitous whether, as a result of tenancy in common, all four unities are created. All may be present, the tenancy not being joint because of the existence of other circumstances; or one or all of the unities of interest, title or time may be absent. For example: A conveys Blackacre to B and C, B to take one-third thereof and C the remaining two-thirds. A conveys Blackacre to B and C, B to take a life interest and C an estate in fee simple. In both examples B and C take as tenants in common as there is no unity of interest. [page 596]

A conveys Blackacre to X for life, remainder to B at 21 and C at 21. In 1958 B attains the age of 21; in 1959 C attains the age of 21; in 1960 X dies. B and C take as tenants in common for their interest vested at different times. (Limitations contained in a conveyance to uses or in a will provided an exception to this requirement.) B and C are joint tenants. B conveys his interest to D. C and D take as tenants in common as each derived title from a different disposition; further, each acquired his interest at a different time. A tenant in common may deal with his undivided share as he wishes … A tenant in

common may alienate his undivided share, inter vivos, and … the undivided share may itself become the subject matter of co-ownership. The right to survivorship, a vital characteristic of a joint tenancy, does not apply as upon the death of a tenant in common his undivided share will pass under his will or to the persons entitled upon his intestacy. The benefit of survivorship may, however, be expressly attached to the estate at the time of creation of the tenancy in common: Haddersley v Adams (1856) 22 Beav 266; 52 ER 1110.

CREATION OF CO-OWNERSHIP — JOINT TENANCY OR TENANCY IN COMMON? 6.7

In deciding whether a joint tenancy or a tenancy in common has been

created, the legal and equitable positions must be considered separately. In some circumstances, persons who hold interests as joint tenants at law may be found to be tenants in common in equity.

At law 6.8

As the extract from the New South Wales Law Reform Commission

Report (see 6.2E) indicates, the common law leaned in favour of joint tenancy. Thus, where there was a conveyance or devise to two or more persons, the result was a joint tenancy at law unless either the four unities were not present or ‘words of severance’ were used in the instrument. (The common law principle appears to apply to land under the Torrens system, except where it has been negatived by a statutory provision.) Words of severance were words which showed an intention that each of the co-owners should take a distinct share in the property. Examples of words of severance include ‘in equal shares’, ‘share and share alike’ and ‘amongst or respectively’.

The concept of equal shares is inimical to the concept of a joint tenancy because the nature of survivorship is that one tenant (the survivor) will get the whole of the interest to the exclusion of the estate of the other. The same principles applied to the creation of interests in personalty. As stated by Lord Hatherly LC in Robertson v Fraser (1871) 6 Ch App 696 at 699: ‘[A]nything which in the slightest degree indicates an intention to divide the property must be held to abrogate the idea of a joint tenancy, and to create a tenancy in common’.

[page 597]

6.9

Questions

Consider the effect of the following limitations in relation to land in a deed and in a will: 1.

To A, B and C in fee simple equally.

2.

To A, B and C in fee simple.

3.

To A, B and C in fee simple share and share alike.

4.

To such of my children who shall attain the age of 21 years.

5.

To the children of X.

6.

To be divided among my children.

6.10

In Re Leaver, a will provided that the residue of the estate was to be

held on trust for A and B absolutely as joint tenants. Later, the testator made

a codicil providing that he wished to include C to share equally as a joint tenant with A and B, previously named as joint tenants in the will. Derrington J held at 57–8 that the use of the word ‘equally’ indicated that A, B and C should take as tenants in common.6 6.11

Concurrent ownership may exist in other forms of property besides

land. In Dennis v Dennis (1971) 124 CLR 317; 45 ALJR 605; [1972] ALR 599, the plaintiff sought both a declaration that he was the co-owner of a horse as a tenant in common with the defendant, and the taking of an account of the prize moneys received by the defendant. In his judgment, Windeyer J differentiated between: 1.

a transfer to the plaintiff of a legal half share in the horse;

2.

a contract for the sale to the plaintiff of a half share in the horse, which, if specifically enforceable would confer an equitable half interest in the horse on the plaintiff; and

3.

a contract under which the plaintiff would receive a half share of winnings and of the proceeds of sale of the horse, in return for payment of training expenses. Windeyer J held that the substantive arrangement between the parties fell

into the third category, so that the plaintiff had failed to establish he was a co-owner, either in law or in equity. What is the difference between being the owner of a one-half share in a horse and being entitled to one-half of the net winnings of the horse plus one-half of its sale price? 6.12

A owns a horse. He sells B a half-share for $2,000. The horse wins

several races and A and B share the net winnings. Six months after the

original sale, A, without B’s authority, sells the horse for $8,000 to C. C knows nothing of B’s interest in the horse. The true value of the horse at the time of the sale was $12,500. What remedies are available to B? As Derham notes, a co-owner can generally not sue another co-owner in conversion where there has been a wrongful disposal of the chattel. The only exception to the rule is where the sale of the chattel resulted in its destruction, as in the case where a ship was wrongfully sold, and was sunk by the purchaser shortly after: Barnardiston v Chapman (1715) 4 East 121. Derham argues that the rule should be revised: see ‘Conversion by Wrongful Disposal as Between Co-owners’ (1952) 68 LQR 507.

[page 598]

In equity 6.13

As the extract at 6.2E above indicates, equity has traditionally

favoured tenancies in common: see Delehunt v Carmody (1986) 161 CLR 464. In three situations in particular, equity would hold that joint tenants at law would hold as tenants in common in equity.

Business partners 6.14

The first situation was where the joint tenants were business partners.

The leading case is Lake v Craddock (1732) 3 P Wms 158; 24 ER 1011. In 1695, the defendant (Craddock), Craddock’s father, the plaintiff (Lake) and three others took a conveyance of a certain marshland. The price for the land

was £5,145, of which Craddock’s father contributed £1,025. The object of the enterprise was to drain the land in order to increase its value and make a profit. The conveyance to the five business partners did not employ words of severance so that they took the entire legal estate as joint tenants. About five years later, Craddock’s father abandoned the enterprise altogether and took no further part in it. In 1703 the remaining four partners purchased some neighbouring land as part of the scheme. The purchase was made in their names, omitting Craddock’s father. Craddock’s father died leaving the defendant Craddock as his heir and executor. Lake, one of the original partners, brought a bill against the others for an account and division of the partnership estate. The Master of the Rolls decided that the five partners, although joint tenants at law, were tenants in common in equity. The main reason for his conclusion was that it would be unfair to permit the principle of survivorship to operate in an undertaking designed to produce a profit, since the partner who happened to die first would lose all his investment. However, he imposed as a condition of the defendant Craddock’s entitlement to a onefifth share in the original purchase an obligation to contribute one-fifth of the purchase price of the neighbouring land acquired in 1703 (that venture having turned out to be unprofitable). On appeal, this decree was affirmed by the Lord Chancellor, the obligation to contribute to the unprofitable venture being justified as a reasonable condition imposed in the exercise of the discretion that a court of equity always has in granting relief. In there any justification for the rule that business partners acquiring

interests in land do so as tenants in common in equity, other than that of avoiding unfairness to the partner who happens to die first?

Money advanced on mortgage 6.15

A second case in which equity will presume a tenancy in common,

despite the position at common law, is where two or more persons advance money on mortgage, whether in equal or unequal shares: Re Jackson (1887) 34 Ch D 732. The reason behind this rule is obvious and resembles that in Lake v Craddock. Mortgagees usually lend money only as an investment and it is unlikely that co-owners would expect to forgo their money if they should die before it was repaid. Originally, the presumption of a tenancy in common in equity meant that when a mortgagor redeemed, a receipt for the money from all co-owners had to be obtained. Moreover, if one of the tenants in common died, the mortgagor had to look to the legal personal representatives of the deceased co-owner for a receipt. This was inconvenient, and often delayed redemption for some time. To overcome this problem it became the practice to insert a joint account clause in mortgages when money had been lent by two or more people. This clause recited that both in law and in equity the money belonged jointly to the mortgagees.

[page 599]

The statement was usually untrue, but it protected the mortgagor, who could safely repay the money to one of the mortgagees or a surviving mortgagee if

the other mortgagee had died. However, this was a mere conveyancing device, and did not affect the rights of the mortgagees inter se. Thus, a surviving mortgagee who received repayment of the whole of the money lent would hold the relevant portion of it on trust for the personal representative of the deceased mortgagee. Statute now provides that a person dealing in good faith with a mortgagee is entitled to assume that the mortgagees, if more than one, were entitled to the money on a joint account and that the mortgagee can give a valid receipt for the money.7

Unequal contributions to the purchase price 6.16

A third example of equity’s dislike of the joint tenancy is the principle

that, if two or more people acquire an interest in land (or any other object), having contributed unequally to the purchase price, they are presumed in equity to hold as tenants in common in proportion to their respective contributions: Robinson v Preston (1858) 4 K & J 505; 70 ER 211. The principle was applied in Bull v Bull [1955] 1 QB 234; [1955] 1 All ER 253, where a mother and son purchased a dwelling house, the son contributing most of the purchase price and taking the conveyance in his own name. It was held that mother and son were tenants in common in equity in proportion to their contributions and that the son could not evict the mother from the house since she was entitled to concurrent possession of the premises.8 The presumption has been extended to the case where a person assumes joint liability under a mortgage, rather than making a contribution to the purchase price.9 The presumption will not arise where a conveyance to the parties expressly declares their beneficial interests in the property: Goodman v Gallant

[1986] 1 All ER 311 (CA). By contrast, where parties contribute equally to the purchase price, a joint tenancy is presumed in equity. The following case explores the question whether the three situations where equity would presume a tenancy in common are exhaustive. 6.17C

Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549; [1986] 1 WLR 590; [1986] 1 All ER 711 Privy Council

[United Overseas Land Ltd (‘United’) purchased a building from Malayan United Credit Property Pty Ltd, which was a subsidiary of Malayan Credit Ltd. Pursuant to a clause in the agreement for sale, United leased the seventh floor of the building to Malayan Credit Ltd (the defendant) and Jack Chia-MPH Ltd (the plaintiff). Prior to entry into the lease, the plaintiff and defendant had arranged for the allocation of the floor space between them and for apportionment of liability for rent. The parties went into occupation of the allocated areas and were separately invoiced by United Overseas for their proportion of rents and

[page 600]

charges. The issue before the Privy Council concerned the nature of the parties’ interests in the property.] Lord Brightman: … Their Lordships will deal first with the general principles involved in the case. As the lease itself contains no words of severance, it necessarily takes effect as a grant to the lessees as joint tenants at law. As regards the beneficial interest in the lease in equity, there are three possible situations. Situation A. The lessees at the inception of the lease hold the beneficial interest therein as joint tenants in equity. This will be the case if there are no circumstances which dictate to the contrary. On subsequent severance, the lessees would hold the beneficial interest in equal shares. Situation B. The lessees at the inception of the lease hold the beneficial interest as tenants in common in equity in equal shares. Situation C. The lessees at the inception of the lease hold the beneficial interest as tenants in common in equity in unequal shares. Situation A is that which is advocated by the plaintiff. The argument is that, in the

absence of an express agreement, persons who take as joint tenants at law hold as tenants in common in equity only in three classes of case: first, where they have provided the purchase money in unequal shares; in this case they hold the beneficial interest in similar shares: secondly, where the grant consists of a security for a loan and the grantees were equal or unequal contributors to the loan; again they would hold the beneficial interest in the same shares; and thirdly, where they are partners and the subject matter of the grant is partnership property. See for example, Snell’s Principles of Equity, 28th ed (1982), pp 37 and 38. The plaintiff contends that the instant case falls into none of these three categories. Therefore it is said that the lessees hold as joint tenants in equity as well as at law, with the result that either party was at liberty to sever the joint tenancy and thus ensure that the beneficial interest was thereafter held in equal shares. Subject to severance, which either party can secure at will, there is no difference between the end result of situation A, and situation B. Situation C is that which is advocated by the defendant. If situation A applies to the present case, it is not in dispute that there has been a severance. The matter came before the High Court on affidavit evidence. The trial judge held that as the premises were disproportionately divided between the parties, there was a tenancy in common in unequal shares; in other words, situation C. He said that he was fortified in this view by the fact that the stamp duty was paid in unequal shares, as also the rent. The Court of Appeal reversed the trial judge, holding that there was a joint tenancy which, on later severance, became a tenancy in common in equal shares; in other words, situation A. The Court of Appeal directed a sale. It seems to their Lordships that where premises are held by two persons as joint tenants at law for their several business purposes, it is improbable that they would intend to hold as joint tenants in equity. Suppose that an accountant and an architect take a lease of premises containing four rooms, that the accountant uses two rooms, and that the architect uses two rooms. It is scarcely to be supposed that they intend that if, for example, the accountant dies first without having gone through the formalities of a severance, the beneficial interest in the entire premises is to survive to the architect. Their Lordships do not accept that the cases in which joint tenants at law will be presumed to hold as tenants in common in equity are as rigidly circumscribed as the plaintiff asserts. Such cases are not necessarily limited to purchasers who contribute unequally, to co-mortgagees and to partners. There are other circumstances in which equity may infer that the beneficial interest is intended to be held by [page 601]

the grantees as tenants in common. In the opinion of their Lordships, one such case is where the grantees hold the premises for their several individual business purposes. Furthermore, there is no fundamental distinction to be drawn for present purposes between joint tenants who acquire a term of years on payment of a premium and at a token rent, and joint tenants who acquire a term of years on the payment of no premium but at a rack rent [that is, a market rent]. If in the first case the lessees contribute unequally towards the premium, it is plain that they hold the term of years (in the absence of contra-indications) as tenants in common in equity in unequal shares. The

premium is the purchase money. In the second case the rent is equivalent to the purchase money. If that is paid in unequal shares, logically the joint tenants should hold the beneficial interest in equity (in the absence of contra-indications) as tenants in common in unequal shares. There are features in the instant case which appear to their Lordships to point unmistakably towards a tenancy in common in equity, and furthermore towards a tenancy in common in unequal shares: (1) the lease was clearly taken to serve the separate commercial interests of the defendant and the plaintiff. (2) Prior to the grant of the lease the parties had settled between themselves what space they would respectively occupy when the lease came to be granted. This was roughly 62 per cent to the defendant and 38 per cent to the plaintiff. (3) Prior to the grant of the lease, the parties had made meticulous measurements of their respective allotted areas, and divided their liability for the rent and service charge in unequal shares in accordance with the respective areas that they would occupy. (4) Prior to the grant of the lease, the plaintiff was invoiced for its due share of the deposit which was to be paid to the landlord as security under the terms of the lease, the apportionment being made in unequal shares in the like manner. This deposit was a sum which was not to be refundable by the landlord until the termination of the lease. The plaintiff did not dispute the principle of this apportionment. (5) After the grant of the lease, the defendant and the plaintiff paid the stamp duty and the survey fees in the same unequal shares. (6) As from the grant of the lease, the rent and service charges were paid in the same unequal shares. With great respect to the Court of Appeal, their Lordships feel unable to support their conclusion that the parties are beneficially entitled in equal shares. In the opinion of their Lordships, the payment of rent and service charge in unequal shares, the payment of the stamp duty and the survey fee in unequal shares, and the unequal contributions to the deposit payable under the terms of the lease which was to be outstanding for the whole period of the lease, are comparable to the payment of purchase money in unequal shares. All the circumstances point decisively to the inference that the parties took the premises in equity as tenants in common in unequal shares, those shares being (as a result of the meticulous calculations made by the parties) 3,614 shares to the defendant and 2,306 shares to the plaintiff. Their Lordships are, however, in agreement with the Court of Appeal that a partition of the premises is inappropriate and that they should be sold by order of the court under the Supreme Court of Judicature Act …

Statutory reform 6.18

As the extract at 6.2E above indicates, in New South Wales the

common law presumption in favour of a joint tenancy has been reversed by legislation. Equity will not follow the law and will instead favour tenancies in common, even though a specific provision may not strictly apply: Delehunt v

Carmody (1986) 161 CLR 464, discussed below at 6.23. The Conveyancing Act 1919 (NSW) s 26 provides as follows.

[page 602]

6.19E

Conveyancing Act 1919 (NSW)

26 Construction of conveyance etc of any property beneficially to two or more persons together (1) In the construction of any instrument coming into operation after the commencement of this Act a disposition of the beneficial interest in any property whether with or without the legal estate to or for two or more persons together beneficially shall be deemed to be made to or for them as tenants in common, and not as joint tenants. (2) This section does not apply to persons who by the terms or by the tenor of the instrument are executors, administrators, trustees, or mortgagees, nor in any case where the instrument expressly provides that persons are to take as joint tenants or tenant[s] by entireties.

6.20

Section 26(2) provides for exceptions from the statutory deeming: see

Minter v Minter (2000) 10 BPR 18,133. Why are executors, administrators, trustees and mortgagees excluded from the operation of this presumption? Similar legislation is in force in Queensland, the Northern Territory and the Australian Capital Territory, although not confined to ‘instruments’.10 Each of the Queensland and Northern Territory sections provide that the provision equivalent to s 26(1) of the Conveyancing Act 1919 (NSW) does not apply to a disposition for partnership purposes in favour of persons carrying on business in partnership.11 In the absence of an intention to the

contrary, they are presumed to be joint tenants at law and tenants in common in equity: s 35(3). In addition, in both Queensland and the Northern Territory, in relation to Torrens system land, if an instrument transferring an interest to co-owners does not show whether they are to hold as tenants in common or as joint tenants, the Registrar must register them as tenants in common.12 The provisions of the Australian Capital Territory, New South Wales, the Northern Territory and Queensland statutes apply to dispositions of real and personal property.13 However there is some doubt as to whether the provisions apply to dispositions of choses in action: see Buchan v Nash [1983] 2 NSWLR 575. In all other jurisdictions the common law and equitable rules outlined above apply.14

[page 603]

6.21C

Mitchell v Arblaster [1964–65] NSWR 119 Supreme Court of New South Wales

Hardie J: The above-named testator, by his will dated 22 October 1960, left his residuary estate to ‘Harry Mitchell and Nellie Mitchell’. The same persons were appointed as his executors. On 8 July 1961, ie, after the date of the will and before the death of testator, the person referred to in the will as Harry Mitchell (in fact Henry Benjamin Mitchell) died. About two years later, on 18 June 1963, the testator died without having made a fresh will or a codicil to take care of the position created by the prior death of one of the two main beneficiaries. The question argued in this originating summons was whether the person named in the will as Nellie Mitchell (in fact Eleanor Beatrice Mitchell), the plaintiff, takes the whole of the deceased’s residuary estate or one-half only, the other half share passing to the deceased’s next-of-kin as on an intestacy. The persons named in the will as Harry Mitchell and Nellie Mitchell were husband and wife, though they were not so described in the will. They were also appointed as the

executors. That appointment was clearly a joint one, with the result the surviving appointee became entitled to obtain, and did obtain probate of the will. It is well settled law that, subject to statutory provision to the contrary such as that contained in s 29 of the Wills Probate and Administration Act 1898, as amended, a beneficiary named in a will takes no interest, and his estate takes no interest in the event of his predeceasing the testator. There is then a lapsed share, and the problem frequently arises, as it has in this case, whether the lapsed share in residue passes as an increment to the shares of the other beneficiaries entitled to residue or passes as on an intestacy. The claim of the plaintiff to take the whole residuary estate could be supported in one of two different ways, either on the basis of the residuary gift being a joint one (which would carry with it the benefit of accruer by survivorship, whether the death of the other beneficiary occurred before or after the death of the testator) or as a class gift (in which event the plaintiff would take the whole residue as the sole member of the class in existence at the date of the death of the testator, in the event — as happened — of the other beneficiary predeceasing the testator). See Jarman on Wills (8th ed) vol iii, p 1799; Knight v Gould (1833) 2 My & K 295 at 298; 39 ER 956 at 957–8. The argument that the beneficial gift was a joint one was based mainly on the provisions of s 26(2) of the Conveyancing Act 1919, as amended. It was contended that the sub-section had the effect of preserving, in a case such as the present, the earlier presumption in favour of joint interests. That sub-section provides, inter alia, that sub-s (1), which reverses the earlier presumption, does not apply to ‘persons who by the terms or by the tenor of the instrument are executors, administrators, trustees, or mortgagees’. It is true that the two persons in question are executors, but they are also beneficiaries, and I am satisfied the sub-section has no application to interests which they take as beneficiaries and not as executors. I am accordingly of the opinion that the gift to the two residuary beneficiaries described in the will as ‘Harry Mitchell and Nellie Mitchell’ was not appropriate to create a joint tenancy. The other approach raises the question as to whether the residuary gift to the two named persons was in effect a class gift, ie a gift to them in their official capacity as executors and thus conditional upon their surviving the deceased and obtaining a grant of probate. The relevant principle to apply is set out in the judgment of the Lord Chancellor in Knight v Gould … The language of the will now under consideration gives the residuary estate to [page 604]

the two beneficiaries in question as named persons; the fact that they are also appointed as executors falls far short of establishing the essential basis for the rather special principle applied in Knight v Gould. Summarising the position, I am satisfied that the will in question was expressed in language appropriate to give the residuary estate to the two named beneficiaries in equal shares. One of those beneficiaries having died before the will came into operation, and the testator not having revised his testamentary dispositions, there is an intestacy as to the one-half share which the deceased beneficiary would have taken in the estate, had he survived the testator.

6.22 Questions 1.

Would the decision in this case have been the same in jurisdictions other than the Australian Capital Territory, New South Wales, the Northern Territory and Queensland?

2.

Should jurisdictions without legislation in the form of s 26 of the Conveyancing Act 1919 (NSW) adopt similar legislation?

3.

Are there any disadvantages in the presumption of a tenancy in common? For another case interpreting the Conveyancing Act 1919 (NSW) s 26, see Mole v Ross (1950) 1 BPR 9101, discussed at (1951) 24 ALJ 356.

6.23

The principle that tenancies in common should be favoured over joint

tenancies was applied, with controversial results, in Delehunt v Carmody (1986) 161 CLR 464; 68 ALR 253; 61 ALJR 54. In that case, a man and a woman had lived together as de facto partners for 31 years, in a house registered in the man’s name. Both had contributed equally to the purchase price of the property. In equity, where equal contributions are made to the purchase price, the person with legal title holds that title on trust for himself or herself and other contributors as joint tenants. In this case, however, it was held that equity should follow the principles established by the Conveyancing Act s 26, so that the property was held on trust for the man and his de facto spouse as tenants in common. This was so even where, as in this instance, the

instrument was a disposition to one person. The result was that on the death of the man, his de facto wife of 31 years received only her own half share and his estranged wife was entitled to his half share in the property. In Schmeling v Stankovic (1984) 3 BPR 9325, it was held that s 26 of the Conveyancing Act 1919 (NSW) did not apply to a provision for redemption contained in a mortgage of general law land. Since the mortgagors were joint tenants, the equity of redemption remained in them as joint tenants throughout the period of the mortgage. On the death of one mortgagor, the principle of survivorship operated in favour of the remaining mortgagor.

Co-ownership and the Torrens system 6.24

In New South Wales, Victoria, South Australia, Western Australia,

and the Australian Capital Territory, the Torrens legislation provides that if two or more persons are registered as

[page 605]

joint proprietors of an estate or interest in land, they are deemed to be entitled as joint tenants.15 The intention behind such provisions is to remove the feudal language of tenure and tenants from the Torrens system, so that persons seeking to have the relationship of joint tenants would be registered as ‘joint proprietors’. But some doubt has arisen about whether the purpose of these provisions is to apply the common law presumption of a joint tenancy to Torrens system land, or whether the provision is intended to apply only to

persons described as joint proprietors.16 Registrars have attempted to overcome this difficulty by requiring instruments presented for registration to specify whether the co-owners are to take as joint tenants or tenants in common. An instrument which does not state the nature of co-ownership will in practice not by registered, and in the Australian Capital Territory must not be registered.17 However, in the Northern Territory and Queensland, the Registrar must register co-owners as holding their interests either as tenants in common or as joint tenants.18 If the instrument does not indicate how they are to hold, they are to be registered as tenants in common.19 In Tasmania, people named as transferees or proprietors are joint tenants, if there are no words of severance: see Land Titles Act 1980 (Tas) s 44. 6.25

In New South Wales, the interaction between the Real Property Act

1900 s 100(1) (as referred to in 6.24 above) and the Conveyancing Act 1919 s 26 (set out in 6.19E above) has been unclear. In Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501, Mr and Mrs Hircock were protected tenants of a house which the defendant wished to demolish in order to erect a block of home units. The defendant agreed with the Hircocks, in a document under seal, to grant them a lease of a unit in the building at a fixed rental, for a term lasting for the lifetime of the survivor. In due course, a lease from the defendant to the Hircocks was registered. The lease was for 10 years with an option to renew for a further 10 years subject to a proviso that the lease and any extension would determine on the death of the survivor of the lessees. The option was exercisable ‘at the written request of the Lessees’. Mrs Hircock died during the first 10-year period and Mr Hircock, the plaintiff, purported to exercise the option in his own right. The

question was whether he was entitled to do so as a surviving joint lessee, or whether the option could only be exercised with the participation of the representative of the estate of Mrs Hircock. One argument for the plaintiff was that s 26 of the Conveyancing Act was inconsistent with s 100(1) of the Real Property Act and therefore the lessees, on registration of the lease, held jointly. Hutley JA (at 505–6) stated that this argument, if correct, would produce an extraordinary situation, arguing that until registration the executed lease would be a tenancy in common (by s 26(1)), but upon registration would become a joint tenancy. Rather, he concluded that s 100(1) simply applied the incidents of a joint tenancy at common law to an interest registered as ‘joint proprietorship’. It followed that, under s 26, the parties were presumed to hold the beneficial estate as tenants in common. This, however, was only a rule of construction and the proper interpretation of the lease, taking into account the surrounding circumstances,

[page 606]

was that the option was to be exercisable by the surviving lessee. Thus, the presumption established by s 26 was rebutted and the option had been effectively exercised. Hutley JA went on to hold that even if the lessees held as tenants in common, the option, as a matter of construction, could be exercised by one of the lessees. In Equititrust Ltd v Franks (2009) 258 ALR 388 the New South Wales Court of Appeal applied the reasoning in Hircock

v Windsor Homes (Development No 3) Pty Ltd to an assignment governed by Queensland law: see Property Law Act 1974 (Qld) s 35. In Gerard Cassegrain and Co Pty Ltd v Cassegrain, Basten JA noted that s 100(1) had the effect of incorporating only such common law principles relating to joint tenancies as are not inconsistent with the principles of the Torrens system.20 While these include the rights of survivorship, they are overridden, for example, by the statutory definition of fraud in the Torrens statutes. 6.26

Registration of persons as joint tenants conclusively determines the

nature of their interest, so far as third parties are concerned. However, even in states with Torrens legislation that provides that if two or more persons are registered as joint proprietors, they are deemed to be entitled as joint tenants, this does not prevent joint tenants establishing that in equity, the parties hold as tenants in common between themselves.21 6.27

Where equitable tenants in common over certain property later

acquire the legal interest in the same property as joint tenants, but otherwise co-extensive with their equitable interest, it has been held that the equitable interests merge in the legal interest, so that the parties become joint tenants at law and in equity: Selby v Alston (1797) 3 Ves 339; 30 ER 1042; Re Selous [1901] 1 Ch 921. This rule has been abrogated in some jurisdictions, with the result that the parties will hold as tenants in common both in law and equity, unless they otherwise agree.22

RIGHTS OF ENJOYMENT INTER SE OF

CO-OWNERS OF LAND Rights of occupation 6.28

Each co-owner has the right to possess and enjoy the whole of the

land. As a consequence of this rule, one co-owner cannot bring an action for trespass against another co-owner except in the case where the co-owner’s occupation has excluded the other co-owner from possession, or, possibly, where a co-owner does something preventing common enjoyment of the land: see Stedman v Smith (1857) 8 E1 & B1 1, 7; 120 ER 1, 3. The right to possess and enjoy the whole of the land includes the right to invite someone to live on the premises: see Thrift v Thrift (1975) 10 ALR 332.

[page 607]

Occupation rent 6.29

In general, a co-owner who elects not to exercise his or her right of

possession is not entitled to claim compensation from the occupying coowner/s. There were two exceptions at common law. First, if a co-owner was ousted by a co-owner, an occupation rent could be charged. The second exception was where the parties agreed on the payment of an occupation rent. The principle that a co-owner in sole occupation of property is not normally chargeable for occupation rent was applied in Luke v Luke (1936) 36 SR (NSW) 310. Laura and Ada Luke occupied land as tenants in common under

their father’s will from 1915 to 1920. In 1920 Laura died intestate and thereafter Ada remained in possession of the land. She did not exclude Laura’s next of kin and they did not attempt to exercise their rights of possession. In a suit for administration of the father’s estate, brought many years later, the administrator sought sale of the land and an order charging Ada with an occupation rent. It was held that Ada was not chargeable, since she had neither excluded the other co-owners, nor claimed an allowance for improvements. 6.30

In Jones v Jones [1977] 1 WLR 438, the doctrine of proprietary

estoppel was used to modify, in one respect, the usual relationship between co-owners. In that case, the defendant’s father bought a house in his (the father’s) name. However, the defendant contributed one-quarter of the purchase price and understood that his father intended to give him the house. After the father’s death, his widow brought proceedings claiming possession of the house. The judge held that the defendant had a one-quarter beneficial interest as tenant in common and accordingly refused to make an order of possession against him. There was no appeal from this decision. Later, the widow commenced a second action, claiming three-quarters of a fair rent, or, alternatively, the sale of the house. The Court of Appeal held that one tenant in common could not claim rent from another even though that other occupied the whole. Moreover, the plaintiff could not obtain an order for sale of the property and division of the proceeds, since the father’s conduct led the son reasonably to believe he could stay in the house for his lifetime. The son, having acted on this expectation, could not be turned out of possession or subjected to an order for sale.

6.31

Where co-owners agree that one or more of them should occupy the

premises, such an agreement can provide for payment of occupation rent. For example, the co-owners may agree that one of their number will manage the property but that the other co-owner must pay rent, or one co-owner may lease his or her interest to another: Leigh v Dickeson (1884) 15 QBD 60.

Ouster 6.32

If one co-owner prevents another co-owner from exercising their

right to possess the entire property, the ‘ousted’ party may sue for an occupation rent, or fee. This rent is in the nature of mesne profits, because ouster is an instance of ‘ejectment’: see Chieco v Evans (1990) 5 BPR 11,297 (SC (NSW)); Marriott v Franklin (1993) 60 SASR 457 (SC (SA)). Merely telling one’s co-owner to ‘get out’ does not constitute ouster in the event that the addressee leaves: Cardinaels-Hooper v Tierney (1996) NSW ConvR ¶55,887 (SC (NSW)). The inconvenience caused by one joint tenant’s renovations to a driveway do not amount to an ouster: Ferguson v Miller [1978] 1 NZLR 819. In England, courts have become increasingly willing to impose an obligation to pay occupation rent where it is unreasonable to expect the parties to continue to live together. In Chhokar v Chhokar [1984] FLR 313; 14 Fam Law 269,

[page 608]

the English Court of Appeal held that today the correct test for determining

whether a co-owner should pay occupation rent was whether this was fair. See also Mayo v Mayo [1966] NZLR 849; Re Pavlou [1993] 1 WLR 1046; [1993] 3 All ER 955. Australian courts have not gone so far. Is this a preferable approach? Consider the following case. 6.33C

Biviano v Natoli (1998) 43 NSWLR 695 Court of Appeal of New South Wales

[Biviano and Natoli were tenants in common of a property where they lived with Biviano’s daughter in a domestic relationship. After the relationship broke down, Natoli was the subject of an apprehended violence order prohibiting him from going near Biviano, her child or their residence (the co-owned property). Natoli commenced partition proceedings under s 66G of the Conveyancing Act 1919 and sought occupation rent for the period during which he was excluded from the property.] Beazley JA: The issue between the parties here was quite specific — namely whether, in the circumstances to which I have referred, the appellant had ousted the respondent from the premises so as to entitle the respondent to an occupation fee. The true nature of ouster is that it constitutes a trespass by one co-tenant of another co-tenant’s rights in respect of the property. ‘An express denial of the title and right to possession of fellow tenants, brought home to the latter openly and unequivocally’, would clearly amount to an ouster: see 20 Am Jur 2d, Co-tenancy and Joint Ownership, para 51, citing Williams v Sinclair Refining Co Inc 39 NM 388, 47 P 2d 910 (1935) and Howell v Bradford 570 So 2d 643 (1990). See also Doe v Bird (1809) 11 East 49; 103 ER 922. On the other hand, a temporary disturbance to an access way to the property would not: see for example Ferguson v Miller [1978] 1 NZLR 819. The circumstances where a marriage or other domestic relationship breaks down poses more challenging questions as to what amounts to ouster, particularly where there is legislation such as Pt 15A of the Crimes Act in existence, which is directed to protecting persons from harassment, molestation and violence. The issue of a breakdown in domestic relationships has been considered in England in the context of the Domestic Violence and Matrimonial Proceedings 1976 (UK). Section 1(1) of that Act provided: [O]n an application by a party to a marriage the county court shall have jurisdiction to grant an injunction containing … (c) a provision excluding the other party from the matrimonial home.

Subs (2) extended the provisions of subs (1) to parties in a de facto relationship. In Davis v Johnson [1979] AC 264, the parties lived together in a joint tenancy of a council flat. Davis left the home together with her child because of the violent behaviour of Johnson. Davis applied to the county court for an injunction pursuant to the provisions of the Domestic Violence and Matrimonial Proceedings Act to restrain him from molesting her or the child and to exclude him from the home. She was granted the injunctions and returned to the flat. The making of the injunctions was upheld in the Court of Appeal. Lord Denning MR … said at 274: [page 609]

Social justice requires that personal rights should, in a proper case, be given priority over rights of property. In this court at least, ever since the war we have acted on that principle. Whenever we have found a husband deserting his wife or being cruel to her, we have not allowed him to turn out his wife and his children and put them on the street. Even though he may have, in point of law, the absolute title to the property as owner, no matter whether it be the freehold of a fine residence or the tenancy of a council house, his property rights have been made in this court to take second place. An appeal to the House of Lords [1979] AC 317 was dismissed … The issue again arose in Dennis v McDonald [1982] Fam 63 where Purchas J found that owing to violence exercised upon her by the defendant in the past, the plaintiff, who had left the jointly owned property was afraid to go back. His Honour held at 71: In the instant case the plaintiff is clearly not a free agent. She was caused to leave the family home as a result of the violence or threatened violence of the defendant. In any event, whatever might have been the cause of the breakdown of the association, it would be quite unreasonable to expect the plaintiff to exercise her rights as a tenant in common to occupy the property as she had done before the breakdown to her association with the defendant. In my judgment she falls into exactly the kind of category a person excluded from the property in the way envisaged by Lord Cottenham LC in M’Mahon v Burchell, 2 Ph 127. Therefore, the basic principle that a tenant in common is not liable to pay an occupation rent by virtue merely of his being in sole occupation of the property does not apply in the case where an association similar to a matrimonial association has broken down and one party is, for practical purposes, excluded from the family home. (The matter went on appeal but on a different point: see [1982] 2 WLR 275.) Young J in Chieco v Evans doubted the correctness of Purchas J’s view in Dennis v McDonald, stating at 11,300: I do not, with respect to his Lordship and the Court of Appeal which upheld his decision, see how that decision can be reconciled with the principles [in Australia as to ouster] and there must be serious doubts whether it should be accepted as part of Australian law.

With respect to Young J, I cannot agree. Indeed the position in New South Wales is even stronger given the express provisions of s 562D which enable the court to make such an order regardless of a person’s legal or equitable interest in the property. Was there an ouster in this case? On one view of the evidence in this case, the respondent left the property voluntarily and never sought to return. If that is the case, there was no ouster. On another view, and I suspect the better view, the respondent was kept away from the property by the apprehended violence order. In those circumstances and although the precise issue which arose for determination in Dennis v McDonald does not arise here, I consider that the respondent’s removal from the property and the continuance of that removal did not constitute a legal wrong: see Luke v Luke at 314. On the contrary, it occurred pursuant to an express statutory power. In that circumstance, the respondent could not successfully have maintained an action for ejectment: see cases earlier cited. Accordingly, the actions of the appellant in obtaining an apprehended violence order did not constitute an ouster. [page 610]

However, the existence of the apprehended violence orders does not resolve the matter. On 26 May 1995, subsequent to the making of the apprehended violence order, but before its expiration, the respondent commenced these proceedings. The appellant filed a defence on 2 August 1995 in which she denied the respondent’s interest in the property. Prior to that, she had not responded to correspondence from the respondent’s solicitors in which the respondent had sought a sale of the property and the division of the proceeds. I do not consider that conduct amounted to an ouster. There is nothing in the authorities or in point of principle, to suggest that the ignoring of a request for sale constitutes a denial of title. To the extent there is authority on the point, it is to the contrary: see Jager v Jager 136 NJ Eq 379; 42 A 2d 201 (1945), where the Court of Chancery of New Jersey held that refusal by one of several tenants in common to join in a co-tenant’s deed to sell the property did not constitute an ouster. However, the appellant persisted in her denial of the respondent’s title during the proceedings and up to the commencement of the hearing of the appeal, at which point she abandoned the grounds of appeal against the trial judge’s finding that the respondent had a beneficial interest in the property. In my opinion, the denial of the respondent’s interest in the property amounted to an express denial of his rights as co-tenant and constituted an ouster. The appellant is thus liable to pay an occupation fee from the date of the filing of the defence.

6.34 Questions 1.

On what basis did the husband fail in his claim that he was

initially ousted from the premises? 2.

From what point in time was the husband entitled to an occupation fee?

3.

Why does denial of title amount to ouster? Is this a just result?

4.

Do you agree with Lord Denning’s comments in Davis v Johnson [1979] AC 264 at 274 that ‘[s]ocial justice requires that personal rights should, in a proper case, be given priority over rights of property’?

5.

Is domestic violence that induces a co-owner to leave an ouster?

6.

Dennis v McDonald [1982] 2 WLR 275; [1982] 1 All ER 590 is discussed by Annand, ‘The Tenant in Common as a Tenant’ (1982) 132 New LJ 526. In McKay v Mckay [2008] NSWSC 177 at [51] Brereton J agreed with Purchas J in Dennis v McDonald and Beazley JA in Biviano v Natoli, that ‘the basic principle that a tenant in common is not liable to pay an occupation rent by virtue merely of his being in sole occupation of the property does not apply in the case where a matrimonial or similar relationship has broken down and one party is, for practical purposes, excluded from the family home’. His Honour added: ‘At present, however, Biviano would seem to restrict that to a case in which the exclusion was not authorised by a court order — whether under matrimonial legislation or an APVO’. Do you agree with this understanding of Biviano? What constitutes an ouster was also considered in Callow v

Rupchev: see below at 6.36C.

[page 611]

The quantum of occupation rent 6.35

In Forgeard v Shanahan (1994) 35 NSWLR 206; 18 Fam LR 281,

Meagher JA summarised the established principles governing the right to charge a co-owner with an occupation rent. The context was a domestic relationship which ended before the enactment of the Property Relationships Act 1984 (NSW). Some years later, Forgeard bought proceedings in the Supreme Court for the appointment of statutory trustees for sale of the property and division of the proceeds of sale. After the relationship broke down, Shanahan had remained in occupation of the property with the children, made mortgage payments as they fell due, and paid rates, insurance and expenses for pest control. The question was whether Shanahan was liable for an occupation rent and whether any allowance should be made in her favour for the mortgage repayments, rates, insurance and other expenses. Meagher JA took the view that the common law equitable principles regulating the rights of co-owners inter se should also be applied by a court exercising its statutory powers to order a sale and division of the proceeds under s 66G of the Conveyancing Act 1919 (NSW). His Honour held that Shanahan was entitled to an allowance for half the cost of the mortgage repayments and the rates, but not for half the costs of insurance and pest control which were neither improvements to the property (amounting only to

maintenance) nor payments of debts jointly owing. The basis for recovery was that the mortgage payments and rates were payments made by one debtor of a debt jointly owned by both debtors. His Honour was doubtful whether Shanahan should have been held liable for occupation rent, since there was no finding that she had excluded Forgeard from the property and she was not claiming for improvements in her own capacity as co-owner, but in her capacity as joint debtor. However, since there was no cross-appeal on this issue his Honour did not disturb the original finding. He also held that the claim for an occupation fee should not be allowed in excess of the value of improvements. Mahoney JA agreed with Meagher JA. Kirby P dissented from the result proposed by the majority, holding that both Forgeard and Shanahan had proper complaints about the adjustment of their claims. His Honour took the view that exercise of the judicial discretion under s 66G was not restricted to applying the common law and equitable principles previously applied in actions to partition the land. 6.36C

Callow v Rupchev (2009) 14 BPR 27,533; [2009] NSWCA 148 Court of Appeal of New South Wales

Beazley, Basten JJA, Handley AJA: In 1998, the parties to the present application were living together in a domestic relationship. They purchased a house in joint names but, after approximately three months, the relationship fell apart and Ms Callow left the premises, which remained in the occupation of Mr Rupchev. The premises were ultimately sold in November 2006 and the present dispute concerns the distribution of the proceeds of sale. … Occupation fee not dependent on ouster … the focus of the case at trial was that Ms Callow was entitled to set off a notional occupation fee because she had been involuntarily excluded from the property by

violence or the threat of violence from Mr Rupchev. Mr Rupchev not only denied the allegations, but also argued that his claim for contribution, based on a legal entitlement, was not affected by any setoff which might have arisen had he been seeking equitable relief. [page 612]

The last submission should be rejected. Although a claim for contribution between joint debtors may arise in law or in equity, a plaintiff seeking contribution cannot avoid equitable defences by invoking a common law remedy. In each case, the right is founded upon concepts of fairness and justice and is thus subject to the same qualifications: see Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 at [14]–[15] (Gaudron ACJ and Hayne J), at [38] (McHugh J) and at [143] (Callinan J), each adopting the analysis of Kitto J in Albion Insurance Co Ltd v Government Insurance Office of NSW [1969] HCA 55; (1969) 121 CLR 342 at 349–52 (Windeyer J agreeing). In a passage adopted by McHugh J in Burke at [38], Walsh JA in Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 stated at 48: It seems, however, that in England a claim for contribution of a type which can be brought at common law may be defeated if the circumstances are such that in equity the claim for contribution would fail. See Cunningham-Reid v Public Trustee [[1944] KB 602]. … The first issue concerns the scope of the doctrine of ouster and its more recent developments, sometimes described as ‘constructive ouster’. If, as will be suggested below, it is not necessary to identify violence or a threat of violence sufficient to justify a finding that the departure of one co-tenant was involuntary, the findings discussed above will not be critical. Rather, it will be suggested, the authorities justify the conclusion that a notional occupation fee may be set off against the claim of the tenant in occupation for a contribution to expenses or improvements, in circumstances where the co-ownership arose out of a domestic relationship which has broken down, rendering departure of one party reasonable in the circumstances. The traditional grounds for charging an occupying co-owner with an occupation rent, for the benefit of a co-owner who was not in possession, were an actual ouster by the occupying co-owner which prevented the other co-owner from exercising his or her right to possession, a constructive ouster by denial of title, and a claim by the occupying coowner to be recouped for his expenditure on permanent improvements which had increased the value of the property. The relevant principles, and the decisions on which they are based, were reviewed in Luke v Luke (1936) 36 SR (NSW) 310. These principles became established in cases between siblings and other relatives decided before the Married Women’s Property Act 1882 (Eng). In the early cases the coownership was created by a common ancestor, not by the co-owners themselves. The parties in Luke v Luke were related, but were not married, and had not lived together in a de facto domestic relationship akin to marriage. The increase in home ownership after the Second World War, financed by long term

mortgages, the increased participation of married women in the paid workforce, and the popularity of domestic relationships without marriage, have brought before the courts a new class of disputes between co-owners, those who were or had been married, and those who had shared their lives without marriage, or such a person and the trustee in bankruptcy of the other. The established principles, developed in earlier times for a different group of coowners, were ill-suited for the resolution of disputes involving this new group of coowners. Thus it was not long before the English courts commenced to fashion additional principles more suitable for this new group; those decisions have been followed in Australia. The ‘new’ principles, based on cases dating from the 1970s, have established that a forceful ouster is not necessary [page 613]

where the domestic relationship has broken down and one co-owner, for practical reasons, can no longer live in the property with the other, and leaves. These ‘new’ cases were correctly decided and should be applied where the coownership flowed from a marital or equivalent domestic relationship: they should be applied in the present case. On that basis it is neither necessary nor appropriate to express any views on the traditional ouster principle, or the doctrine of constructive ouster based on denial of the title of the co-owner, or their application in this case. Indeed the application of the doctrine of constructive ouster to the facts of this case is doubtful, the respondent’s denial of Ms Callow’s title not being directed to her legal title, which was clear on the face of the register, but to her beneficial title. It was only maintained from December 2005 until May 2006, whereas the ‘new’ principles could apply to the whole period from separation in June 1998 until the sale was completed in November 2006. There was no evidence that this denial had any real effect on the conduct of Ms Callow. It did not prevent her exercising her rights of co-ownership and returning to live in the property. Further, a doctrine which gives substantive effect to such a pleading is troubling: compare Warner v Sampson [1959] 1 QB 297 (EWCA Civ). In Cracknell v Cracknell [1971] P 356 (EWCA Civ) at 363 Lord Denning MR, who gave the principal judgment, held that if the wife leaves the matrimonial home ‘voluntarily’, the husband who remains and makes the mortgage payments is entitled to contribution, but if she is forced out the husband is not entitled to contribution even for his payments of principal. This view did not survive. In Leake v Bruzzi [1974] 1 WLR 1528 (EWCA Civ) the husband was only given credit for his payments of principal because, as Ormrod LJ said at 1533: … he has had the use and enjoyment of the house … and it is not at all unrealistic to regard the interest under the mortgage as something equivalent to rent or payment for use and occupation. This approach was followed in Suttill v Graham [1977] 1 WLR 819 (EWCA Civ) at 822 where the wife had left the matrimonial home to live with another man … The ‘new’ principles became established in England by the decision of Purchas J in Dennis v

McDonald [1982] Fam 63. He reviewed the cases which had worked out the established principles and concluded at 71: Only in cases where the tenants in common not in occupation were in a position to enjoy their right to occupy but chose not to do so voluntarily, and were not excluded by any relevant factor, would the tenant in common in occupation be entitled to do so free of liability to pay an occupation rent. He then formulated the ‘new’ principles applicable to co-owners who had lived together in a domestic relationship at 71: … whatever might have been the cause of the breakdown of the association, it would be quite unreasonable to expect the plaintiff to exercise her rights as a tenant in common to occupy the property as she had done before the breakdown of her association with the defendant … Therefore, the basic principle that a tenant in common is not liable to pay an occupation rent by virtue merely of his being in sole occupation of the property does not apply in the case where an association similar to a matrimonial association has broken down and one party is, for practical purposes, excluded from the matrimonial home. [page 614]

These principles, still described by the Court of Appeal in that case as ‘an ouster’ (at 80), were not challenged on the appeal from Purchas J. His decision was again followed in Bernard v Josephs [1982] Ch 391 (EWCA Civ) at 401 where Lord Denning MR said: … seeing that he has the use of her share, it would only be fair that he should pay an occupation rent in respect of it: see Dennis v McDonald [1982] Fam 63, 64. No doubt, however, he has been paying the whole of the mortgage instalments and this should be taken into account as well. It may relieve him of paying any occupation rent for her half-share. In In re Gorman (A Bankrupt) [1990] 1 WLR 616 at 625 Vinelott J, giving the judgment of the Divisional Court referred to Suttill v Graham and Bernard v Josephs and said that they established ‘[t]he general principles on which the court acts in making adjustments to the shares in which tenants in common are entitled to the proceeds of sale of the property’. That case involved a dispute between the wife and the husband’s trustee in bankruptcy and the principles referred to were those applicable to parties in a domestic relationship. He continued (at 625, 626): In some cases, to avoid the necessity of expensive and protracted inquiries and accounts, the courts have treated mortgage interest, paid by a tenant in common who has been in sole occupation, as equal to an occupation rent, leaving only an appropriate proportion of any capital repayments to be credited to him … That practice is not, of course, a rule of law to be applied in all circumstances irrespective of, on the one hand, the amount of the mortgage debt and the instalments paid, and

on the other hand, the value of the property and the amount of the occupation rent that ought fairly to be charged. It is a rule of convenience. Then in In re Pavlou (A Bankrupt) [1993] 1 WLR 1046, where the husband had left the wife in the property and later became bankrupt, Millett J, after referring to the judgment of Purchas J in Dennis v McDonald, said at 1050–1: I take the law to be to the following effect. First, a court of equity will order an inquiry and payment of occupation rent, not only in the case where the co-owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity between the parties that an occupation rent should be paid. The fact that there has not been an ouster or forceful exclusion … is far from conclusive. Secondly, where it is a matrimonial home and the marriage has broken down, the party who leaves the property will, in most cases, be regarded as excluded from the family home, so that an occupation rent should be paid by the co-owner who remains. But that is not a rule of law; that is merely a statement of the prima facie conclusion to be drawn from the facts. The true position is that if a tenant in common leaves the property voluntarily, but would be welcome back and would be in a position to enjoy his or her right to occupy, it would normally not be fair or equitable to the remaining tenant in common to charge him or her with an occupation rent which he or she never expected to pay … There remains the question of the interest element in the mortgage payments which the wife has paid. Once again, prima facie, she is entitled to reimbursement since the date on which the husband left the property … In many cases the court has set off the interest element in the mortgage repayments against an occupation rent. [page 615]

… Under the traditional principles an actual ouster by the occupying co-owner involved a civil wrong, either a trespass to the person by assault or battery, or a physical obstruction which prevented the absent co-owner from exercising his right to occupy the property: Jacobs v Seward (1872) LR 5 HL 464 at 472–3. One can describe the breakdown of a domestic relationship as an ouster, but such relationships can break down without attributable fault on the part of either party. To describe such a breakdown as an actual ouster involves a fiction and it is better to recognise such a breakdown as an independent ground for charging the co-owner who remains with an occupation rent. The relevance of the traditional grounds for charging a co-owner with an occupation rent when the parties had been in a de facto relationship arose in Forgeard v Shanahan (1994) 35 NSWLR 206 where the Court was divided. Meagher JA applied the established principles which he summarised in 16 paragraphs. He doubted the correctness of the conclusion of Rolfe J that a claim for contribution for mortgage payments could be equated with a claim for the cost of improvements for the purpose of attracting a liability to account for an occupation rent, although that decision stood because the respondent in possession had not cross-appealed: at 225. The question which divided the Court was whether, as the majority held, the appellant’s claim to charge the respondent with an occupation rent could not exceed the

amount of the respondent’s claim for contribution for mortgage payments. In his review of the established principles Meagher JA referred to the position of a co-owner out of occupation and said that ‘the law treats the latter simply as someone who has chosen not to exercise his legal right to occupy the land’: at 221. Although Dennis v McDonald had been cited, he held that the established principles applied with undiminished force to coowners who had been in a domestic relationship. Mahoney JA, who agreed with Meagher JA, said at 219: The principles which have been evolved in this area of the law derive in the first instance, from the incidents which the law long ago attached to common ownership of land. I see no reason to depart from them. To do so would be merely to substitute one set of judgments as to what is just for another, without there being a compelling reason for the one or the other. Kirby P, in dissent, declined to apply the established principles which had been developed for co-owners who were not married or in a domestic relationship: at 211–12. The decision of this Court in Biviano v Natoli (1998) 43 NSWLR 695, and in particular the reasons of Beazley JA (Stein JA agreeing), marked a significant departure from the views of the majority in Forgeard v Shanahan. Beazley JA approved the reasoning of Purchas J in Dennis v McDonald: at [40]–[41] above. Powell JA’s conclusion that there had been an actual ouster in that case and that the reasoning of Purchas J should be understood on that basis cannot, with respect, be supported. Part of the dispute in Biviano concerned the quantum of the occupation fee chargeable to the appellant. The trial judge had assessed this at 65% of the full market rent: at 703. This Court reduced it to 50%, and might have reduced it further if the appellant had also challenged the adoption of the full market rent because she had a right of concurrent occupation and arguably the value to her of the use of the respondent’s half-share should have reflected this … In Biviano the absent co-owner had not ‘voluntarily’ withdrawn from the property and there was no claim for contribution to mortgage payments. Both issues arose for consideration in Ryan v Dries [2002] NSWCA 3; 10 BPR 19,497 where once again the Court was divided. [page 616]

Sheller JA held that In re Pavlou was correctly decided and quoted with approval the passage from the judgment of Millett J, at [44] above, where his Lordship held that an occupying co-owner could be charged with an occupation rent where a domestic relationship had broken down and one co-owner leaves without an actual ouster: Ryan v Dries at [5]. He agreed with Hodgson JA that a claim by the occupier for contribution to mortgage payments as part of an equitable accounting attracted an obligation to do equity, and thus to submit to an occupation rent: at [7]. Hodgson JA said: … once an occupier is required to do equity because he or she is seeking equity,

there is no reason to distinguish between improvements or repairs effected to the property on the one hand, and the reduction of a charge on the property through mortgage repayments on the other … In my opinion, the principles supported in Luke mean that the appellant, now claiming equity in relation to those payments, should do equity by making some appropriate adjustment in respect of his very much greater use of the property, and indeed exclusive use thereof since November 1997. Giles JA dissented and held that the appellant was not accountable for the value of his shared occupation of the property prior to November 1997, and that his claim for contribution for his mortgage payments did not attract an obligation to pay an occupation rent for that period. In Re Pavlou and Biviano have since been applied in the Full Court of the Federal Court in Draper v Official Trustee in Bankruptcy [2006] FCAFC 157; 156 FCR 53 at [102]–[107] (Rares J). In McKay v McKay [2008] NSWSC 177, Brereton J reviewed a number of the authorities discussed above and concluded at [51]: I, therefore, agree with Purchas J in Dennis v McDonald and Beazley JA in Biviano v Natoli, that the basic principle that a tenant in common is not liable to pay an occupation rent by virtue merely of his being in sole occupation of the property does not apply in the case where a matrimonial or similar relationship has broken down and one party is, for practical purposes, excluded from the family home. Upon breakdown of a domestic relationship, if it becomes no longer reasonable or practicably sensible to expect the partners to co-occupy the one property, the one who remains in possession may be taken to do so to the exclusion of the other, and to be liable to pay an occupation fee. At present, however, Biviano would seem to restrict that to a case in which the exclusion was not authorised by a court order — whether under matrimonial legislation or an [apprehended personal violence order]. This statement of principle may be accepted, subject to the qualification that, viewed in the context of the broader authorities, Biviano should not be seen as restricting the allowance of a notional occupation fee to those cases where the exclusion was not required or authorised by a court order. That conclusion accords with the statement of the law set out by K Gray and S F Gray, Elements of Land Law (5th ed, OUP, 2009) at [7.4.44] in the following terms: To this basic common law principle of rent-immunity between co-tenants there emerged, over the years, a number of overlapping exceptions, most of which involved some trauma in the personal or family relationship of the co-owners. It came to be [page 617]

accepted, for instance, that an occupation rent is payable by a co-tenant whose sole occupation was achieved by the intentional ouster or violent exclusion of another co-

tenant or where termination of a personal relationship made it ‘unreasonable’ to expect continued joint occupation. Likewise a co-tenant who claimed credit for improvements, repairs or mortgage outgoings paid on the co-owned land was normally required to give credit for a notional rent to be assessed in respect of any sole occupation which he had enjoyed. The operation of such a broad statement of equitable principle may have ramifications which have not been fully worked through. Underlying the concept of ouster was a lack of voluntary choice in the decision not to continue to occupy the property. Where a domestic relationship has broken down, the underlying purpose is to achieve a fair and reasonable settlement of property interests as between the parties to the relationship. That may now be more generally achievable pursuant to application under the Family Law Act 1975 (Cth) or the Property (Relationships) Act 1984 (NSW). That exercise involves an adjustment of interests with respect to property, taking into account financial and nonfinancial contributions and beneficial usage. General law principles do not replicate the statutory schemes.

6.37

In Callow v Rupchev the court accepted as the amount of the

occupation rent the figure of $210 per week which had been proposed by Ms Callow at the trial and which was not challenged by Mr Rupchev. The court rejected Mr Rupchev’s submission that an occupation fee should be limited to the period during which he was making mortgage payments. The court held that it should accrue during the period of Mr Rupchev’s sole occupancy and observed at [71]: An occupation fee is chargeable, inter alia, where it is unreasonable to expect co-owners to continue to live under the same roof after a domestic relationship has collapsed, and one party moves out. However when the premises later become vacant for an extended period the party who initially remained may not be obtaining any financial benefit, or the same level of financial benefit from the property. If neither co-owner is using the property for residence or storage it may not be appropriate or equitable for either to be charged with an ‘occupation rent’ unless a proper basis for this is established. Ms Callow’s assertion that Mr Rupchev was exercising control was just assertion based on evidence relating to an earlier period. As the relevant issues were simply not explored and she bore the onus of proof, she must fail on this issue. We express no concluded view

on the legal position where it is sought to charge a co-owner with an occupation rent in respect of a vacant property … Because, absent ouster, the basis for setting off a notional occupation fee is the unreasonableness of requiring the joint owners to reside together, it would be necessary, in a case where the party claiming contribution has vacated the premises for a period, for the other party to demonstrate affirmatively that it was unreasonable to expect him or her to return to the premises during that period. That task was not assayed by Ms Callow in the present case and accordingly the notional occupation fee should be limited to the period during which Mr Rupchev was actually in physical occupation of the premises.

6.38

Forgeard and Callow were the subject of comment by Kourakis CJ

speaking for the Full Court of the Supreme Court of South Australia in W v D (2012) 115 SASR 61; [2012] SASCFC 142. In that case, in the context of the breakdown of a domestic relationship,

[page 618]

the claimed occupation fee would have exceeded the mortgage payments demanded by the occupying owner and intruded upon his capital entitlement. The court observed at [73]ff: Should the same reasoning apply when an occupation fee is offset against a claim for contribution to mortgage payments? The New South Wales decisions to which I have referred show that there is considerable scope to defend a claim made by a co-owner of land for a contribution to payments discharging a joint liability arising out of that co-ownership by claiming an occupation fee as an equitable set off. The cases hold that it is unconscionable for a resident co-owner to claim a contribution to repayments of a joint loan without bringing to account the benefit he or she has received from remaining in occupation of the residence. The basis for that approach is not difficult to see. The price for retaining the benefit of the continued occupancy of the residence after the domestic partner, with which the property was intended to be shared, has left is to bring into

account an occupation fee. Indeed, the resident co-owner is likely to have made the mortgage payments precisely so that he or she can remain in occupation free of any disturbance from the mortgagee. However, if the absent co-owner were to be allowed to charge the capital share of the resident co-owner with an occupation fee where it exceeded the mortgage payments, the primary rule of legal co-ownership would be infringed … When there has been a breakdown of a domestic relationship without an ouster, I would value the occupation fee by reference to the value of the occupation to the resident co-owner without discounting it for the burden of the occupancy being a joint one. The resident co-owner who continues to pay the mortgage does so in order to enjoy the occupation of the entire property in the knowledge that the breakdown of the domestic relationship makes it unlikely that he or she will again be bound to share it with his or her former partner. Over time the resident co-owner may, as in this case, also come to share the home with another partner. In such a case, there may be what I earlier referred to as an operational inconsistency which amounts to an ouster. There would be even more reason in those circumstances not to discount the occupation fee. Accordingly, in my view there should be no discount of the market rent in calculating the occupation fee. The occupation fee should bear the same proportion to the market rent as the absent co-owner’s proportionate interest in the land.

6.39

Victoria has enacted provisions that expand the basis for payment of

occupation rent beyond the common law rules. Section 228(1) of the Property Law Act 1958 (Vic) gives the Victorian Civil and Administrative Tribunal power ‘to make any order it thinks fit to ensure that a just and fair sale or division of land occurs’. By s 233(1) compensation or reimbursement may be ordered, and s 233(2) sets out a range of factors to be considered. They include: any damage caused by unreasonable use of the land (so abrogating the common law rule in relation to waste); any costs reasonably incurred by a co-owner in the improvement, maintenance or insurance of the land or goods; any payments such as rates, mortgage repayments, or other outgoings; and occupation rent.23 Section 233(3) preserves two parts of the

common law occupation rent rule, namely that an order to pay it can only be made if a claim for compensation is made by the occupying co-owner or there has been exclusion. But by s 233(3)(c) the court may make an order if ‘the coowner claiming an amount equivalent to rent has suffered a detriment because it was not practicable for that co-owner to use the goods with the other co-owner’. This substantially extends the common law rule to cover situations similar to that

[page 619]

in Callow v Rupchev, although arguably the requirement of ‘detriment’ requires a wider array of circumstances to be considered in claims by the nonoccupant.24 6.40

Note that powers given to the Family Court and courts administering

the de facto relationships legislation give judges substantial discretion to vary the property rights, including in co-owned property: see 4.112. For the court’s powers under s 66G when co-ownership is terminated, see 6.81.25

Accounting for rents and profits The Statute of Anne 6.41

In Callow v Rupchev, Mr Rupchev conceded that he must account to

Ms Callow for 50 per cent of the payments he received from renting the premises for a period when he went to live in Queensland. It was therefore

not necessary for the court to consider the matter further. In Forgeard v Shanahan, Meagher JA referred to the Statute of Anne 1705 which allowed a co-owner to bring an action of account against the other co-owners (or their personal representatives) for ‘receiving more than comes to [their] just share or proportion’ of rents. This provision still applies in South Australia, Western Australia and Tasmania: see Re Tolman’s Estate (1928) 23 Tas LR 29; Scapinello v Scapinello [1968] SASR 316 at 318. Queensland and the Northern Territory have replaced the 1705 Act with specific provisions to the same effect.26 In New South Wales, the Statute of Anne was repealed by Imperial Acts Application Act 1969 s 8. A similar situation applies in the Australian Capital Territory under Imperial Act Application Act 1986 (ACT); Imperial Acts (Repeal) Act 1988 (ACT) s 3(2).27 Until recently there may have been no obligation to account in Victoria, as the result of the repeal of the Statute of Anne by Imperial Acts Application Act s 5.28 In Forgeard v Shanahan, Meagher JA took the view that repeal of the Statute of Anne deprived a co-owner of any remedy where another co-owner received more than their share of rents. By contrast, Kirby P took the view that the principle of the statute could still be applied by New South Wales courts in proceedings for sale under Conveyancing Act 1919 s 66G. In Ryan v Dries, Hodgson JA (Sheller and Giles JJA concurring) held that Strelly v Winson (1685) 1 Vern 297; 23 ER 480 preserved the equitable rule that allowed a coowner to claim a share of rents collected by another. The non-occupying coowner can therefore claim rents and profits despite the repeal of the Statute of Anne. This would now appear to represent the law in New South Wales. Which view is preferable? A right to recover a share of the rent and profits

does not create a lien over the land: Brickwood v Young (1905) 2 CLR 387 at 398; 11 ALR 154.

Statute of Anne not applicable 6.42

In Henderson v Eason (1851) 17 QB 701; 117 ER 1451, the Court of

Exchequer Chamber held that the Statute of Anne did not apply to the case of a tenant in common

[page 620]

who worked the land himself or herself, sold all the produce and retained the proceeds without accounting to the other tenant in common (who had chosen not to occupy the land). The section was interpreted to cover only the case of one co-owner receiving money paid by a third party in respect of the land; for example, rent received from a tenant. In that case, the co-owner, if he or she received more than the proportionate share of the proceeds, was obliged to disgorge the excess; there was no difficulty in ascertaining the share of each co-owner and in determining whether one had exceeded his or her just share. The section could not apply to the mere exclusive occupation of the land by one co-owner even where this resulted in the earning of profits, unless that co-owner had prevented the other co-owner from taking possession of the land or unless there had been an express agreement between the co-owners. In his judgment, Parke B said (at (QB) 720–1; (ER) 1458): Again, there are many cases where profits are made, and are actually taken, by one co-tenant, and

yet it is impossible to say that he has received more than comes to his just share. For instance, one tenant employs his capital and industry in cultivating the whole of a piece of land, the subject of the tenancy, in a mode in which the money and labour expended greatly exceed the value of the rent or compensation for the mere occupation of the land; in raising hops, for example, which is a very hazardous adventure. He takes the whole of the crops: and is he to be held accountable for any of the profits in such a case, when it is clear that, if the speculation had been a losing one altogether, he could not have called for a moiety of the losses, as he would have been enabled to do had it been so cultivated by the mutual agreement of the co-tenants? The risk of the cultivation, and the profits and loss, are his own; and what is just with respect to the very uncertain and expensive crop of hops is just also with respect to all the produce of the land, the fructus industriales, which are raised by the capital and industry of the occupier, and would not exist without it. In taking all that produce he cannot be said to receive more than his just share and proportion to which he is entitled as a tenant in common. He receives in truth the return for his own labour and capital, to which his co-tenant has no right …

In Rees v Rees [1931] SASR 78, four brothers were tenants in common. Two brothers farmed the property, doing all the work and paying all the expenses. The two working brothers were held to be entitled to the whole of the produce and profit for that period and an order restraining the other two brothers from interfering with the disposal of the present crop. Is there an economic rationale for this doctrine? Is it consistent with a Lockean view of property?

Compensation for repairs and improvements to land by one co-owner 6.43

In Brickwood v Young (1905) 2 CLR 387; 11 ALR 154, the High

Court of Australia held that a co-owner’s right to recover compensation for improvements was a ‘defensive’ or ‘passive’ equity which could only be

exercised in actions involving the rights of other co-owners; for example, in an action for partition or sale, for administration or for division of the proceeds of compulsory acquisition of the land. What policy reasons may justify restricting a co-owner’s right to compensation to the case where the co-ownership situation has ended? The right to obtain compensation for improvements was held in Brickwood v Young not to be personal to the coowner making the improvements, but to give rise to an equitable charge attaching to the land which can be exercised by a successor in title to the person originally entitled to it. The rationale given by the High Court for the principle that the benefit of this ‘defensive equity’ runs with the land is that successors in title will usually have paid more for the land as a result

[page 621]

of the improvements. Thus, Brickwood, as successor in title to the person who originally built houses on the land, in the belief that he alone was entitled to the property, was entitled to have the value of the improvements taken into account in determining his share of the compensation paid when the land was compulsorily acquired from himself and the other co-owners. Under the principle that a person who seeks equity must do equity, Brickwood’s assertion of his equity in relation to compensation for improvements was conditional upon Brickwood accounting for any rents and profits he had received in excess of his share. On a similar basis, a co-owner who has been in sole occupation and claims compensation for improvements will be liable for occupation rent. In Brickwood v Young, it was suggested any

occupation rent for which Brickwood was liable was limited to the extent of his claim for improvements. 6.44

The defensive equity in relation to compensation for improvements is

not enforceable against a bona fide purchaser of the legal (and possibly equitable) estate in general law land, for value without notice. If the land is under the Torrens system, a purchaser who registers an interest in the land against which the charge is enforceable, will take free of it. See McMahon v Public Curator of Queensland [1952] St R Qd 197; Deeks v Deeks [1988] 1 NZLR 664. To what extent does Brickwood v Young qualify the principle of Henderson v Eason (1851) 17 QB 701; 117 ER 1451; 6.42? Compensation for repairs as well as improvements may be recoverable if the repairs are more than mere maintenance: Leigh v Dickeson (1884) 15 QBD 60. In Ryan v Dries (2002) 10 BPR 19,497; [2003] ANZ ConvR 47 (see Note (2002) 76 ALJ 410) (6.41), Hodgson JA (with whom Sheller and Giles JJA agreed) concluded that any repairs, including maintenance, which increased the value of the property would be compensable.

6.45 Questions 1.

Does the principle in Brickwood v Young apply in the case where a co-owner has made mortgage payments for the other co-owner?

2.

Is a distinction drawn between repayment of capital and interest?29

3.

What principles should the court apply in assessing the compensation due to an improving co-owner? Is the compensation to be calculated by reference to the cost of the improvements or to

the value of the improvements as at the time the court of equity hears the matter? If the former, does the approach take account of the effect of inflation? 4.

In McMahon v Public Curator [1952] St R Qd 197, the court held that the original amount expended would not be adjusted by reference to inflation. What is the position if the work which has improved the property has been done by a co-owner personally? In Cardinaels-Hooper v Tierney (1995) 7 BPR 14,435 Cohen J rejected such a claim. In Maio v Sacco (2009) 14 BPR 27,591 White J commented that if the matter were free from authority he would have been inclined to allow such a claim, however it was not necessary to decide the issue as the defendant conceded the point.

[page 622]

6.46

Some of these questions were considered in Squire v Rogers (1979) 27

ALR 330, a decision of the Federal Court of Australia on appeal from the Supreme Court of the Northern Territory. The joint lessee of a lease in perpetuity of land in the Darwin area applied for an order for sale and an account against the other joint lessee. The plaintiff had not lived on the leasehold land for about 16 years. During this time, the defendant had made improvements to the land to provide accommodation for visitors and to establish a caravan park. There was evidence that the defendant’s expenditure on improvements amounted to $100,000, but, because of the devastation

caused by Cyclone Tracy in 1974, the increase in value attributed to the improvements was only about $15,000. Deane J (with whom Forster and Brennan JJ agreed) cited with approval at 346 a passage by A H Simpson CJ in Eq in Boulter v Boulter (1898) 19 LR (NSW) Eq 135 at 137: In no case can the co-owner who has improved the property obtain more than his outlay, though such outlay may have trebled the value of the property. And, on the other hand, the increase in the price obtained is the limit of what he can receive, though his actual outlay may be far larger.

According to this approach, the defendant was entitled only to compensation of $15,000. However, on the taking of the account, Deane J concluded that the plaintiff could only claim rents and profits attributable to the defendant’s improvements if she were willing to make an allowance for their cost, over and above that to which the defendant was entitled on the principle of Boulter v Boulter. This statement appears to be slightly different to that made by Meagher JA in Forgeard v Shanahan (1994) 35 NSWLR 206; 18 Fam LR 281. Meagher JA commented that where the co-owner uses the rent to finance the improvements, the other co-owner cannot claim a share of the rents without making an allowance for all the money spent. In Squire v Rogers, counsel for the plaintiff conceded that an account could only be ordered for the relevant limitation period (six years before the issue of the writ) and that the defendant was entitled to an allowance for his time and labour in earning the rents and profits for which he was liable to account. Such rents and profits were ‘limited to those receipts which [could] properly be regarded as rents and revenue of the … property itself as distinct from the profits which the defendant may have made by his use and occupation of the common property (for example fees for services and for the use of items of

equipment)’: at 345. Should this distinction be drawn? In the result, the plaintiff elected not to proceed with the claim for an account. For a criticism of Squire v Rogers, see Stein, ‘Moot Point’ (1989) 63 ALJ 631. 6.47

The ungenerous rule in Boulter v Boulter (1898) 19 LR (NSW) Eq

135 has been further modified recently to allow the improving co-owner the right to participate in the increase in value of the property over and above the cost of improvements. So, in Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 57, the co-owner was allowed both the costs of improvement and a proportionate share of the increase in the value of the property. Also, the court held that no reimbursement is available for the expenditure of time and effort, or for expenses incurred in relation to loans to finance the improvements.

Liability for waste 6.48

A co-owner can bring an action against another co-owner for

voluntary waste. In Ferguson v Miller [1978] 1 NZLR 819, a co-owner was entitled to an injunction to prevent another co-owner from destroying the character of a driveway by removing ornamental trees

[page 623]

planted along it, but not to an injunction to prevent a re-sealing and widening of the driveway, which was regarded as an act of repair.

Disposition of interests by co-owners 6.49

A joint tenant or tenant in common may sell or give his or her

interest to another person, provided this does not interfere with the right of the other co-owner to possession of the land. In Frieze v Unger [1960] VR 230, Sholl J held that a joint tenant could grant a lease which would bind his or her own undivided share. However, the lessee could not exclude other joint tenants, who had not joined in the grant of the lease, from entering into occupation of the premises with the lessee: see also Catanzariti v Whitehouse (1981) 55 FLR 426. If a joint tenant of a fee simple interest dies after leasing premises, the lessee’s rights are not extinguished. Instead, the joint tenancy is suspended during the period of the lease and the surviving joint tenant(s) are entitled to the reversion upon it. In Frieze v Unger [1960] VR 230 at 246 Sholl J suggested that the rent falls into the estate of the deceased lessor between the date of death and the expiry of the lease. 6.50

In Hedley v Roberts [1977] VR 282, the question, in proceedings for

an interlocutory injunction, was whether one of two tenants in common could create an easement, binding on the other tenant in common and successors in title, under which a neighbour was permitted to erect and use a toilet on the co-owned land. Harris J (at 288) considered the correct principle to be that: … a joint tenant, or a tenant in common, can encumber his interest in the land so as to compel his co-owner to submit to the encumbrance if the encumbrancee does not interfere with the right of that co-owner … to possession of the land and his other rights with respect to the land.

The easement in this case did not subject the other co-owner to undue

interference with her right to possession, bearing in mind that the portion of land on which the toilet was erected was already subject to drainage and sewerage easements. The easement was enforceable against the registered proprietors of the co-owned land (successors in title to the original tenants in common), notwithstanding that the easement was unregistered by virtue of the Transfer of Land Act 1958 (Vic) s 42(2)(d). Hedley v Roberts was applied in Allen Taylor and Co Pty Ltd t/as Boral Timber v Harrison (2010) 15 BPR 28,505; [2010] NSWSC 1021. If an easement was granted by a joint tenant, what effect would the easement have after the death of that joint tenant if the other joint tenant took by survivorship? In Fulton v 523 Nominees Pty Ltd [1984] VR 200, Tadgell J held that a mortgage granted by a co-owner, without the consent of the other co-owner, bound only the undivided share of the mortgagor: see also Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 at 679. 6.51

A co-owner may unilaterally determine a bare licence granted by

another co-owner: Annen v Rattee (1985) 273 EG 503; [1985] 1 EGLR 136; and see Slatter, ‘Co-Owners and Licensees: Not So Simple?’ (1985) 135 New LJ 885. See also State of NSW v Koumdjiev (2005) 63 NSWLR 353 upholding a grant of damages to a person who was arrested after attempting to prevent the police entering onto a common property of which he was a tenant in common. An unknown third party had allowed the police access but the plaintiff denied it. Compare Pitt v Baxter [2007] WASCA 104 where it was held that revocation by one

[page 624]

tenant in common would be inconsistent with the rights of use or enjoyment of the common property by the other tenants in common. A periodic tenancy held by joint tenants can be determined by any one of the joint tenants giving the landlord a notice ending the tenancy.30 In Elton v Cavill (No 2) (1994) 34 NSWLR 289, Young J held that a deed made between co-owners of home units, which contained a clause prohibiting sale, transfer, lease or license of the whole or part of each co-owner’s interest in the property without the written consent of the other co-owners was an invalid restriction or alienation. However, if the clause had provided that such consent could not be unreasonably withheld, it would have been valid on the ground that it served the legitimate purpose of giving the co-owners the right to control who should own other shares in the same property. Young J’s reasoning was approved by the New South Wales Court of Appeal in Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 16 BPR 30,111; [2011] NSWCA 396.

SEVERANCE OF JOINT TENANCY Modes of severance 6.52

In order for a joint tenant to avoid survivorship, he or she must sever

the joint tenancy prior to death. As we have seen above, a joint tenant cannot dispose of the interest by will. There are a number of ways to sever. First, the

joint tenant may sever by unilateral action. Second, the joint tenant may agree with the co-joint tenants to sever the interest, or all of the interests held by the joint tenants, at which point the joint tenancy will come to an end. Third, the joint tenant may embark on a course of dealing, short of an agreement, which evinces an intention that they treated the joint tenancy as at an end. Fourth, independently of action by the joint tenants, a joint tenancy may be severed by order of the court. Fifth, a severance may effectively arise in the case of homicide committed by one joint tenant against another. Finally, a joint tenancy may be severed on bankruptcy.

Severance by unilateral act 6.53C

Corin v Patton (1990) 169 CLR 540; 92 ALR 1; 64 ALJR 256 High Court of Australia

[The facts of this case are set out in 4.85C.] Mason CJ and McHugh J: It is convenient to begin by considering the various ways in which a joint tenancy can be severed. The starting point is inevitably the judgment of Page Wood V-C in Williams v Hensman (1861) 1 J & H 546 [70 ER 862], in which his Lordship said, at 557–558 [867]: A joint-tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. [page 625]

The right of each joint-tenant is a right by survivorship only in the event of no severance having taken place of the share which is claimed under the jus accrescendi. Each one is at liberty to dispose of his own interest in such manner as to sever it from the joint fund — losing, of course, at the same time, his own right of survivorship. Secondly, a joint-tenancy may be severed by mutual agreement. And, in

the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. When the severance depends on an inference of this kind without any express act of severance, it will not suffice to rely on an intention, with respect to the particular share, declared only behind the backs of the other persons interested. In the present case, the second and third of these means are clearly not relevant. But there is the question whether a unilateral declaration of intention or other act inconsistent with the continuation of a joint tenancy may suffice for the purposes of the first method of severance. That question was answered firmly in the negative long before Page Wood V-C came to express the general principles already outlined … In Wright v Gibbons (1949) 78 CLR 313, Latham CJ stated (at 322) that the agreement of some but not all tenants would not suffice to sever a joint tenancy. In England, however, a different approach has been taken. Thus, in Burgess v Rawnsley [1975] Ch 429, Lord Denning MR said (at 439): It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common. I emphasise that it must be made clear to the other party. Sir John Pennycuick, at 447–448, appeared to agree with this statement of the law, while Browne LJ expressed no final opinion. There is no evidence in the present case of Mrs Patton’s intention to sever the joint tenancy having been communicated to Mr Patton. But in any event there are powerful reasons for declining to adopt in Australia the approach which was taken in Burgess v Rawnsley. First, as the judgment of Sir John Pennycuick makes clear (at 447), the decision turned on the construction of s 36(2) of the Law of Property Act 1925 (UK), which permits the severance of a joint tenancy by notice in writing by one joint tenant to the other, rather than on the state of the pre-existing law. Secondly, as a matter of history and principle, the severance of a joint tenancy can only be brought about by the destruction of one of the so-called four unities: see Blackstone, Commentaries on the Laws of England, (1778), vol 2, pp 185–6. Unilateral action cannot destroy the unity of time, of possession or of interest unless the unity of title is also destroyed, and it can only destroy the unity of title if the title of the party acting unilaterally is transferred or otherwise dealt with or affected in a way which results in a change in the legal or equitable estates in the relevant property. A statement of intention, without more, does not affect the unity of title. Thirdly, if statements of intention were held to effect a severance, uncertainty might follow; it would become more difficult to identify precisely the ownership of interests in land which had been the subject of statements said to amount to declarations of intention. Finally, there would then be no point in maintaining as a separate means of severance the making of a mutual agreement between the joint tenants. Accordingly, it is necessary in this case for the appellants to demonstrate that Mrs Patton effectively alienated the property in equity. Although this may involve questions of whether or not Mrs Patton could have withdrawn from the transactions, the issue is primarily whether or not the property was alienated.

[page 626]

[Brennan and Deane JJ delivered separated judgments in which they agreed with Mason CJ and McHugh J that it was necessary to show that an equitable interest had passed from Mrs Patton to Corin, to sever the joint tenancy.] Deane J: … [I]t seems to me that the preferable starting point in the present case is a more general enquiry about whether the effect of the operation of any applicable doctrine of equity was, as between Mrs Patton and Mr Corin, to give rise to a trust of any interest in the subject land. If it was, the question will then arise whether the effect of that trust or beneficial interest was to create a tenancy in common of the subject land in equity which bound Mr Patton and effectively precluded him from enjoying the benefit of the right of survivorship which he enjoyed at law. Equity will impose a trust of Real Property Act land held by the legal owners as joint tenants if the joint tenants actually agree to terminate the joint tenancy. Thereafter, their beneficial entitlement to the land will be as tenants in common: the legal joint tenants will hold as trustees for themselves as tenants in common in equal shares. Where such an agreement is made, there is valuable consideration in that each party agrees to relinquish the beneficial interest of a joint tenant of the common property, including the right of accretion by survivorship, in return for the share of a tenant in common. Such an agreement can be express. Alternatively, it can be implied from a ‘course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common’: See Williams v Hensman (1861) 1 J & H 546 at 557 [70 ER 862 at 867]. There was no such express or implied agreement in the present case. Indeed, it has not been suggested that Mr Patton was aware of the fact that the memorandum of transfer had been executed until after Mrs Patton was dead. It is unnecessary to consider whether equity will also impose a trust in a case where joint tenants of Real Property Act land are parties to mutual conduct of a kind which, while falling short of evidencing an express or implied agreement, ‘indicates a common intention that the joint tenancy should be severed’: see Gray, Elements of Land Law, (1987) p 329. Even if it be assumed that equity will impose a trust in those circumstances, it is clear that Mr Patton was not a party to any such conduct in the present case. There are circumstances in which equity will impose a trust for tenants in common of land held by legal joint tenants notwithstanding that there has been no relevant mutual agreement, understanding, dealing or intention between or on the part of the joint tenants. The only example of such circumstances which would seem to be relevant for present purposes is the voluntary or involuntary alienation in equity (ie the creation of a trust) of one legal joint tenant’s interest in the land. Where such alienation has occurred, equity will, subject to any overriding competing equities, enforce a trust not only of the alienated interest but of the whole of the land under which the legal joint tenants hold it as trustees for tenants in common in equity. The explanation of why that is so is not free of difficulty. Ultimately, it must be found in the nature of joint tenancy and the manner in which equity acts in such a case. It is necessary to diverge briefly to examine those matters. The substance of joint tenancy, while it subsists, lies in the equality and the personal

character of the interests of the joint tenants in the undivided rights which constitute ownership of the whole of the relevant property. When one joint tenant dies during the subsistence of the joint tenancy, his interest ceases: the interests of the remaining joint tenants expand by accretion. When there is but one survivor, the joint tenancy has run its course and the survivor becomes the full owner of the whole property. In that context, it is not surprising that one joint tenant cannot effectively assign at law his place in a continuing joint tenancy: see Wright v Gibbons (1949) 78 CLR 313 at 323. The only way in which an assignee can be substituted [page 627]

as a legal joint tenant is by the establishment of a new and different joint tenancy. On the other hand, it has long been settled that one joint tenant can, by an appropriate instrument or act of legal transfer and in the absence of applicable statutory restraint, alienate his legal interest in the relevant property. Involved in such an alienation are two steps which occur simultaneously: the creation of a distinct proportionate share of the whole and the detachment of that share from the property which is subject to the joint tenancy with the consequence that the transferee receives the share of a tenant in common. If there were initially two joint tenants, the transferee and the non-transferring joint tenant will thereafter hold as tenants in common in equal shares. If there were initially more than two joint tenants, the transferee will hold the detached proportionate share (ie 1/n where n equals the number of joint tenants) as tenant in common with the non-transferring joint tenants who, as between themselves, will hold the remaining share (n-1/n) as joint tenants. If such a transfer is effective at law and the circumstances of the case do not attract the operation of equitable doctrine, the legal position will be uncomplicated by the existence of distinct equitable estates or interests. Where the circumstances attract the operation of equitable doctrine, equitable estates or interests may come into existence and prevail over legal entitlement. In a case where equitable doctrine operates between all the legal joint tenants or between a third party and all the legal joint tenants, there is ordinarily no difficulty in understanding the theoretical basis of the resulting equitable estate or interest. Where, for example, equity imposes a trust to give effect to the actual or presumed intention of the joint tenants or to do equity between them, there is no difficulty in understanding how all joint tenants come to be bound by a trust of the whole property. The conceptual difficulty is with the case where the direct operation of equitable doctrine is between one only of the joint tenants and a third party. One such case is where one joint tenant effectively alienates his interest in the subject property to a third party by an ‘assignment’ which is, as between the parties to it, effective in equity but not at law. In such a case, one can readily see a basis for a trust of the ‘assignor’s’ own legal interest as joint tenant, that is to say, a trust which did not affect the rights of accretion by survivorship of the legal joint tenants but bound the assigning joint tenant to hold his legal entitlement for the assignee. As has been indicated, however, the cases establish that the true position in the case of such an equitable assignment by one joint tenant is that, subject to competing equities, there will be a trust of the whole property: the legal joint tenants will hold the property in trust for the assignee and the non-assigning legal joint tenant or tenants as tenants in common in equity. The explanation of why the assignee’s equitable

rights in personam against the assignor should bring about a conversion in equity of the overall joint tenancy into a tenancy in common would seem to be that equity, disregarding the imperfection of the analogy between the equitable rights of a cestui que trust and actual ownership of the trust property, has treated the creation or transfer of those rights of a cestui que trust as equivalent, in equity, to an ad rem assignment of the actual property and, on that basis, superimposed equitable rights and interests to mirror what would have been the legal position if the assignment had been effective at law. [All members of the court held that the joint tenancy had not been severed because the donor had failed to put the donee in a position to secure registration without further assistance from the donor: see 4.55C.] Appeal dismissed with costs.

[page 628]

6.54

In Corin v Patton, the issue which arose was whether Mrs Patton had

effectively disposed of a legal or equitable interest in property. Similarly, in McNab v Earle [1981] 2 NSWLR 673, the joint tenant executed a memorandum of transfer purporting to transfer her interest as a joint tenant to herself as a tenant in common. Presumably it was believed that the transfer would destroy unity of time and consequently bring the joint tenancy to an end. The memorandum of transfer was held by the joint tenant’s solicitor and not registered prior to her death. It was held that because the transfer was unregistered, it had no effect in law or equity. Hence, it had not operated on the share of the joint tenant to effect a severance.31 Would the result in these cases have been different if the transfer had been registered?32 Suppose that, as the result of application of the principle in Baumgartner v Baumgartner (1987) 164 CLR 137; 76 ALR 75; 62 ALJR 29 (4.123C), the de facto spouse

of a joint tenant acquires an interest in the property under a constructive trust. Does this sever the joint tenancy? 6.55

The question as to whether an authority given to the donee addressed

to the bailee of the certificate of title would perfect the gift in equity was examined in Costin v Costin (1997) 7 BPR 15,167. A father and one of his sons were joint tenants of a property. The father wished to transfer his share to his other son. He executed a transfer of interest, and signed an authority and direction to his solicitors to produce the certificate of title for registration. The solicitors refused to do so without the authority of the other son. The New South Wales Court of Appeal held that the gift was not perfect, as the donee still required the authority of the other joint tenant to be in a position to secure registration. The refusal of the bailee of the certificate whether in the capacity of mortgage, co-joint tenant or solicitor will render the gift imperfect in equity. In Stone v Registrar of Titles [2012] WASC 21 Simmonds J made the point, citing Costin v Costin at [132], that ‘a clearly established intention to make a gift is not determinative of whether a gift has been perfected’. In Queensland, the Property Law Act 1974, s 200 had effectively adopts the approach of Mason CJ and McHugh J in Corin v Patton. 6.56

New South Wales, the Northern Territory, Queensland and

Tasmania are the only Australian jurisdictions which permit severance of Torrens title land by the unilateral act of a joint tenant. Land Titles Act 1980 (Tas) s 63 provides for a joint tenant to sever the joint tenancy by registration of a declaration of severance. On registering the declaration, the recorder is to

notify the other joint tenants. In Queensland, a joint tenant can sever the joint tenancy by registration of a transfer (presumably a transfer to the joint tenant as tenant in common). The transfer is only to be registered if the Registrar is satisfied a copy has been given to any other joint tenant: Land Title Act 1994 (Qld) s 59. Following the recommendations of the New South Wales Law Reform Commission, a joint tenant of Torrens system land is now able to sever by registering a transfer to himself or herself. Section 97 of the Real Property Act 1900 (NSW) now provides that a joint tenant may register a transfer to himself or herself in order to sever the joint tenancy. No accompanying certificate of title is required. The Registrar-General may require the names and addresses of all joint tenants and a statement that the severing joint tenant is unaware of any limitation on

[page 629]

the right to sever, such as a private agreement not to: s 97(2)(b). The Registrar must then notify all other joint tenants of the lodgement of the transfer: s 97(5). In Britain, s 36(2) of the Law of Property Act 1925 (UK) specifically permits a joint tenancy in land to be severed by a notice in writing given by one joint tenant to the other joint tenants.33

6.57 Questions

1.

What good reason is there for co-joint tenants to be notified as required by s 97? Is this an unnecessary obstacle to prompt registration?

2.

Is the transfer effective in equity prior to registration?

3.

Would the right to severance by notice more effectively resolve the problems evident in Corin v Patton and Costin v Costin?

6.58

The

Western

Australian

Law

Reform

Commission

has

recommended that a joint tenant should be able to sever by written notice to the other joint tenant. In relation to Torrens system land, it was suggested that severance should take effect in equity prior to registration. In addition, the commission recommended that registration of a declaration of severance should sever a joint tenancy. The Registrar should have discretion to register the declaration without production of the duplicate certificate of title. Somewhat oddly, the commission also recommended that other forms of unilateral severance (for example, by transfer of the joint tenant to himself or herself, or by transfer to a third party) should not be effective without notice to third parties: Report on Joint Tenancy and Tenancy in Common, Project No 78, 1994, 35–7. The report did not make proposals for unilateral severance of general law land, because a joint tenant of such land can sever the joint tenancy by transferring or conveying his or her interest to himself or herself as tenant in common pursuant to legislation which allows a person to convey land to, or vest land in, himself or herself.34 In some states, the interposition of a use may be necessary to make the conveyance effective.35 Such a

technique may also be available in the case of a registered transfer of Torrens system land: see Freed v Taffel [1984] 2 NSWLR 322.

Severance by transfer to a stranger 6.59

In Wright v Gibbons (1949) 78 CLR 313, three sisters, Olinda, Ethel

Rose and Bessie Melba Gibbons, were registered under the Real Property Act 1862 (Tas) as joint tenants for an estate in fee simple. In an attempt to sever the joint tenancy, Olinda and Ethel Rose executed a single document in which each purported to transfer her interest as a joint tenant to the other. This document was registered and thereafter the three sisters were registered as tenants

[page 630]

in common in equal shares. The High Court held that the registration of the transfer was effective to bring about a severance, so that Bessie Melba’s right of survivorship was defeated, although members of the court gave varying reasons for reaching this conclusion. Latham CJ commented (at 323–4): Where a joint tenant alienates his interest to a stranger the joint tenancy is severed and the alienee becomes a tenant in common as to an undivided share of the land. If there were only one other joint tenant, then the alienee and the continuing joint tenant hold as tenants in common. If, however, there were three joint tenants, A, B and C, and A transferred his interest to a stranger, D, then D would own a one-third interest as between themselves as joint tenants. The survivor of B and C would take the whole of the two-thirds interest, but D would not either gain or lose by the survivorship of any person. … If there are three joint tenants, A, B and C, and one joint tenant A transfers his interest to

another joint tenant B, the result is that A then has no interest in the land, B becomes a tenant in common as to one-third interest in the land, and remains a joint tenant with C as to a two-thirds interest. If subsequently B transfers to A the interest which he still has as a joint tenant (A then having become a stranger to the title, his interest having passed to B), there is a further and complete severance. A becomes a tenant in common as to one-third interest with B and C, the transfer working a severance of the joint tenancy between B and C in the two-thirds interest in the land. The final result is that A, B and C become tenants in common, each having a one-third interest.

Rich J held that, regardless of whether the execution of a similar document would have been effective to sever a joint tenancy in general law land, registration of the transfer under the Torrens system brought about a severance. Even if it did not do so, the transfer would operate in equity, as an agreement for valuable consideration between the sisters to transfer their interests as joint tenants to each other as tenants in common. Such an agreement, would, if specifically enforceable, bring about a severance. Dixon J held that the Torrens legislation had provided a conveyancing mechanism under which the sisters could make cross-transfers to each other which enabled them to sever their joint tenancy by use of a single document, although this mechanism may not previously have existed under the common law.36

Declaration of trust 6.60

Each state has legislation that makes provision for the creation of

trusts by declaration. A person beneficially entitled to property may declare that they henceforth hold the property on trust for designated beneficiaries. For instance, by s 23C(1)(b) of the Conveyancing Act 1919 (NSW) such a

declaration will be effective if made in writing signed by the person entitled to the property.37 With the completion of the relevant documentary formalities, the beneficiary will have a valid interest in equity in the property. The interest will therefore be effectively severed in equity. This mode of severance is a way of circumventing the Torrens requirements of registration, with their attendant problems of delay in the face of an unco-operative cojoint tenant.

[page 631]

Does grant of a mortgage or a lease sever a joint tenancy? 6.61

What is the difference between a mortgage of general law land and a

mortgage of Torrens system land? What are the consequences, if any, of the difference for the question of severance by one joint tenant of the joint tenancy? In an exhaustive judgment, McInerney AJ in Lyons v Lyons [1967] VR 169 held that a mortgage of Torrens system land by a joint tenant did not of itself sever the joint tenancy. His Honour rejected the contrary view expressed by M da Costa, ‘Co-ownership under Victorian Land Law’ (1961) 3 MULR 433 at 448–52.38 Does the decision in Lyons v Lyons make it more or less difficult for one joint tenant of Torrens system land to mortgage the interest? What happens if the joint tenant who has entered into the mortgage dies? What happens if another joint tenant dies? 6.62

For further authority to the effect that a mortgage of Torrens title

land does not sever a joint tenancy, see Re Commonwealth Bank of Australia (2009) 14 BPR 26,819; [2009] NSWSC 81; Singh v Kaur Bal (No 2) [2014] WASCA 88; St George Bank v Wright (2015) 17 BPR 34,055; [2015] NSWSC 255. There is competing authority on whether an equitable mortgage of general land law will sever a joint tenancy. In Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 at 680, Meagher JA suggests that it would not do so, dismissing contrary English authority. 6.63

In Frieze v Unger [1960] VR 230 at 241–5, it was held that the grant

of a term of years by a joint tenant of a fee simple interest did not sever the joint tenancy, but merely suspended it during the period of the lease. In the case of a joint tenancy of a term of years, the grant of a fixed-term lease to a stranger severs the joint tenancy. The same result may follow where a joint tenant of a life estate grants a fixed-term lease: cf Re Shannon’s Transfer [1967] Tas SR 245 at 257–60.

Severance by agreement 6.64

A joint tenancy will be severed if the co-owners agree to sever:

Williams v Hensman (1861) 1 John & H 546; 70 ER 862. Does the agreement need to meet the statutory requirements for the enforceability for contracts to create or transfer an interest in land? Courts have differed in their answers to this question. In Lyons v Lyons [1967] VR 169, McInerney J held that the statutory formalities apply. But the balance of more recent decisions indicates that they do not: Abela v Public Trustee [1983] 1 NSWLR 308. The agreement will sever the joint tenancy so that the co-owners will be tenants in

common in equity; however, their status as joint tenants at law will continue until the requisite statutory formalities have been met. In Saleeba v Wilke [2007] QSC 298 Chesterman J provided a comprehensive outline of the law on severance by agreement. 6.65

The question whether a joint tenancy has been severed and the right

of survivorship terminated often arises in case involving separated and divorced spouses. In Re Pozzi [1982] Qd R 499, a divorced husband and wife who were joint tenants of their matrimonial home

[page 632]

made an agreement that the wife would have the sole right to occupy the home until the occurrence of certain events, after which the home would be sold and the proceeds divided between them. The agreement was registered under s 86 of the Family Law Act 1975 (Cth), which provides a machinery for the enforcement of such ‘maintenance agreements’ but does not exclude their variation by the Family Court in the exercise of its powers to order maintenance and alter the property rights of parties to a marriage. The husband died while the wife was in occupation of the home. The court applied the principle that a joint tenancy can be severed by agreement between the parties and held that a half-share in the property passed to the husband’s estate. A similar approach was taken by the Supreme Court of Queensland in Calabrese v Miuccio (No 2) [1985] 1 Qd R 17, where the couple had made an oral agreement dividing the proceeds of a joint bank

account unequally between them. It was intended that this arrangement would be incorporated into a written ‘maintenance agreement’ and submitted to the Family Court for approval under s 87 of the Family Law Act. The effect of approval of a s 87 agreement is that the court can only revoke or vary the agreement in exceptional circumstances. The husband withdrew his consent to the Family Court sanctioning the agreement and the wife later died. The Supreme Court of Queensland (Full Court) held that the oral agreement severed the joint tenancy. 6.66

In Abela v Public Trustee [1983] 1 NSWLR 308, a husband and wife

were joint tenants of their matrimonial home. They also had personal property which had been purchased from the proceeds of a joint bank account to which both husband and wife had made contributions. After the couple separated, they entered into negotiations to sell the house and divide the proceeds. With the consent of the parties, the Family Court ordered the parties to join in a sale of the property. However, the proceeds of the sale were not to be released until the proportions in which the proceeds were to be paid were resolved by agreement between the parties or order of the court. The husband died after the marriage was dissolved and the property was sold. At that time, the Family Law Act did not confer jurisdiction on the Family Court to make an order for distribution of the property after the death of a party to the marriage. The wife brought an action in the Supreme Court of New South Wales. She sought a declaration that the joint tenancy in the house had not been severed and that she was beneficially entitled to the whole of the proceeds of sale. She also claimed the personalty under the principle of survivorship.

The Supreme Court of New South Wales held that the parties had severed their joint tenancy in the real estate by agreement, although they had not agreed on their precise shares. In the absence of an agreement about shares, they took equally. Thus, the wife was entitled to a half-interest in the real estate after her husband’s death. No agreement had been made to sever their joint tenancy in personalty, so that the wife took the personalty by survivorship. In Slater v Slater (1987) 12 Fam LR 1, it was held that correspondence between solicitors for the husband and the wife proposing that property order would be obtained by consent in the Family Court which would, inter alia, sever the joint tenancy in the parties’ matrimonial home, did not indicate an intention to sever prior to the obtaining of a court order. A subsequent repudiation of an agreement to sever does not affect the severance: Abela v Public Trustee [1983] 1 NSWLR 308 at 315 per Rath J. In Public Trustee v Pfeiffle [1991] 1 VR 19, the parties, following the dissolution of their marriage, entered into a maintenance agreement, approved by the court under the Family Law Act 1975 (Cth) s 87, which provided that upon either party remarrying, property held in joint tenancy was to be sold and equally divided. When the wife, who had not remarried,

[page 633]

died, her estate claimed a half interest in the property. The trial judge found that the agreement did not sever the joint tenancy. On appeal it was held that the agreement of the joint tenants to sever brought about immediate

severance and that the mechanisms for the sale of the property and the division of the proceeds did not fix the time of severance but were consequential on it. In Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375 it was held that there was severance by agreement where the parties had agreed to split the proceeds of sale from an anticipated sale of the co-owned property by reference to their perceived fractional shares. 6.67

The making of an application for division of property under s 79 of

the Family Law Act 1975 (Cth) does not bring about severance: In the marriage of Pertsoulis (1979) 4 Fam LR 613; [1979] FLC 90-613; Patzak v Lytton [1984] WAR 353; cf Harris v Goddard [1983] 1 WLR 1203; [1983] 3 All ER 242. It seems to be established in Australia that a final court order requiring one joint tenant to transfer his or her interest to the other, or requiring the jointly owned property to be sold and the proceeds equally divided, will effect a severance: Re Johnstone [1973] Qd R 347; Public Trustee v Grivas [1974] 2 NSWLR 316; but cf In the Marriage of V and W Corry (1983) 9 Fam LR 201 where the order was not regarded as final. In Berdal v Burns [1990] WAR 140, the Supreme Court of Western Australia held that the effect of an order under the Matrimonial Causes Act 1959 (Cth) under which the wife was given the sole right to occupy the matrimonial home until remarriage, death or further court order, was to sever the husband and wife’s joint tenancy in the property. In In the Marriage of Bourke (No 2) (1994) 18 Fam LR 1; [1994] FLC 92-479, the couple entered into a consent order for division of their property under s 79 which had the effect of severing the joint tenancy. Later, they agreed to consent to the setting aside of the original

orders, and then the wife died. The Full Court of the Family Court (Ellis, Lindenmayer and Holden JJ at Fam LR 16; FLC 80-897) suggested that there was considerable merit in the submission that the effect of this agreement was to revive the joint tenancy, though they did not express a conclusion on this issue. In the case of a married couple agreeing to sell the matrimonial property after the marriage has ended but where one party dies before the sale, it will be commonly inferred that a severance has occurred: Scott v Scott [2009] NSWSC 567. For a case where severance did not occur following separation and divorce, see Chapman v Chapman (2014) 17 BPR 33,093; [2014] NSWSC 1140.

Severance following a course of dealing 6.68

In Williams v Hensman (1861) 1 John & H 546 at 557; 70 ER 862 at

867, it was recognised that a joint tenancy could be severed by an act of a joint tenant operating on his or her own share. Severance will only occur when the parties’ conduct indicates that they treated themselves as tenants in common. In this case documents executed by the eight co-owners indicated that their shares in a common fund were to be treated as separate by the manner of payment. Payments of proceeds of sale of a joint tenancy into separate bank accounts represent a course of dealing sufficient to sever: Abela v Public Trustee [1983] 1 NSWLR 308. If an agreement to sever is not concluded because certain preconditions are not met, it will not constitute a sufficient course of dealing to sever: Abela v Public Trustee [1983] 1 NSWLR 308. In Magill v Magill (1997) NSW ConvR ¶55-795, negotiations by joint tenants exploring the termination of the joint tenancy by one brother

purchasing the other brother’s interest were held to be insufficient to have brought about a severance prior to the death of one of them,

[page 634]

because there was no consensus about sale, despite reference in solicitors’ letters between them to their respective half-shares (earlier proceedings are reported in (1993) NSW ConvR ¶55-663). In Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375 severance was effected by a general understanding that mortgage repayments by one party were based on the notion that each had distinct shares. 6.69

A severance of a joint tenancy is not effected where each joint tenant

occupies a separate floor of the building and pays individually for the maintenance and improvement of the premises he or she occupies, as long as the parties evidenced an intention that the right of survivorship could continue: Greenfield v Greenfield (1979) 38 P & C R 570. How can Greenfield v Greenfield be reconciled with Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] 1 AC 549; [1986] 1 WLR 590; [1986] 1 All ER 711? The fact that joint tenants have treated property as part of partnership assets for taxation purposes does not of itself bring about a severance: Barton v Morris [1985] 1 WLR 1257; [1985] 2 All ER 1032; Wilkinson, ‘Severing a Joint Tenancy’ (1984) 134 New LJ 63.

Severance following homicide

6.70

If there are two joint tenants, one of whom is killed by another, the

principle that a wrongdoer should not be entitled to benefit from his or her own crime will prevent the wrongdoer taking by survivorship in equity. At law, the principle of survivorship will continue to operate, so that the wrongdoer will be entitled to the whole interest; but in equity a constructive trust will be imposed under which the legal owner will hold a half interest on trust for the deceased joint tenant. Known as the ‘forfeiture’ rule, this principle has been applied in many cases. In Rasmanis v Jurewitsch [1968] 2 NSWR 166; aff’d [1970] 1 NSWR 650; (1969) 90 WN (NSW) Pt 2 154; 70 SR (NSW) 407, there were three joint tenants: a husband, a wife and a third party. The husband was convicted of manslaughter for killing his wife. Street J held that the husband and the third party remained joint tenants at law, taking the wife’s interest by survivorship. However, in equity the husband could not benefit by surviving his wife. Thus, the husband and the other joint tenant held in trust for themselves as tenants in common in the proportions one-third/two-thirds, with the husband taking the one-third interest. In other words, the killing prevented the husband from benefiting from the death, but not the third party. In the case of a second property co-owned only by the deceased and the husband, the court held that the husband was entitled to the legal estate as sole owner by survivorship, but held the beneficial interest on trust for himself and his wife’s estate as tenants in common. Street J reasoned as follows at 169: There is no third joint tenant, as with the [other] land, to whom the enhancement goes in entire consistency with the basic nature of a joint tenancy. And simply for the want of any other suitable

recipient, the enhancement will result back to the legal personal representatives of Helene Jurewitsch as part of her estate. I reject any notion of this result being produced by way of compensation to the victim’s estate, as is suggested in some of the American cases. The result is due to equity acting in personam so as to preclude the felon’s unconscientious action gaining him this benefit. A home for the benefit must be found and the estate of the victim is the only available destination.

[page 635]

6.71 Questions Is this a satisfactory solution? Why should the estate of the victim fail to benefit in the case where there is a third joint tenant, and not where there is none? Should this principle apply to all cases where one joint tenant is criminally liable for killing another joint tenant?

6.72

Courts have sought to restrict the operation of the rule in cases of

reduced moral culpability on the part of the person responsible for the death. So the rule was held not to apply where the joint tenants have died after a suicide pact, on the ground that there was no intention to benefit from the killing: Permanent Trustee Co Ltd v Freedom from Hunger Campaign (1991) 25 NSWLR 140. Nor does the rule apply in cases of self-defence of extreme provocation, as where a woman kills her partner after many years of violent treatment: Public Trustee v Evans (1985) 2 NSWLR 188; Re Keitley [1992] 1 VR 583. If the death results from the negligent driving of another joint tenant, the right of survivorship remains unaffected: Gardner v Moore [1984]

AC 584. In contrast, where the offender is mentally ill, although not to the extent that he or she cannot be held guilty of manslaughter, the rule has been held to apply: Public Trustee v Fraser (1987) 9 NSWLR 433; Re Stone [1989] 1 Qd R 351. In Troja v Troja (1994) 33 NSWLR 269, a majority of the New South Wales Court of Appeal retreated from these exceptions, holding that the forfeiture rule applied where a wife was convicted of manslaughter on the grounds of diminished responsibility.39 Meagher JA (Mahoney JA concurring) rejected the earlier line of authority, his Honour concluding that ‘there is something a trifle comic in the spectacle of Equity judges sorting felonious killings into conscionable and unconscionable piles’ (at 299). 6.73

In New South Wales, the Forfeiture Act 1995 (NSW) now confers

discretion on a court to vary the forfeiture rule if ‘it is satisfied that justice requires the effect of the rule to be modified’: s 5(2). The Act, and its Australian Capital Territory equivalent,40 renders obsolete the ruling in Troja v Troja. In exercising its discretion the court may consider the conduct of the deceased, the conduct of the offender, the effect of the application of the forfeiture rule on the offender or any other person, and any other matters the court considers material: s 5(3). The court has no discretion, however, where the offender has been convicted of murder: s 4. In Permanent Trustee Company Ltd v Gillett (2004) 145 A Crim R 220; [2004] NSWSC 278, Austin J modified the forfeiture rule in favour of a schizophrenic son who had attacked and seriously wounded his father. The father died ten days later but it was not clear if the injuries inflicted by his son had caused his death. Although the elements of the offence of malicious wounding had been made

out, the son had been found not guilty by reason of mental illness. See also Public Trustee (NSW) v Fitter [2005] NSWSC 1188.

[page 636]

Severance by court order 6.74

In Mitrovic v Koren [1971] VR 479, A and B were joint registered

proprietors of an estate in fee simple in certain land. X, a judgment creditor of A, caused a writ of fieri facias to issue and served a copy on the Registrar of Titles, who noted a memorandum of service in the register book as affecting A’s interest in the land. Pursuant to the writ, the sheriff sold at auction all A’s interest in the land. The purchaser, P, lodged the transfer executed by the sheriff for registration, however A and B refused to deliver to P possession of the duplicate certificate of title. Instead, A and B lodged a transfer to B and a third person, C. P sought (i) a declaration that he was entitled to have his transfer registered in priority to any other dealing; (ii) an order compelling A, B and C to deliver possession or control of the duplicate certificate of title to P to enable him to obtain registration of his transfer; and (iii) an injunction restraining them from registering their transfer. The court held that taking the joint tenant’s interest in execution under the judgment severs the joint tenancy. In Guthrie v ANZ Banking Group (1991) 23 NSWLR 672 at 680, Meagher JA examined the effect of a judgment creditor or secured creditor obtaining execution against that joint tenant. His Honour stated certain principles of law regarding joint tenancies including:

A judgment creditor, or a secured creditor, of one joint tenant may execute against that joint tenant’s aliquot share (Wright v Gibbons (at 331) per Dixon J), and when that happens a severance of the jointure must be effected … A judicial decree or order that one joint tenant transfer his share to his co-tenants operates to sever the jointure: Harris v Walker (1969) 14 FLR 167; Re Johnstone [1973] Qd R 347; sub nom Re Johnstone’s Estate (1973) 22 FLR 291; Pollard v Pollard (1975) 25 FLR 125; 6 ALR 256; and Penny Nominees Pty Ltd v Fountain (No 3) [[1991] ACL Rep 355 NSW 1]. Such orders are often made under the Family Law Act 1975 (Cth) s 79. The effect of the transfer inter vivos by one joint tenant of his mortgaged share to a co-tenant was decided as long ago as 1607 in Lord Abergavenny’s Case (1607) 6 Co Rep 78b; 77 ER 373. That case has been constantly followed and never (so far as I know) been doubted. The legal proposition for which it is authority is that where judgment is given against one of two joint tenants and afterwards that one releases to the others before execution such a release shall not bar the creditor’s execution, whereas if the releasing joint tenant had died before execution the survivor holds the land discharged of any execution. The reason for the distinction is that in the former case the release derives title from the release not from the jus accrescendi …

Severance upon bankruptcy 6.75

An order of court declaring a joint tenant bankrupt will sever the

joint tenancy. The bankruptcy of a joint tenant vests the joint tenant’s interest in land in the Official Trustee in Bankruptcy. By s 58(2) of the Bankruptcy Act 1966 (Cth), the property does not vest in the trustee until the statutory registration requirements have been met, but in equity severance occurs on the declaration of bankruptcy: Re Francis; Ex Parte Official Trustee in Bankruptcy (1988) 82 ALR 335; Cummins v Cummins (2006) 227 CLR 278; Peldan v Anderson (2006) 229 ALR 432.

[page 637]

TERMINATION OF CO-OWNERSHIP 6.76

Co-ownership, whether of land, goods or other property, may be

terminated in several ways. First, where all but one of a number of joint tenants have died, the jus accrescendi operates, enabling the survivor to become the sole owner of the property previously jointly owned. In the case of land, the Torrens legislation usually provides for the registration of the surviving joint tenant as the sole proprietor of the fee simple estate.41 A tenancy in common or joint tenancy may also be determined if one co-owner purchases or otherwise acquires the interest of all the other co-owners. Secondly, if all co-owners join in a transfer or assignment of their interests to another person, that person will acquire sole ownership of the object assigned. Thirdly, coowners may agree amongst themselves to divide the property in accordance with their respective shares. Thus, for example, two joint tenants of land may agree that each shall become the sole proprietor of a designated half of the land. Finally, the court, acting pursuant to powers conferred by statute, on the application of one or more co-owners, may compel the unwilling coowners to divide the property or, more usually, join in a sale and division of the proceeds. The materials below briefly describe the legislation specifically authorising the courts to order the sale or partition of a co-owned property, although it should be noted that similar orders may be made in the exercise of powers conferred by other legislation, such as that governing matrimonial property disputes or the winding up of partnerships.

The relationship between the various statutes may give rise to very complex questions. The extent to which state jurisdiction under the co-ownership legislation is displaced by the jurisdiction of the Family Court under the Family Law Act 1975 is especially difficult.42

Land The Partition Acts 6.77

At common law, the agreement of all co-owners was required for the

partition (physical division) of land.43 By the Partition Acts of 1539 and 1540, joint tenants and tenants in common were made compellable to partition on application to the court, regardless of how inconvenient the order might be. Despite the fact that equity assumed jurisdiction to decree partition under the legislation, there was no general discretion to refuse a decree or to order a sale of the property. By the Partition Acts 1868 and 1876, the court was empowered to order a sale in lieu of partition in certain circumstances. In Australia, the legislation of four states is based on the English Partition Acts, although there is some variation in the form of the legislation.44 6.78

In South Australia, Tasmania, Western Australia and Victoria the

primary remedy is an order for partition but, although the details vary slightly, all four states provide for sale

[page 638]

on the request of interested parties, notwithstanding the dissent or disability of any of the owners, if the court is satisfied that this would be more beneficial for the parties. In Victoria the application is made to Victorian Civil and Administrative Tribunal (VCAT). VCAT must make an order for partition unless it considers that it would be ‘more just and fair’ to make an order for sale or for a combination of partition and sale. In Yeo v Brassil [2010] VSC 344 the Supreme Court of Victoria held at [23] that ‘the court has no general discretion which would enable it to refuse an application on grounds of hardship or unfairness’ and that in the absence of a legal or equitable right which would justify VCAT refusing an order it was obliged to make an order. In Western Australia if the request for an order for sale is made by the party or parties interested, individually or collectively, to the extent of a half share or more in the land to which the action relates, the court must make the order. 6.79

It is no bar to an order under the legislation for partition that

planning permission is required for the partition to take place. If it turns out that permission cannot be obtained, the parties may apply for alternative orders: cf Squire v Rogers (1979) ALR 330 at 338–43. See also Palethorpe v Public Trustee of Queensland [2011] QSC 335. In practice, orders for partition, as opposed to those requiring sale, are infrequent. 6.80

The Tasmanian legislation requires that it must have been possible

for a judgment for partition to be made. This prevents the provisions applying to land held on trust for sale, because an order for partition could not have been made in these circumstances: Ward v Trustees, Executors and

Agency Co Ltd (1893) 14 ALT 274. The restriction does not apply in other jurisdictions. As to the rights of a mortgagee in an action for partition or sale, see Fulton v 523 Nominees Pty Ltd [1984] VR 200, and cf McMahon v A F Wade Pty Ltd [1983] WAR 152. Can a co-owner, who has acted to his or her detriment on the basis that property will not be partitioned, successfully argue that the other co-owner is estopped from seeking partition? In Lucas v McNaughton (1990) 14 Fam LR 347 an application for summary judgment was rejected because it is possible for a party to be so estopped. The central question to be addressed is whether it would be unconscionable for the other co-owner to resile from the assumption he has induced.

Statutory trusts 6.81

An alternative approach to the sale or partition of co-owned property

was adopted in New South Wales in 1930 in an attempt to simplify and cheapen the procedure available under the Partition Acts. The legislation (Conveyancing Act 1919 (NSW) Pt IV Div 6) has been followed, with amendments of varying significance, in the Australian Capital Territory, the Northern Territory and Queensland.45 The New South Wales Act enables the court, on the application of any one or more co-owners of property (other than chattels), to appoint trustees of the property to hold the property on the statutory trust for sale or on the statutory trust for partition: s 66G(1).46 Coownership is defined in s 66F to include ‘ownership whether at law or in equity in possession by two or more persons as joint tenants or as tenants in common’, and co-owner to include ‘an incumbrancer of the interest of a joint

tenant or tenant in common’.47 In Darrington v Caldbeck (1990) 20 NSWLR 212, it was held

[page 639]

that an applicant under s 66G must be a co-owner at the date of making the application. An application made by the executors of a deceased co-owner, prior to the grant of probate of the deceased person’s will, did not come within the section, since under other New South Wales legislation, the estate of the deceased vested in the Public trustee. In ANZ Banking Group Ltd v Scott (1993) 6 BPR 13,217, it was held that a bank which had a mortgage granted by the joint tenants of a property did not come within the definition of co-owner under s 66G, and hence was unable to apply for appointment of trustees for sale. If, however, the mortgage had been granted by only one of the co-owners, the mortgagee would have been able to apply. An equitable charge is also within the definition of ‘incumbrancer’ and therefore within the definition of qualifying applicants: Commonwealth Bank of Australia v MacDonald (2000) 10 BPR 18,111. 6.82

Property held on the statutory trust for sale is held on trust to sell the

same and to stand possessed of the net proceeds of sale and of the net income until sale upon such trusts and subject to such powers and provisions as may be requisite for giving effect to the rights of co-owners.48 Property held on a statutory trust for partition is held on trust for the partition of the property, to give effect to the partition by assuring the property to the respective co-

owners, and to provide for payment of money (which would normally be raised by mortgage) for equalising shares. The nature of equality money (i.e. the amount that needs to be paid by one party to the other in a partition to ensure equality of value) and the broad concept underlying its foundation was discussed by Barrett JA, speaking for the New South Wales Court of Appeal, in Segal v Barel (2013) 16 BPR 31,457; [2013] NSWCA 92. If, on application for appointment of trustees on the statutory trust for sale, a coowner satisfies the court that partition would be more beneficial than sale for the co-owners interested in the extent of upwards of a moiety in value, the court may appoint trustees for the partition, instead of trustees for sale.49 The court may refuse to grant an order for partition if it would involve hardship on the minority: Hayward v Skinner [1981] 1 NSWLR 590. The trustees holding the property on the statutory trust for sale or the statutory trust for partition are to consult the beneficiaries and give effect to their wishes, so far as is practicable and consistent with the general interest of the trust.50 6.83

The legislation does not merely create new machinery for terminating

co-ownership. Under the Partition Acts, the primary right is partition and the power to order a sale in lieu thereof depends on the case being brought within the situation specified in the legislation. Under the legislation, the court has discretion to appoint trustees for sale regardless of whether the applicant is entitled to call for partition of the land. Thus, for example, although there is authority that no order can be made under the Partition Acts in relation to land that is already the subject of a trust for sale (because the subsistence of a trust for sale excluded partition), an order can be made

under the legislation in such a case as in the exercise of the court’s discretion. In general, under legislation: … [s]ale and partition … are true alternatives; there is no longer the dependence of the power to order the one on the power to order the other. And it may perhaps be suggested …

[page 640]

that the emphasis has in another way been shifted from partition as the primary right, with sale in particular cases, to sale as the primary right with partition in special circumstances … [Re Cordingley (1948) 48 SR (NSW) 248 at 249–50.]

In Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 the court also held that in the case of an application for appointment of trustees for sale there was an onus in favour of sale. The court held that it had discretion in deciding whether to appoint trustees for sale of the trademarks. In appropriate circumstances, equitable grounds may justify withholding that discretion. Woodson was doubted and distinguished in Tory v Tory [2007] NSWSC 1078. Nonetheless, in Segal v Barel (2013) 16 BPR 31,457; [2013] NSWCA 92, the New South Wales Court of Appeal, without referring to Woodson, adopted a similar approach. Barrett JA, with whose judgment McColl JA and Preston CJ of the NSW Land and Environment Court agreed, put the matter thus at 31,463–31,464: Before considering the issues arising on the appeal, I should say something about certain observations which, although not directly challenged, informed the judge’s decision-making and much of his reasoning. He referred on several occasions to the notion that, under Division 6 of Part 4 of the Conveyancing Act, sale is the ‘preferred remedy’ and that, in the ordinary course, an

order for the appointment of trustees for sale should be made in preference to an order for the appointment of trustees for partition. His Honour rejected that view, saying that he did not think that ‘it is entirely accurate to say that the legislation makes sale the “preferred” remedy’. He emphasised that s 66G(1) contemplates either sale or partition as alternative remedies, so that ‘a judge does not start with a predisposition towards sale simply because it is cleaner, simpler and more straightforward. The choice of sale or partition will depend on the particular facts and careful consideration of the discretionary factors’. … But it is important to pay attention to the way the statute works. If one co-owner applies for partition and there is no counter-claim for sale, the only question the court will have occasion to consider is whether or not there should be partition. No question of sale will arise; nor will any question of ‘preferred remedy’. Likewise, if one owner seeks the appointment of trustees for sale and is not met by a counter-claim for partition, the question of termination of co-ownership by sale will be the only question to be decided and there will be no issue of ‘preferred remedy’. If, however, there are competing claims — one for the appointment of trustees for sale and the other for the appointment of trustees for partition — the position will be that, having regard to s 66G(4) [which states that if, on application for appointment of trustees on the statutory trust for sale, a coowner satisfies the court that partition would be more beneficial than sale for the co-owners interested in the extent of upwards of a moiety in value, the court may appoint trustees for the partition, instead of trustees for sale], the claim for partition will not succeed unless the person pressing that claim satisfies the court that partition is, in the sense referred to in s 66G(4), ‘more beneficial’ than sale. The co-owner who advances the competing claim for sale, by contrast, is not called upon to show that that remedy is ‘more beneficial’ than partition. If the co-owner claiming partition does not satisfy the court that partition is more beneficial than sale, the only remaining alternative would be sale of the property. This does not mean that sale is the ‘preferred remedy’, only that once the court is not satisfied that partition is the more beneficial remedy, sale of the property remains as the only remedy available. If, however, the co-owner claiming partition does satisfy the court that partition is more beneficial than sale, it does not follow that the court must order partition. The court still

[page 641]

retains a discretion to choose the remedy of partition over sale. Because of the additional onus that an applicant for the appointment of trustees for partition must always discharge when pitted against an applicant for the appointment of trustees for sale, the situation is not in truth one of choice between two equally available alternatives. Once that onus is discharged, however, the court is in a position to choose between the two outcomes according to the justice of the case. That is the point that Kearney J made in Hayward v Skinner [1981] 1 NSWLR 590, a case the judge cited in connection with the proposition that sale should not be regarded as the ‘preferred remedy’. Kearney J referred (at 593) to the possibility that, although partition had been shown to be more beneficial than sale for the owners interested as to more than one-half, there ‘may, for example, be circumstances imposing considerable hardship on a minority of co-owners if the greater benefit to the majority should prevail’. It is only after the s 66G(4) condition is satisfied that any notion of equally available alternatives comes into play.

6.84

Originally, there was doubt about whether the provision enabling the

court to appoint trustees for sale or partition left any discretion in the court to decline to do so. It is now clear that such discretion exists.51 The court cannot refuse a sale on broad grounds of hardship or unfairness: see Re McNamara and the Conveyancing Act (1961) 78 WN (NSW) 1068. However, the court can refuse an application where sale would breach a contractual or fiduciary obligation or where it would be unconscionable for the applicant to invoke the section. In Williams v Legg (1993) 29 NSWLR 687, the New South Wales Court of Appeal refused an application for the appointment of trustees for sale of property in which a half-interest was left to the applicant by will, but the gift was subject to an equitable obligation to permit another person to reside on the property until his death. In Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635; 116 ALR 26; 67 ALJR 739, the High Court examined the enforceability of a contract under which co-owners agreed not to apply for

partition or sale without first offering their interest to the other co-owners at a mutually agreed price. It was held that agreements between co-owners not to apply for sale or partition without notifying the other co-owners, or giving the other co-owners a right of first refusal over the property were not contrary to public policy. The High Court left open whether an agreement precluding an application under the legislation in all circumstances would be an invalid restraint or alienation. See also Matsen v Matsen [2008] NSWSC 135; and Butt, ‘Restraints Upon Alienation: Tenants in Common’ (1995) 69 ALJ 683. 6.85

The power to appoint trustees extends to any property and any estate

or interest in any property other than chattels. In Stone v Stone (2014) 17 BPR 33,443 it was held that land held at law as joint tenants by partners was property within the meaning of s 66G, notwithstanding its status as a partnership asset in a partnership which had been wound up but not dissolved, and s 22(1) of the Partnership Act, 1892, which reflects the position in equity between partners inter se, did not operate to remove land as property within the meaning of section 66G (at 33,448–33,450). In Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685, the court, in an application which was made in relation to jointly

[page 642]

owned trademarks, ordered that the sale should be subject to an obligation to give effect to an estoppel and to avoid unconscionable detriment to one of the co-owners. In Commonwealth Bank of Australia v MacDonald (2000) 10 BPR

18,111 the court also held that co-owned shares that conferred a right of occupancy in a company title unit were property for the purposes of s 66G.

Chattels 6.86

It appears that at common law the court had no power to order the

sale or division of chattels the subject of co-ownership: see, for example, Ryan v King [1932] QWN 1. In some states, legislation empowers the court to make such an order in certain circumstances. The Conveyancing Act 1919 (NSW) s 36A provides that: … [w]here any chattels belong to persons jointly or in undivided shares, the persons interested to the extent of a moiety or upwards may apply to the court for an order for division of the chattels or any of them, according to a valuation or otherwise, and the court may make such order and give any consequent directions as it thinks fit.

Property Law Act 1958 (Vic) s 187 is in similar terms.52 For an application of the provision, see Tillack v Tillack [1941] VLR 151. It has been held that the phrase ‘division of the chattels’ in the New South Wales Act s 36A includes division by conversion into money and distribution of the money, and therefore the section permits the court to order a sale in an appropriate case: Ferrari v Beccaris [1979] 2 NSWLR 181. In Naziridis v Rimis (1985) 9 BPR 16,201 it was held that registration of a car in joint names was only one factor in determining whether the interest was a moiety or upwards. Also, the court held that there is no power to appoint a trustee for sale as in the case of s 66G. In addition, the court may have power to order a division of chattels where such chattels are vested in a trustee for persons in undivided shares.53 These provisions explicitly empower the court to order sale of chattels and

distribution of the proceeds, division of the chattels, or division of some chattels and sale of others. The legislation in the Northern Territory, Queensland and Tasmania provides that any co-owner of a chattel or chattels, regardless of the quantum of share, may apply to the court for an order for sale or division.54

Legislative reform 6.87

Historically, the orthodox co-ownership principles played a

significant part in the development of the law relating to family or domestic property disputes. As seen in Chapter 4, at 4.115ff, those principles have been substantially modified by changes in the law of constructive trusts and by legislation to confer power on the court to alter the property interests of de facto partners and parties to a domestic relationship.

1.

Unit Titles Act 2001 (ACT); Strata Schemes Development Act 2015 (NSW); Unit Titles Act (NT); Body Corporate and Community Management Act 1997 (Qld); Community Titles Act 1996 (SA); Strata Titles Act 1998 (Tas); Subdivision Act 1988 (Vic); Strata Titles Act 1985 (WA).

2.

For the origins of the expression, see Gray and Gray, 5th ed, 915, n 2.

3.

Blackstone, Commentaries, Vol II, 182.

4.

See Civil Law (Property) Act 2006 (ACT) s 209; Conveyancing Act 1919 (NSW) s 25; Law of Property Act (NT) s 34; Property Law Act 1974 (Qld) s 34; Law of Property Act 1936 (SA) s 24C; Conveyancing and Law of Property Act 1884 (Tas) s 62(4)–(6); Property Law Act 1958 (Vic) s 28; Property Law Act 1969 (WA) s 29.

5.

See Conveyancing Act 1919 (NSW) s 35; Succession Act 1981 (Qld) s 65; Presumption of Survivorship Act 1921 (Tas) s 2; Property Law Act 1958 (Vic) s 184.

6.

Re Leaver [1997] 1 Qd R 55. See also Re Barbour [1967] Qd R 10 (‘share and share alike as joint

tenants’; held: joint tenancy intended); Roberston v Fraser (1871) 6 Ch App 696 (X ‘may participate in such bequest’; held: tenancy in common). 7.

Conveyancing Act 1919 (NSW) ss 96A, 99; Law of Property Act (NT) s 103; Property Law Act 1974 (Qld) s 93; Law of Property Act 1936 (SA) ss 54, 55; Conveyancing and Law of Property Act 1884 (Tas) ss 30, 73; Property Law Act 1958 (Vic) ss 112, 113; Property Law Act 1969 (WA) ss 67, 68.

8.

See also Diwell v Farnes [1959] 1 WLR 624; [1959] 2 All ER 379; Currie v Hamilton [1984] 1 NSWLR 687; Buchan v Nash [1983] 2 NSWLR 575.

9.

See Ingram v Ingram [1941] VLR 95; Calverley v Green (1984) 155 CLR 242; 56 ALR 483; 59 ALJR 111; 4.79.

10. Civil Law (Property) Act 2006 (ACT) s 210; Law of Property Act (NT) s 35; Property Law Act 1974 (Qld) s 35. 11. Law of Property Act (NT) s 35(2)(c); Property Law Act 1974 (Qld) s 35(2)(b). 12. Land Title Act (NT) s 57(2); Land Title Act 1994 (Qld) s 56(2). 13. See Civil Law (Property) Act 2006 (ACT) s 210; Conveyancing Act 1919 (NSW) s 7; Law of Property Act (NT) s 4; Property Law Act 1974 (Qld) s 35. 14. By force of statute in Victoria and Tasmania: Land Titles Act 1980 (Tas) s 44; Transfer of Land Act 1958 (Vic) s 33(4). 15. See Real Property Act 1900 (NSW) s 100; Transfer of Land Act 1958 (Vic) s 30(2); Real Property Act 1886 (SA) s 74; Transfer of Land Act 1893 (WA) s 60; Land Titles Act 1925 (ACT) s 54(2). 16. See Law Reform Commission of Western Australia, Report on Joint Tenancy and Tenancy in Common, Project No 78, 1994, 18. 17. This is required by legislation in the Australian Capital Territory: Land Titles Act 1925 (ACT) s 54(1). 18. Land Title Act (NT) s 57; Land Title Act 1994 (Qld) s 56. 19. In Western Australia, a similar provision was recommended by the Law Reform Commission of Western Australia: Report on Joint Tenancy and Tenancy in Common, Project No 78, 1994, 19. 20. Gerard Cassegrain and Co Pty Ltd v Felicity Cassegrain (2013) 305 ALR 612 per Basten JA at [137]–[139]; upheld on appeal: Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 316 ALR 111 at [45]. 21. Re Foley (Deceased), Public Trustee v Foley [1955] NZLR 702; Calverley v Green (1984) 155 CLR

242; 56 ALR 483; 59 ALJR 111; 4.112. 22. Civil Law (Property) Act 2006 (ACT) s 211; Conveyancing Act 1919 (NSW) s 27; Law of Property Act (NT) s 36; Property Law Act 1974 (Qld) s 36. 23. For instance, Davies v Johnston [2014] VCAT 512. 24. See further, Moore, Grattan and Griggs (eds), Bradbrook, MacCallum and Moore’s Australian Real Property Law, Thomson Reuters, 6th ed, 2016, 591–3. 25. See also Brereton, ‘The Rights Between Co-owners of Land’ (1995) 69 ALJ 316. 26. Property Law Act 1974 (Qld) s 43; Law of Property Act (NT) s 45. 27. Note: Both of these Acts have themselves been repealed. 28. Property Law Act 1958 (Vic) s 28A, inserted by Property Law Amendment Act 1998 (Vic) requires a co-owner to account for receipt of more than his or her share of rent. 29. See Hardingham and Neave, Australian Family Property Law, 1984, 197–8; Muschinski v Dodds (1985) 160 CLR 583; 62 ALR 429; 60 ALJR 52; Calverly v Green (1984) 155 CLR 242; 56 ALR 483; 59 ALJR 111 (4.112); Ryan v Dries (2002) 10 BPR 19,497; [2003] ANZ ConvR 47; 6.41. 30. See Crawley Borough Council v Ure [1996] QB 13; [1995] 3 WLR 95; [1996] 1 All ER 724; Harrow London Borough Council v Johnstone [1997] 1 WLR 459 at 465; [1997] 1 All ER 929 at 935 per Lord Mustill. 31. McNab v Earle was followed on similar facts in Freed v Taffel [1984] 2 NSWLR 322 and Patzak v Lytton [1984] WAR 353. See also McCoy v Caelli (2010) 15 BPR 28,735. 32. Corin v Patton was followed in Oboohoff v Melnicke [1990] ACLD 35.1039 and applied in Penny Nominees Pty Ltd v Fountain (No 3) (1990) 5 BPR 11,284. 33. For a discussion of difficulties in the application of this provision, see Tee, ‘Severance Revisited’ [1995] Conv 105. See also Gray and Gray, 5th ed, 942–3. 34. See Civil Law (Property) Act 2006 (ACT) s 208; Conveyancing Act 1919 (NSW) ss 24, 44(2); Law of Property Act (NT) s 13(4); Property Law Act 1974 (Qld) s 14(3); Law of Property Act 1936 (SA) s 40(3); Conveyancing and Law of Property Act 1884 (Tas) s 62(2); Property Law Act 1958 (Vic) s 72; Property Law Act 1969 (WA) ss 39, 44. 35. See M da Costa, ‘Co-ownership under Victorian Land Law’ (1961) 3 MULR 433 at 456–60. 36. For a later decision arising out of litigation reported in Wright v Gibbons, see Gibbons v Wright (1954) 91 CLR 423. In the later case, Bessie Melba Gibbons failed to establish her claim that her sisters lacked the mental capacity to execute effectively the document purporting to sever the joint

tenancy. 37. See Civil Law (Property) Act 2006 (ACT) s 201; Law of Property Act (NT) ss 9–11; Property Law Act 1974 (Qld) ss 11–12; Law of Property Act 1936 (SA) ss 29–31; Conveyancing and Law of Property Act 1884 (Tas) s 60; Property Law Act 1958 (Vic) s 53; Property Law Act 1969 (WA) ss 34–36. 38. Lyons v Lyons was followed in Re Shannon’s Transfer [1967] Tas SR 245 and Guthrie v ANZ Banking Group (1991) 23 NSWLR 672. But compare the position in England: United Bank of Kuwait Pty Ltd v Sahib [1995] 2 WLR 94; [1995] 2 All ER 973, where it was suggested that the effect of an equitable charge would be to sever the joint tenancy; and see Preece, ‘The Effect of Partial Alienation by a Co-Owner of Land’ (1981) 55 Law Inst J 115. 39. See also Youdan, ‘Acquisition of Property by Killing’ (1973) 89 LQR 235; Mackie, ‘Manslaughter and Succession’ (1988) 62 ALJ 616; Butt, ‘Forfeiture Rule Confirmed’ (1995) 69 ALJ 682. 40. Forfeiture Act 1991 (ACT) ss 3, 4. Reform has been proposed in both Tasmania and Victoria recently: The Forfeiture Rule, Report No 6, December 2004, Tasmania Law Reform Institute; The Forfeiture Rule: Report, Victorian Law Reform Commission, September 2014. 41. See Land Titles Act 1925 (ACT) ss 54(1), 55; Real Property Act 1900 (NSW) ss 100, 101; Real Property Act 1886 (SA) ss 74, 188; Land Titles Act 1980 (Tas) ss 44, 100; Transfer of Land Act 1958 (Vic) s 50; Transfer of Land Act 1893 (WA) ss 60, 227. 42. For a review of the authorities, see Williams v Williams [1979] 1 NSWLR 376; cf National Australia Bank v Pasupati [2011] NSWSC 540. 43. This did not apply in the case of coparceners. This form of co-ownership, which arose where a person died intestate leaving no male heirs, and more than one female heir (for example, daughters) is now extinct. 44. Law of Property Act 1936 (SA) Pt 8; Partition Act 1869 (Tas); Property Law Act 1958 (Vic) Pt IV; Property Law Act 1969 (WA) Pt XIV. 45. Civil Law (Property) Act 2006 (ACT) Pt 2.5; Law of Property Act (NT) Pt 5 Div 2; Property Law Act 1974 (Qld) Pt V Div 2. 46. See also Civil Law (Property) Act 2006 (ACT) s 244(3); Law of Property Act (NT) s 40; Property Law Act 1974 (Qld) s 38. 47. See also Law of Property Act (NT) s 37(1); Property Law Act 1974 (Qld) s 37. 48. Conveyancing Act 1919 (NSW) s 66F(2); Law of Property Act (NT) s 37; Property Law Act

1974 (Qld) s 37A; cf Civil Law (Property) Act 2006 (ACT) s 244(3). 49. Conveyancing Act 1919 (NSW) s 66G(4); Law of Property Act (NT) s 40(7); Property Law Act 1974 (Qld) s 38(4); cf Civil Law (Property) Act 2006 (ACT) ss 243–244. 50. Conveyancing Act 1919 (NSW) s 66H; Law of Property Act (NT) s 41; Property Law Act 1974 (Qld) s 39. 51. See Stephens v Debney (1960) 60 SR (NSW) 468 at 469–70; Hayward v Skinner [1981] 1 NSWLR 590; Pannizutti v Trask (1987) 10 NSWR 531; Ngatoa v Ford (1990) 19 NSWLR 72. 52. For other jurisdictions see Law of Property Act (NT) s 43; Property Law Act 1974 (Qld) ss 41– 42; Law of Property Act 1936 (SA) s 69(1); Conveyancing and Law of Property Act 1884 (Tas) s 84L; Property Law Act 1969 (WA) s 129. 53. Trustee Act 1925 (NSW) s 87. 54. Law of Property Act (NT) s 43; Property Law Act 1974 (Qld) s 41(1); Conveyancing and Law of Property Act 1884 (Tas) s 84L(1).

[page 643]

The Alienability of Proprietary Interests

CHAPTER

7

INTRODUCTION 7.1

The doctrine of estates gave considerable flexibility to those wishing to

create interests in land, by permitting the creation of successive interests either by grants inter vivos or testamentary dispositions. This flexibility, however, also had disadvantages for those receiving the interests and for the community as a whole. In particular, it was and is possible for successive interests to be created so that, in the absence of statutory powers, no single person is able at any given time to dispose of the fee simple absolute in the land. Before the intervention of the legislature, this allowed a determined testator or grantor to tie up land effectively for long periods of time. Indeed, in the family settlement commonly employed by the landed classes in England until well into the nineteenth century, the paramount objective of the benefactor was usually to ensure that the land remained within the family

for generations. Generally, the holder of each estate could deal only with his or her own interest and could not defeat the interests of beneficiaries taking later under the settlement and consequently alienability was effectively restricted. A sale of the fee simple required the concurrence of all parties with interests in the land, whether present or future. In many instances, their concurrence was impossible, since some of the potential beneficiaries were unborn or otherwise unascertained, or had not attained full age and capacity. Such problems were not confined to settlements of land, since a settlor or testator could employ the trust to create successive interests in personal property, such as a fund of money or shares in a company. The common law developed doctrines designed to impose checks on the more blatant attempts to tie up interests in property for undue periods. Thus, a body of rules emerged that struck down direct restraints on alienation contained in settlements and other documents; see 7.2ff. This negative attitude to restricting the alienability of interests in land and, later, other forms of property, gave birth to the modern rule against perpetuities, which still survives, although modified substantially in some jurisdictions by statute. In the case of land, the judicial doctrines were supplemented by the intervention of the legislature in the form of the settled land legislation and related enactments. This legislation will not be dealt with here. For an outline of the relevant provisions, see the 8th edition at 725–32.

[page 644]

JUDICIAL DOCTRINES — RESTRAINTS ON ALIENABILITY 7.2C

Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 16 BPR 30,111; [2011] NSWCA 396 New South Wales Court of Appeal

[The registered proprietor of a parcel of land developed the land as a retirement village and sold the subject strata home unit to the purchasers as a retirement unit. The contract of sale required the purchasers to enter into an occupancy agreement and a buyback deed with the appellant. Under the terms of the occupancy agreement, the purchasers promised not to dispose, mortgage, encumber or lease the property without the consent of the appellant. Further, the purchasers acknowledged that their right of occupancy of the unit and communal areas in the retirement village ceased on the happening of certain events which included the death of the occupant or the sale or disposal of any interest in the property. Upon the happening of any such event, the appellant had the right, exercisable by service of a notice (‘the default buyback notice’), to call upon the purchasers to transfer the property to the appellant for a specified price. The buyback deed provided, inter alia, that should an owner of a unit intend to sell, transfer or dispose of the unit, the owner was obliged to serve a one-month notice of such intention and upon the expiration of the notice, the appellant was given an option to purchase the property for a specified price exercisable by notice within 28 days. Following the death of the purchasers, the appellant purported to exercise the option to purchase by service of the default buyback notice upon the respondents. The respondents were the executors of the will of the purchasers. The respondents argued, inter alia, that the buyback arrangements in the occupancy agreement and buyback deed were unenforceable as an invalid restraint upon alienation.] Campbell JA: The Law Concerning Restraints on Alienation [His Honour proceeded to give an exhaustive summary and analysis of the law relating to restraints upon alienation before the seminal decision of the High Court of Australia in Hall v Busst in 1960 beginning with Littleton and Coke on Littleton. His Honour then discussed Hall v Busst and later authorities.]

Hall v Busst [1960] HCA 84; (1960) 104 CLR 206 is the seminal Australian case on restraints against alienation. Accordingly it is of direct relevance to the instant proceedings. However, it is not entirely clear for exactly what propositions Hall v Busst is authority. A detailed discussion of the case is required. Hall v Busst concerned a sale of land. On the one day, the vendor and the purchaser executed both a contract for the sale of land, and a deed in which the purchaser was called the grantor. The relevant provisions of the deed are: 3. The grantor shall not at any time transfer, assign, set over or lease any part of the said lands (other than by way of mortgage to a banking institution) without the consent in writing of the grantee first obtained; 4. For the purpose of obtaining the consent of the Grantee in the preceding clause mentioned the Grantor shall give to the Grantee one calendar months’ notice in writing of her intention to so deal with the said fee simple or any part thereof and during the currency of that notice the Grantor Doth Hereby Give and Grant to the Grantee the first [page 645]

option of purchasing the said fee simple and all improvements thereon on the terms and conditions herein contained; 5. The purchase price relating to such option shall be the sum of Three thousand one hundred and fifty-seven pounds four shillings (£3157 4s 0d) to which shall be added the value of all additions and improvements to the said property since date of purchase by the Grantor (such value to be taken as at date of exercise of this option) and from which shall be subtracted the value of all deficiencies of chattel properly and a reasonable sum to cover depreciation of all buildings and other property on the land; 6. This option shall remain open for exercise by the Grantee at all times for a period of 1 month from the date of giving of the notice by the Grantor of her intention to deal with the said fee simple and this option may be exercised by the Grantee by giving notice to the Grantor or leaving such notice for her at the office of Messrs J J Bell & Bell Solicitors of Tully or their successors in office. The price named in cl 5 was identical with the purchase price under the contract. Some years later, the purchaser sold the land to a third party without complying with these clauses. The action in question was an action for damages for breach of contract. It was contended that there had been a breach of both cll 3 and 4. There was a question of construction, that Dixon CJ expressed at 214 as being whether ‘… cl 3 formed but an introductory provision to cll 4, 5 and 6 and was not independently enforceable’. The alternative view was that clause 3 had an independent effect. As Dixon CJ put it at 214, the question of whether cl 3 was void as ‘a restraint upon alienation which was unqualified’ arose if cl 3 was a provision having an independent effect. That

was because there was a question about whether the price at which the option could be exercised was too uncertain to give rise to a valid contract. For Dixon CJ, the uncertainty of the price would mean that the promise in cl 4 to give the first option of purchasing the property was void, and hence could not be sued on. The promise in cl 4 to give one month’s notice was clearly dependent on cl 3, and so the breach of that promise could be sued on only if cl 3 could be sued on. The promise not to transfer without consent, in cl 3, had been broken, but it could be sued on even if the option was not enforceable only if cl 3 had an independent effect to the option. And if cl 3 had an independent effect, there was then a question of whether cl 3 was void as a restraint on alienation. Dixon CJ construed cl 3 as having an independent effect. He construed it as ‘an indefinite prohibition … of alienation without consent of the fee simple of the land or any part of it and of the creation of any less estate or interest therein whether legal or equitable’ (215). (This is a little puzzling when cl 3 permitted mortgaging to a banking institution, which would itself be a creation of an interest in the land, and would inevitably confer on the mortgagee a power of sale. However I am in no position to do anything other than accept Dixon CJ’s categorisation of the clause.) Dixon CJ noted that the words ‘Grantor’ and ‘Grantee’ include the executors, administrators and assigns of the respective parties, and thus that cl 3 was not confined in its operation to the life of the vendor and the life of the purchaser (214). He held that the effect of the clauses, read together, was that the grantor was required to give the notice required by cl 4 whenever she intended to deal with the fee simple, or any part thereof, that thereupon an option to purchase would arise, but if the option was not exercised the Grantor remained prohibited from transferring any interest in the lands without the written consent of the grantee. So construed, cl 3 created a prohibition of alienation without consent. [page 646]

At 217 he said: … the question arises whether, considered as an obligation binding the purchaser … her executors, administrators and assigns and operating upon her and her legal personal representatives indefinitely, cl 3 is not void as an attempt wholly to restrain alienation. At 217–18 Dixon CJ said: The question whether a bond or covenant or contract purporting to impose a total contractual restraint upon alienation is void does not seem to be settled. A condition doing so attached as a condition subsequent to the estate is of course void. The invalidity may be put on the ground of repugnancy to the grant or upon public policy or for that matter it may conceivably be attributed to an indirect effect of Quia Emptores. That is immaterial, for it is a known rule that the condition is void. But with contractual restraints there is no fetter upon alienation which does more than sound in damages, that is, unless a doctrine of equity intervenes to make it bind the land. Coke at one time seemed to think that a bond with a condition against alienation of an estate was good: Coke Litt. 206b. And in Freeman v Freeman a bond

against barring an entail was held valid. But according to Tatton v Mollineux Coke is said to have taken a contrary view in the case of Poole. In a learned article by Mr Charles Sweet upon ‘Restraints on Alienation’ (1917) 33 LQR, pp 236, 342 that writer does not refer directly to the question whether a covenant or agreement purporting to restrain alienation is or may be valid; but the author says, ‘If property is given to A absolutely he cannot be restrained from alienating it by any device, whether the device takes the form of a condition against alienation or a gift over on alienation; the attempted restraint is contrary to public policy, and its form is immaterial’ (p 240). Dr Glanville Williams has attacked the logical basis of invalidity for repugnancy (1943) 59 LQR, p 343; (1944) 60 LQR, pp 69, 190. In the course of doing so the learned writer (1943) 59 LQR, pp 349–51) invoked the alleged contrast of a contract, covenant or bond not to alienate as something inconsistent with the theory that a condition against alienation is repugnant. In effect he suggested that the distinction was untenable. The ground for denying the validity of a contractual restriction upon alienation is that it is a principle of the law that private property should be fully alienable. See per Jessel MR in In Re Buckton v Hay (1879) 11 Ch D at 648, 649 and Sweet (1917) 33 LQR 236. Cruise, 2 Dig p 6, in effect expresses a view that a contractual restriction upon the alienation of an absolute estate if unqualified should be considered void and this seems to accord with modern views of policy. Cruise, after referring to the supposed distinction between a condition and a covenant or contract, says this: ‘This doctrine appears extremely questionable, as it offers an obvious mode of restraining a person from those rights over an estate which the common law gives him; consequently of frustrating the common law, as fully as if a condition of this kind were allowed to be inserted in a conveyance of land; and in some cases it appears not to have been allowed.’ Indeed it is impossible to doubt that a fetter on alienation may be imposed by covenant which is as effective over a very long period of time to prevent alienation of land as a condition subsequent would have been had it been valid. I think therefore that cl 3 should be considered void as an independent restraint on alienation. [page 647]

Fullagar J, at 223, stated his conclusion that, ‘the restraint on alienation imposed by cl 3 of the deed on the owner of the fee simple is repugnant to the estate and void.’ I note that Fullagar J is there adopting the ‘repugnancy to the estate’ explanation for the voidness of restraints on alienation, about which Dixon CJ has expressed reservations without expressly rejecting it. At 223–4 Fullagar J agreed with the reasons of Dixon CJ for concluding that the principle was the same, whether a restraint on alienation was imposed ‘on a transferee of a fee simple’, by a condition subsequent in a grant, or by a separate contractual covenant. However Fullagar J reasoned to his conclusion by a different path to that of Dixon CJ. At 224, Fullagar J construed the clauses of the deed as interacting in a different way to that which Dixon CJ adopted. He started by saying that if clause 3 stood alone ‘it would be obviously void, for it is absolute in terms: consent could, of course, be withheld at will

– for any reason or for no reason at all’. However, construing the deed as a whole, Fullagar J regarded the grantor as being free to dispose of an interest in the land if a notice was given and the option was not exercised. Even so construing it, he held that the restriction in cl 3 was void … Fullagar J said, at 225: It is true that, on my construction of the deed, it is possible to get rid of the restriction. But the appellant can only get rid of it by giving to the respondent an option of purchase at a fixed price. She may not wish to alienate for many years: the restriction is of indefinite duration. She may then only wish to let the property for twelve months or to mortgage it for a few hundred pounds. But she cannot sell or lease or mortgage without giving the option of purchase to the respondent. And, when she does wish to alienate, the property may be worth a great deal more than £3157 plus and minus the items mentioned in c1. 5: it was apparently in fact worth nearly three times that sum at the end of 1957. I feel no doubt that the restraint is repugnant and void … Menzies J, at 235–6 said: I agree with the Chief Justice and Fullagar J that cl 3 is an unlawful restraint upon alienation, and to the reasons which they give for treating a covenant in restraint of alienation in the same way as a condition in restraint of alienation. I wish to add nothing beyond the observation that it is well settled that a covenant in general restraint of marriage is void as contrary to the public interest in just the same way as is a condition with the effect, and I think that it is in accordance with sound principle to regard general restraints upon alienation, whether by condition or covenant, similarly to general restraints upon marriage. Thus, Menzies J did not enter into the differing reasons that Dixon CJ and Fullagar J gave, arising from the different construction that they gave to the clauses, concerning why cl 3 was an unlawful restraint upon alienation. However his independent statement of the principle related only to ‘general’ restraints on alienation … Concerning restraint on alienation, Kitto J, at 228, construed the clauses as operating in the same way as Fullagar J had construed them, namely ‘that if the respondent does not exercise the option, the appellant will achieve her purpose of obtaining the consent, the respondent being then bound to give it’ (229). Kitto J continued: On this construction of the deed, there can be no valid objection to cl 3 on the ground that it prohibits alienation. Whether the clause would be void as against public policy if it were construed as imposing an unqualified prohibition upon alienation [page 648]

by the appellant or her representatives without the consent of the respondent or his representatives, is a question upon which I express no opinion. Windeyer J said at 245–6, that if he had construed the deed as Dixon CJ had done he

would have agreed that it was void, for the reasons that Dixon CJ gave. However, he construed it in the same way as Fullagar J had construed it. Windeyer J’s conclusion concerning restraint on alienation was ‘I agree in substance with my brother Kitto on this’ (246). In light of the fact that Windeyer J would have dismissed the appeal, that can only mean that he agreed with Kitto J not only about the construction of the clauses, but also that cl 3 did not impose an invalid restraint on alienation. It follows from this analysis that there is a majority in the High Court that cl 3 was to be treated in the same way as a condition in restraint of alienation. There is a majority for the conclusion that cl 3 was an unlawful restraint on alienation. However, there is no majority reasoning as to why cl 3 was an unlawful restraint on alienation. Reuthlinger v MacDonald Reuthlinger v MacDonald [1976] 1 NSWLR 88 is of relevance to the present case for two reasons. One is that it analysed the scope of the restraints on alienation imposed by a contract unrelated to transfer of the relevant property that, in accordance with Hall v Busst, were void. The other is that it was apparently the first case to adopt the view that a restraint on alienation imposed for the protection of a legitimate collateral object is not invalid. Reuthlinger concerned an agreement under which MacDonald, the holder of a minority parcel of ordinary shares in a proprietary company, agreed with Reuthlinger, the holder of half of the ordinary shares, not to transfer his shares or give any transfer notice to the company until Reuthlinger held a majority of the shares. MacDonald gave a transfer notice in breach of that agreement. Needham J held that the agreement did not impose an invalid restraint on alienation, and granted an injunction requiring MacDonald to act in accordance with the agreement. The contractual provision in Reuthlinger was imposed as part of an agreement by which MacDonald agreed to convert 3000 preference shares that he had formerly owned to ordinary shares (as it appears he was entitled to do at his own election under the company’s articles of association). In other words, it was not associated with any property being transferred to MacDonald. Reuthlinger promised that he would pay to MacDonald all amounts by which either the dividends received or capital distributed was less than it would have been had the shares remained preference shares, MacDonald promised not to himself vote or appoint a proxy concerning the shares, and MacDonald irrevocably appointed Reuthlinger as his attorney to exercise the voting power of the shares. Needham J stated that the principles concerning restraint on alienation as stated by Coke did not give support to a proposition ‘that contractual restraints, unrelated to feoffment, are void’ (94–5) … At 95–6 his Honour noted a problem with the application of law concerning restraints on alienation in any wider context than restraints imposed in relation to the transfer of property: I know of no authority which suggests that an option to purchase, or a right of preemption, granted by contract between capable parties unconnected with the transfer of property, would be void at law merely because the price fixed was substantially below the market value. Such a contract might be set aside in Equity for various reasons unconnected with the doctrine of restraint on alienation, but, if the defendants

[page 649]

here are correct … then such an option or right of pre-emption would be void at law, because it amounted to an absolute restraint on alienation. After extended discussion of Hall v Busst he toyed at 100 with the notion that: [T]he wider statements of Dixon CJ and Menzies J were obiter, because in Hall v Busst the contractual restraint became effective at law only when the transfer of land was completed, and therefore, the contractual restraint was imposed in connection with a transfer of the property affected. However, he was not willing to ignore obiter dicta of a considered nature from Dixon CJ and Menzies J. Thus, he proceeded on the basis that the doctrine of restraint on alienation had relevance to ‘restraints arising from contractual provisions unrelated to the transfer of the relevant property. The question then is — what is the extent of that relevance?’ (100). He noted, at 100–1, that the owner of property has contractual power to limit the incidents of ownership in numerous ways, notwithstanding that many such contractual arrangements, if inserted as conditions or executory limitations in grants of land, would be void. He held, at 101, that the question that the majority in Hall v Busst had answered in the affirmative was: … whether a bond or covenant or contract purporting to impose a total contractual restraint upon alienation is void. His conclusion concerning the applicable principle was, at 101: Each of the majority construed the agreement as imposing a restriction on alienation for ever without the consent of the other party. I do not think Hall v Busst can be used to invalidate any less contractual restriction. Needham J found that there were, in substance, two reasons why the restriction in Reuthlinger was not void. The first was that restriction was not total. The agreement did not extend the definition of the parties to include their executors, administrators and assigns, and thus the restriction was limited to the joint lives of the parties. The second was that Needham J accepted: [T]he view of Charles Sweet that a restraint imposed for the protection of a valid collateral object is not invalid. There is no objection in law, in my opinion, to the grant of an irrevocable power of attorney during the joint lives of the parties. The restraint on sale in this case is in aid of that grant of power. … I respectfully agree with Needham J’s analysis of the ratio of Hall v Busst, in so far as it dealt with contractual restraints on alienation. I agree that, in so far as dicta of Dixon CJ and Menzies J are applicable to contractual restraints on alienation unconnected with the transfer of the property whose alienation is restrained, those dicta contemplate that such a restraint would be invalidated only if the restraint was total …

Wollondilly v Picton Power Lines The principal relevance of Wollondilly Shire Council v Picton Power Lines Pty Ltd [1994] 33 NSWLR 551 to the present case is a statement of Handley JA, not essential to the decision, that restraints against alienation arising as incidents of a personal contract for sale or option or right of pre-emption stand outside the doctrine of restraint against alienation and cannot [page 650]

be invalidated thereunder. If this observation were adopted, it could be a serious obstacle for the respondents. This is because the restraints against alienation in the present case were restraints in the occupancy agreement and buyback deed and the grant to BBA of an option. However, as will be seen below, I do not agree that restraints against alienation arising as incidents of a personal contract for sale or option or right of pre-emption can never be invalidated by operation of the doctrine of restraint against alienation. This conclusion will require a detailed discussion of the facts of Picton Power Lines and the cases upon which Handley JA relied in that passage. [His Honour then proceeded to recite the facts and the reasoning of Handley JA in Wollondilly v Picton Power Lines and the authorities relied upon by Handley JA which included Woodroffe v Box [1954] HCA 22; (1954) 92 CLR 245 and Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1 and concluded:] Moreover, I do not consider that either … Woodroffe v Box or Bahr v Nicolay (No 2) support the proposition that restraints against alienation arising as incidents of a personal contract for sale or option or right of pre-emption can never be invalidated by operation of the doctrine of restraint against alienation. Accordingly, I do not agree with Handley JA’s statement of principle, [referred to] above. In principle it is perfectly possible for restraints against alienation arising as incidents of a personal contract for sale or option or right of pre-emption to be invalidated by operation of the doctrine of restraint against alienation. It is another question, of course, whether any particular option infringes the rule against restraints on alienation, or indeed whether in practice one ever encounters such an option. But, for example, a sale of land with a contemporaneous option for the purchaser or his executors or administrators to repurchase at any time in the next 100 years may be a candidate … [His Honour considered further cases decided since Hall v Busst and concluded with an application of the distilled principles to the facts.] The right that Mr and Mrs Evans [the purchasers] acquired was a full fee simple — the transfer to them said that CGM [the vendor] ‘transfers an estate in fee simple’, and the effect of s 41 Real Property Act 1900 is that upon registration of that transfer the estate or interest specified in it is passed to Mr and Mrs Evans. Equity would regard the granting

of the options and other restraints in the occupation deed and the buyback deed as a reason why Mr and Mrs Evans held a lesser interest in the land only to the extent that either of the options or any of the other restraints was specifically performable. That in turn depends on whether either of the option agreements or any of the other restraints is contrary to the public policy concerning restraints on alienation. The restrictions on alienation of the unit to which Mr and Mrs Evans agreed under the two documents were very great. The occupancy agreement bound not only Mr and Mrs Evans, but also their successors in title. Clause 2(g) of the occupancy agreement contains a prohibition on disposing of any estate or interest whatever in the unit without the consent of BBA [the appellant]. As a matter of construction, BBA can withhold its consent, even unreasonably, except in relation to a proposed mortgage on terms that protect all its rights under the occupancy agreement. The practical effect of obtaining a mortgage on those terms would be that the amount that could be raised on mortgage would be, at best, a percentage of the price that would be receivable by the mortgagee on exercise of the option. There is a further exception, permitting leasing, subleasing or parting with or sharing possession of the unit within the very narrow [page 651]

limits established by the proviso to cl 2(f). The prohibition on disposing of any estate or interest without consent is not absolutely total, but very close to total. The circumstances in which the option is exercisable, set out in cl 7 of the occupancy agreement, effectively prevent disposal of any interest in the unit without the option becoming exercisable. Furthermore, even if (as has happened) the option was not effectively exercised on the death of Mr Evans, the restraints still bind his executors and other successors in title. The respondents fall within the definition of ‘Proprietor’, so if the restraints are enforceable, another occasion for exercise of the option will arise when they wish to sell, or when any of the other triggering events identified in the occupation agreement and the buyback deed happen. The price at which the option is exercisable (broadly, $107,000, minus BBA’s legal fees, and the cost of refurbishment of the unit) was always bound to be less than the market value of the unrestrained fee simple, particularly when Mr and Mrs Evans purchased for less than the value of the unrestrained fee simple. The expert evidence concerning value of the unit in 2008 bears that out. While the buyback deed does not include an express clause prohibiting transfer, there would be an implied term that no transfer would occur that would have the effect of frustrating the option granted in the buyback deed. The relevant provisions of the option in the buyback deed are the same as those of the occupancy agreement. The buyback deed has a provision not contained in the occupancy agreement, permitting the proprietor to dispose of the unit to a qualified occupant who is prepared to undertake the same restrictions on transfer as applied to Mr and Mrs Evans. Permitting a transfer to occur on terms that no sensible purchaser would agree to, or would agree to only at a severely discounted price, is in substance the same as prohibiting transfer. If the restrictions in the present case had been imposed by a condition in a transfer of a fee simple, they would have been invalid in several ways:

–

–

–

–

–

… [T]he restrictions would fall foul of the principle adopted in Attwater v Attwater [(1853) 18 Beav 330; 52 ER 131] and In Re Cockerill [[1929] 2 Ch 131] that it is not possible to transfer property subject to a condition that it can be sold only to one person or one of a very narrow class of persons. A similar principle was recognised in Re Mavromates [[1964] VR 612] and in Re Brown [[1954] Ch 39]. As the restraints in the present case prohibit (subject to the very narrow exceptions previously mentioned) any disposition of the land, not merely a sale or some other specific type of transaction, they are restrictions more extensive than those held to be void in Attwater v Attwater, in Re Rosher [(1884) 26 Ch D 801], in Re Elliot [[1896] 2 Ch 353], Crofts v Beamish [(1905) 2 IR 349] and in Re Cockerill. The restrictions in the present case would fall foul of the observation of Jessel MR in Re Ridley; Buxton v Hay [(1879) 11 Ch D 645] approved by Dixon CJ in Hall v Busst that ‘The law does not recognise dispositions which would practically make property inalienable for ever.’ That the price at which the only permitted sale can be made was always likely to be substantially below the market value of the unit means that reasoning analogous to that in Re Rosher, in Re Cockerill and Grayson v Grayson would be available to recognise that in practice the unit is made inalienable). Unlike the option to repurchase in Blacktown Municipal Council v Doneo [(1971) 1 NSWLR 157], the option that is contained in the buyback deed in the present case prevented Mr and Mrs Evans and their successors in title from alienating the unit before the option to purchase became exercisable … [page 652]

–

–

In the present case, the restrictions on alienation relate to virtually all manner of disposing land, continue in perpetuity, and are in practice highly likely to permit a sale to only one person (or its nominee). Whoever it is sold to, it will be only at a price well below the market value … In John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc [2004] SASC 128, Besanko J held that cl 4 of the encumbrance was invalid because it required the purchaser to obtain from a successive purchaser an agreement to lodge a memorandum of encumbrance. This would have the effect that any sale to a successive purchaser would be at a substantial discount to the market value. This reason for invalidity is applicable in this case. I am obliged to follow the decision of the South Australian Full Court in Nitschke unless I think it is clearly wrong, which I do not, or the decision is distinguishable.

I had earlier agreed with Needham J’s analysis of the ratio of Hall v Busst in so far as it dealt with contractual restraints on alienation. However there is an additional theme in the majority judgments, that should be accorded respect. The contractual provision that was in issue in Hall v Busst was in fact one that was imposed simultaneously with the

grantor entering the contract to purchase the land. The question that Dixon CJ posed for himself [quoted above] concerned whether ‘a bond or covenant or contract purporting to impose a total contractual restraint on alienation is void’. However, there is a theme in the passage that I have quoted that it is not possible to do indirectly what one cannot do directly. In particular, Dixon CJ suggested that it is not possible to do by a covenant entered at the time of acquiring property what one could not do by a condition in a grant. Fullagar J agreed with the reasons of Dixon CJ for concluding that the principle was the same, whether a restraint on alienation was imposed ‘on a transferee of a fee simple’ by a condition subsequent in a grant, or by a separate contractual covenant … Some of the cases discussed above have considered whether a relevant matter for deciding the enforceability of a contractual restraint on alienation is whether it is imposed for the purpose of restraining alienation or for a valid collateral purpose. Needham J sourced such a principle in Reuthlinger from the view of Mr Charles Sweet. While Dixon CJ cited Mr Sweet’s article with apparent approval in Hall v Busst, the citation did not specifically relate to Mr Sweet’s principle concerning valid collateral purpose. Nevertheless, the Court of Appeal (Street CJ, Glass and Samuels JJA) embraced Needham J’s analysis in unqualified and enthusiastic terms. Subsequently, Young J in Elton v Cavill (No 2) (see above at [265]) expressed grave doubts over whether the authorities cited in Mr Sweet’s article actually supported the principle for which Mr Sweet contended. All the same, his Honour adopted the principle (without apparent reference to the fact he was bound to do so by its acceptance by the Court of Appeal in Reuthlinger). I am bound to follow the previous Court of Appeal in Reuthlinger unless I am convinced that is clearly or plainly wrong … I am not so convinced. The principle sourced by Mr Sweet may well have had a shallow root in earlier precedent. However, that a contractual restraint on alienation may be enforceable where it is imposed for a valid collateral purpose is consistent with the source of the principle in public policy … If a contractual restraint does indeed have a valid collateral purpose, that can provide a reason for public policy to favour its enforcement. Part of the reason for this, of course, is that public policy will be taken into account in assessing whether a collateral purpose is valid or legitimate … I would reiterate the view … that if there are both legitimate and illegitimate purposes in a restraint on alienation and the clause cannot be severed, the court must decide whether, overall, the clause is contrary to public policy. [page 653]

My acceptance of the ‘valid collateral purpose’ consideration provides a further reason why it can be a relevant matter, in deciding the enforceability of a contractual restraint on alienation, that the restraint is imposed at the time of transfer of the property in question. Consider first a situation in which a contractual restraint on alienation of property is imposed at the time of the grant of the relevant interest in land. Next, consider a situation in which the contractual restraint is imposed at a later time, when the person restrained already has the interest in land the alienation of which is restricted. It will be easier to conclude that the purpose of a contractual restraint is imposed for the purpose of restraining alienation in the former case rather than the latter.

As Dixon CJ accepted in Hall v Busst, whether an agreement offends public policy should be decided as a matter of substance, not of form. To the extent that the public interest in free alienability of property is the applicable test, it should result in the same result being arrived at concerning a restriction that is imposed as a condition of a transfer of property as it arrives at concerning a restriction that is agreed as a matter of contract as part of a commercial transaction that includes a transfer of property … The restrictive covenant on the title, requiring occupants of the [building] to be aged 55 or more, already existed at the time the occupancy agreement and buyback deed were entered. That restrictive covenant was sufficient to enable the [building] to operate as a retirement village, in the rudimentary sense of a place where people aged 55 or more lived. However, as the obligations of [the appellant] in the occupancy agreement show, it was intended that [the appellant] would provide services of substantial and important kinds to the residents. Further, the provision of accommodation at a significant discount to the value that a unit would have had without the buy-back provision would assist in its being affordable for aged people. Undoubtedly, one of the purposes of including the buyback provisions was to assist [the appellant] to make a profit, but that is not inconsistent with the buyback provisions being characterised, overall, as being for the purpose of the valid collateral objective of assisting in the provision of housing for aged people … As Giles JA recognised in Moraitis v Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327, there is a public policy that someone who agrees to a contractual restriction should be held to the agreement unless there is a good reason to the contrary. The primary judge also recognised this, and said: In my opinion it is outweighed by the very long-established public policy consideration favouring free alienability of freehold estates in fee simple. There are very wide fields for freedom of contract in relation to the organisation of retirement villages. The subject is regulated by statute, but within that regulated environment there is room to organise retirement villages on a way which does not leave the capital gain to those who live in them, by employing other mechanisms; contractual licences not involving any transfer of property, leases which it is well established can be made in terms which prevent their being alienated, and can be made defeasible on the death of the lessee, and the grant of freehold estates for life. The public policy relating to freedom of contract can be fully served without impinging the public policy against restraining alienation of freehold estates in fee simple. I do not, with respect, find this reasoning persuasive. It seeks to balance the public interest in free alienability against the public interest in freedom of contract, without according weight to provision of housing for aged persons being itself a valid collateral purpose. As well, much of the case law relating to the free alienability of freehold estates in fee simple has arisen [page 654]

concerning limitations on alienability that are imposed by the terms of the grant itself.

Many of those cases are influenced by the concept of the restraint being repugnant to the grant, which in turn was influenced by medieval conveyancing principles about the impossibility of limiting an estate after a fee simple. The outcomes of those cases do not necessarily translate into the different universe of discourse applicable to contractual restraints on alienation, which is dependent solely on public policy. Clearly there is a public interest in property not being unduly tied up. However, it is an oddity of options that entering the option is itself an exercise of the owner’s power of alienation (albeit in a way that is conditional), and that the entering of the option brings with it a restriction of the power of alienation thereafter, to the extent (but only to the extent) that is needed to make the grant of the option efficacious. One aspect of the free alienability of freehold estates is being able to alienate them through entering an option. There is a public interest in the owner of property being free to alienate it, but that does not mean there is a public interest in the owner of property being free to alienate the property twice, to two different people through inconsistent dispositions. Because the law concerning permissible restraints on alienation imposed by a contract is based on public policy, it should operate by reference to the substance of an arrangement, not its form. There are many ways in which substantially the same commercial objectives can be achieved, for both a retirement village operator and a retirement village resident, by the grant of a fee simple subject to an option to repurchase, and by other conveyancing devices not involving a fee simple plus an option to repurchase. This very fact is itself reason for doubting that there is a public policy objection to a retirement village being run on the basis that a resident acquires a fee simple, but subject to an option to repurchase. In all these circumstances, I am not persuaded that public policy requires the invalidity of the contract that [the purchasers] freely entered … That conclusion is supported by the legislation governing the operation of retirement villages, to which I now turn. [His Honour reasoned that the legislation in question provided confirmation that the options considered did not contravene public policy.] [Giles JA added some observations but agreed with the reasoning of Campbell JA. Whealy JA agreed with Campbell JA.]

7.3

Attempts to fetter the free alienability of land were liable to be

frustrated by the judicial doctrine of restraint on alienability. Typically, the attempted restraint took the form of a condition attached to the conveyance, transfer or grant of a fee simple. An unqualified and absolute ban on the free alienability of a fee simple in the form of a condition imposed by the conveyance, transfer or grant clearly offended the rule and was and remains

invalid. Williams (‘The Doctrine of Repugnancy’ (1943) 59 LQR 343 at 349) cites an American author who justifies the invalidity of restraints on alienation on these grounds: Restraints keep the property out of commerce, and tend towards a concentration of wealth … A valid restraint makes it practically impossible for the present owner of property to consume it; the most that he can spend is the income derived from it. There is yet another objection … The restraint, in the case of land, tends to prevent improvement. A landowner will be reluctant to make improvements upon land that he cannot sell during the period of restraint. In many instances, therefore, the restraint deters the owner from obtaining the maximum enjoyment of the land; it may also retard the development of a particular section of the

[page 655]

community, and prevent the increase in taxable values which would otherwise naturally occur … In so far as a restraint operates to prevent a creditor from resorting to property of his debtor in satisfaction of his claim, it works an obvious hardship upon him: Schnebly, ‘Restraints upon the Alienation of Legal Interests’ (1935) 44 Yale LJ 961 at 964.

Williams does not dispute that the doctrine could find its rationale in public policy requirements but argues that the present law owes as much to the scholasticism of the repugnancy doctrine as to notions of policy. He points to particular rules that are incompatible with a general community policy favouring alienability of proprietary interests, such as the validity of restraints attached to particular estates, and the apparent validity of certain partial restraints upon alienation. He also refers to the principle that covenants forbidding alienation, as opposed to conditions breach of which gives rise to a right of re-entry, are not regarded as contrary to public policy. This supposed

principle was discussed by the High Court in Hall v Busst (1960) 104 CLR 206; [1961] ALR 508 and by the New South Wales Court of Appeal in Gora (7.2C). 7.4

A total restraint on alienation of land or personalty imposed by the

grantor, vendor or transferor at the time of disposition, whether imposed by condition or by covenant, is void. This much is clear from Bondi Beach Astra Retirement Village v Gora and Hall v Busst. What is less than clear is under what circumstances a condition or contractual restraint which does not impose a total restraint is invalid. This was, of course, the issue in Gora. In cases where a covenant imposing a qualified restraint on alienation is concerned, a common instance will typically involve a grant and transfer of title with a promise on the part of the grantee to resell or retransfer to the grantor upon the happening of a defined event. A variation on this theme arises where the purchaser or transferee confers upon the vendor or transferor a right of pre-emption or option exercisable upon the happening of a specified event. Yet another variation is where the transferee covenants at the time of transfer with the transferor to benefit a third party or covenants directly with the third party at the time of transfer. The occupancy agreement and buyback deed in Gora was an example of the latter. As to the difference between an option to purchase and a right of pre-emption or ‘right of first refusal’, see Pritchard v Briggs [1980] Ch 338; [1979] 3 WLR 868; [1980] 1 All ER 294; Walker Corporation Pty Ltd v W R Pateman Pty Ltd (1990) 20 NSWLR 624 (cf Jonns v Tan (1999) 9 BPR 17,113); Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510. In assessing the validity of such arrangements, several factors may need to be

taken into account. First, the length of time the restriction enures after creation. The longer the time, the more likely the restriction will be struck down as an invalid restraint upon alienation. For example, in Reuthlinger, Needham J held the restriction valid on the ground that the restriction was limited to the joint lives of the parties and did not extend to executors, administrators and assigns. Secondly, if the buyback or option price is significantly below market value, this is likely to be a factor pointing towards an invalid restraint. Thirdly, the width of the restriction may be a factor. Thus, a prohibition on selling or transferring to a particular person or class of persons may be less offensive than a prohibition unlimited to any person or persons. (It would be otherwise if the prohibition to a person or class of persons was based on racial or religious grounds as to which see 7.12.) Fourthly, a prohibition on alienation except to one person or a small group of people is likely to be void; Attwater v Attwater (1853) 18 Beav 330; 52 ER 131; In re Cockerill; Mackaness v Percival [1929] 2 Ch 131; Re Mavromates [1964] VR 612; In re Brown; District Bank Ltd v Brown [1954] Ch 39.

[page 656]

7.5

It is suggested that, aside from grounds of equitable fraud such as

procedural unconscionability or undue influence, it is no fetter on free alienability for an owner of property to grant to a third party an option to purchase or right of pre-emption at a low price or to enter into an unconditional contract of sale to sell the land at an undervalue. In Goyal v Chandra (2006) 12 BPR 23,553; [2006] NSWSC 239 at [23], Brereton J

held (obiter) that it is not a restraint on alienation if one co-owner ‘binds himself or herself to deal with his or her interest only in a particular way — namely, by transferring it or devising it, or leaving it to pass by way of survivorship to the other’. In Gora, Campbell JA expressed disagreement with Handley JA’s observations in Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 (see 7.7) that restraints against alienation arising as incidents of a personal contract for sale or option or right of preemption stand outside the doctrine of restraint against alienation and cannot be invalidated thereunder. Nonetheless, where the ‘restraint’ is imposed after acquisition by the owner of property in favour of a third party, Handley JA’s observations are in no way controversial. Note the observations of Grattan: Campbell JA agreed with Needham J in Reuthlinger that Hall v Busst established the proposition that a restraint on alienation imposed by contract was void if it prohibited for an indefinite period alienation without the consent of the other party. Campbell JA noted that the restriction in Hall v Busst was imposed at the same time as the grantor purchased the land, and also that in Hall v Busst Dixon CJ was influenced by the notion that it should not be possible to do something indirectly if that thing cannot be done directly. Thus, if one cannot impose a total restraint on alienation in the condition of a grant, one should not be able to impose a total restriction on alienation at the time the grantor of the restraint acquires the property simply because the restriction is in a contract, rather than in the instrument of grant itself. Here Campbell JA laid the foundation for a possible distinction between contractual restraints entered into at the time of the grantor’s acquisition of the relevant property, and those entered into at a later time and therefore unconnected with the acquisition.1

7.6

Johnston & Halliday v Halliday [1984] ANZ ConvR 652 concerned

two brothers and their respective wives who agreed that they would purchase property as joint tenants on the basis that one couple (C and A) would have the use and occupation of the premises during their lives and after that ‘the

survivor of the purchasers would transfer or devise’ the property to the children of the other couple (M and E). C and A lived in the house until A died. Thereafter, C continued to live there. However, C decided to transfer his interest in the property to his nieces. He executed a transfer in their favour and the nieces paid all the costs of the transfer. However, at the time of the litigation the transfer had not been registered. In an action against the widow of M in the Supreme Court of South Australia, it was argued on behalf of the nieces, inter alia, that the provision requiring the survivor of the purchasers to transfer the property to M’s children was void as an unlawful restraint on alienation or, alternatively, for uncertainty. Millhouse J followed Hall v Busst and declared that the provision was a restriction upon alienation and therefore was void. His Honour rejected the argument that Hall v Busst could be distinguished because there the covenant was between vendor and purchaser whereas here it was between co-purchasers. Referring to Hall v Busst, Millhouse J said at 655: ‘I note that Dixon CJ refers only to “a contractual restriction upon alienation” — an expression quite

[page 657]

wide enough to include the present case … The principle, as Dixon CJ said, is “that private property should be fully alienable”.’ 7.7

In Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33

NSWLR 551, the New South Wales Court of Appeal was asked to consider

the validity of a covenant in a transfer to the following effect following a sale of land by the Council to the respondent: (a) The Transferee shall not transfer the land by way of sale gift or otherwise prior to the erection thereon of premises approved of (by) the Transferor and prior to the use of such premises by the Transferee for an industry approved of by the Transferor. (b) The Transferee shall erect upon the land within eighteen (18) months from the date of settlement hereof industrial premises approved of by the Transferor and should such premises be not completed within the period of twenty four (24) months from the date hereof (then) the land shall be sold by the Transferee back to the transferor at or for the price or sum of $35,000 [the original sale price] …

At first instance the trial judge held that the question was one of degree and that the restraint was too severe to uphold. On appeal, Handley JA, with whom Clarke and Meagher JJA agreed, referred to the ‘considerable differences of opinion’ in Hall v Busst and continued at 554–5: The clauses in the present contract stand in marked contrast to those in Hall v Busst. The relevant restraint imposed by subcl (a) only continued until the company had built industrial buildings on the land which subcl (b) contemplated would occur within two years of the sale. Once that condition was fulfilled the restraint came to an end. Subclause (a) to this extent was neither independent nor unlimited in duration. Moreover the contract for resale came into existence because the respondent failed to perform its promise to build which was one of the terms on which it obtained the land from the Council. The contract did not come into existence because the respondent wished to alienate the land.

7.8

While Campbell JA in Gora did not agree with Handley JA’s

statement of principle that incidents of personal contracts stand outside any legal doctrine invalidating contractual restraints on alienation, his Honour did agree with the conclusion reached in Wollondilly. The conclusions in Wollondilly and Gora are consistent with that of the Full Court of the Supreme Court of Queensland in Re Permanent Trustee Nominees (Canberra)

Ltd [1989] 1 Qd R 314. The court considered an agreement between coowners of land that neither would make an application to the court for appointment of trustees on statutory trusts for sale without first giving 12 months’ notice in writing to the other, during which time a right of preemption could be exercised. The court held that the agreement was not void either as an attempt to oust the jurisdiction of the court or as a restraint on alienation. The case was followed in Ngatoa v Ford (1990) 19 NSWLR 72. Needham J of the Supreme Court of New South Wales concluded that a contractual limitation upon the right to seek the appointment of trustees for sale could be taken into account in deciding whether or not the court should appoint such trustees, provided that the contractual limitation did not fall within the principle of Hall v Busst. In a learned analysis of the decision in Gora, Grattan made the following comment: In identifying the importance to society of providing accommodation for the aged, the court in Gora gave expression to a conception of property as a means of a proper social ordering. The values that underpin the way in which property rights are allocated are not limited to

[page 658]

the satisfaction of individual preferences and the efficient use of resources. There is a benefit to society in a strata unit being occupied by someone of advanced (or at least advancing) years, rather than by someone else who was simply willing and able to pay more for it on the open market. In certain contexts the rules that promote the free alienability of property should be able to be displaced by private agreement, especially where the private agreement serves the public, and not merely private, interest.2

7.9

A condition in a grant or transfer of restricting alienation may be void

as repugnant to the grant. It is a question of degree. In the case of a contractual restraint on alienation, an invalidity of the restriction must be sourced in public policy and cannot be grounded in the repugnancy doctrine. The public policy is the importance of free alienability of property. As Campbell JA points out in Gora, a contractual restraint on alienation vulnerable to invalidity as offending the public policy of promoting free alienability of property, might be saved as having a valid collateral purpose. For instance, it has long been the case that lessees do not normally enjoy the benefit of unqualified alienability of the lease. Typically, a lessee cannot assign the lease without the lessor’s consent. This is for the reason that lessors have a legitimate collateral purpose in consenting to an assignment to an approved assignee. Similarly, restrictions on the free assignability of a life estate have been upheld as the remaindermen will wish to approve the identity and character of the assignee. It is a question of degree and recognition of the need to balance the public policy of free alienability of property with a legitimate collateral purpose. Thus in Gora, the provision of public housing to aged persons was seen as a valid collateral purpose counterbalancing the public purpose of free alienability. On the other hand, in Elton v Cavill (No 2) (1994) 34 NSWLR 289 Young J was of the view that a clause in an agreement between co-owners that a co-owner would not sell, transfer, assign, lease or license the interest without the written consent of the other co-owners was too wide and went too far in securing a valid collateral purpose. However, Young J did accept the principle of the valid collateral purpose rule as part of the law of the state.

7.10

While, in principle, the doctrine against restraints on alienation

applies to personalty as well as to land, the principle is more honoured in the breach than in the observance. In Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, Lord Browne-Wilkinson rejected a submission that restraints on the assignment of contractual rights were contrary to public policy. His Lordship commented at 107: We were not referred to any English case in which the courts have had to consider restrictions on the alienation of tangible personal property, probably because there are few cases in which there would be any desire to restrict such alienation. In the case of real property there is a defined and limited supply of the commodity, and it has been held contrary to public policy to restrict the free market. But no such reason can apply to contractual rights: there is no public need for a market in choses in action. A party to a building contract, as I have sought to explain, can have a genuine commercial interest in seeking to ensure that he is in contractual relations only with a person whom he has selected as the other party to the contract. In the circumstances, I can see no policy reason why a contractual prohibition on assignment of contractual rights should be held contrary to public policy.3

[page 659]

For cases citing the decision in Linden Gardens with approval, see Fulham Partners LLC v National Australia Bank Ltd (2013) 17 BPR 32,709; [2013] NSWCA 296; Vangale Pty Ltd (in liq) v Kumagai Gumi Co Ltd [2002] QSC 137 and the cases mentioned at [63] by Mullins J, who commented that the ‘reasoning and authority’ of Linden Gardens ‘are persuasive’. In 1998 Mackie summarised the standing of Hall v Busst, saying that the decision:

… does not appear to currently have any application in respect to personal property and only minimal application to options and pre-emptive rights and rights between co-owners. The whole tenor of the more recent judgments, particularly in Woolondilly [sic] Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 and Elton v Cavill (No 2) (1994) 34 NSWLR 551, indicates a distinct unwillingness to apply any sweeping view that all contractual restraints on alienation are necessarily void.4

7.11

The observations of Young CJ in Eq in Amble Inn Pty Ltd v Ryan

[2001] NSWSC 875 at [35]–[37] suggest that Mackie’s comments are still apposite. His Honour said: Although that case has been attacked and is no longer the law in England, it is still binding here. In South Sydney Council v Royal Botanic Gardens [1999] NSWCA 478, for some extraordinary reason not reported, the Chief Justice said at [13]: ‘In the case of sale of land this Court would be constrained to follow Hall v Busst which, although doubted, has never been overruled.’ However, his Honour said that in a case of a rent review clause, Hall v Busst did not govern the situation. The judgment suggests to me that modern courts will confine the operation of Hall v Busst and would not apply it in a case involving the sale of chattels.

Nonetheless, Tolhurst5 sees Hall v Busst at odds with the House of Lords in Linden Gardens and notes Needham J’s observations in Reuthlinger that the doctrine of restraints on alienation applied to both realty and personalty. Tolhurst suggests that a provision prohibiting assignment will be upheld in the case of rights to contractual performance but may be struck down in the case of debts, particularly trade-related debts. 7.12

Re Dugdale and Hall v Busst were concerned with restraints on

alienability, whether imposed by way of condition subsequent, terminable limitation or contractual stipulation. Conditions or stipulations concerned with questions other than the free alienability of interests in property may be

challenged on public policy grounds or for uncertainty. There are, for example, many reported decisions dealing with religious conditions attached to testamentary dispositions. The cases are often difficult to reconcile: see Trustees of Church Property of Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; [1961] ALR 339; Re Cuming; Nicholls v Public Trustee (SA) (1945) 72 CLR 86; [1945] ALR 456; Ramsay v Trustees Executors & Agency Co Ltd (1948) 77 CLR 321; [1949] ALR 105; Butt, ‘Testamentary Conditions in Restraint of Religion’ (1977) 8 Syd LR 400. English authorities include Blathwayt v Baron Cawley [1976] AC 397; [1975] 3 All ER 625; Re Tuck’s Settlement Trusts [1978] Ch 49; [1978] 1 All ER 1047.

[page 660]

THE RULE AGAINST PERPETUITIES Background 7.13

From an early stage in its development, the common law favoured

freedom of alienation of interests in land. Perhaps the first expression of this policy was the enactment of the Statute of Quia Emptores in 1290, which made all land freely alienable by tenants other than tenants-in-chief. Freedom of alienation conflicted with the aspirations of landowners, who sought to ensure that the landholdings built up by them would not be dissipated after their death by spendthrift relations. By complex limitations which developed over many generations, they attempted to control the

disposition of their property for long periods into the future. In certain ways, the common law was prepared to frustrate the wishes of the landowners; see 3.49ff. The vulnerability of contingent remainders to both natural and artificial destruction tended to promote the ready alienability of interests in land. Even the invention of the trust to preserve contingent remainders, which saved such remainders from artificial destruction, could not guard them against failure where the prior estate determined naturally before the remainder vested. Moreover, the recognition by the common law courts of the device of the common recovery as a means of barring entails also assisted the policy of alienability. The effect of the common recovery was to defeat the purpose of the Statute of De Donis and to thwart attempts to create inalienable fees tail. The later invention of the legal executory interest and the trust made it possible for landowners to create elaborate sets of future interests in their land. Legal executory interests were at first regarded as destructible by artificial means in the same way as contingent remainders, but by the early sixteenth century the contrary view prevailed. However, those legal executory interests which were subject to the rule in Purefoy v Rogers (1671) 2 Wms Saund 380; 85 ER 1181 (3.68ff), remained liable to natural destruction. Trusts, on the other hand, were entirely free of the possibility of destruction and could accordingly be used to create interests fettering the free alienation of land more or less indefinitely. 7.14

Eventually, it became clear to the courts that a policy of freedom of

alienation could only be secured by placing restrictions on the ability of the landowner to create future interests. Various piecemeal attempts were made

to achieve this result: Holdsworth, vol vii, 194–214. One such attempt was known as the rule in Whitby v Mitchell (1889) 42 Ch D 494, although it originated earlier than the date of the case. This rule stated that if an interest in realty was given to an unborn person, any remainder to the issue of that person was void, together with any subsequent limitations. The effect of the rule was narrow, and became narrower because of various judicial restrictions placed upon its operation. For this reason, it did not really go to the root of the problem of restrictions upon alienation. The modern rule against perpetuities, subsequently formulated, was a much more satisfactory solution. (The rule in Whitby v Mitchell has been abolished by the following legislation: Conveyancing Act 1919 (NSW) s 23A; Law of Property Act (NT) s 201; Property Law Act 1974 (Qld) s 216; Law of Property Act 1936 (SA) s 61(1) (b); Perpetuities and Accumulations Act 1992 (Tas) s 21; Perpetuities and Accumulations Act 1968 (Vic) s 12; Property Law Act 1969 (WA) s 114.) 7.15

During the seventeenth century, the judges became aware that the

real problem to be tackled was the remoteness of the time at which the future interest was to vest. However, it was left to the Court of Chancery to formulate the general rule, which is today known as the

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‘modern rule against perpetuities’. This rule was laid down in 1681 by Lord Nottingham LC in the Duke of Norfolk’s Case (1682) 3 Ch Cas 1; 22 ER 931, and his decision was upheld by the House of Lords in 1685: (1685) 3 Ch Cas

54; 22 ER 963. Its final form was settled by the House of Lords in Cadell v Palmer (1833) 1 Cl & F 372; 6 ER 956. The rule invented by the Court of Chancery ultimately applied not only to interests in land, but to limited interests created by way of trust in any kind of property. The rule stipulates that for an interest in property to be valid, it must vest, if it is to vest at all, within the period of a life in being and 21 years thereafter. The modern rule of perpetuities, as modified by statute, continues to apply in all Australian states except South Australia, where it was abolished in 1996 by Law of Property Act 1936 s 61. Section 61 was inserted by the Law of Property (Perpetuities and Accumulations) Amendment Act 1996. The current legislation in Australia is: Australian Capital Territory: Perpetuities and Accumulations Act 1985; New South Wales: Perpetuities Act 1984; Northern Territory: Law of Property Act Pt 11; Queensland: Property Law Act 1974 Pt 14; Tasmania: Perpetuities and Accumulations Act 1992; Victoria: Perpetuities and Accumulations Act 1968; and Western Australia: Property Law Act 1969 Pt XI. 7.16

It should be noted carefully that the rule against perpetuities is

concerned with the vesting of interests outside the perpetuity period. Indeed, the rule may be more felicitously described as the rule against remoteness of vesting. There is an analogous rule known as the rule against perpetual

duration of trusts which is concerned with the duration of a trust and not the vesting of the trust interest. This rule serves a public purpose not dissimilar to the rule against perpetuities, that is, to promote the free alienability of property. Thus, in Phillips v McCabe [2016] SASC 27, a trust for the upkeep and maintenance of a family grave was struck down as a non-charitable purpose trust. Where a non-charitable purpose trust is valid, the duration of the trust is limited to the perpetuity period.6 7.17

Today, the function of the rule against perpetuities has changed and

its value is, to some extent, in question. Allan has discussed the modern rationale for the rule: This original policy of the rule, to prevent the withdrawal of land from commerce, no longer holds good today. In the first place the rule has been extended from realty to all forms of property. It has been applied to interests in personalty with little thought as to whether it was appropriate and, so far as personalty is concerned, the capital fund which is invested remains productive and cannot be said to have been withdrawn from commerce. Secondly, the long family settlement seems now to be a thing of the past; and thirdly, even where land is subject to successive interests, there is invariably today a power of sale vested in someone. Where land was not held subject to an express trust for sale, a statutory power was conferred by the Settled Land Act …

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It seems clear today, therefore, that the rule against perpetuities has no relation to marketability in so far as it concerns land, chattels or investments. It is virtually impossible today to create an interest in any form of property that cannot be freely dealt with. Accordingly, many attempts have been made in recent years to justify the continued existence of the rule on other grounds, both economic and social. Some of these grounds might be listed briefly: 1.

Trusts reduce risk capital. It is said that modern conditions demand speculation and the

maintenance of a proper balance between risk capital and trust capital. The rule against perpetuities restricts trusts and therefore ensures the availability of risk capital. This view was summarised most neatly and forcefully by F H Lawson (Introduction to the Law of Property (1958) 145): ‘The economic progress of a nation is often measured by the number of its bankruptcies. Trusts exist to prevent bankruptcies. Hence they should be curbed’. However, as Leach has pointed out (‘Perpetuities Legislation: Hail, Pennsylvania!’ (1960) 108 U Pa LR 1124 at 1135), the economic arguments in support of the rule have never been adequately explored and most of them are pure hypothesising by lawyers. In any event, the rise of the stock market and the fall of the bond market in the past 15 years does not point to any shortage of risk capital … 2.

Trust capital is not available for expenditure on consumer goods. Again it is not really for the lawyer to say whether this is a good or a bad thing, and similar considerations apply as in the case of the first ground.

3.

Trusts need periodic review. Granted the right of testators to control the devolution of their property, changing conditions make it desirable that the trusts should be reconsidered and resettled every so often, and the rule against perpetuities ensures a periodic resettlement. If this is so, it ignores how fast conditions are capable of changing today.

4.

Trusts produce undue concentrations of wealth. The rule against perpetuities limits this. However, even if this is true, the result is achieved more effectively and appropriately today by taxation.

5.

The social undesirability of protecting some members of society from the struggle for survival. As a justification for the rule against perpetuities, this is a sweeping condemnation of the welfare state.

6.

The social undesirability of ‘dead-hand’ control. It is the natural desire of each generation to provide for future generations by distributing the assets it has amassed in the manner it thinks will be most beneficial for those future generations. Similarly, it is the natural desire of each generation to shape its own destiny, which it cannot do if an earlier generation has already prescribed for it. ‘The far-reaching hand of the testator who would enforce his will in distant future generations destroys the liberty of other individuals, and presumes to make rules for distant times’: Kohler, Philosophy of Law (1921) 205–6. Hence the rule against perpetuities holds a balance between the aspirations and interests of the living and of the dead and is a compromise to secure that the control of property is not withheld from the living for too long

a period, but on social rather than economic grounds. This last ground, it is submitted, is the major justification of the rule today. However, it raises acutely the important policy question … of how far we should permit testators freedom to dispose of their assets as regards (a) the proportion of assets, (b) the period of control, and (c) the capriciousness of purpose. The rule against perpetuities is directed towards the second of these aspects, the period of control, and it may be that it is not the most satisfactory and efficient way of tackling the problem. Nevertheless, in the absence of anything else, it finds here its justification.

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Modern settlements generally contain wide powers of investment, falling not far short of those of absolute owners; where these are lacking most investments and transactions can be effected if a court can be persuaded of their desirability. The modern settlement usually contains discretionary trusts over income and powers to appoint or advance capital; and there exist both statutory and common law powers to vary or even terminate the trust. It cannot be alleged today that trust property is withdrawn from commerce and is rendered unproductive. In the absence of a rule against perpetuities, the only consequence would be that it would not be necessary to limit the duration of the trust, but it is doubtful if any dire economic consequences would follow. It is only in the need to limit the period of testamentary control for social reasons that the rule today is required. We can, however, learn from the experience of those American States that sought to replace the rule against perpetuities by substituting other rules based on different principles. In all these cases it was found necessary to restore the rule against perpetuities. What we can do is to limit the scope of the rule by excluding its application from those areas where no justification can be found for it. Hence s 19 of the Perpetuities Act [now ACT, s 14; NSW, s 13; NT, s 195; Tas, s 17; WA, s 115; see also Qld, s 220; Vic s 17] provides that the rule no longer applies to superannuation funds, on the ground that the continuation of these funds is more desirable than their termination. Similarly, s 14 [now ACT, s 16(1)(b); NSW, s 15(b); NT, s 197(b); WA, s 110; see also Qld, s 218; Tas, s 15; Vic, s 15] exempts from the rule options to purchase contained in leases, because these encourage the leaseholder to develop the land. Section 29 of the Trustees Act [cf ACT, s 12(1); NSW, s 11(2); NT, s 193(2); Qld, s 220; Tas, s 14; Vic, s 14] exempts many administrative

powers of trustees from the rule, because they enable the trustees to keep the land productive and marketable. … It might be asked whether it would be feasible to scrap the modern technicalities of the rule and return to Lord Nottingham’s principle of ‘visible inconvenience’. A proposal for legislation somewhat along these lines has recently been made for Saskatchewan: Lang, ‘A Perpetuities Act for Saskatchewan’ (1962) 40 Can BR 294. It is undoubtedly a fine principle on which the rule should be based and against which any application of the rule should be judged, but it lacks the certainty that settlors and draftsmen must require. Testators and settlors need to know while they are alive that their dispositions as they have set them out are valid. The problem today, apart from confining the rule to its proper field, is to restate it on a basis of avoiding visible inconvenience, but as a clear and certain rule.7

7.18

As Allan suggests, the policy expression by the courts in the modern

rule against perpetuities still has some life today. However, as the details of the rule are discussed, it will be seen that the courts in many cases have rigidly applied the letter of the rule rather than its spirit. On the one hand, this has meant that dispositions which do not amount to serious ‘dead-hand’ control or offend the policy of freedom of alienation, have been struck down, thus frustrating the intentions of settlors and testators. For example, the rule as it stands at common law does not distinguish between events which are likely to occur, and those which are extremely unlikely or indeed virtually impossible. For instance, the legal assumption that a woman of any age could have a child (the ‘fertile octogenarian’ rule) led to the invalidity of dispositions which did not tie up property for long periods of time. On the other hand, the ingenuity of drafters enabled testators and settlors to employ techniques which, in fact, restricted alienation, but did not fall foul of the rule as it was expressed.

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7.19

Because of these defects, statutory modifications to the rule were

necessary. The first amendment, which has been in effect in Victoria for more than 50 years, provided that where a gift was too remote, because it was contingent upon a beneficiary or a member of a class attaining an age greater than 21, the age of 21 years could be substituted for the specified age: Vic, s 9 (deriving from Real Property Act 1918 (Vic) s 11); Qld, s 213; Tas, s 11; WA, s 105; see also ACT, s 10; NSW, s 9; NT, s 191. This went some way towards saving dispositions which would otherwise be invalid, while giving effect to some part of the donor’s intention. However, it did not save dispositions which were too remote because of some other defect. 7.20

The second and more radical reform to the common law took the

form of a substantial overhaul of the rule against perpetuities, in an attempt to retain the best features of the rule while eliminating its worst absurdities. The Fourth Report of [the English] Law Reform Committee (Cmnd 18, 1956) recommended sweeping changes designed to achieve this result. The Perpetuities

and

Accumulations

Act

2009

(UK)

implemented

recommendations made in a report issued in 1998 by the English Law Commission (Report No 251: The Rules against Perpetuities and Excessive Accumulations). Under the Act, a single fixed perpetuity period of 12 hd5 years applies to trusts created on or after 6 April 2010. In 1962 Western Australia passed legislation, basically following the recommendations of the Law Reform Committee: Law Reform (Property, Perpetuities and Succession) Act 1962 (WA) (now WA Pt XI, ss 99–115): see Allan, ‘The Rule Against Perpetuities Restated’ (1963) 6 UWALR 27. In 1964 both England and New Zealand followed suit; Perpetuities and Accumulations

Act 1964 (UK); Perpetuities Act 1964 (NZ) (this legislation followed the report of a Special Subcommittee of the Law Reform Committee, dated June 1964). For a full discussion of the English reforms, see Morris and Wade, ‘Perpetuities Reform at Last’ (1964) 80 LQR 486; see also Megarry and Wade, 247ff. The reforms were adopted in Victoria in 1968 (Perpetuities and Accumulations Act 1968 (Vic)) and Queensland in 1972 (the Queensland legislation was originally passed as the Perpetuities and Accumulations Act 1972 but that has been repealed and re-enacted as Pt 14 of the Property Law Act 1974). In 1976 the New South Wales Law Reform Commission published its Report on Perpetuities and Accumulations, LRC 26, 1976, which included a draft Perpetuities Bill. The Perpetuities Act 1984 (NSW) partly adopts the recommendations of the commission in its report. The Australian Capital Territory legislation largely follows the New South Wales model: Perpetuities and Accumulations Act 1985. Tasmania enacted legislation reforming the rule against perpetuities in 1992: see Perpetuities and Accumulations Act 1992 (Tas). The Northern Territory followed in 1994: Perpetuities Act 1994, now repealed and replaced by Pt 11 of the Law of Property Act. In this part, the statutory modifications made in the Australian Capital Territory, New South Wales, the Northern Territory, Queensland, Tasmania, Victoria and Western Australia are considered alongside the common law principles, since the legislation builds on those principles. 7.21

The New South Wales Law Reform Commission (Report, paras 2.3–

2.5) justified reform of the rule against perpetuities in this way:

Criticisms of the rule against perpetuities. The main causes of dissatisfaction with the rule are two: first, the requirement of absolute certainty that the interest will vest within the perpetuity period, and its consequent invalidity if any possible combination of events, however improbable or fantastic, could cause it to vest outside the period; and, secondly,

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the harsh consequences of violating the rule, whereby the interest fails completely instead of being altered so as not to offend the rule. Leach, in 1952, suggested that the rule was then: so abstruse that it is misunderstood by a substantial percentage of those who advise the public, so unrealistic that its ‘conclusive presumptions’ are laughable nonsense to any sane man, so capricious that it strikes down in the name of public order gifts which offer no offence except that they are couched in the wrong words, [and] so misapplied that it sometimes directly defeats the end it was designed to further [Leach, ‘Perpetuities: Staying the Slaughter of the Innocents’ (1952) 68 LQR 35].

Abolition of the rule against perpetuities. Notwithstanding the criticisms levelled at the rule, we know of no considerable body of opinion calling for its abolition. The relevant Acts of Western Australia, the United Kingdom, New Zealand, Victoria, Queensland, Ontario and Alberta only modify the rule, they do not abolish it. Why is this so? According to Morris and Wade, it is because the rule strikes ‘a fair balance between the desires of members of the present generation, and similar desires of succeeding generations, to do what they wish with the property which they enjoy’ [Morris and Wade, ‘Perpetuities Reform at Last’ (1964) 80 LQR 486 at 486] … We do not propose that the rule be abolished. Possible reforms of the rule against perpetuities. There appear to be at least

three principal ways of reforming the rule, namely — –

To provide that in its operation the occurrence of events which are theoretically possible but in practice impossible, or at least highly improbable, should be disregarded.

–

To modify the terms of excessive limitations so as to make them give effect to the substantial intention of the dispositions creating them so far as it is possible to do so without infringing the rule. This might be done, for example, by means of specific statutory provisions appropriately qualifying the effect of particular types of gift, as has already been done in relation to certain classes of gift (as to which, see below).

–

To abolish the present inflexible requirement that the validity of any limitation must be tested ab initio in relation to possible events, and substitute for it a wait-and-see principle which would determine validity on the basis of actual rather than possible events. In the draft bill annexed to this report we use each of these, and other,

methods. 7.22

The rule against perpetuities and the statutory reforms have

generated a substantial literature, much of which traces familiar territory. Apart from the articles referred to above, the following may be consulted: Simes, ‘Reform of the Rule Against Perpetuities in Western Australia’ (1963) 6 UWALR 21; Leach, ‘Perpetuities Reform: London Proposes, Perth Disposes’ (1963) 6 UWALR 11; Hogg and Ford, ‘Victorian Perpetuities Law in a Nutshell’ (1969) 7 MULR 155; Doane and McCredie, ‘Perpetuities Reform in Victoria’ (1969) 43 ALJ 366; Sappideen and Butt, ‘Rendering the

Rule Against Perpetuities Less Remote’ (1979) 8 Syd LR 620 (an analysis of the report of the New South Wales Law Reform Commission); Sappideen, ‘Life After Death — Sperm Banks, Wills and Perpetuities’ (1979) 53 ALJ 311; Sappideen and Butt, The Perpetuities Act 1984 (1986); Sappideen, ‘Perpetuities — Age Reduction and the Application of the Eighty-Year Period: Some Unexpected Problems’ (1986) 60 ALJ 471; Dukeminier, ‘Waitand-See: The Causal Relationship Principle’ (1986) 102 LQR 250; Sparkes and Snape, ‘Class Closing and the Wait and See Rule’ (1988) 52 Conv & PL 339.

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The rule Statement of the rule 7.23

The modern rule against perpetuities (also known as the ‘rule against

remoteness of vesting’) states that for an interest in property to be valid, it must be certain to vest, if it vests at all, not later than the expiration of the perpetuity period.8 The perpetuity period expires 21 years after the death of the last ‘life in being’ at the date the interest was created. (The period is extended to allow for a gestation period, for example, where at the death of the life in being, his wife is pregnant and the gift calls for that child to attain 21 before a vested interest is received.) It is important to appreciate that under the rule, a future interest is invalid at the outset if there is any possibility, however unlikely, that it will vest outside the perpetuity period.

With minor exceptions, the issue is determined according to the facts as they exist at the date the instrument creating the interest takes effect — that is, the date of execution of a settlement inter vivos or the date of death of the testator. It is not permissible, in the absence of statutory amendments to the rule, to ‘wait and see’ whether the interest ultimately vests within the perpetuity period. Generally speaking, the statutory modifications effected in the Northern Territory, Queensland, Tasmania, Victoria and Western Australia retain the common law period, but permit the drafter to employ a substitute period of ‘such number of years not exceeding 80 as is specified in the instrument as the perpetuity period applicable to the disposition’: Qld, s 209(1); see also NT, s 187(1); Tas, s 6; Vic, s 5(1); WA, s 101. The drafter may refer to this substitute period either by specifying the number of years, or by fixing a date by which the disposition will vest: Qld, s 209(3); Tas, s 6(3); Vic, s 5(3). No provision relating to the fixing of a date is made in the Northern Territory or Western Australia, although it appears that NT, s 187 and WA, s 101 would be interpreted to reach a similar result. This means that one can conclusively ensure the validity of a disposition by inserting a provision in the document to the effect that interests conferred by the document must vest within the 80-year period from the date when the document comes into operation. If, however, this is not expressly done, the common law period continues to apply except in the Northern Territory, where a perpetuity period of 80 years is the default provision: NT, s 187(2). 7.24

The New South Wales Law Reform Commission recommended the

opposite approach, namely, that the perpetuity period should be 80 years

from the date the settlement takes effect unless the settlor specifies the common law period: Report, paras 8.1–10, 12; in the event, parliament denied the drafter any choice at all and the perpetuity period in New South Wales is now 80 years: see Perpetuities Act 1984 (NSW) s 7 and see below 7.75ff. The Australian Capital Territory has followed the New South Wales example: see Perpetuities and Accumulations Act 1985 (ACT) s 8.

Vesting of interests 7.25

The rule lays down the period beyond which interests must not vest.

The rule does not concern itself with interests which may endure for long periods or indeed indefinitely, provided the interests vest within the required period. The meaning of the term ‘vest’ has been considered earlier, principally in relation to the legal remainder rules: see 3.49ff. It was seen that for the

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purpose of those rules that a remainder was vested (as opposed to contingent) if (i) the precise identity of the person who was to take the interest was ascertained; (ii) there was no condition precedent to the interest falling into possession other than the regular determination of the prior particular estate. A remainder (whether legal or equitable) can vest in interest before the remainderman becomes entitled to possession, while an executory interest, which operates by cutting short the prior particular estate, does not vest in

interest until it falls into possession. These threshold points may be illustrated by two examples: Example 1: Remainder: Devise ‘to T in trust for B for life, remainder in trust for C in fee simple when C attains 21’. If C attains 21 before B dies, C’s fee simple remainder will vest in interest and accordingly will be an asset in his estate even if he predeceases B. But C will not be entitled to possession until B dies. Example 2: Executory interest: Devise ‘to T in trust for B in fee simple, but if C takes up residence in Australia in trust for C in fee simple’. When C takes up residence in Australia, but not before that date, her interest will vest and, simultaneously, she will become entitled to possession of the land. 7.26

It is often said that before an interest can be regarded as vested for

the purposes of the rule against remoteness of vesting, it must satisfy not only the conditions set out above, but also an additional requirement. This is that the precise share of each person who is to take an interest must be ascertained.9 Expressed in this way, the requirement is confusing. It is less confusing to regard vesting as a concept which applies only to the interests of individuals and which depends only on the two requirements mentioned above. In a gift such as ‘to those of my children who shall attain the age of 21’, the interests of all of those who have attained that age are vested, as they have met the criteria for membership of the class of ‘my children who are 21’. However, the class is still capable of opening to admit new members as and

when the remaining children turn 21. The additional requirement can be seen, not as a criterion of vesting, but as a separate test for the validity of gifts to members of classes. The issue concerns an aspect of the rule against perpetuities, known as the ‘all-or-nothing’ rule. At common law, this rule invalidates a class gift for all members of the class, if it is possible that the interest of any member of the class will vest outside the perpetuity period. The rule applies even if some members of the class have met the contingency upon which vesting, in the case of a gift to an individual, would depend. Thus, a gift ‘to the children of A when they marry’, would fail for all of A’s children even though one or more might be married. This would not be the case if, prior to the instrument creating the gift taking effect, the class of A’s children had been closed by the death of A. In certain cases, the problem can be solved by closing the class artificially using the class-closing rules. These rules exclude those members (usually unborn) the remote vesting of whose interests threatens the interests of all, thereby saving the gift from invalidity: see 7.55. The all-or-nothing rule has been abolished in the Australian Capital Territory, New South Wales, the Northern Territory, Queensland, Victoria and Western Australia: see 7.57.

Presumption in favour of vesting 7.27

Where possible, the courts lean in favour of construing an interest as

vested, since an interest that is vested at the outset cannot breach the perpetuities rule. If a gift is subject to a condition subsequent, which may become operative outside the perpetuity period, the divesting

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condition fails and the gift is indefeasibly vested; see generally the comprehensive discussion in South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259 when Burchett AJ considered a valid trust to establish a grave followed by a trust for maintenance of the grave that was void for perpetuity with a subsequent limitation of a gift to a charity. His Honour, in line with the authorities he considered, distinguished between the gift to the charity being associated with the invalid trust from dependency or expectancy on it. This approach to construction has given rise to decisions which, on their face, are sometimes difficult to justify and have created artificial rules distinguishing between interests that are vested but are subject to divesting and interests that are contingent. These rules of construction are discussed in Morris and Leach, 40–50, and are illustrated below. The examples in this paragraph do not necessarily raise a problem of perpetuities, but they illustrate the presumption in favour of vesting. This presumption can save dispositions that otherwise would infringe the rule against perpetuities. Example 3: Bequest ‘to B at 25’. Is it a condition precedent to the operation of the bequest that B attains 25? If B is aged 21 at the testator’s death, is her interest vested? Example 4: Legacy ‘to B payable at 25’. Is it possible to construe this legacy in a different manner from the bequest in Example 3? When does B’s

interest vest? If B dies before reaching 25, to whom will the legacy be payable? See Shrimpton v Shrimpton (1862) 31 Beav 425; 54 ER 1203. Example 5: Bequest ‘to T on trust for B for life, then on trust for B’s children at the age of 25, but after the death of B the trustees shall pay the income in equal shares to B’s children until they respectively attain 25’. From what date does the testator intend the children of B to derive benefits from the gift? When does the gift vest? See Re Wrey (1885) 30 Ch D 507 at 512; Barrett v Barrett (1918) 18 SR (NSW) 637 at 641, per Harvey J. Example 6: Bequest ‘to T on trust for B for life, then on trust for B’s children, but if all B’s children die without marrying on trust for C’. B is alive at the testator’s death. Will B’s children necessarily marry within the common law perpetuity period? Is the requirement of a marriage a condition precedent to the effectiveness of the bequest to B’s children? Or will the interest of children who do not marry be divested on their death? Is the bequest to B’s children valid? Is the gift to C valid? Example 7: Legacy ‘to my granddaughter B, if she shall be living at the date of death of the survivor of myself and my wife and shall attain the age of 21 years or marry under that age. If B shall predecease me or shall survive me but shall not attain the age of 21 years or marry under that age, then I give the legacy to C’. Is it a condition precedent to the vesting of the gift that the granddaughter should attain 21 or marry under that age? See Re Heath [1936] Ch 259. (This case involved no question of perpetuities. The granddaughter was 16 and unmarried at the testator’s death. If the bequest

were vested, she was entitled to receive the income until she attained 21; if contingent, she was not so entitled.) At first glance, this would appear to create a condition precedent. However, this example is governed, in the absence of a contrary intention, by the rule of construction known as the rule in Phipps v Ackers (1842) 9 Cl & Fin 583; 8 ER 539. This provides that where a gift is made to a beneficiary or a specified class of beneficiaries on attaining a specified age, with a limitation over in the event of the beneficiary or beneficiaries dying under that age, the attainment of the age is treated as a condition subsequent rather than a condition precedent. Thus, the beneficiary or beneficiaries take an immediate vested interest subject to being divested

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upon death under the specified age. The rule in Phipps v Ackers does not apply where the attainment of the specified age is part of the description of the beneficiary, so that no gift at all is made to a person who does not answer the description. Compare the following limitations with that in Re Heath: (i) ‘to those of my children who shall attain the age of 30 years’; (ii) ‘to my first grandchild to attain the age of 21 years’: see Morris and Leach, 45. The distinction between vested and contingent interests is, as Re Heath shows, important for reasons other than the operation of the rule against perpetuities: see, for example, the discussion of the rule in Saunders v Vautier

(1841) Cr & Ph 240; 41 ER 482; Meagher and Gummow, Jacobs Law of Trusts, 6th ed, 1997, 695–9.

The commencement of the perpetuity period 7.28

The period begins to run at the date of creation of the interest or

interests in question. Thus, if the interests are created by will, the period begins to run at the date of the testator’s death; if created inter vivos, the perpetuity period commences at the date of delivery of the deed. In certain circumstances, this means that an interest created by will is valid, while a similar interest created by deed is invalid. Example 8: Settlement inter vivos ‘to T on trust for all the settlor’s grandchildren born after the date of the settlement’. The gift to the grandchildren fails at common law. The reason is that the settlor may have more children after the date of the settlement and these children are therefore not lives in being for the purposes of the rule against perpetuities. It is possible that children of the settlor born after the date of settlement may themselves have children (grandchildren of the settlor) who will be born outside the perpetuity period — that is, the life of the settlor, plus 21 years. Since there is a possibility, however remote, that the gift will vest outside the perpetuity period, it fails at the outset. In the absence of express provision in the settlement, the gift cannot be construed as confined to the grandchildren of the settlor born to those of his children who were alive at the date of the settlement although, depending on the facts, the classclosing rules might affect the position: see 7.55.

Example 9: Bequest ‘to all my grandchildren born after my death’. This gift does not infringe the rule. Since the testator is unable to have further children after death (except for a child en ventre sa mere at that time), children alive at that time are lives in being for the purposes of the rule. Any grandchildren born after the testator’s death must be born during the lifetime of the lives in being (the testator’s children). Thus, the gift cannot possibly vest outside the perpetuity period. For a discussion of the effect of new genetic technology on this reasoning, see Sappideen, ‘Life After Death — Sperm Banks, Wills and Perpetuities’ (1979) 53 ALJ 311. Special rules relating to the commencement of the period apply to certain kinds of interests. These are based on the principle that the period does not begin to run as long as some person is either the sole beneficial owner of the property or alternatively can make himself or herself sole beneficial owner. For example, in a trust which is revocable by the settlor, the perpetuity period does not begin to run until the death of the settlor or until the time when he or she releases his or her power of revocation: Morris and Leach, 56–60. The principles set out above are unchanged by statute.

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Lives in being 7.29

At common law, the perpetuity period is a life or lives in being at the

date of creation of the interest plus 21 years. The relevant measuring lives are

the lives of those persons either expressly mentioned or necessarily implied as measuring lives in the instrument creating the interest. Example 10: Settlement ‘to T in fee simple on trust for B for life, remainder on trust for C’s first child to attain 21 in fee simple’. The measuring life is C. The gift is valid, since C’s first child to attain 21 must do so within 21 years of C’s death. The gift cannot possibly vest outside the perpetuity period. It is necessary to find only one life in being which will enable the gift to comply with the rule against perpetuities. 7.30

No limitation is placed on the number of lives that may be selected by

the draftsperson, provided that they are not so numerous the last survivor cannot be ascertained. The proviso is illustrated by Re Moore [1901] 1 Ch 936, where the vesting was postponed until ‘21 years from the death of the last survivor of all persons who shall be living at my death’. This was held to be void for uncertainty. It is not necessary for the lives in being to be ascertained at the date the instrument takes effect, provided it is clear that the measuring lives are in fact in existence at that date and that they do not form part of a class capable of increase. In Hardebol v Perpetual Trustee Co Ltd [1975] 1 NSWLR 221, a gift of residue referred to the widows (born in the testatrix’s lifetime) of the testatrix’s children. It was held that the widows could be regarded as lives in being for the purposes of the perpetuity period, even though their identity could not be ascertained at the testatrix’s death. Subject to the need for certainty, the measuring lives selected need not be the lives of beneficiaries or of persons having any connection with the settlor or testator. Consequently, it is not unusual for a ‘royal lives clause’ to be

employed, although this has been used less frequently in Australia than in England. Under the royal lives clause, vesting is postponed until the period ending at the expiration of 21 years from the death of the last survivor of the lineal descendants of a named sovereign living at the date when the instrument comes into effect. In Re Villar [1929] 1 Ch 243, the court reluctantly upheld such a disposition where the named sovereign was Queen Victoria, despite the fact that in 1922 (four years after the death of the testator) there were about 120 such descendants of Queen Victoria spread all over Europe, and that the tracing of the last survivor would be extremely difficult: see also Re Leverhulme [1943] 2 All ER 274, upholding a similar clause in the will of a testator who died in 1925. Today, a royal lives clause formulated by reference to Queen Victoria would doubtless be invalid for uncertainty, but there is no reason why an updated version of the royal lives clause should not achieve the desired result. The use of the royal lives clause resulted in the settlor achieving probably the longest period of postponement of vesting available at common law. Thus, in a settlement to ‘T on trust for my lineal issue living 21 years from the death of the survivor of the now living descendants of his late Majesty King George VI’, the vesting date would, in the most likely event, be postponed for at least 100 years or more. 7.31

At common law, where a class of people which is mentioned

expressly or impliedly in the gift may increase by the addition of more members, the lives of members of the class who are actually in existence at the date when the disposition comes into effect cannot count as measuring lives so as to validate the gift.

Example 11: Settlement ‘to T on trust for the first grandchild of B to attain 21’. This is void unless, at the date the instrument is executed, either (i) a grandchild has reached 21, thereby

[page 671]

attaining a vested interest; or (ii) B is dead. If B is alive at the date of the settlement, the lives of her existing children are not relevant measuring lives for the purposes of the rule against perpetuities. It is possible that B will have a further child, whose own child (B’s grandchild) might attain 21 outside the perpetuity period, yet be the first grandchild of B to reach that age. On the other hand, if B is dead at the date of the settlement, she can have no further children. Accordingly, her children living at that date are regarded as lives in being and it follows that any child born to B’s children to attain the age of 21 must do so within the perpetuity period. In short, if B is dead at the date the interest is created, that interest cannot possibly vest outside the perpetuity period. For a discussion of measuring lives and the causal relationship principle, see Deech, ‘Lives in Being Revived’ (1981) 97 LQR 593 and Dukeminier, ‘Wait-and-See: The Causal Relationship Principle’ (1986) 102 LQR 250. 7.32

The legislation in Queensland, Tasmania and Victoria (but not the

Northern Territory and Western Australia) enables the life of a person who belongs to a class capable of increase to be used as a measuring life. Thus, Vic, s 6(4) provides as follows:

7.33E

Perpetuities and Accumulations Act 1968 (Vic)

6 ‘Wait and see’ rule … (4) Nothing in this section makes any person a life in being for the purposes of ascertaining the perpetuity period unless the life of that person is one expressed or implied as relevant for this purpose by the terms of the disposition and would have been reckoned a life in being for such purpose if this section had not been enacted: Provided however that in the case of a disposition to a class of persons or to one or more members of a class, any person living at the date of the disposition whose life is so expressed or implied as relevant for any member of the class may be reckoned a life in being in ascertaining the perpetuity period. [Compare Qld, s 210(4)–(5); Tas, s 9(6)].

7.34

The proviso to s 6(4) would not of itself validate the disposition in

Example 11 if B were alive at the date of the disposition. Even if children living at the date of the disposition were regarded as measuring lives, B might have a further child who could produce a grandchild of B attaining 21 outside the perpetuity period. However, when the ‘wait-and-see’ provisions are taken into account (see 7.40), the proviso to s 6(4) does serve a useful purpose.

Certainty of vesting: unborn widows, fertile octogenarians and others 7.35

The perpetuity rule is concerned with possibilities, not probabilities.

At common law, if an interest can possibly vest outside the perpetuity period, even if it is highly improbable that it will do so, the interest is invalid. To be valid, it must not be possible for the interest to vest outside (that is, beyond) the perpetuity period. It is not permissible to wait and see whether the

interest in fact vests within the period. The rigour of the rule is sometimes illustrated by

[page 672]

four examples of its extreme application. These are known as the cases of the ‘unborn widow’, the ‘precocious toddler’, the ‘fertile octogenarian’ and the ‘magic gravel pits’. The ‘unborn widow’ problem (or, more accurately, the ‘unborn widower’ problem) is illustrated by the High Court’s decision of Harris v King (1936) 56 CLR 177. The court considered a gift by will to the testator’s grandchildren who were living at the time of the death of the survivor of his daughter and her husband (if any) and who had attained the age of 21 years or married. In stating his reasons, Starke J said at 184: The period within which a future interest must vest commences at the time when the limitation comes into force, which is the date of the testator’s death where the limitation is contained in a will. The direction in the present case is, as we have seen, to sell after the death of the testator’s daughter and her husband (if any) and to pay and divide the surplus of the proceeds equally between the children of his daughter who shall be living at the time of the death of the survivor of ‘them my said daughter and her husband (if any) who shall have attained the age of 21 years or married’. But it is possible that the daughter’s husband may be a person who is not born at the time of the testator’s death, and thus the lives after which the interest is to vest are not necessarily lives of persons in being at the death of the testator. It is immaterial that the contingency in fact happened in this case within the limits prescribed by the rule.

7.36

The gift to the daughter’s children, living at the death of the survivor

of the daughter and her husband, was invalid since the expressed contingency, being alive at the death of the survivor, might possibly occur more than 21

years after the death of the life in being, the daughter. The husband could not have been considered as a life in being, since at the date of the testator’s death, any husband the daughter might have married might not yet have been born. If the daughter had been married at the date of the testator’s death, it might have been possible for the court to construe the gift to the daughter and the husband to whom she was then married. Such a construction, if open and adopted, would have resulted in a valid disposition. 7.37

The problem of the unborn widow (or widower) has been treated by

reforming legislation. Vic, s 10 provides as follows: 7.38E

Perpetuities and Accumulations Act 1968 (Vic)

10 Unborn partner The surviving partner of a person who is a life in being for the purposes of the rule against perpetuities shall be deemed to be a life in being for the purpose of — (a) a disposition in favour of that surviving partner; and (b) a disposition in favour of a charity which attains or of a person who attains or of a class the members of which attain according to the terms of the disposition a vested interest on or after the death of the survivor of the said person who is a life in being and that surviving partner, or on or after the death of that surviving partner on or after the happening of any contingency during her or his lifetime. Compare NT, s 188; Qld, s 214; Tas, s 7; WA, s 108.

[page 673]

7.39

Where the vesting of an interest is expressly made to depend on the

happening of one of two or more expressed contingencies, one of which must occur, if it occurs at all, within the perpetuity period, and the others of which

may not occur within that period, the gift is valid if the first contingency occurs, although it is invalid if the second or other contingencies occur: see Morris and Leach, 181ff. This is one of the situations where the court is permitted to ‘wait and see’, and is thus an exception to the principle that the perpetuity rule deals with possibilities rather than actual occurrences. However, this principle could not have operated to save the gift to the children in Harris v King, since the principle has been held not to operate unless the settlor or testator has split the gift and clearly expressed the gift to take effect on one of two alternative contingencies. It is not enough that such an intention was implicit: see Morris and Leach, 181–2. Under the reforming legislation, the ‘wait-and-see’ provision has rendered the alternative contingency rule redundant; see 7.46. 7.40

At common law, it is conclusively presumed that a living person is

capable of having children, notwithstanding his or her age or physical condition. In the light of this presumption, consider the validity of the dispositions set out below. Example 12: Devise ‘to T on trust for B for life, remainder on trust for B’s children for their lives, remainder on trust for such of B’s grandchildren as attain 21’. B is a woman past the age of child-bearing. None of her grandchildren has attained 21 at the death of the testator. If the theoretical possibility that B may have more children is taken into account, is the gift valid? It is not. B is the life in being, not B’s children. Example 13: Settlement inter vivos of shares ‘to T on trust to pay the income to the employees of the M Co and upon the death of the last

survivor of the settlor’s children to divide the shares equally between all grandchildren of the settlor who have attained 21’. At the date of the settlement, the settlor is an elderly widower with three children and 11 grandchildren: see Tidex v Trustees Executors and Agency Co Ltd [1971] 2 NSWLR 453. Example 14: Bequest ‘to Mary and the issue of her body, and in default of such issue for the daughters then living of Elizabeth Jee’. Elizabeth Jee was aged 70 years at the date of the testator’s death and had four daughters. It was held that the gift to Mary created an interest in the personalty akin to a fee simple subject to an executory gift over if Mary had no issue. The word ‘issue’ was construed as meaning ‘descendants’ and was not limited to the children of Mary. If the theoretical possibility that Elizabeth Jee could have more children was taken into account, was the gift valid? See Jee v Audley (1787) 1 Cox Eq Cas 324; 29 ER 1186, and also Ward v Van der Loeff [1924] AC 653. The gift was held invalid as the court refused to consider that Elizabeth Jee was past the age of child-bearing. A construction of the gift which the court could have adopted to render it valid would have been for the court to have construed the word ‘daughters’ as the daughters of Elizabeth Jee living at the date of the testator’s death: see Morris and Leach, 79.

[page 674]

7.41

The reforming legislation also deals with the ‘fertile octogenarian’

and ‘precocious toddler’ rules. Vic, s 8 provides as follows: 7.42E

Perpetuities and Accumulations Act 1988 (Vic)

8 Presumptions and evidence as to future parenthood (1) Where in any proceedings there arises on the rule against perpetuities a question which turns on the capacity of a person to have a child at some future time, then — (a) it shall be presumed, subject to paragraph (b), that a male can have a child at the age of twelve years or over but not under that age and that a female can have a child at the age of twelve years or over but not under that age or over the age of fifty-five years; but (b) in the case of a living person evidence may be given to show that he or she will or will not be capable of having a child at the time in question … (4) In the foregoing provisions of this section references to having a child are references to begetting or giving birth to a child; but those provisions (except subsection (l)(b)) shall apply in relation to the possibility that a person will at any time have a child by adoption, legitimation or other means as they apply to his or her capacity at that time to beget or give birth to a child. [Compare NT, s 189; Qld, s 212; Tas, s 10; WA, s 102].

7.43

See Morris and Leach, 76–84, for another proposed solution to the

problem of the fertile octogenarian. (In New South Wales and the Australian Capital Territory, the perpetuity period being fixed at 80 years with no option for selection of the common law period of a life in being plus 21 years, there is no opportunity for problems of unborn widows, fertile octogenarians and precocious toddlers to arise.) 7.44

The ‘magic gravel pits’ case is Re Wood [1894] 3 Ch 381. In that case,

the testator owned gravel pits which he devised to trustees on trust to work them until they were exhausted and then to sell them and divide the proceeds among the testator’s issue then living. If the pits continued to be worked at

the same rate as in the testator’s lifetime, they would have been exhausted four years from the date of his death. In fact, they were exhausted six years after his death. The Court of Appeal held that since the rule was concerned with possibilities, the gift to the testator’s issue was invalid. Notwithstanding the evidence as to the likely life of the pits, it was theoretically possible that they might not be exhausted until after the expiration of the perpetuity period (in this case, 21 years from the testator’s death). The perpetuities problem in cases like Re Wood can be avoided by interpreting the will or settlement so as to require vesting to take place within a limited period. 7.45

In Re Atkins’s Will Trusts [1974] 2 All ER 1, for example, the will

created a life interest in certain property, and then directed the trustee to sell the property, no time for sale being mentioned, and no express power to postpone sale being included. The will directed the trustee to divide the proceeds among a class of beneficiaries living at the completion of the sale. It was held, as a matter of interpretation, that the trustee was bound to sell the property as soon as would be convenient after the death of the life tenant in the proper course of realisation of assets. By analogy with the ‘executor’s year’ (the period allowed to realise the testator’s assets), this amounted

[page 675]

to a duty to sell within a year of the life tenant’s death. Re Wood was distinguished on the ground that the rule against perpetuities was not concerned with the possibility that the trustee might delay the sale in breach

of its duty: see also Re Petrie [1962] Ch 355; [1961] 3 All ER 1067, where the will provided for a gift to take effect on the realisation of the testator’s residuary estate.

The statutory wait-and-see rule 7.46

The special problems relating to unborn widows, fertile octogenarians

and precocious toddlers have been overcome by specific provisions in the reforming legislation. The more general problem remains that the rule is concerned with the possibility that interests may vest outside the perpetuity period and invalidates any disposition which involves this possibility. The reforming legislation approaches this question by overturning the common law rule that a limitation will be invalid if, at the date of its creation, it is not certain to vest within the perpetuity period. The legislation directs that the limitation is to be treated as valid until it becomes clear that the vesting, if it is to occur, must do so outside the perpetuity period. If the interest, in fact, vests within the permitted time it will be valid; if it does not do so, it will fail, unless it can be saved by applying the provision relating to reduction of the age contingency: see 7.50. The Victorian ‘wait-and-see’ provision (s 6(1)) is as follows: 7.47E

Perpetuities and Accumulations Act 1968 (Vic)

6 ‘Wait and see’ rule (1) Where apart from the provisions of this section and of section 9 a disposition would be void on the ground that the interest disposed of might not become vested until too remote a time the disposition shall be treated until such time (if any) as it becomes established that the vesting must occur, if at all, after the end of the

perpetuity period as if the disposition were not subject to the rule against perpetuities; and its becoming so established shall not affect the validity of anything previously done in relation to the interest disposed of by way of advancement, application of intermediate income or otherwise. See also ACT, s 9; NSW, s 8; NT, s 190; Qld, s 210(1); Tas, s 9; WA, s 103(1).

7.48

As originally enacted, NT, s 190 omitted the ‘not’ in the phrase ‘shall

not affect the validity’. The error was retrospectively corrected by the Statute Law Revision Act 2003 ss 2(2), 9. As to what difficulties might arise where trustees are obliged to ‘wait and see’, note Fourth Report of English Law Reform Committee (Cmnd 18, 1956) paras 19–22. How will the property be held during the time the trustees are waiting? How is the perpetuity period to be determined for the purpose of applying the ‘wait-and-see’ provision? Consider the following example as arising in the Northern Territory, Queensland, Tasmania, Victoria or Western Australia. Example 15: Settlement inter vivos ‘to T in fee simple on trust for the first grandchild of B to attain the age of 21 in fee simple’. This is invalid at common law, if B is alive at the date of the disposition: see 7.28. Under the statutory provisions, it would first be relevant to inquire whether B is a woman past the age of 55, or otherwise incapable of having children: see 7.41. If so, her existing children’s lives are the relevant measuring lives and the gift is valid, since no grandchild of B can attain 21 outside the perpetuity period. If B is a man, or a woman

[page 676]

capable of child-bearing, the gift still appears to fail. However, under the wait-and-see provision, the gift takes effect if it in fact vests within the perpetuity period. If it does not vest, the gift fails. The perpetuity period is the same as at common law, with the added gloss that the lives of B’s children living at the date of the disposition are measuring lives, despite the fact that B might have further children: see 7.32. This may extend the ‘wait-and-see’ period, making it longer than the common law perpetuity period. 7.49

The statutory ‘wait-and-see’ provision was applied in Nemesis

Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152. Under the relevant trust deeds it was possible for the trustees to advance the vesting date thus avoiding the possibility of an interest under the trust vesting outside the perpetuity period. In the Federal Court, Tamberlin J held that, against that possibility, the dispositions must be treated as valid until the end of the perpetuity period. It was necessary to wait and see what in fact occurred within the perpetuity period before it could be established that the trust interests must vest outside that period.

Reduction of age contingencies 7.50

At common law, a disposition may infringe the rule against

perpetuities solely because the beneficiary is required to attain an age greater than 21. Several states have long had legislation providing for reduction of the stipulated age in these circumstances, although in the Australian Capital Territory, New South Wales, the Northern Territory, Queensland,

Tasmania, Victoria and Western Australia, the provision is now part of the more general perpetuities legislation. In Victoria, s 9 provides as follows. 7.51E

Perpetuities and Accumulations Act 1968 (Vic)

9 Reduction of age and exclusion of class members to avoid remoteness (1) Where a disposition is limited by reference to the attainment by any person or persons of a specified age exceeding twenty-one years and it is apparent at the time the disposition is made or becomes apparent at a subsequent time — (a) that the disposition would apart from this section be void for remoteness; but (b) that it would not be so void if the specified age had been twenty-one years — the disposition shall be treated for all purposes as if instead of being limited by reference to the age in fact specified it had been limited by reference to the age nearest to that age which would if specified instead, have prevented the disposition from being so void. (2) Where in the case of any disposition different ages exceeding twenty-one years are specified in relation to different persons — (a) the reference in paragraph (b) of sub-section (1) to the specified age shall be construed as a reference to all the specified ages; and (b) that sub-section shall operate to reduce each such age so far as is necessary to save the disposition from being void for remoteness … (5) Where this section has effect in relation to a disposition to which section 6 applies [the ‘wait-and-see’ provision] the operation of this section shall not affect the validity of anything previously done in relation to the interest disposed of by way of advancement, application of intermediate income or otherwise.

[page 677]

7.52

The Queensland and Tasmanian provisions take a similar form: Qld,

s 213 (reduction to 18 years); Tas, s 11. In Western Australia, a statutory age of 21 years is substituted for the offending age: WA, s 105. (This contrasts

with the approach in the Northern Territory, Queensland, Tasmania and Victoria, where the age is to be reduced to an age nearest the specified age which would prevent the disposition from being void.) In the Northern Territory, s 191 provides that the age is to be reduced to the greatest age that, if substituted for the specified age, would save the provision from offending the rule. In other words, the substituted age may be one less than the age of 21 years, there being no equivalent in the Northern Territory legislation to the opening words in Vic, s 9(1)(b) ‘that it would not be so void if the specified age had been twenty-one years’. In the Australian Capital Territory and New South Wales, the age of 21 has ceased to have any special significance and accordingly, the legislative reform has adopted a different approach. The provisions in the Australian Capital Territory and New South Wales (ACT, s 10; NSW, s 9) provide that the age shall be read down to the greatest age that would, if substituted for the specified age, save the provision from the rule. This approach may cause difficulties in interpretation when applied to class gifts; see 7.78. Consider the following example as applying in the Northern Territory, Queensland, Tasmania, Victoria and Western Australia. Example 16: Settlement inter vivos ‘to my first grandchild to attain 25’. At common law, this infringes the rule against perpetuities. Under the Northern Territory, Queensland, Tasmanian and Victorian provisions, it is first necessary to wait until the end of the perpetuity period to see whether the gift has vested by then. If no grandchild has then attained 25, the gift is bad for perpetuities, unless a reduction of the age contingency can save it.

If the donor has a grandchild aged 24 at the end of the perpetuity period, the required age is reduced to 24 and the grandchild is able to take his or her interest. If, on the other hand, the donor’s oldest grandchild is aged 11, the provision relating to reduction of the age contingency does not assist in Queensland, Tasmania, Victoria and Western Australia and the gift fails. In the Northern Territory, s 191 permits the age to be reduced to 11 years. Note that in Western Australia, even where the eldest grandchild is 24 at the end of the perpetuity period, the required age is reduced to 21 years.

Application of saving provisions 7.53

The relationship between the age reduction and wait-and-see

provisions may be very important in determining the effect of a limitation. Consider the following as applying in the Northern Territory, Queensland, Tasmania, Victoria and Western Australia. Example 17: Bequest ‘to T on trust for B’s first child to attain 25’. B survives the testator. He later has two children, C1 and C2. C1 dies aged 23. C2 ultimately reaches 25, B being still alive. At common law, this gift would be void at the outset as infringing the rule against perpetuities. Under the reforming legislation, if the age reduction provision is applied immediately, the age specified in the bequest would be reduced to 21 and C1 would take. If the wait-and-see provision is applied, it becomes clear in this example that the bequest satisfies the rule and the age requirement remains unaltered, with the result that C2 takes.

Under the reforming legislation in Queensland, Tasmania, Victoria and Western Australia, the order of application of the saving provisions is, first, specific modifications to the rule, such as the presumption of infertility; second, the wait-and-see rule; and third, the age reduction provision. In the Northern Territory, it is, first, the wait-and-see rule; and second, the age

[page 678]

reduction rule. Thus, in Example 17, the age specified in the bequest would not be reduced and C2 would take: see NT, s 192; Qld, ss 210, 213; Tas, ss 9, 11; Vic, ss 6, 9; WA, ss 103, 105, 107. In New South Wales, the wait-andsee provision is applied before the age reduction provision: see NSW, s 10. There is no corresponding provision in the Australian Capital Territory legislation. 7.54

Because of the operation of the ‘all-or-nothing’ rule (see 7.57), if,

when the instrument containing a disposition to a class takes effect, it is possible that the interest of one or more members will vest outside the perpetuity period, then the disposition fails. This is a frequent cause of invalidity under the common law rule against perpetuities. Example 18: Bequest ‘to T on trust for B for life, remainder on trust for such of B’s children as shall marry’. B is alive at the testator’s death. Even if some of B’s children are married at this date, the bequest fails at common law. B might have further children who might marry beyond the perpetuity

period. The ‘all-or-nothing’ rule has been abrogated by the reforming legislation; see 7.57. Example 19: Settlement inter vivos ‘to T on trust for my nephews and nieces’. The settlor’s parents are still alive and neither his brother nor sister has any children at the date of settlement. The gift will not vest until it is known that all members of the class have been born, that is, at the death of the settlor’s parents and siblings. The vesting time will be a time which may occur outside the perpetuity period. The wait-and-see legislative provisions considered so far will not save the gift if the class of beneficiaries is still open at the expiration of the perpetuity period. Example 20: Gift of residue in a will ‘to T on trust for X, Y and Z and all of my grandchildren who shall marry’. What shares do X, Y and Z have in the residue of the estate? This will depend upon the number of grandchildren who marry. Can their shares be ascertained at the outset? No, since X, Y and Z will have to wait until the number of grandchildren taking a vested interest is known. Does the gift comply with the rule against perpetuities at common law? No, it does not since the number of grandchildren who satisfy the contingency may not be known within the perpetuity period: see Barrett v Barrett (1918) SR (NSW) 637. If not, how could the court construe the gift to X, Y and Z to make it valid? If the gift were construed per stirpes so that each of X, Y and Z took a one-quarter share and the remaining one-quarter share was divided amongst the grandchildren, the gift to X, Y and Z would be valid. The gift to the

grandchildren would still offend the rule at common law: compare Re Birkett [1950] 1 Ch 330. Example 21: Gift to residue in a will ‘to the children of my brothers who reach 25 years in the case of boys and 21 years in the case of girls’. Such a gift is valid neither for the boys nor for the girls in the absence of some age reduction provision: see In the Will of Breheney [1915] VLR 242. Example 22: Gift of residue in a will ‘to B for life, remainder for such of B’s children as shall attain the age of 21 years and the children of such of those children who shall die under 21 years leaving children who shall attain the age of 21 years, such children to take the shares which their parent would have taken’. Is the gift valid? The gift is not valid, since the quantum of the share of the survivors will not be known until a period which may possibly exceed the perpetuity period: Pearks v Moseley (1880) 5 App Cas 714. How does this gift

[page 679]

compare with a gift of residue ‘to T on trust for B for life, remainder on trust for such of B’s children as attain the age of 21 years, but if any of B’s children shall die under the age of 21 leaving a child or children, such children shall take their parents’ share’? Is the gift to the children of B who attain the age of 21 years valid? Standing alone, such a gift is, of course, valid. Is the substitutional gift valid? Yes it is, for the substitutional gift must vest, if at all, within the perpetuity period. For a case dealing with a

disposition similar to that in Pearks v Moseley, see Re Drummond’s Settlement [1986] 3 All ER 45.

The class-closing rules 7.55

Gifts to a class often raise difficult issues in determining who is

included in the class. These difficulties may arise quite independently of any perpetuity problem: see, for example, Napper v Miller (2003) 11 BPR 21,175; [2003] NSWSC 376. In certain cases, the rigour of the all-or-nothing rule can be mitigated by adopting a construction of a class gift that limits the width of the class. Class gifts not infrequently infringe the rule against perpetuities solely because of the possibility that some persons may qualify as members of the class after the instrument creating the gift comes into effect. In such cases, the class gift may be saved from invalidity by construing it to apply only to those members of the class identified and in existence at the date the instrument becomes effective, that is, by construing the gift as applying only to a subset of the originally designated group. Sometimes, the class is limited simply because of the facts as they exist at the relevant time. If, for example, a testator bequeaths property to the children of B who attain 25 and B predeceases the testator, the bequest is clearly valid. The eligible beneficiaries are all lives in being, each of whom must attain a vested interest, if at all, within his or her own lifetime. In other cases, the rules of construction known as the ‘class-closing rules’ have a similar effect. The rules enable the court to adopt a construction of the disposition which ‘closes the class’ to after-born prospective members. Although the rules were evolved for

the sake of administrative convenience, they often have the effect of validating a gift that would otherwise be bad for perpetuity. The class-closing rules derive from the case of Andrews v Partington (1791) 3 Bro CC 401; 29 ER 610. The principle behind the rule in Andrews v Partington is that where a gift is made to a class, the class closes to after-born members as soon as one member of the class is entitled to call for his or her share. All members born up to this date are eligible for inclusion in the class. All potential members born after that date are excluded. The rule is based upon the assumption that the testator or settlor would prefer to exclude some members of the class, rather than keep those members who have already qualified waiting indefinitely for distribution. Since the rule is a rule of construction only, it can always be excluded by the expression of a contrary intention: see, for example, Re Chapman’s Settlement Trusts [1977] 1 WLR 1163; [1978] 1 All ER 1122; cf Re Clifford’s Settlement Trusts [1981] Ch 63. The class-closing rules were explored by Dixon J in Crane v Crane (1949) 80 CLR 327 at 335–37: The case is governed by the well-known rule of construction or of convenience, relating to the ascertainment of the objects of a postponed class gift. If a fund is bequeathed to a class so that when each member attains a specified age or fulfils some other condition attached to the gift he is enabled to call for his share, only those may take who are in existence when the first member reaches that age or fulfils the prescribed condition and those who come into existence afterwards are excluded. The class is then closed and although the numbers who ultimately share may be diminished by reason of the failure of one or more of them to attain full age or comply with some other condition on which the title to participate may

[page 680]

be contingent, the numbers cannot be enlarged by the birth of additional persons who if born earlier would have been eligible for membership of the class. The rule applies alike to limitations which merely postpone payment until attainment of the specified age or fulfilment of the given condition and to limitations which make vesting contingent thereon. The purpose of the rule is to enable those members of a class who have qualified so that they have an interest vested in possession to enter at once into enjoyment of their shares. This could not be done if the class were kept open so long as it were possible that other children might be born and become members. As long as the parent lived the class might be increased by the birth of further children and the share of existing children diminished accordingly. As the share would thus be unascertainable and the minimum amount even could not be fixed no payment could be made, until the parent died, to those whose interests were otherwise vested in possession. To avoid this consequence a construction is given to such bequests which will make further accession to the class impossible once the conditions have been satisfied giving any child a share vested in possession. Until this event children are let in and by their number the minimum share is fixed which each will take. But, by the death of any of them before qualifying for a vested interest by attaining the given age or satisfying the conditions attached to the gift, the size of the proportionate share may afterwards be enlarged. ‘The rule of the court has gone upon an anxiety to provide for as many children as possible with convenience. Therefore any coming in esse before a determinate share becomes distributable to anyone is included’ (per Lord Eldon, Barrington v Tristram [(1801) 6 Ves 345 at 348, 31 ER 1085 at 1087]. It would be highly inconvenient if there were no such principle of construction and the shares of children were left unascertainable throughout the whole life of their parent because of the possibility of accession to the class by future births. It is a rule of convenience. But, it has been repeatedly pointed out, the rule resolves an inconsistency of intention disclosed by the testator’s dispositions. He intends that every child who attains the given age shall have his share but he intends that he shall have it before, on the literal words of the limitation, it is possible to ascertain the objects who fall within the class … … But the rule cannot be applied if the will expresses an intention which is inconsistent with the idea of the first child who satisfied the conditions attached to the gift calling for his share. Such an inconsistent intention may be found in a provision postponing the distribution of any share until, for example, the youngest child for the time being attains twenty-one. It has been found in maintenance or advancement clauses framed in such a way as to show that the fund was to be kept together notwithstanding that the share or shares of a member or members of the class

had vested in possession and maintenance or advancement was to be allowed thereout beyond that period.

7.56

The working of the class-closing rules is illustrated by the examples

below. For a further discussion, see Morris, ‘The Rule Against Perpetuities and the Rule in Andrews v Partington’ (1954) 70 LQR 61; Morris and Leach, 110–25. Example 23: Bequest ‘to T on trust for the grandchildren of B’. B is alive at the testator’s death and has three grandchildren. In such a case, the grandchildren can call for their shares immediately, as the class closes on the testator’s death. The gift is valid for perpetuities in these circumstances, since the beneficiaries are a closed class and are thus ascertained. The result is the same if B has only one grandchild at his death. What if B has no grandchildren at the testator’s death? In these circumstances, the court construes the gift as applying to all after-born grandchildren and the classclosing rules do not operate even when B later has a

[page 681]

grandchild. In a case such as this, the gift is not valid for perpetuities: see Re Manners [1955] 1 WLR 1096. Example 24: Bequest ‘to T on trust for the children of B who attain 25’. B is alive at the testator’s death and has three children, one of whom, C1, has attained 25. C1 is entitled to call for her share immediately and the class

has closed to after-born children. In these circumstances, the gift is valid for perpetuities since the potential beneficiaries are all ascertained and are therefore the relevant lives in being. They must attain the age of 25, if at all, within their own lifetimes. Suppose none of B’s children has attained 25 at the testator’s death, but three years later C1 attains 25. C1 cannot call for her share until she attains 25 and, at that time and not before, the class closes to after-born children. Without the benefit of legislative age reduction provisions, the gift is not valid for perpetuities in these circumstances: see In the Will of Breheney [1915] VLR 242. Example 25: Bequest ‘to T on trust for B for life, remainder on trust for such of C’s children as attain 25’. C is alive at the testator’s death and has no children. Is the gift valid for perpetuities? It is not: see Re Zahel; Nicoll v Queensland Trustees Ltd [1931] St R Qd 1; Re Will of Hassell (1940) 43 WALR 36. What if C, at the testator’s death, has three children: C1 aged 25, C2 aged 23 and C3 aged 16. C1 is not entitled to call for his share until the death of the life tenant. In these circumstances, the class will not close until the death of the life tenant and any children of C born during B’s lifetime will be eligible to take. Accordingly, without the operation of age reduction provisions, the gift is void: Reid v Earle (1914) 18 CLR 493. Example 26: Bequest ‘to T on trust for B for life, remainder to such of B’s grandchildren as attain 21’. B is alive at the testator’s death. He has three grandchildren: GC1 aged 22, GC2 aged 20 and GC3 aged 4. GC1 is not entitled to call for his share until the death of his grandparent, B, the life tenant. At that time and not before, the class closes to after-born

grandchildren. Nonetheless, any grandchildren born during B’s lifetime must attain the age of 21, if at all, within 21 years of the death of B and, most importantly, it will be known that this will be so at the date the instrument comes into operation, that is, at the death of the testator. In these circumstances, the gift is valid. Would the gift be valid if, at the testator’s death, no grandchild of B had attained 21? No, it would not. The reason is that at the date of the testator’s death, it would not be known with certainty that the class would close on B’s death on grandchildren then born: cf Tidex v Trustees, Executors and Agency Co Ltd [1971] 2 NSWLR 453. As noted above, the class-closing rules were developed for administrative convenience and their effect on the operation of the rule against perpetuities is incidental. Thus, the operation of the class-closing rules may exclude beneficiaries who have absolutely no perpetuity problems. Example 27: Bequest ‘to T on trust for my grandchildren at 21’. At the testator’s death, there are three grandchildren aged 18, 19 and 20. The testator’s children are the lives in being, so there is no perpetuity problem. It is not possible for the grandchildren to reach 21 outside a perpetuity period measured by their parents’ lives plus 21 years. One year after the testator’s death, the eldest grandchild turns 21. As he is then entitled to call for his share, the class closes and excludes the fourth grandchild born two years after the testator’s death: see Crane v Crane (1949) 80 CLR 327; Denison v Denison [2000] NSWSC 1205.

[page 682]

Reform of the all-or-nothing rule 7.57

A class gift which would infringe the rule against perpetuities at

common law may be saved by one or more of the statutory reforms discussed earlier. The presumption of infertility may render a class incapable of increase, thus ensuring that interests will vest within lives in being; the application of the wait-and-see provision will save those class gifts which actually do vest within the perpetuity period. If a class gift containing an age contingency fails to vest within the perpetuity period, reduction of the specified age may validate the gift. Even after all these remedies have been applied in the case of a class gift, some members of the class may still not attain a vested interest within the perpetuity period. The application of the all-or-nothing rule at this point would lead to failure of the whole gift. To prevent this, the reforming legislation abrogates the all-or-nothing rule. The Victorian legislation (Vic, s 9(3), (4)) provides as follows: 7.58E

Perpetuities and Accumulations Act 1968 (Vic)

9 Reduction of age and exclusion of class members to avoid remoteness (3) Where the inclusion of any persons being potential members of a class or unborn persons who at birth would become members or potential members of the class prevents the foregoing provisions of this section from operating to save a disposition from being void for remoteness those persons shall thenceforth be deemed for all the purposes of the disposition to be excluded from the class and the said provisions shall thereupon have effect accordingly. (4) Where in the case of a disposition to which subsection (3) does not apply it is apparent at the time the disposition is made or becomes apparent at a subsequent time that apart from this subsection the inclusion of any persons, being potential

members of a class or unborn persons who at birth could become members or potential members of the class would cause the disposition to be treated as void for remoteness those persons shall unless their exclusion would exhaust the class thenceforth be deemed for all the purposes of the disposition to be excluded from the class. Compare ACT, s 10(3); NSW, s 9(4); NT, s 191(4); Qld, s 213(3), (4); Tas, s 11(3), (4); WA, ss 106, 107.

7.59

The wording of the legislation makes it quite clear that exclusion of a

member from the class is the ultimate saving provision, to be applied only when the others do not save the disposition. Consider the following as applying in the Northern Territory, Queensland, Tasmania, Victoria and Western Australia. Example 28: Settlement inter vivos ‘to T in fee simple on trust for such of my nephews and nieces as attain the age of 25 years’. The settlor has no nephews or nieces at the date of the settlement. The settlor’s parents are alive at that date, the mother being aged 47. On these facts, the classclosing rules cannot operate to validate the gift at common law. The statutory presumption of infertility does not apply to the settlor’s parents. Accordingly, it is possible that the settlor’s parents may have further children and these in turn may have further children (nephews and nieces of the settlor) who may attain 25 beyond the perpetuity

[page 683]

period. The wait-and-see provision applies at this point. Suppose that at the end of the perpetuity period (which on these facts could be the life of

the settlor plus 21 years), the settlor has three nephews, aged 23, 22 and 17 respectively. Reduction of the age contingency to 22 would mean that two nephews would qualify to take within the perpetuity period. The 17-yearold nephew could be excluded from the class by the legislation repealing the all-or-nothing rule and the two older nephews would take. Suppose that, in this example, the settlor’s oldest nephew died aged 24 before the end of the perpetuity period. Would his estate be entitled to call for a share under the settlement? It seems that there is no reason in principle why the existence of statutory wait-and- see provisions and class-reduction provisions should exclude the class-closing rules, given that the rationale of class-closing rules and the statutory wait-and-see provisions are quite different and have an independent operation: see Sparkes and Snape, ‘Class Closing and the Wait and See Rule’ (1988) 52 Conv & PL 339.

Subsequent interests 7.60

If an interest is void because it infringes the rule against perpetuities,

a question may arise as to whether subsequent interests are also invalid. Where the subsequent interest is dependent on the same contingency as the prior (invalid) interest, the subsequent interest clearly will also be invalid. Example 29: Bequest ‘to T on trust for B’s first son to marry, but if B shall have no such son, then to C’. At the testator’s death, B is alive and has no married son. The bequest to C is invalid under the common law rule

against perpetuities, for exactly the same reason as the bequest to B’s son is invalid. Where the subsequent interest is not contingent upon the failure of the prior interests, but is bound to vest within the perpetuity period, there is no reason why that subsequent interest should fail. The courts, however, have laid down a rule that where a limitation is dependent or expectant upon a prior limitation which is void for remoteness, that dependent or expectant limitation is also invalid: Morris and Leach, 176; cf Tidex v Trustees, Executors and Agency Co Ltd [1971] 2 NSWLR 453. This rule has been applied even where the subsequent disposition is vested or certain to vest within the perpetuity period. No case clearly defines the meaning of ‘dependent or expectant’, and the authorities considering the rule show little consistency. The rule has been abolished by the reforming legislation. The Victorian legislation (Vic, s 11) provides as follows: 7.61E

Perpetuities and Accumulations Act 1968 (Vic)

11 Dependent limitations A disposition shall not be treated as void for remoteness by reason only that the interest disposed of is ulterior to and dependent upon an interest under a disposition which is so void, and the vesting of an interest shall not be prevented from being accelerated on the failure of a prior interest by reason only that the failure arises because of remoteness. [Compare ACT, s 18; NSW, s 17; NT, s 199; Qld, s 215; Tas, s 12; WA, s 109].

[page 684]

7.62 Example 30: Bequest ‘to T on trust for B for life then on trust for B’s grandchildren but if there are no grandchildren, on trust for C’. At the testator’s death, B has no children. At common law, the gift to the grandchildren fails and, under the rule relating to dependent limitations, the gift to C also fails. Under the reforming legislation, the wait-and-see provision is applied. If no grandchildren are born within the perpetuity period, the gift to them will fail. The gift to C will be saved by the abolition of the dependent limitations rule. (This example is taken from the New South Wales Law Reform Commission, Report, para 19.6.)

Legal contingent remainders 7.63

At common law, legal remainders were subject to the rule against

perpetuities, although this had little practical significance. The reason was that a contingent remainder limited to take effect after a life estate to a living person could not vest outside the perpetuity period. In a conveyance ‘to B for life remainder to the first son of B to attain 25’, it is clear from the outset that, under the legal remainder rules, the contingent remainder had to vest, if it vested at all, before the termination of B’s life estate. If B’s first son to attain 25 did so after B’s death, the contingent remainder failed because of the legal remainder rules. In other words, the vulnerability of legal remainders to destruction by the natural termination of the prior estate validated dispositions that otherwise would have fallen foul of the rule against perpetuities.

The rules governing the creation and validity of legal remainders in land have been considerably modified by statutes in all Australian states: see 3.74. Moreover, legal remainders are rarely, if ever, created by conveyancers in modern times, future interests being created by means of trusts or in wills. Future interests in land created by will take effect as equitable interests and, as such, are subject to the rule against perpetuities in the usual way. The statutory reforms to the legal remainder rules requiring vesting during the continuance of the prior estate have made matters more complicated. For example, it has been seen that some states have enacted a provision modelled upon the Contingent Remainders Act 1877 (UK): see 3.74. This provides in effect that a contingent remainder shall, if the particular estate determines before the contingent remainder vests, take effect as an executory limitation, if it would have been valid as an executory limitation. In the example given above, if B’s first son does not attain 25 during A’s lifetime, he is not able to rely on the saving statutory provision based on the 1877 Act. The reason is that if the remainder is treated as an executory interest, it fails for perpetuities. Presumably, the end result is that the remainder fails, not because it infringes the perpetuities rule, but because it fails to vest as required by the legal remainder rules, which in this instance are not modified by statute. In those states which have reformed the modern law against perpetuities by enacting a wait-and-see rule, the interaction of the contingent remainders provision and the wait-and-see provision presents some difficulties. In the case of a conveyance ‘to B for life, remainder to B’s first son to attain 25’, it appears that the son’s interest is valid so long as he attains 25 within the

perpetuity period, whether or not he does so during the continuance of the prior estate. For a discussion of the interaction of the wait-and-see provisions and legal contingent remainders in New South Wales, see Sappideen and Butt, 68–73.

[page 685]

Possibilities of reverter and rights of re-entry 7.64

The distinction between possibilities of reverter and rights of re-entry

has been noted in 3.29. The generally accepted view is that at common law the rule against perpetuities applies to rights of re-entry for breach of condition subsequent (see Morris and Leach, 210–19), but not to possibilities of reverter or analogous equitable interests: Freemasons Hospital v AttorneyGeneral for the State of Victoria [2010] VSC 373; The Cram Foundation v Corbett Jones [2006] NSWSC 495; Re Chardon [1928] Ch 464; contra: Hopper v Corp of Liverpool (1944) 88 Sol J 213. Thus, a conveyance ‘to B in fee simple so long as the University of Melbourne continues to exist’ would create a valid determinable fee simple at common law. By contrast, in a conveyance ‘to B in fee simple on condition that the University does not cease to exist’ the condition subsequent would be invalid, since the relevant event might occur outside the perpetuity period. Consequently, B would take a fee simple absolute. The reforming legislation abolishes the distinction between possibilities of reverter and rights to re-entry for breach of condition subsequent for the purpose of the rule against perpetuities. The rule applies to

both classes of interest in the same way: ACT, s 15; NSW, s 14; Qld, s 219; Tas, s 16; Vic, s 16; WA, s 111. In the Northern Territory, statutory modification of the rule against perpetuities is now found in Pt 11 of the Law of Property Act s 221 which repealed the Perpetuities Act 1994. Following this, two puzzling changes from the Perpetuities Act 1994 became apparent. One anomaly was corrected when the Statute Law Revision Act 2003 ss 2(2) and 9 replaced a ‘not’ apparently omitted from s 190 of the Law of Property Act. The other anomaly is s 196(4), the equivalent provision to NSW, s 14(3), now provides that for the purposes of the section an interest created by, or a provision in, and appointment or other exercise of a power of settlement (except a general power of appointment) ‘is not to be treated as an interest created by, or a provision in the settlement’. This treatment is opposite to that in the equivalent legislation of other jurisdictions. NSW, s 14(3), for example, provides that such an interest ‘shall be treated’ as so created. There is nothing in the parliamentary debates regarding this change and there are no Northern Territory explanatory notes. The provision is contrary to the thrust of the section and it is not clear if the change was intended. 7.65

In the 1930s, the Grand Lodge of Freemasons Victoria resolved to

acquire land and to build a hospital. The hospital ran for many years and had been financed for some time by the freemasons who took an ongoing interest in the administration and operation of the hospital. In the 1990s, the land and buildings comprising the hospital were transferred to the plaintiff as trustee for the hospital fund. In 2006, the hospital was sold to a consortium. Were the proceeds of sale to be held upon resulting trust for the Grand

Lodge or to be administered cy-près? The plaintiff sought the assistance of the Court. Gardiner AsJ followed Brereton J in Cram Foundation v Corbett Jones [2006] NSWSC 495 in holding that the common law rule against perpetuities did not apply to possibilities of reverter. His Honour took the view that the grant to the hospital was that of a determinable dedication. He held further that the reforming legislation did not apply to the original dedication and subsequent funding did not result in there being anything other than a single dedication. The result was that the determining event having occurred, there was a reverter to the grantor which was not invalidated by the reforming legislation: Freemasons Hospital v Attorney-General for the State of Victoria [2010] VSC 373. What would the result have been if the dedication had occurred after the reforming legislation commenced?

[page 686]

7.66

The rule against perpetuities is concerned to prevent the sterilisation

of property resources by the grant of future interests which may vest at too remote a date: Megarry and Wade, 238–41. For this reason, the rule does not apply to purely contractual obligations, which may remain enforceable between the parties forever. A contract, such as that creating an option to purchase land, may have both a proprietary as well as a personal character. Contracts which create proprietary interests may be enforced between the parties on a contractual basis, and to that extent the rule against perpetuities has no application to the agreement. If the contract is to be enforced against a successor in title to the original promisor — for example, a successor in title

to the optionor — this can be done only to the extent that the contract creates a proprietary interest. The rule against perpetuities invalidates attempts to create proprietary interests which do not vest until after the expiration of the perpetuity period. These principles are particularly important in the case of options to purchase property. Example 31: The A company, the holder of the fee simple estate in ‘Blackacre’, grants the B company an option to purchase Blackacre for $1,000,000. The agreement allows the option to be exercised at any time. (If the option can be interpreted as having to be exercised within a limited period, any perpetuities problem can be avoided: see, for example, Headland Developments Pty Ltd v Bullen [1975] 2 NSWLR 309 at 321–23; aff’d [1976] ACLD 805.) The option may be enforced by the B company against the A company at any time, by way of a decree of specific performance (if the A company retains Blackacre) or an award of damages. The fact that there is no time limit on the exercise of the option is irrelevant, as the rule against perpetuities does not apply to personal contractual obligations. Since the benefit of a contract may be assigned, the B company may assign the benefit of the option against the A company, the optionor: Hutton v Watling [1948] Ch 26. If the A company sells Blackacre to the C company, the B company cannot enforce the option against the purchaser. The option is capable of being exercised outside the perpetuity period and is therefore invalid, the exercise of the option against a third party being treated as the equivalent of the vesting of an interest: Woodall v Clifton [1905] 2 Ch 257. The B company will be able to claim

against the A company for breach of contract (Worthing Corp v Heather [1906] 2 Ch 532), but it cannot claim specific performance against the C company. 7.67

At common law, the rule against perpetuities applied to an option

granted to a lessee to acquire the reversion (the landlord’s fee simple estate). An option to renew a lease was, however, exempt from the rule, because such an option ran with the land in accordance with well-established principles of tenancy law: see Morris and Leach, 219–27; Rossiter, ‘Options to Acquire Interests in Land — Freehold and Leasehold, Part II’ (1982) 56 ALJ 624, 632–33; Farrands, The Law of Options, 1992, 59–62. In Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607, Young J held that the rule did not apply to an option to purchase contained in a lease where there had been no assignment of the reversion. His Honour went on to hold that, since the lease in question was registered under the provisions of the Real Property Act 1900 (NSW), the option acquired an indefeasible status by registration and was not affected by the rule against perpetuities even had it applied. 7.68

A right of pre-emption does not confer upon the grantee a

proprietary interest: Mackay v Wilson (1947) 47 SR (NSW) 315; Pritchard v Briggs [1980] Ch 338. The interest of the

[page 687]

grantee lies in contract only, and for this reason, is not affected by the rule

against perpetuities. However, there is authority for the view that once the conditions for the grantee’s right to call for a contract for sale between grantor and grantee have been fulfilled, the grantee enjoys the same right as the holder of an option to purchase, and from that time on, is the holder of a proprietary interest: Pritchard v Briggs [1980] Ch 338 at 418 per Templeman LJ and at 423 per Stephenson LJ; Sterns Trading Pty Ltd v Steinman (1988) NSW ConvR 55–414. Contrast the view of Brownie J in Walker Corporation Pty Ltd v W R Pateman Pty Ltd (1990) 20 NSWLR 624. If that view be correct, then it follows that rights of pre-emption are subject to the rule against perpetuities from the time the grantee is entitled to call for the grantor to enter into a contract for sale. In Queensland and Victoria, legislation provides that a right of preemption (unless conferred by will or contained in a lease) shall be void after the expiration of 21 years from the date of grant: Property Law Act 1974 (Qld) s 218; Perpetuities and Accumulations Act 1968 (Vic) s 15. A different approach is taken in New South Wales, where it is provided that the rule against perpetuities does not apply to any right of pre-emption given for valuable consideration or by will in respect of property: Perpetuities Act 1984 (NSW) s 15(c). In the Northern Territory, the rule does not apply to a right of pre-emption of a lessee to acquire a reversionary interest in property comprised in the lease: NT, s 197(b). 7.69

The reforming legislation has not been consistent in its approach to

amendment of the common law rule governing options. In the Australian Capital Territory, Queensland, Tasmania, Victoria and Western Australia, the rule against perpetuities does not apply to an option in favour of a lessee

for purchase of the reversion, provided the option is exercisable by the lessee or the lessee’s successors in title during the currency of the lease (ACT, s 16(1)(b)) or one year after the determination of the lease: Qld, s 218(1); Tas, s 15(1); Vic, s 15(1); WA, s 110(1). No such proviso operates in the Northern Territory: NT, s 197(b). In all jurisdictions, the rule does not apply to an option to renew a lease. 7.70

So far as an option to purchase in gross is concerned, the legislation

in Queensland, Victoria and Western Australia provides that an option to acquire an interest in land or a right of pre-emption which is exercisable more than 21 years from the date of its grant is void and not exercisable even on a contractual basis after the expiration of 21 years from the grant. In the Australian Capital Territory, s 16(2) provides that where the rule voids an option, no action lies, in contract or otherwise, for giving effect to it or making restitution for its lack of effect. The New South Wales legislation is unique in providing baldly that the rule against perpetuities does not apply to any option given for valuable consideration or by will to acquire an interest in property: Perpetuities Act 1984 (NSW) s 15. The Northern Territory legislation is silent upon the point. Commercial agreements frequently employ options and rights of preemption and natural resource agreements in the mining industry are no exception. The parties to such agreements will need to remain aware of the diverse approaches taken to the validity of options and rights of pre-emption by the reforming legislation in the various Australian jurisdictions. The challenge thrown up by such diverse approaches cannot necessarily be overcome by deployment of a governing or proper law clause in the

agreement. The issues are taken up and discussed by Merralls, ‘The Application of the Rule Against Perpetuities to Natural Resource Agreements’ [2007] AMPLA Year Book 214.

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Accumulations 7.71

A settlor or testator may direct that the income of the property be

accumulated for a period and that at the end of that period, the fund, together with accumulated income, be distributed. Such a direction enables a donor to keep capital and accrued income out of the reach of the beneficiaries for a substantial period, yet to dictate the ultimate disposition of the fund. At common law, a direction to accumulate was valid so long as it was confined to the perpetuity period. In 1800 the United Kingdom Parliament enacted Thelluson’s Act, which reduced the period during which an accumulation of income could be validly directed. Parliament was prompted to take this action by the will of Peter Thelluson, which directed that the income of his property should be accumulated at compound interest during the lives of his son, grandson and great-grandchildren living at the date of his death, and that on the death of the survivor, the accumulated fund should be divided in a certain manner. The direction was valid, since it was confined to lives in being, but it was estimated that the accumulated fund would amount to millions of pounds: Thelluson v Woodford (1799) 4 Ves 227; 31 ER 117; (1805) 11 Ves 112; 32 ER 1030. Thelluson’s Act reduced the common law perpetuity

period applicable to accumulations of income by stipulating a variety of periods from which a testator or settlor could choose. Its provisions were previously contained in the Law of Property Act 1925 (UK) ss 164–166, since repealed. Thelluson’s Act applied to the Australian colonies. New South Wales, South Australia and Victoria all passed similar legislation in place of the original Act. Under the English legislation, the Perpetuities and Accumulations Act 2009 (UK), the rule against excessive accumulations has been abolished for all non-charitable trusts. For charitable trusts, two accumulation periods are available: either 21 years, or the life of the settlor. 7.72

The perpetuities legislation in the Australian Capital Territory, New

South Wales, Northern Territory, Queensland, Tasmania, South Australia, Victoria and Western Australia has now repealed the Thelluson’s Act provisions. In Victoria, Vic, s 19(1) provides as follows: 7.73E

Perpetuities and Accumulations Act 1968 (Vic)

19 Accumulation of income (1) Where property is settled or disposed of in such manner that the income thereof may be or is directed to be accumulated wholly or in part the power or direction to accumulate that income shall be valid if the disposition of the accumulated income is or may be valid and not otherwise.

7.74

Compare ACT, s 19; NSW, s 18; NT, s 202; Qld, s 222; Tas, ss 22,

27; WA, s 113. Where a testatrix failed to give any direction for the disposition of the accumulated balance of a trust fund, the direction to accumulate the balance in perpetuity was not saved by Vic, s 19: see The Equity Trustees Executors and Agency Co Ltd v Epstein [1984] VR 577. In

South Australia, the rule against accumulations was abolished by an amendment to the Law of Property Act 1936: s 61(1)(c). However, where there is a direction to accumulate income for more than 80 years, the court may, on application, vary the terms of the settlement or trust so as to vest both capital and income within a period of 80 years: s 62.

[page 689]

The reasons for a return to the common law situations are set out in the report of the New Zealand Law Revision Committee on Reform of the Rules Against Perpetuities and Accumulation, 1964, paras 12–15: The statutory accumulations provisions have always been extremely difficult to apply, and have introduced many technicalities and complexities into conveyancing, frequently frustrating reasonable dispositive schemes. The chief danger lies in the threat they represent to unobserved implied directions to accumulate which are to be found even in the best drafted settlements. A learned American author (Professor Lewis Simes: Public Policy and the Dead Hand, page 100) has observed that ‘the moment you have a separate rule for accumulations with a shorter permissible period, the volume of litigation on the subject increases enormously.’ From our own experience we are prepared to agree that very serious difficulties in the administration of a trust can arise. The main justifications that have in the past been put forward for the statutory restriction of accumulations are that the power of compound interest is such that it enables a man to leave his immediate family destitute, to withdraw capital and property from ordinary commerce, and ultimately to endanger the national economy by unleashing vast funds upon the community. None of these arguments seems to us to be justified today. The power of compound interest is mitigated by the levelling effect of taxation and duty, and is incapable of producing such an accumulation of the extent envisaged in the Thelluson case. Property which is the subject of an accumulation is not in fact withdrawn from commerce, for the trustees’ duty in respect of it is to invest it — so that both capital and income are working, but the income is not distributed and (while this situation

continues) no person has the right to the immediate enjoyment of either the income or capital of the trust property. There may be nobody with sufficient interest in the trust to supervise the trustee in his administration, but this argument has not very much point where a trustee corporation is appointed as trustee. It is said that the power to accumulate for the full perpetuity period would enable property to be left to remote descendants to the neglect of the immediate family; but testators have always been able to defeat the claims of their family by leaving property to strangers or to charity. Furthermore some restriction is placed on this today by the provisions of the Family Protection Act, by statutory powers for maintenance and advancement [of family members], and by the statutory provisions for the variation of trusts. It should also be remembered that any person or persons absolutely entitled to the property being accumulated may put an end to that accumulation under the rule in Saunders v Vautier [(1841) 4 Beav 115; 49 ER 282. The effect of the rule is that a beneficiary of full age with a vested and indefeasible interest in property may claim the property at any time, notwithstanding a direction for accumulation of income from the property. For the relationship between the rule in Saunders v Vautier and Thelluson’s Act, see Blair v Curran (1939) 62 CLR 464 at 525]. Most of the arguments that we have heard in favour of the rule turn on its ability to prevent a testator from disinheriting his immediate descendants. But we do not think the rule was designed for this purpose, nor is it effective to achieve it, and accordingly if a more stringent restriction on freedom of testation is required we think the problem should be tackled directly and not indirectly through the accumulations provision. We also note that many of the American States have never had a statutory restriction on accumulations, and most of those which have introduced a statute in this regard have at an early stage been obliged to repeal it. Nevertheless this does not seem to have harmed the American economy or caused other inconveniences.

[page 690]

The Perpetuities and Accumulations Act 1985 (ACT) and the Perpetuities Act 1984 (NSW) 7.75

The reforming legislation in the Australian Capital Territory and

New South Wales, passed in 1985 and 1984 respectively, is unique and may

become the model for future legislative action in other common law jurisdictions, and is therefore deserving of some discrete treatment. For a general overview of the legislation, see Sappideen and Butt. Broadly, the legislation reforms the common law in three principal ways. First, the perpetuity period is expressed to be 80 years with no option offered for selection of the common law period of a life in being plus 21 years. This reform eliminates, in one stroke, the complications and anomalies caused by fertile octogenarians, unborn widows and precocious toddlers: ACT, s 8; NSW, s 7. Secondly, a wait-and-see provision has been introduced. Thus, only those interests which have not in fact vested at the expiration of 80 years from the time the perpetuity period commenced to run are invalidated: ACT, s 9; NSW, s 8. Thirdly, where an interest is given, contingent on the attainment of a specified age, the age may be reduced to the maximum age that would cause the interest to vest within the 80-year period. In sympathy with this provision, the all-or-nothing rule applicable to class gifts has been abrogated. Accordingly, those members of a class who have not taken a vested interest at the expiration of the 80-year period and cannot benefit from the age reduction provision, are excluded from the class: ACT, s 10; NSW, s 9. 7.76

Both the Australian Capital Territory Act and the New South Wales

Act contain transitional provisions: ACT, s 3; NSW, s 4. Although the Australian Capital Territory Act is worded more clearly, both provisions are to the effect that the legislation does not apply retrospectively, and that a will coming into effect after the commencement of the legislation but executed before its commencement will not be invalidated by the legislation. It must be

conceded that the wording of the transitional provision is not free from ambiguity, but the better view appears to be that the disposition is first examined applying the statute, and only if the disposition is invalidated under the statute, is the common law applied. It should be noted, however, that the common law of perpetuities continues to apply to wills (and settlements) that took effect prior to the commencement of the reforming legislation and that issues arising under them may still arise: Cram Foundation v Corbett-Jones [2006] NSWSC 495. 7.77

Consider the following examples:

Example 32: In a deed of settlement, the class-closing rules having been excluded, executed in 2006 ‘to the grandchildren of B, whenever born, who attain 35’. At the date of the settlement, B was alive and had no grandchild who had attained 35. At common law, the disposition is void ab initio. Under the legislation, the perpetuity period will expire in 2086 and the wait-and-see provision will apply until that time. Assume that in 2086 there are 20 grandchildren ranging in age from 26 to 60. The better view of the legislation appears to be that the age of the class as a whole is reduced to 26 and the class is closed, excluding those potential members born after 2086. Example 33: In a deed of settlement, the class-closing rules having been excluded, executed in 2007 ‘to the grandchildren of B, whenever born, who graduate in law’. At the date of the settlement, B was alive and had no grandchild who had graduated in law. The wait-and-see provision will apply until 2087. Assume that in 2087, there are 18 grandchildren, five of

whom have graduated in law. The gift is valid as to those five while all others are excluded

[page 691]

by ACT, s 10(3) and NSW, s 9(4). At common law, the disposition would have been void ab initio. Example 34: In a will executed in 2000, the testator having died in 2007 ‘to A for life and then to such of B’s daughters who marry’. At the death of the testator, B was aged five. Assume A dies in 2040 and at that time, B has three daughters, D1, D2 and D3, one of whom, D1, has married. A fourth daughter, D4, is born in 2045. The perpetuity period expires in 2087 and, at that time, assume D2 and D4 have also married. The reforming legislation has not suspended the operation of the class-closing rules (see 7.55) and, thus, the class closes on the death of the life tenant, A, excluding D4 in the absence of a contrary intention. D3 has not attained a vested interest at the close of the perpetuity period and is thus excluded from the class by statutory force, leaving D1 and D2 to take all equally. 7.78

The age reduction provision in the New South Wales legislation (s 9)

is not free from ambiguity. Consider the following: Example 35: By deed ‘to the children of X who attain 30’. Assume the perpetuity period expires in 2068 and the first child of X is born in 2040.

Section 9(1)(b) provides that the age may be reduced if ‘it becomes apparent that the provision would, but for this subsection, infringe the rule against perpetuities but that it would not infringe that rule if the specified age had been a lesser age’. At what time does it become apparent that the rule will be infringed if the age is not reduced? Is it when it first becomes apparent? Consider the example. In 2040 it is clear the rule will be infringed if the age is not reduced to 28. But if the reduction is applied in 2040, only the firstborn of X will take an interest. Perhaps another approach is to apply s 9 when the number of potential beneficiaries is for the first time finally known, namely, when the class naturally closes at the death of X. Assume X dies in 2050 leaving four children surviving, C1, C2, C3 and C4. In 2050, C4 is two and, of course, the class will be closed. It is thus apparent in 2050 that, in order to save the gift to C4, the age contingency will have to be reduced to 20 and this age, presumably, will operate as the substituted age for all members of the class. Thus, for example, C1 would take a vested interest on attaining 20 in 2060. Yet another approach would dictate the withholding of the application of s 9 until the expiration of the perpetuity period. If C1, C2, C3 and C4 were all alive in 2068, the result would be the same as in the previous approach, but see 7.80.

7.79

The ambiguity in the New South Wales legislation does not appear

reflected in the legislation of the Australian Capital Territory. Section 10(1) of the Australian Capital Territory Act provides, in respect of a specified age not being attained at the expiration of the perpetuity period, that ‘the interest shall, for all purposes, be treated as if its vesting depended on the attainment

by the person … of the age that he or she has attained immediately before the expiration of that perpetuity period’. 7.80

Consider further the problem raised in 7.78 and note the following

example in the context of the relevant provisions of the New South Wales legislation: Example 36: In a will executed in 2006, the testator having died in 2007: ‘to the grandchildren of A who attain 30’. Assume the eldest grandchild attains 30 in 2070 and there are then eight grandchildren. Does the class close in 2070? If so, assume G8 is then aged two. Is

[page 692]

s 9 then applied to reduce the age for all to 19? If so, is there any retrospective benefit for G1? Assume G6 dies in 2082 aged 23. Does his interest pass to his estate? Presumably, yes. Consider the position if G3 dies in 2068 aged 23. Presumably, s 9 cannot be applied before the class has closed and G3 does not have a vested interest at death. 7.81

For an analysis of the problems raised in 7.78–7.80, see Sappideen

and Butt, 93–101, especially 96–7; see also Sappideen, ‘Perpetuities — Age Reduction and the Application of the Eighty Year Period: Some Unexpected Problems’ (1986) 60 ALJ 471. For a discussion of the class-closing rules and also s 9, see Sappideen and Butt, 102–10; see also Sparkes and Snape, ‘Class Closing and the Wait and See Rule’ (1988) 52 Conv & PL 339.

Example 37: Consider the following problem arising in a will made in 2005. The testator died in 2006. ‘To A for life, remainder to A’s grandchildren who being male attain 30 and being female graduate in law’. The following additional facts are given: A was aged five in 2006 and dies aged 70 in 2071. GS1 attains 30 in 2060. In 2071 there are eight grandsons aged eight to 41. GS5 is aged 13 in 2071. GS9 and GS10 were born in 2072 and 2073 respectively. GS3 dies in 2065 aged 24. GS4 dies in 2075 aged 24. GS6 dies in 2080 aged 20. GD1 graduated in 2065. She dies in 2067. In 2071 three granddaughters are alive, GD2, GD3 and GD4. None have graduated. GD5 and GD6 are born after 2071. In 2086, GD2 and GD6 have graduated in law. 7.82

Who takes, how much and when? In analysing this problem, it may

be useful to consider the following questions: 1.

When does the class close?

2.

When does it become apparent that some grandsons will not fulfil the

age contingency? 3.

How old will GS5 be in 2086? Since he will be the eldest grandson under 30 in 2086, is the age of the class reduced to the minimum age to satisfy the gift to him? If not, why not?

4.

GS9 and GS10 take nothing. Why?

5.

If the age is reduced to allow all grandsons not excluded by the classclosing rules to take a vested interest in 2086, what is the substituted age contingency? Will the answer to this question be different depending upon whether the validity of the disposition is tested under the legislation prevailing in the Australian Capital Territory or New South Wales?

[page 693]

6.

GS3 will have attained, as events are to occur, the minimum age requisite for vesting but will do so before the class closes. As he is to die before the class closes, does GS3’s estate take an interest?

7.

Will the estate of GS6 take any interest?

8.

When does the class close on the granddaughters?

9.

Why does ACT, s 10; NSW, s 9(4) abrogating the all-or-nothing rule, assist GD1’s estate and GD2?

10. Having ascertained which grandchildren will take an interest at the expiration of the perpetuity period, the final matter is to determine the quantum of each share. Does this simply depend upon the number of

eligible grandchildren or is the class of grandchildren divided into grandsons and granddaughters?

1.

S Grattan, ‘Revisiting Restraints on Alienation: Public and Private Dimensions’ (2015) 41(1) Monash Law Review 67 at 90.

2.

S Grattan, ‘Revisiting Restraints on Alienation: Public and Private Dimensions’ (2015) 41(1) Monash Law Review 67 at 94.

3.

Despite Lord Browne-Wilkinson’s statement that there was no public need for a market in choses in action, the UK government announced in August 2015 that it would issue regulations pursuant to the Small Business, Employment and Enterprise Act 2015 (UK) which would nullify contractual prohibitions on the assignment of invoices in business to business contracts (excluding certain contracts such as those involving financial derivatives and interests in land). This was for the purpose of facilitating invoice finance and lower finance costs for businesses.

4.

Mackie, ‘Contractual Restraint on Alienation’ (1998) 12 Journal of Contract Law 255 at 267.

5.

‘The Efficacy of Contractual Provisions Prohibiting Assignment’ [2004] Syd LR 8; (2004) 26(2) Syd LR 161. Tolhurst may have qualified his views in a more recent discussion about restraints on the assignment of contractual rights and, in particular, whether an assignment in breach of a contractual prohibition should be recognised in equity and whether a prohibition captures a declaration of trust: Tolhurst and Carter, ‘Prohibitions on Assignment: A Choice to be Made’ [2014] CLJ 405.

6.

ACT, s 17; NSW, s 16; NT, s 198; Qld, s 221; Tas, s 18; Vic, s 18; WA, Pt XI.

7.

Allan, ‘The Rule Against Perpetuities Restated’ (1963) 6 UWALR 27 at 30–3.

8.

Gray, The Rule Against Perpetuities, 4th ed, 1942, 201.

9.

See Megarry and Wade, 243; Sappideen and Butt, 49.

[page 695]

Leases

CHAPTER

8

INTRODUCTION 8.1

Leases, like freeholds, are estates in land, as the older term ‘leasehold’

suggests. They confer on tenants greater rights than those inherent in lesser interests such as easements, or covenants or profits. The lessee’s rights essentially comprise an estate carved out of the larger estate of the freeholder, but limited in time. Specifically, the lease gives the tenant exclusive possession of land for a maximum fixed duration. It is therefore ‘analogous to a form of feudal tenure’.1 Yet the lease has not always been characterised as an estate, and to that extent, as a distinctive form of proprietary right. It originally conferred only contractual rights on the tenant, the leaseholder eventually acquiring a proprietary remedy for eviction from the land by third parties in the late fifteenth century.2 It still retains a distinctive contractual pedigree, however, as leases conventionally arise in contracts; it is therefore ‘a curious hybrid which hovers between the worlds of property and contract’.3 Over the centuries, leases have served many purposes and the nature of legal regulation has varied according to those purposes and the social and economic conditions of the times. Leaseholds, for example, were mainly used

for agricultural purposes in the sixteenth century, while by the late eighteenth and early nineteenth centuries the growth of the cities in England had made the leasehold an important form of both commercial and residential landholding in urban areas. In the Australian context, the common law of landlord and tenant has, from the middle of the nineteenth century, been substantially modified by statute to deal with distinctive local conditions — economic, social and political. As the majority of the High Court in Wik Peoples v Queensland emphasised, the common law lease was particularly unsuited to regulate the use

[page 696]

and development of large areas of pastoral land far beyond the reaches of the towns and cities. For instance, Gummow J concluded: Traditional concepts of English land law, although radically affected in their country of origin by the Law of Property Act 1925 (UK), may still exert a fascination beyond their utility in instruction to the task at hand.4

Accordingly, legislatures introduced the unique regime of statutory Crown leases that continues to be the primary form of landholding in rural Australia.5 8.2

Despite these large statutory encroachments on the common law, the

modern law of landlord and tenant retains the influence of the common law and, particularly, the laissez-faire economic philosophy that dominated the

law of contract and the law of property in the nineteenth century. Leases are usually created by contractual arrangement between the parties. The general rule is that the parties are free to agree on such terms as suit their particular needs. Thus, in the absence of specific legislation, the rights and duties of landlord and tenant are governed by the express provisions in the lease, even though one party might be in a superior bargaining position and able to dictate the terms of the agreement. 8.3

A significant change in the legal treatment of landlord–tenant relations

appeared with the rise of the welfare state in the early- to mid-twentieth century. One element of the political shift marked by this new state form, and its concomitant social structure, was the introduction of legislation protective of weaker parties in the marketplace and elsewhere, rejecting as inadequate the laissez-faire approach to contract and property. Common law principles that assume equal bargaining power between the contracting parties are now widely acknowledged to cause hardship when that assumption is inaccurate. Take the example of the incongruity of applying orthodox contractual principles to standard contracts of adhesion — printed contracts that are in no sense the product of negotiation and are presented to consumers on a ‘take-it-or-leave-it’ basis.6 While it is usually proper to assume equality of bargaining power between business entities, it has become clear that for tenants of residential accommodation, as for other vulnerable tenants such as those in the agricultural and retail sectors, a freedom of contract regime often means inequality and hardship rather than independence or autonomy. Accordingly, legislatures in each of the states and territories have, with increasing vigour since World War II, introduced statutory regimes to

provide protection to various classes of vulnerable tenants. These different regimes will be outlined briefly below, and in more detail later in the chapter, because they take many landlord–tenant relationships outside the common law of leases which is the major focus of this chapter.

Residential tenancies 8.4

In the case of residential tenancies, for many reasons — a shortage of

satisfactory housing, economic disadvantage, an inadequate command of English or a lack of informed

[page 697]

advice — tenants in the private sector may be vulnerable to exploitation and poorly placed to enforce their rights. Consequently, reformers have emphasised the need to assess residential tenancy laws in terms of the protection they provide to tenants viewed as consumers. Reform of residential tenancy law constitutes only one element in a housing policy designed to improve the quality of accommodation for poorer people. An important part of that policy is an expansion of the role of public authorities responsible for providing public housing. Equally in the private rental sector, legal reforms can play a very significant role in improving the position of tenants. Residential tenancy law has departed significantly from the common law rules governing landlord–tenant relations, as legislatures recognise the need to impose obligations on landlords that cannot be waived by ‘agreement’ with

the tenant and to establish procedures and agencies to assist tenants in enforcing their statutory rights. Typically, the legislation regulates such matters as payment and deposit of bonds, rental increases, termination and eviction procedures, and, most importantly, dispute resolution. Given the extent of the reforms of the common law of leases introduced by this legislation these topics are considered later in this chapter in a separate section: see 8.202–8.224.

Retail tenancies 8.5

Consumer protection and other reforming legislation have also affected

commercial tenancies. The Consumer and Competition Act 2010 (Cth), replacing the former Trade Practices Act 1974 (Cth) has made a significant impact on commercial leases by proscribing unconscionable conduct, misleading and deceptive conduct and certain kinds of false representations.7 Legislation has been introduced in several states protective of retail tenants particularly in relation to standard form commercial leases of large shopping centre plazas which are frequently offered to a tenant on a take-it-or-leave-it basis, with little or no scope for true negotiation over terms.8 Discussion of this legislation is beyond the scope of this book.

Agricultural tenancies 8.6

Similar legislative protection is afforded agricultural tenants. The states

and

territories

have

accordingly

enacted

statutes

regulating

such

relationships.9 A particular area of vulnerability for agricultural tenants is

fixtures. As we have seen in Chapter 1, at common law annexation of chattels to the realty by tenants gives title to the fixture to the landlord, but subject to the tenant’s right to remove. The legislation also protects tenants by giving them an entitlement to longer notice periods than is the case under common law tenancies. For reasons of space, this legislation cannot be examined in detail in this book.

[page 698]

Leases under the Crown Lands Act 8.7

As we have seen in Chapter 3, and particularly in Wik Peoples v

Queensland, the regime of Crown Lands Acts reflected distinctly Australian conditions, and in particular the need to regulate land use in the vast areas of the continent beyond more closely-settled regions. This legislation introduced a number of concepts unknown to the common law of landlord and tenant such as the perpetual lease. It also blurred the distinction between the lease and licence. Although it is of considerable importance in rural areas, and in the mining and agricultural sectors of the economy, this highly specialised area of land law will not be discussed further.10

Other tenancies 8.8

It follows that the common law operates to regulate landlord–tenant

relations in cases where the above special statutory regimes do not apply, most typically the standard commercial lease. This reduced sphere of

operation should not be taken to imply that the principles of the common law of landlord and tenant to be considered in this chapter are of marginal importance. On the contrary, they govern those leases that form the predominant commercial rental sector of the economy. No less important, the concepts to be discussed below underpin the statutory regimes, and assist greatly in understanding the concepts, terms and operation of those regimes.

THE GENERAL LAW OF LANDLORD AND TENANT Terminology 8.9

The person granting the lease is known as the lessor or landlord. The

person taking the lease is known as the lessee or tenant. The lessor is said to ‘lease’ or to ‘let’ the premises, although the older term ‘demise’ is occasionally used. The lessor’s interest in the land during the currency of the lease is known as the ‘reversion’. In the usual case the landlord’s reversion consists of the fee simple estate, subject to the leasehold interest of the lessee. When the lessor disposes of this interest, usually by transferring the estate in fee simple (the purchaser taking subject to the lease), the lessor is said to ‘assign the reversion’. The lessee, too, may dispose of the interest by ‘assigning the lease’. When the lessee does so, the assignee of the lease steps into the lessee’s shoes and becomes the new lessee or tenant. Usually the person granting the lease is the holder of the fee simple estate in the land, but he or she may have a lesser estate such as a life estate or a leasehold estate (in the case of a sublease).

8.10

Instead of assigning the lease the lessee may decide to ‘sublet’ the

premises for any period less than the duration of the lease. Thus a lessee holding a lease with 10 years to run may sublet to a sublessee for a term of, say, nine years. The lessee continues to pay rent to the lessor, but is now entitled to receive rent from the sublessee instead of remaining in occupation of the premises. At the end of the nine-year period the lessee will be entitled to resume possession of the premises. A purported sublease for a period equal to or in excess of the balance of the term

[page 699]

is at law an assignment of the lease, no matter how it is described by the parties.11 Conversely, a purported assignment for less than the balance of the term operates as a sublease.12 A yearly tenant has a sufficient reversion to enable a sublease for a term of years, while a protected tenant (that is, a tenant given security of tenure by legislation) may sublet for a longer term than the contractual lease has left to run.13 8.11

A lease for a specified period is known as a ‘term of years’, whether

the term is for 999 years or six months. A term of years continues for the specified duration unless determined earlier. By contrast, a periodic tenancy lasts for the designated period, which might be a week, month, quarter or year, and continues thereafter for a further period (and successive periods) unless the appropriate notice is given by either party. The periodic tenancy is seen as one for a definite period, with a superadded provision that it is to

continue for another definite term of the same period, unless terminated by proper notice to quit at the end of the first or previous period.14 It follows that, in the absence of express agreement to the contrary, the landlord cannot unilaterally vary the rent during a periodic tenancy. If the landlord wishes to increase the rent and the tenant is not prepared to agree, the landlord must give the tenant appropriate notice to terminate the periodic tenancy and offer a fresh tenancy at the proposed new rent.15 8.12

An example will illustrate the terminology employed in the law of

landlord and tenant. L and T are the original lessor and lessee respectively, the lease being for a term of 25 years. Figure 8.1: Terminology

The lessor, L, assigns his reversion to R. Where the land is under the Torrens system, L transfers the fee simple estate to R who becomes the registered proprietor of the land, subject to the lease. The landlord–tenant relationship now exists between R and T. T assigns the lease to A. The landlord–tenant relationship now exists between R and A. A, as the assignee of the

[page 700]

lease now sublets to S for a period of 10 years. In addition to the landlord– tenant relationship existing between R and A, a similar relationship now subsists between A and S, the subtenant. A occupies a dual position: she is both the landlord and tenant.

Creation of leases 8.13

The landlord–tenant relationship is usually created by means of

certain documentary formalities, typically in the form of an express agreement between the parties. In certain circumstances the relationship is created by implication of law notwithstanding the absence of a concluded agreement between the parties. For example, a tenant who continues in possession (‘holds over’) after the determination of the lease and pays rent which is accepted by the landlord, will obtain a fresh leasehold interest by implication of law. Similarly, a tenant entering possession of land without concluding an agreement with the landlord as to the terms of a proposed lease acquires a tenancy by implication of law when rent is paid and accepted. A lease also may be created where the parties do not enter into a lease as such, but agree to enter a lease at a later date. Among the matters for which a lease commonly provides are the landlord’s obligation to allow the tenant quiet enjoyment of the premises, payment of rent, repair and cleaning of the premises and any furniture or fittings, payment of rates and other charges levied on the property, insurance, purpose

for which the premises may or may not be used, alterations, inspection by the landlord, assignment or subletting, accidental destruction or substantial damage to the premises, insolvency of either party, review of rent during the term, options for renewal and holding over by the tenant after the expiration of the term. Where the premises form only part of a building then provision will have to be made for the adjustment of rights between the tenant and other occupiers of the building, the use of common areas, and so on. It is also usual to make specific provision for the rights of the landlord in the event that the tenant does not pay the rent or breaches any of the other covenants. In addition to the formal requirements for the creation of a lease, there are two substantive requirements that must be met before a valid lease is created: certainty of duration, and exclusive possession. The substantive requirements will be examined first.

Substantive requirements Certainty of duration Fixed-term tenancies 8.14

The common law rule is that a valid lease must be of a duration that

is certain, or at least be capable of being rendered certain: ‘[E]very contract sufficient to make a lease for years ought to have certainty in three limitations, viz in the commencement of the term, in the continuance of it, and in the end of it: so that all these ought to be known at the commencement of the lease …’.16 In Lace v Chantler, the principle was applied to invalidate a lease expressed to be for the duration of the war.17

Similarly, a lease executed in 1965 was held not to be valid where it was expressed to subsist ‘until the end of peanut crop in 1968 or end of harvesting period or

[page 701] as otherwise agreed upon’.18 Where C leased premises, the term of the tenancy being ‘until the completion of new premises owned by the lessor M which were being built’, it was held that the facts were not distinguishable from Lace v Chantler and that, accordingly, no valid lease was created.19 As long as the maximum period of the lease is certain, the fact that it may be determined within that period on the occurrence of an event the timing of which is uncertain, does not render the lease invalid. The rule applied in Lace v Chantler does not deprive the parties to a lease of flexibility in determining the duration of the tenancy. A fixed term of years may be made determinable before the end of the term on a given period of notice by one or both of the parties. Thus the effect of Lace v Chantler in England was overcome by the Validation of War Time Leases Act 1944, which converted leases for the duration of the war into terms of 10 years determinable at the end of the war by one month’s notice on either side. This rule was approved by the House of Lords in Prudential Assurance Co Ltd v London Residuary Body.20 A lease of a strip of land adjacent to a highway granted in 1930 for a rent of £30 per annum was held to be void because it was expressed to last until needed by the landlord for widening the

highway.21 Prudential Assurance Co v London Residuary Body was considered in Wilson v Meudon Pty Ltd [2005] NSWCA 448. In determining that a clause in a written agreement did not create a leasehold interest, Bryson JA (with whom Handley and Hodgson JJA agreed) stated (at [65]) that since the clause conferred a right to exclusive occupation tied to the duration of ownership of certain shares, it would not meet the requirements for certainty of duration: The right of occupation under art 6 exists as long as the shares are owned; it is not terminable at will and does not expire at any ascertainable date. The right is not related to any term or to any recurring periods and is not terminable by the company by notice, nor is it terminable by the company at all. A right of this kind is quite inconsistent with a leasehold or a tenancy of any kind, including a tenancy at will or at sufferance.

As a result, the right conferred was held to be only contractual, therefore enforceable only between the original contracting parties, not proprietary. Compare the following case. 8.15C

Berrisford v Mexfield Housing Co-operative Ltd [2012] 1 All ER 1393; [2012] 1 AC 955; [2011] 3 WLR 1091 Supreme Court of the United Kingdom

Lord Neuberger: Mexfield Housing Co-Operative Ltd (‘Mexfield’) is a fully mutual housing co-operative association, which was founded by a bank as part of a mortgage rescue scheme, ie with a view to buying mortgaged properties from individual borrowers who are in difficulty, and then letting the properties back to them. In that capacity, it acquired a number of residential properties, which it then let out to the former owner–mortgagors, who were required by its rules to be members of Mexfield. [page 702]

Mexfield purchased a property from Ms Ruza Berrisford and, by written agreement made on 13 December 1993, agreed to let it back to her … Clause 1 [of the ‘Occupancy

Agreement’] provided as follows: ‘[Mexfield] shall let and [Ms Berrisford] shall take the [premises] from 13 December 1993 and thereafter from month to month until determined as provided in this Agreement.’ … [Clause 5 provided that:] 5 This Agreement shall be determinable by [Ms Berrisford] giving [Mexfield] one month’s notice in writing. [Clause 6 provided that:] 6. This Agreement may be brought to an end by [Mexfield] by the exercise of the right of re-entry specified in this clause but ONLY in the following circumstances: a) b) c) d)

If the rent reserved hereby or any part thereof shall at any time be in arrear and unpaid for 21 days … If [Ms Berrisford] shall at any time fail or neglect to perform or observe any of the [terms of] this Agreement which are to be performed and observed by [her] If [Ms Berrisford] shall cease to be a member of [Mexfield] If a resolution is passed under … [Mexfield’s] Rules regarding a proposal to dissolve [Mexfield]

THEN in each case it shall be lawful for [Mexfield] to re-enter upon the premises and peaceably to hold and enjoy the premises thenceforth and so that the rights to occupy the premises shall absolutely end and determine as if this Agreement had not been made … Ms Berrisford remained in occupation of the premises, complying with her obligations under the Agreement, until (apparently through no fault of hers) she fell behind with her rent. Mexfield could have invoked cl 6(a), but it did not do so, presumably because it is a forfeiture provision, and Ms Berrisford soon paid off the rent arrears, so it would have been a foregone conclusion that she would have obtained relief from forfeiture. Rather than relying on cl 6(a), what Mexfield did was to serve a notice to quit on Mrs Berrisford on 11 February 2008, expiring on 17 March 2008. Mexfield then brought proceedings for possession in the County Court, arguing that, despite the apparent limited circumstances in which, and the limited method by which, it could terminate the Agreement (sc under cl 6), it nonetheless was entitled to put an end to Ms Berrisford’s tenancy by serving a notice to quit. The evidence advanced on behalf of Ms Berrisford suggests that, in the past five years or so, Mexfield, or its mortgagee, came under some financial pressure, and that, as a result of purchasing its mortgage debt, Mexfield is now effectively owned and controlled by ‘a businessman’, who is seeking to pursue the claim for possession for ‘commercial reasons’. Mexfield’s evidence is that it is run by a committee of management, and nobody else … Is such an arrangement capable of being a tenancy as a matter of law? I turn to the second issue, namely whether an arrangement, which can only come to an end by service of one month’s notice by the tenant, or by the landlord invoking a right of determination on one or more of the grounds set out in cl 6, is capable, as a matter of

law, of being a tenancy in accordance with its terms. Mr Wonnacott accepts that it is not so capable. His concession is supported both by very old authority and by high modern authority. [page 703]

It seems to have been established for a long time that an agreement for an uncertain term cannot be a tenancy in the sense of being a term of years. In Say v Smith (1563) Plowd 269, 272, Anthony Brown J said that ‘every contract sufficient to make a lease for years ought to have certainty in three limitations, viz in the commencement of the term, in the continuance of it, and in the end of it … and words in a lease, which don’t make this appear, are but babble.’ … The Court of Appeal in Breams Property Investment Co Ltd v Stroulger [1948] 2 KB 1, 6 held that an agreement by a landlord in a periodic tenancy not to serve notice to quit for three years unless it required the premises for its own use was valid. In In re Midland Railway Co’s Agreement, Charles Clay & Sons Ltd v British Railways Board [1971] Ch 725, the Court of Appeal held that an agreement by a landlord not to determine a halfyearly tenancy until the premises were needed for the purposes of its undertaking was valid. The court distinguished Lace [1944] KB 368 on the ground that it did not concern a periodic tenancy, and derived assistance from Breams [1948] 2 KB 1. In Prudential [1992] 2 AC 386, the House of Lords overruled Midland Railway [1971] Ch 725, effectively on the basis that a fetter of uncertain duration on the service of a notice to quit in relation to a periodic tenancy was as objectionable to the concept of a tenancy as was the existence of an uncertain term. It was not, however, suggested by Lord Templeman that Breams [1948] 2 KB 1 was wrongly decided. Following the decision of the House of Lords in Prudential [1992] 2 AC 386, the law appeared clear in its effect, intellectually coherent in its analysis, and, in part, unsatisfactory in its practical consequences. The position appears to have been as follows. (i)

An agreement for a term, whose maximum duration can be identified from the inception can give rise to a valid tenancy; (ii) an agreement which gives rise to a periodic arrangement determinable by either party can also give rise to a valid tenancy; (iii) an agreement could not give rise to a tenancy as a matter of law if it was for a term whose maximum duration was uncertain at the inception; (iv) (a) a fetter on a right to serve notice to determine a periodic tenancy was ineffective if the fetter is to endure for an uncertain period, but (b) a fetter for a specified period could be valid. If we accept that that is indeed the law, then, subject to the point to which I next turn, the Agreement cannot take effect as a tenancy according to its terms. As the judgment of Lady Hale demonstrates (and as indeed the disquiet expressed by Lord Browne-Wilkinson and others in Prudential [1992] 2 AC 386 itself shows), the law is not in a satisfactory state. There is no apparent practical justification for holding that an agreement for a term

of uncertain duration cannot give rise to a tenancy, or that a fetter of uncertain duration on the right to serve a notice to quit is invalid. There is therefore much to be said for changing the law, and overruling what may be called the certainty requirement, which was affirmed in Prudential [1992] 2 AC 386, on the ground that, in so far as it had any practical justification, that justification has long since gone, and, in so far as it is based on principle, the principle is not fundamental enough for the Supreme Court to be bound by it. It may be added that Lady Hale’s Carrollian characterisation of the law on this topic is reinforced by the fact that the common law accepted perpetually renewable leases as valid: they have been converted into 2000-year terms by s 145 of the Law of Property Act 1922. [page 704]

However, I would not support jettisoning the certainty requirement, at any rate in this case. First, as the discussion earlier in this judgment shows, it does appear that for many centuries it has been regarded as fundamental to the concept of a term of years that it had a certain duration when it was created. It seems logical that the subsequent development of a term from year to year (ie a periodic tenancy) should carry with it a similar requirement, and the case law also seems to support this … Would such a tenancy have been treated as a tenancy for life before 1926? While Mr Wonnacott accepts that the arrangement contained in the Agreement would not be capable of constituting a tenancy in accordance with its terms, he contends that, at any rate before 1926, the arrangement would have been treated by the court as a tenancy for the life of Ms Berrisford, determinable before her death by her under cl 5, or by Mexfield under cl 6. There is much authority to support the proposition that, before the 1925 Act came into force, an agreement for an uncertain term was treated as a tenancy for the life of the tenant, determinable before the tenant’s death according to its terms. In Bracton (op cit) vol 3, p 50 (f176b), it will be recalled that the grant of an uncertain term was held to give rise to a ‘free tenement’, provided that the formalities had been complied with. The nature of this free tenement would appear to be a tenancy for the life of the grantee. That is clear from what was said in Littleton on Tenures (1481/2) vol 2, s 382 namely: [I]f an abbot make a lease to a man, to have and to hold to him during the time that he is abbot … the lessee hath an estate for the term of his owne life: but this is on condition … that if the abbot resign, or be deposed, that then it shall be lawful for his successor to enter. In Co Litt vol 1, p 42a, it is similarly stated that if an estate is granted to a person until, inter alia, she marries, or so long as she pays £40 ‘or for any like incertaine term’, ‘the lessee hath in judgment of law an estate for life determinable if [the formalities of creation are satisfied]’. This passage was quoted and applied by North J in In re Carne’s Settled Estates [1899] 1 Ch 324, 329. The same point was made in Sheppard’s Touchstones on Common Assurances, where it is said that ‘uncertain leases made with …

limitations … may be good leases for life determinable on these contingents, albeit they be no good leases for years’ — 7th ed (1821), vol 2, p 275. In Doe v Browne 8 East 165, 166–167, Lord Ellenborough CJ and Lawrence J, both of whom rejected the contention that an agreement which was to continue so long as the tenant paid the rent and did not harm the landlord’s business could be a valid term of years, said that it could be ‘an estate for life’, but that it failed to achieve this status because the necessary formalities had not been complied with. Such formalities have now largely been done away with, and they normally only require a written, signed document. As Lord Dyson’s reference to Joshua Williams’s 1920 textbook shows, the perceived legal position right up to the time of the 1925 property legislation was that terms of uncertain duration were converted into determinable terms for life. On this basis, then it seems clear that, at least if the Agreement had been entered into before 1 January 1926 (when the 1925 Act came into force), it would have been treated by the court as being the grant of a tenancy to Ms Berrisford for her life, subject to her right to determine pursuant to cl 5 and Mexfield’s rig145 of the Law of Property Act 1922. [page 705]

Mr Gaunt relies on more recent authorities to support a contention that an agreement for an uncertain term was only regarded as creating a tenancy for life if, on a fair reading of the agreement, that was what the parties to the agreement intended. That does indeed seem to have been the approach of Sir George Jessel MR in Kusel v Watson (1879) 11 Ch D 129, but that is of limited value as the agreement in that case could not have created a tenancy for life, as it was created by a lessee. However, Mr Gaunt’s contention gets rather more support from the reasoning of the Court of Appeal in Zimbler v Abrahams [1903] 1 KB 577, 582 (per Vaughan Williams LJ) and 583 (per Stirling and Mathew LJJ). In my judgment, however, there are three answers to that contention. The first is that the reasoning in Zimbler [1903] 1 KB 577 is not strictly inconsistent with Mr Wonnacott’s analysis: if, as a matter of interpretation, the agreement in that case did involve the grant of a tenancy for life, then there was no need to invoke Mr Wonnacott’s analysis, but that does not mean that the analysis is wrong. Secondly, if Zimbler [1903] 1 KB 577 did proceed on the assumption that an agreement which purported to create a tenancy for an uncertain term could not give rise to a tenancy for life unless it was the parties’ intention to do so, it was wrong, as it would have been inconsistent with the authoritative dicta relied on by Mr Wonnacott, in particular the clear statement in Littleton, vol 2, s 382. (I also note that neither counsel in Zimbler [1903] 1 KB 577 relied on the point made by Mr Gaunt: see pp 578–580). Thirdly, even if an agreement which creates an uncertain term could only have resulted in a tenancy for the life of the tenant if that was the intention of the parties, I consider that, on a true construction of the Agreement, it was intended that Ms Berrisford enjoy the premises for life — subject, of course, to determination pursuant to clauses 5 and 6. I have in mind in particular cl 6(c), which will apply on Ms Berrisford’s death, the fact that her interest is unassignable, and the fact that it was intended to ensure that she could stay in her home …

In these circumstances, I would allow Ms Berrisford’s appeal, and discharge the order made against her. [Lords Hope, Mance, Walker, Clarke, Dyson and Lady Hale concurred.]

8.16 Questions 1.

Do you think the Law Lords in Prudential Assurance might have been influenced by the fact that the likely current annual rental value of the land in the late 1980s was in the region of £10,000? Does this fact suggest that the reasons in favour of the old rule are still valid today?

2.

Why would the arrangement in Berrisford v Mexfield not be capable of constituting a tenancy according to its terms?

3.

To what extent is Prudential good law after Berrisford v Mexfield? Will all attempted leases of uncertain terms now be construed as leases for life? Is such a result likely to be at odds with the intention of the parties?

4.

Have the Law Lords effectively circumvented Prudential Assurance?

5.

Do you agree with the Law Lords in Berrisford that the rule relating to uncertainty of duration is not a sound one? What is the position now in Australian law?

[page 706]

Tenancies for life 8.17

Tenancies for life have long been recognised by the common law, as

Berrisford v Mexfield indicates, and have been recognised in Australia.22 Because lives are not of fixed duration, these leases are an exception to the requirement of certainty of duration. The dividing line between a life estate which is freehold and a lease for life which is leasehold and entails a continuing landlord–tenant relationship may be a fine one, and is a question of construction of the relevant grant. Most leases for life will be residential tenancies, and so may be covered by residential tenancies legislation. However, they are specifically exempted from the operation of the residential tenancies legislation in New South Wales: Residential Tenancies Regulation 2010 (NSW), cl 19 (unless a sub-tenancy has been granted).23

Periodic tenancies 8.18

Periodic tenancies might be considered to be an exception to the

requirement of certainty of duration for the reason that at the commencement of the lease, it is not possible to pinpoint a time when the lease will end. But the requirement of certainty is met because the periodic tenancy is deemed to be a fixed-term lease (of one month, one week etc) with a superadded condition that it is to continue unless brought to an end by notice. The notice period is equivalent to one period, expiring at the end of a period. By contrast, the tenancy at will is a genuine exception. It is permissible for the parties to a lease to combine the features of a term of years and those of a periodic tenancy. In Amad v Grant (1947) 74 CLR 327, the lease provided for a weekly rent, payable monthly in advance. The

tenancy was not to be determined except upon one month’s notice and in any event was to continue for three years at least. It was held by a majority of the High Court that the transaction could be regarded as creating a monthly tenancy, determinable on one month’s notice, with a proviso that notice could not be given by either party for at least three years. In Re Midland Railway Co’s Agreement,24 the court upheld a clause in a lease from half-year to halfyear under which the landlords agreed not to terminate the lease until they required the premises for the purposes of their own undertaking, although as can be seen from the Berrisford v Mexfield extract above, this decision was overruled as being essentially uncertain to a similar degree as if it were an uncertain term without a periodic element. A term which stipulates that a periodic tenancy can be determined only by the lessee and not the lessor is regarded as repugnant to the nature of the tenancy and therefore void.25

Tenancies at will 8.19

A tenancy at will lasts until terminated by notice by either party. But

even a tenancy at will, despite its name, may require a period of reasonable notice to be given before it is effectively determined: Landale v Menzies.26 In that case the tenancy at will was created by

[page 707]

agreement between the parties in the form of a ‘give and take’ fence cutting across a dry creek bed which formed the boundary between the two properties. The reasonable notice prescribes what is usually referred to as a

‘packing up’ period. It is perhaps more usual for a tenancy at will to be created by implication of law, as in the case of a person taking possession of land pursuant to an informal lease before rent is paid. A tenancy at will is unlike other leasehold interests in that it is determined by the death of either party or an attempt to assign by the tenant. The tenant at will is liable, in the absence of agreement, to pay a reasonable sum for his or her use and occupation of the land.27

Tenancies at sufferance 8.20

A tenancy at sufferance will arise where, at the expiry of a lease, either

by effluxion of time in the case of a fixed-term lease, or by notice in the case of a periodic tenancy or tenancy at will, the tenant holds over without the assent or dissent of the landlord.

Exclusive possession 8.21

In order to create a valid lease there must be a grant of exclusive

possession. This requirement has generated a great deal of case law, largely because landlords have attempted to circumvent legislation that offered ‘tenants’ protection either in the form of rent control or security of tenure or both. As was noted in Chapter 1, where the occupant is granted less than exclusive possession, they will be a licensee and will not be able to enforce their rights against third parties, and they will not have a property right. 8.22C

Radaich v Smith (1959) 101 CLR 209; ALR 1253 High Court of Australia

[A deed made on 29 May 1954 between G W E Smith and A Smith (called therein ‘the Licensors’) and M Radaich (called ‘the Licensee’) provided that ‘the Licensors hereby grant to the Licensee for a term of five years … the sole and exclusive License [sic] and privilege to supply refreshments to the public admitted to’ certain premises on a variety of terms, some of which are considered in the judgment of McTiernan J. One term required the licensee ‘during the continuance of this license (to) pay to the Licensors the annual sum of’ £286 by equal weekly payments in advance.] McTiernan J: Maria Radaich appeals to this court from the finding of the Supreme Court of New South Wales upon a case stated by a magistrate of the Fair Rents Board. The magistrate found that a deed, made between the appellant and the respondents (George William Edward Smith and Ada Smith), constituted a lease and that he therefore had jurisdiction to determine a fair rental for the premises specified therein. Brereton J, exercising the jurisdiction of the Supreme Court over the case stated, held that the deed created no lease but a mere licence, and, consequently, that the Fair Rents Board had no jurisdiction in the matter. [page 708]

Neither party denies that all the terms of the agreement are embodied in their deed. The deed contains 10 clauses. In form and matter, it resembles an ordinary lease; it contains, inter alia, a covenant that the ‘licensors’ shall not unreasonably disallow an assignment of the ‘licence’. Another clause, cl 9, confers an option of renewal. The words ‘lease’, ‘lessor’ and ‘lessee’, however, are entirely excluded from the document, and the term ‘licence’, and its appropriate mutations, are sedulously applied to the rights purported to be created. This fact is, of course, far from conclusive in favour of the respondents. It is the substance of the deed that matters. As Denning LJ said in Facchini v Bryson [1952] 1 TLR 1386 at 1389–90: ‘… the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label they choose to put on it’. The true test of a supposed lease is whether exclusive possession is conferred upon the putative lessee. It certainly appears that the ‘exclusive possession’ test has survived intact the criticism it received in Errington v Errington and Woods. Parker and Pearce LJJ concurred in the judgment of Jenkins LJ which is cited in part above. What kind of possession did the present deed confer? Clause 5 is in these terms: Upon the expiration or sooner determination of this licence the Licensee shall immediately give up possession of the said building occupied by her for the purpose of the said business and will execute and do all such assurances and things as may be requisite for transferring to or vesting in the Licensors or any person whom they may nominate any existing licence or licences in payment only of the proper proportion of the sum paid for same.

The preamble recites that the respondents are ‘to carry on the business of a milk bar’ in the subject premises. I think that such a business could only be carried on in reasonable convenience by persons having the exclusive possession of the premises. Nothing in the deed suggests that the parties did not recognise this as an implication of their agreement embodied therein. The premises, it appears, constituted what is often called a ‘lock-up shop’. On several of the rent receipts given by the respondents, and which are in evidence, is the notation: ‘All window, door keys, locks, etc, lost or broken, shall be paid for by the tenant’. The agreement contemplates that the so-called ‘licensee’ is to have control of the premises, and of the persons entering them, during business hours and, indeed, at all other times. I am satisfied that what was granted by this deed was an interest in the premises, therein described, which amounts in truth and in substance to a lease. Accordingly, these premises are subject to the determination of the Fair Rents Board, under the provisions of the Landlord and Tenant (Amendment) Act 1948–1954. The question in the stated case should be answered ‘No’. [Taylor J held that the deed created a lease between the parties because it conferred on the appellant the right to exclusive possession for a specified period. He regarded the factor of exclusive possession as decisive, but added a qualification: ‘This, however, does not deny that exceptional cases may arise in which it will be seen that a right to exclusive occupation or possession has been given without the grant of a leasehold interest.’ Taylor J indicated that the mere fact that a transaction had been motivated by ties of friendship did not bring the case within the exceptional class.] Windeyer J: The distinction between a lease and a licence is clear. ‘A dispensation or licence properly passeth no interest, nor alters or transfers property in anything but only makes an action lawful which without it had been unlawful’: Thomas v Sorrell (1673) Vaugh 330; 124 ER 1098. Whether when one man is allowed to enter upon the land of another pursuant to a contract [page 709]

he does so as licensee or as tenant must, it has been said, ‘be in the last resort a question of intention’: per Lord Greene MR in Booker v Palmer [1942] 2 All ER 674 at 676. But intention to do what? Not to give the transaction one label rather than other. Not to escape the legal consequences of one relationship by professing that it is another. Whether the transaction creates a lease or a licence depends upon intention, only in the sense that it depends upon the nature of the right which the parties intend the persons entering upon the land shall have in relation to the land. When they have put their transaction in writing this intention is to be ascertained by seeing what, in accordance with ordinary principles of interpretation, are the rights that the instrument creates. If those rights be the rights of a tenant, it does not avail either party to say that a tenancy was not intended. And conversely if a man be given only the rights of a licensee, it does

not matter that he be called a tenant; he is a licensee. What then is the fundamental right which a tenant has that distinguishes his position from that of a licensee? It is an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose or purposes. And how is it to be ascertained whether such an interest in land has been given? By seeing whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives. If he was, he is a tenant. And he cannot be other than a tenant, because a legal right of exclusive possession is a tenancy and the creation of such a right is a demise. To say that a man who has, by agreement with a landlord, a right of exclusive possession of land for a term is not a tenant is simply to contradict the first proposition by the second. A right of exclusive possession is secured by the right of a lessee to maintain ejectment and, after his entry, trespass. A reservation to the landlord, either by contract or statute, of a limited right of entry, as for example to view or repair, is, of course, not inconsistent with a grant of exclusive possession. Subject to such reservation, a tenant for a term or from year to year or for a life or lives can exclude his landlord as well as strangers from the demised premises. All this is long-established law: see Cole on Ejectment (1857) pp 72, 73, 287, 458. Recently some transactions from which, in the past, tenancies at will would have been inferred have been somewhat readily treated as creating only licences. And it has been said — especially in connection with family relationships, charity or hospitality — that allowing a person to have the exclusive possession of premises does not necessarily indicate a tenancy as distinct from a licence. These decisions are largely a by-product of rent restriction statutes and other legislation here and in England. They are all explicable if they mean, as I think they all do, that persons who are allowed to enjoy sole occupation in fact are not necessarily to be taken to have been given a right of exclusive possession in law. If there be any decision which goes further and states positively that a person legally entitled to exclusive possession for a term is a licensee and not a tenant, it should be disregarded, for it is self-contradictory and meaningless. We are not concerned with the way in which a court of equity would control the parties in the exercise of legal rights, but with the simple question whether at law this document created a lease or a licence. And the proper touchstone still is: did it give the so-called licensee a legal right to the exclusive possession of the premises during the term? The question must, of course, be resolved by considering the terms of the deed. [Windeyer J discussed the terms of the deed and the surrounding circumstances, and concluded that the terms of the deed conferred the right to exclusive possession on the appellant. Accordingly a landlord–tenant relationship was created between the parties. Dixon CJ and Menzies J agreed.] Appeal allowed.

[page 710]

8.23

Dicta in earlier cases strongly support the view of the High Court.

This is especially true of the judgment of the Privy Council in Glenwood Lumber Co v Phillips,28 in which a ‘licence’ to cut timber was held to grant a lease because the document conferred exclusive possession upon the ‘licensee’. Furthermore, Addiscombe Garden Estates Ltd v Crabbe,29 relied on by McTiernan and Taylor JJ, seems to be squarely in favour of their view. In that case the owners of a tennis court purported to license the trustees of a tennis club to use and enjoy the premises for two years in consideration of monthly ‘court fees’. The Court of Appeal held that the transaction was in substance a lease since exclusive possession was conferred and all the essential elements of a tenancy were present, if somewhat disguised. The ‘court fees’, for example, were in fact rental payments. Since the transaction was to be regarded as a lease the trustees were protected tenants entitled to the benefit of the security of tenure provisions of the Landlord and Tenant Act. Radaich has been followed in many recent cases.30 Compare Somma v Hazlehurst, where an unmarried couple each signed a separate ‘licence’ agreement in respect of a bedsitter. Under each agreement the licensor was entitled to use the room and to nominate one other person who could use the room together with the licensor and licensee. It was held that the agreement did not create a lease since neither licensee had exclusive possession and, even if they were to be regarded as having a joint interest (as opposed to separate interests), they did not have a right to exclusive occupation of the room and were therefore licensees.31 Where the document is a sham, intended to conceal the true nature of the bargain struck by the parties, the court will look to the substance of the relationship. So, where a

landlord granted a ‘licence’ and was given a wide-ranging right to introduce other occupants onto the premises, but the restrictive dimensions of the property were so small as to make the exercise of such a right unrealistic, the court held that a lease was created.32 8.24

In Chaka Holdings Pty Ltd v Sunsim Pty Ltd, Young J held that the

label which the parties to an agreement give to it is only one of a number of important factors to be taken into account.33 His Honour expressly rejected the submission that the label is irrelevant in lease/licence cases. A similar approach was adopted by Malcolm CJ in WA Club Inc v Nullagine Investments Pty Ltd. In holding that the terms of an occupation deed created a lease rather than a licence, his Honour commented that: ‘The occupation deed contains no covenant for quiet enjoyment but “the common sense of the matter” would imply such a covenant from the grant of the right of sole and exclusive use and occupation of the relevant area’.34

[page 711]

8.25C

Swan v Uecker [2016] VSC 313 Supreme Court of Victoria

Croft J: The Applicant owns a two bedroom apartment in Fitzroy Street, St Kilda (‘the Apartment’). In August 2015, she leased the Apartment to the Respondents pursuant to a residential tenancy agreement for a term from 20 August 2015 to 19 August 2016 (‘the Lease’). The Applicant sought an order for possession in VCAT on the basis that the Respondents had sublet the Apartment in breach of the provisions of the Lease. The Applicant’s case was that the Respondents granted leases to third parties (‘AirBnB guests’) who stayed in the Apartment. The Respondents conceded before the Tribunal that AirBnB guests stayed at the apartment for short term stays, booked through the

AirBnB website. VCAT dismissed the application on the basis that the Respondents had granted licences only to the AirBnB guests, but not leases. Consequently, the Tribunal found that they had not sublet the Apartment. The Applicant argued before the Tribunal that the effect of the agreement between the Respondents and the AirBnB guests was to grant to those individuals ‘exclusive possession’ of the Apartment where they took the whole Apartment, rather than just one bedroom, for their occupancy. The Respondents argued the contrary, namely, that the agreement between them and the AirBnB guests did not mean that the latter were granted ‘exclusive possession’ of the Apartment where the agreement was for the whole Apartment option. The Tribunal’s reasons set out the provisions of the AirBnB agreement relied upon by the Respondents, the tenants, their arguments as to intention and conduct flowing from this agreement and, more generally, the Tribunal’s findings and reasoning. The relevant parts of these reasons are as follows: (a) The Airbnb agreement The tenants rely on the wording of the Airbnb agreement which states — Guests agree that a confirmed reservation is merely a licence granted by the Host to the Guest to enter and use the listing for the limited duration of the confirmed reservation and in accordance with the Guest’s agreement with the Host. Guests further agree to leave the Accommodation no later than the checkout time that the Host specifies in the Listing or such other time as mutually agreed upon between the Host and Guest. If a Guest stays past the agreed checkout time without the Host’s consent, they no longer have a license to stay in the Listing and the Host is entitled to make the Guest leave. In this context and in the context of the broader considerations flowing from the authorities which have been considered, I am of the view that the hotel room analogy is not appropriate in the present circumstances. The evidence and the provisions of the AirBnB Agreement indicate, in my view, that although the occupancy granted to the AirBnB guests was, in this case, for a relatively short time, the quality of that occupancy is not akin to that of a ‘lodger’ or an hotel guest. Rather, it was the possession — exclusive possession — that would be expected of residential accommodation generally. In the present circumstances, it is no different from the nature of the occupancy — the exclusive possession — granted to the tenants, the Respondents, under the Lease from the Applicant. They have, by means of the AirBnB Agreement, effectively and practically passed that occupation, with all its qualities, to their AirBnB guests for the agreed period under the AirBnB Agreement. Concluding this more general treatment of the nature of leases and licences in the context of these proceedings, reference is made to [page 712]

the summary of factors which the Respondents submit suggest that the AirBnB Agreement was more likely to be a licence than a lease. None of these factors, in my view, suggests that the AirBnB Agreement was more likely to be a licence than a lease, both for the preceding reasons and for those which follow. As I have indicated, the form

of the AirBnB Agreement and the language used must be construed according to ordinary principles of construction having regard to extrinsic circumstances which may be considered in light of those usual principles. Moreover, the process of construction focuses on substance and not form, and thus the matters raised in the first six of those factors do not assist the Respondents’ position. Neither does the process whereby the AirBnB agreement is entered into via an online booking system affect the position. The website booking facility produces an agreement as a result of the booking — then ascertainment of the terms of the resulting agreement and the proper construction of that agreement is a matter for the application of ordinary, settled, principles of law. The same applies with respect to the process of payment — payment by cash, cheque or electronic funds transfer, for example, does not affect the character of what is paid for in circumstances such as this. Modern commercial law readily accommodates electronic transactions and there is no basis for treating agreements such as AirBnB agreements — whether they are leases or licences in their particular circumstances — any differently. More particularly, in support of the Applicant’s position, there was nothing in the AirBnB Agreement to support the Tribunal’s finding that the Respondents, the tenants, had the ability to access the rented premises, the Apartment, during each AirBnB stay. The reference in that agreement to ‘licence’ is no more than a label, and there are numerous authorities for the proposition that such a label, though it may have some relevance to characterisation, is not decisive and that the courts will look to the substance of the agreement thus labelled in order to characterise it as a lease or a licence. In the context of the Tribunal’s finding in para 45(iv), the label ‘licence’ does not of itself confer a right on the Respondents, the tenants, to access the Apartment when the entire Apartment has been made available to AirBnB guests. Rather, the effect of the Agreement, fully analysed, does, in my view, mean that those guests enjoyed exclusive possession of the Apartment during their stay. It would be entirely inconsistent with the nature and purpose of the AirBnB Agreement were it to be otherwise. This position is, in my view, also confirmed by the relevant AirBnB listing to which reference has been made — that is the listing for the occupation of the whole Apartment, not a single bedroom. The listing relevantly said that ‘I am leaving to allow you to have it all to yourself’. As to surrounding circumstances, it is mere speculation as to whether and to what extent the Respondents, the tenants, left their personal possessions in the Apartment. An example was raised by the Respondents in the course of the hearing postulating the position that might follow if the Respondents had left important documents in the Apartment, such as a driving licence. Common sense would dictate that, in these circumstances, a polite inquiry would be made of the AirBnB guests by the Respondents, the tenants, for permission to enter the Apartment to retrieve the relevant document or documents — and it is hardly likely that common courtesy and common sense would see that request denied. Moreover, if the AirBnB guests were to allow the tenants access, this would be with their permission and, in those circumstances, this would be quite consistent with the characterisation of their occupation as a lease, rather than a licence. There is, however, no evidence of any problems of access of this nature and, indeed, having regard to the evidence, that the tenants were, during the relevant AirBnB stay, away on holidays or staying with friends, the position would seem to be that no access would have been required. Additionally, the point was made by the Applicant that, given the short period of the AirBnB occupation, problems of this kind were unlikely to occur. The evidence was

[page 713]

that the Respondents, the tenants, retained keys to the Apartment — a position which is entirely unsurprising — and, as I observed during the hearing, it would be expected that any landlord or their agents would retain keys to the premises. Clearly, this fact alone is not decisive in terms of the characterisation of the nature of the AirBnB guests’ occupation. Additionally, the Respondents’ offer in the AirBnB website material to assist AirBnB guests with respect to the premises or surrounding attractions is not, in my view, as the Respondents would put it, only consistent with characterisation of the occupation as a licence. There is no doubt that the sensible landlord, caring for their premises and reversionary interest, will always seek to assist their tenant and will readily attend to repairs and difficulties with the leased premises—either under the terms of the lease, under statutory requirements or for commercial reasons. For these reasons, I am of the opinion that there was no evidence or other material to support the finding by the Tribunal that the Respondents were able to access the Apartment during each AirBnB stay. Appeal allowed.

8.26

For illustrations of the ‘intention test’, see Errington v Errington and

Isaac v Hotel de Paris Ltd.35 In that case, the appellant, Isaac, took possession of the first floor of the Parisian Hotel, over which the respondent company held a lease. The Privy Council, without referring to Radaich v Smith, held that although Isaac had exclusive possession of the first floor, the arrangement between the parties did not amount to a sublease of the premises. The conduct of the parties and the surrounding circumstances showed that Isaac was merely intended to have the personal privilege of running the bar, with no interest in the premises. Radaich v Smith suggests that Isaac does not state the law in Australia. Contrast Cobb v Lane, where the defendant, at the request of his sister, was allowed into possession of his sister’s house. The defendant continued to reside in the house, paying nothing for his use and occupation. In November

1950 the sister died. The defendant claimed that he had extinguished his sister’s title by adverse possession. A tenancy at will under the Limitation Act 1939 (UK) was deemed to be determined at the expiration of one year and that the title of the sister was therefore barred after possession for a further period of 12 years. The relevant section has now been repealed. The argument was rejected by the Court of Appeal on the ground that the defendant was never a tenant at will, but rather a mere licensee. The character of the defendant’s possession depended on the intention of the parties ascertained from the surrounding circumstances. In this case the defendant’s possession was the consequence of a convenient family arrangement designed to provide financial assistance to the defendant and his immediate family. These circumstances suggested that the parties did not intend to enter a binding legal relationship, but only to confer a ‘personal privilege’ on the defendant.36 This case represents one of the exceptional cases referred to by Windeyer J in Radaich v Smith whereby ‘allowing a person to have the exclusive possession of premises does not necessarily indicate a tenancy as distinct from a licence’.

[page 714]

Exclusive possession — further exceptions 8.27

As was acknowledged in Street v Mountford, following Radaich v

Smith, there are exceptional instances of a grant of exclusive possession that

does not give rise to a lease. So, Lord Templeman spoke of Errington v Errington and Woods in these terms: In Errington v Errington and Woods [1952] 1 KB 290 and in the cases cited by Denning LJ at 297 there were exceptional circumstances which negatived the prima facie intention to create a tenancy, notwithstanding that the occupier enjoyed exclusive occupation. The intention to create a tenancy was negatived if the parties did not intend to enter into legal relationships at all, or where the relationships between the parties was that of vendor and purchaser, master and service occupier, or where the owner, a requisitioning authority had no power to grant a tenancy [at WLR 885–6; All ER 295–6].

Typical examples of an absence to create legal relations are cases where exclusive possession is granted by one family member to another. Cobb v Lane [1952] 1 All ER 1199 and Heslop v Burns [1974] 1 WLR 1241 may be explained in this way. Where an employer grants an employee possession in order that the employee may perform his or her duties, a licence will arise, even if exclusive possession is conferred (Mayhew v Suttle (1854) 119 ER 133; Australian Convention & Exhibition Services Pty Ltd v Sydney City Council (1998) 9 BPR 16,753), on the basis that the duties are ‘subservient’ to the occupation: HA Warner Pty Ltd v Williams (1945) 73 CLR 421 at 429 per Dixon J. But if the grant of exclusive possession represents remuneration, a lease will have been created, and even where the employee has duties to perform while in occupation the parties will be landlord and tenant if they clearly demonstrate that they intended a lease: HA Warner Pty Ltd v Williams.

8.28 Questions 1.

Is the view of the Privy Council in Isaac v Hotel de Paris consistent

with Radaich v Smith? 2.

Would Windeyer J regard the approach of the Privy Council as ‘self-contradictory and meaningless’?

3.

What consideration might have influenced the courts in Radaich v Smith and the Addiscombe case to reach the conclusions they did?

4.

Why was the AirBnB ‘licence’ in Swan v Uecker held to be a lease? Would the alternative AirBnB offer to rent a bedroom in the apartment, share common areas, but not use the kitchen for cooking, have been held to be a lease?

5.

What factors might have prompted the Court of Appeal to reach the conclusion it did in Cobb v Lane? Would the court have been likely to classify the defendant as a ‘mere licensee’ if he had been ejected by a third party and had brought an action to recover possession of the land from that party?

6.

Would the Privy Council in Isaac’s case have been likely to classify Isaac as a licensee had he been the plaintiff in an action against a third party?

[page 715]

7.

What role does the intention test play in cases such as Isaac’s case and Cobb v Lane? Is there any special difficulty in predicting the outcome of a case where the court is to apply that test?37

8.

Why did the House of Lords in King v David Allen Billposting

Ltd38 find that the respondents had been granted a licence rather than a lease? Compare Claude Neon Ltd v Melbourne and Metropolitan Board of Works below; 8.29.

8.29

Radaich v Smith has been followed in a number of cases in New

South Wales, despite the fact that the Privy Council had differed in its approach to the problem.39 Many of the authorities referred to above were discussed and analysed by the House of Lords in Street v Mountford.40 Lord Templeman, with whom the other Law Lords agreed, adopted the language of Windeyer J in Radaich v Smith concluding (at 826) that ‘the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession …’. In Claude Neon Ltd v Melbourne and Metropolitan Board of Works the appellant ‘leased’ a portion of a city building for the purpose of erecting an electric sign. The arrangement was described as a lease and the parties were referred to as lessor and lessee. The portion of the building so ‘leased’ was the roof, parapets, and part of the exterior walls. The High Court of Australia (Barwick CJ, McTiernan and Menzies JJ; Kitto and Windeyer JJ dissenting) concluded that it was not impossible at law to grant a lease of such a site and that the parties did intend to grant exclusive possession of the upper sides of the roof or the wall and, accordingly, they were grants of leases not licences.41 8.30

W was the owner of 440 hectares of rural land in northern New

South Wales. W entered into an agistment agreement with the plaintiffs for the pasturing of cattle. The area of land was not clearly defined and varied

depending on the state of development of W’s land from time to time. During the currency of the agreement, W used the land as he thought fit, using it for access, making roads on it, clearing timber, eradicating weeds, permitting use by a beekeeper and holding a press conference. W did not seek nor was it expected he would seek the plaintiff’s permission. The conclusion reached by the Supreme Court of New South Wales was that W remained in possession of the land and merely permitted the plaintiffs to graze cattle for a fee. The interest of the plaintiffs thus amounted to a licence and not a lease.42

Formal requirements Torrens title 8.31

The formalities for the creation of leases of Torrens title land depend

on the duration of the lease. For leases in excess of three years, in New South Wales by s 53(1) leases of three

[page 716]

years or more must be registered. By contrast, in Victoria all leases operate as exceptions to indefeasibility, so no formalities are necessary. For further details, see 5.129.

Old system 8.32

At common law, a leasehold interest could be created without

formality. Since no deed or written document was required, a leasehold interest of any duration could be created orally. To prevent abuse of this rule, the Statute of Frauds 1677 required all leases to be in writing, except certain leases not exceeding three years in duration. Later legislation required all leases that previously had to be in writing to be under seal. The English legislation was consolidated in the Law of Property Act 1925 ss 52–54 and has been followed in Australia subject to certain variations in statutory language. The New South Wales provisions especially relevant to the creation of leases are as follows: 23B (1) No assurance of land shall be valid to pass an interest at law unless made by deed. (2) This section does not apply to — … (c) a surrender by operation of law, and a surrender which may, by law, be effected without writing; (d) a lease or tenancy or other assurance not required by law to be made in writing … (3) This section does not apply to land under the provisions of the Real Property Act 1900. 23C (1) Subject to the provisions of this Act with respect to the creation of interests in land by parol — (a) no interest in land can be created or disposed of except in writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law … 23D (1) All interests in land created by parol and not put in writing and signed by the person so creating the same, or by his agent thereunto lawfully authorised in writing, shall have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only. (2) Nothing in this section or in sections 22B or 23C shall affect the creation by parol of a lease at the best rent which can reasonably be obtained without taking a fine taking effect in possession for a term not exceeding three years, with or without a right for the

lessee to extend the term at the best rent which can reasonably be obtained without taking a fine for any period which with the term would not exceed three years. 23E Nothing in sections 23B, 23C or 23D shall — … (c) affect the right to acquire an interest in land by virtue of taking possession …43

[page 717]

Where a provision such as NSW, s 23D(2) applies, any special terms agreed on by the parties may be proved and enforced.44 The subsection applies to periodic tenancies, such as weekly or monthly tenancies, notwithstanding that they may continue for more than three years before they are determined. On the other hand, the subsection does not apply to a lease for a definite term exceeding three years even if the lease can be determined by notice on either side before the three-year period.45 The phrase ‘taking effect in possession’ in s 23D(2) has received divergent interpretation in different jurisdictions. In Victoria and Western Australia it has been interpreted to refer to a lease which requires the tenant to take possession as soon as it is made;46 but in New South Wales this provision was interpreted to refer to leases which gave the tenant the right of immediate possession.47 The subsection applies only to leases for a period not exceeding three years. An agreement for a lease, even for a period less than three years, must be in writing or, if it is to be enforceable in equity, supported by acts of part performance: see 8.33.

Agreement for a lease 8.33

A prospective landlord and tenant, instead of entering into a lease,

may agree to enter into a lease in the future. Such an agreement for a lease is enforceable at law as a contract, provided it is in writing as required by the Statute of Frauds, but does not of itself create a legal leasehold estate. Equity, acting on the principle of Walsh v Lonsdale,48 may regard the parties to an enforceable agreement for a lease (that is, one that is in writing or supported by sufficient acts of part performance) as landlord and tenant. Subject to the usual discretionary considerations, equity will award either party a decree of specific performance and will assess their mutual rights and obligations on the footing that such a decree has already been awarded and obeyed. In Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd,49 the landlord entered an agreement to grant a lease without having legal title to the property, never having taken a conveyance from its vendor. The Court of Appeal held that the doctrine of Walsh v Lonsdale was not confined to the case where there was a single agreement or where there was a direct contractual link between the holder of the legal title and the tenant. Thus, the court could grant specific performance of both agreements and could treat the parties to the agreement for a lease as landlord and tenant in equity. Compare the case where the court refused to exercise its discretion to grant specific performance of an agreement to grant a sublease, because to do so would involve the grantor to be in breach of the head lease,50 or where the tenant had persistently breached terms of the agreement.51 If the agreement is neither in writing nor supported by acts of part performance, it is not

enforceable either at law or in equity. However, if the owner has accepted rent, then an implied lease will arise at law; see 8.35.

[page 718]

8.34

The doctrine of Walsh v Lonsdale applies only if the agreement for a

lease is complete and enforceable on the usual contractual principles: see 4.68C. The usual contractual principles require the parties to have reached final agreement and to have expressed the terms of their agreement with reasonable certainty. If, for example, an agreement for a lease is expressed to be ‘subject to contract’ it will not be enforceable since it is not regarded as a final and enforceable contract.52 But the mere fact that an agreement for a lease contemplates the execution of a more formal document in the future does not of itself deprive the agreement of binding effect.53 Although certainty of agreement is required, the courts are prepared, within limits, to fill in the omissions of the parties in both leases and agreements for leases. A lease must contain certain matters, such as the names of the parties and the rental to be paid, but it is not necessary to stipulate the rights and obligations of the parties in exhaustive detail. The law implies certain terms, or covenants, in the lease in the absence of agreement to the contrary: see 8.90ff. Similarly, it is an implied term of an agreement for a lease that the formal lease, when executed, will contain the usual covenants to be found in leases. In Hampshire v Wickens (1878) 7 Ch D 555, Jessel MR considered an agreement for a lease ‘on all usual covenants and provisos’. It was decided that such a lease included covenants by the lessee to pay rent, to pay taxes (except

those expressly payable by the lessor), to keep and deliver up the premises in repair and to allow the lessor to enter and view the state of repair. The only usual covenant binding the lessor was, in the opinion of the Master of the Rolls, one for quiet enjoyment of the premises by the tenant. In Flexman v Corbett [1930] 1 Ch 672; [1930] All ER Rep 420, Maugham J made it clear that the ‘usual covenants’ are not invariably confined to those specified in Hampshire v Wickens. The question whether any particular covenant is unusual is a question of fact that must be decided on the evidence before the court, including that of conveyancers. Thus, while he decided that a covenant preventing the lessee from carrying on any offensive trade was unusual in the circumstances of the case, he did say that a similar covenant in a lease of a residential house on a large residential estate could well be regarded as usual.

Implied tenancies at law 8.35

Where no valid lease was executed by the parties, but a person went

into possession of land as a tenant and paid rent, an implied tenancy arose at common law. Typical situations where this happens are: 1.

where the parties have made no agreement or arrangement at all;

2.

where the parties have entered into a void lease;

3.

where the parties have entered into an agreement for lease or a lease that does not comply with the statutory formalities; or

4.

where the lessee ‘holds over’ upon the expiration of a fixed-term lease and where there is no holding-over clause. At common law, there were two types of implied tenancies: implied yearly

periodic tenancies; and implied tenancies by reference to other periods (for instance, weekly or monthly periodic tenancies).

[page 719]

Yearly periodic leases 8.36

New South Wales, the Northern Territory, Queensland and Western

Australia make special provision for the case where a lease is implied by payment of rent. For instance, by NSW, s 127(1): No tenancy from year to year shall, after the commencement of this Act, be implied by payment of rent; if there is a tenancy, and no agreement as to its duration, then such tenancy shall be deemed to be a tenancy determinable at the will of either of the parties by one month’s notice in writing expiring at any time.54

In other states, the common law rules prevail. The following cases demonstrate the relevant principles. 8.37C

Dockrill v Cavanagh (1944) 45 SR (NSW) 78 Supreme Court of New South Wales (Full Court)

[W J Dockrill by memorandum of lease registered under the Real Property Act 1900 leased the subject land to F A Cavanagh for four years from 1 November 1937. The lease contained an option to renew for a further two years. The option was duly exercised but no further formal lease was entered into. The lessee remained in possession and paid rent of £16 a month. There was no evidence that this was the best rent that could be obtained without taking a fine. The lessor died during the currency of the option period and the executors refused tender of rent after 1 November 1943. In July 1944 the executors commenced proceedings in ejectment. The judgment of the court was delivered by Jordan CJ, who, after stating the above facts,

continued:] For the defendant appellant it is contended that since 1 November, 1941, the defendant has been a tenant at will of the plaintiff, the tenancy being terminable only by a month’s notice by virtue of s 127 of the Conveyancing Act 1919, and it is common ground that no such notice was given. For the plaintiff respondent it is contended that the tenancy created by the exercise of the option, retention of possession, and payment of rent, came to an end on 1 November, 1943 … Since the argument has been directed chiefly to the effect of s 127, it is convenient to consider how the law stood prior to the introduction of that section, to see what light this throws on the effect which the section was intended to produce. At common law, no formalities were required for the making of a lease. It could be granted by word of mouth. In 1677, however, the following provisions were enacted by the Statute of Frauds, 29 Charles II Chapter 3: Section 1 … all leases, estates, interests of freehold, or terms of years, or any uncertain interest of, in, to or out of any messuages, manors, lands, tenements or hereditaments, made or created by livery and seisin only, or by parol, and not put in writing, and signed by the parties so making or creating the same, or their agents [page 720]

thereunto lawfully authorised by writing, shall have the force and effect of leases or estates at will only, and shall not either in law or equity be deemed or taken to have any other or greater force or effect; any consideration for making any such parol leases or estates, or any former law or usage, to the contrary notwithstanding. Section 2 … Except nevertheless all leases not exceeding the term of three years from the making thereof, whereupon the rent reserved to the landlord, during such term, shall amount unto two third parts at the least of the full improved value of the thing demised. Section 4 … no action shall be brought … upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them … unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised. The Statute did not affect dispositions by deed, which stood outside it, and hence leases upon any terms could still be made by deed. But apart from this, the Statute provided that, as regards form, there should thenceforth be only two types of lease, (1) leases in writing and signed by the parties: such leases might be on any terms and for any period, and (2) leases not in writing signed by the parties: such leases were to operate only as leases at will, unless they were for a period not exceeding three years from their making, at a rack-rent, in which case they operated according to their terms. After the Statute, if a tenant entered under a lease for more than three years which was not in writing, he held prima facie as tenant at will only. It was soon decided, however,

that if such a tenant paid rent which could be referred to a yearly tenancy, as where it was for an aliquot part of a year, the lease at will prima facie became changed to a lease from year to year: ‘The tenancy from year to year succeeded to the old tenancy at will, which was attended with many inconveniences. In order to obviate them, the courts very early raised an implied contract for a year, and added that the tenant could not be removed at the end of the year without receiving six months previous notice’: Doe dem Shore v Porter (1789) 3 TR 13 at 16–17; 100 ER 428. It was further held that if, although there was no written lease, the tenant went into possession and paid rent referable to a yearly tenancy under an agreement for a lease which would be specifically enforceable in equity, not only did he become tenant from year to year, but he became entitled and subject to all the provisions of the agreement which were applicable to a tenancy from year to year: ‘It is argued, that the tenancy arises by operation of law upon payment of rent, and that the law implies no particular mode of cropping, nor any condition of re-entry. But the terms upon which the tenant holds are in truth a conclusion of law from the facts of the case, and the terms of the articles of agreement’: Doe dem Thompson v Amey (1840) 12 A & E 476 at 480; 113 ER 892 at 893; Moore v Dimond (1929) 43 CLR 105 at 119–20. In this respect there was no difference between a person holding over and a person who entered and paid rent on the faith of an executory agreement for a lease: Moore v Dimond (1929) 43 CLR 105 at 114–15. And it has been held that where the agreement under which the rent was paid provided for a term of years at a weekly rent, the fact that it was weekly rent that was paid did not prevent the payment from creating a tenancy from year to year, it being clear that something greater than a yearly tenancy had been intended: Moore v Dimond (1929) 43 CLR 105 at 116– 17; 12 Austn Digest 906. The law imputed an intention to create a tenancy from year to year unless an intention repugnant to this appeared: Moore v Dimond (1929) 43 CLR 105 at 119–23; 12 Austn Digest 906. On the other hand, if it appeared that no more than a quarterly or a weekly tenancy was intended, payment of a quarterly [page 721]

or weekly rent would not bring into existence more than a lease for a periodic quarterly or weekly tenancy: Cole v Kelly [1920] 2 KB 106; Ladies’ Hosiery and Underwear Ltd v Parker [1930] 1 Ch 304 at 328–9. And if it appeared that only a tenancy at will was intended, that only would be created: Meye v Electric Transmission Ltd [1942] Ch 290. In Doe dem Rigge v Bell (1793) 5 TR 471; 101 ER 265, where a tenant had entered and paid rent under a parol lease which was void because for seven years it was held that it was void only as to the duration of the lease, and hence a special term that it was to be terminable at Candlemas was enforceable, so that although notice to quit could be given within the seven years, it must be to quit at some Candlemas. Further, it is well settled that the tenancy from year to year, although it could be determined by six months’ notice, yet if it were allowed to continue until the end of the term provided for by the agreement between the parties, became then automatically terminated without the necessity for any notice: Doe dem Davenish v Moffatt (1850) 15 QB 257; 117 ER 455; Moore v Dimond (1929) 43 CLR 105 at 112–13. It will be seen, therefore, that by a process of judicial legislation, considerable

encroachments had been made upon the provisions of the Statute of Frauds. Leases not in writing signed by the parties were by the statute to have the force and effect of leases at will only, and were not either in law or equity to be deemed or taken to have any other or greater force or effect. If, however, the lessee under such a lease entered into possession and paid rent, not only was the lease treated as having the force and effect of a lease from year to year, but all the terms of any agreement between the parties applicable to such a lease were treated as incorporated into it: Moore v Dimond (1929) 43 CLR 105 at 116, 123; 12 Austn Digest 906 … [His Honour referred to NSW, ss 23B, 23C, 23D and 54A.] So far, I have been examining the position at common law; and the rules above set out, dealing with the creation of tenancies from year to year, were rules of the common law applicable in courts administering only that law. In equity, the position was quite different. By use of the doctrine of part performance (which is expressly saved in England by 15 Geo V Chapter 20, s 55, and in New South Wales by s 23E inserted in the Conveyancing Act 1919) a court of equity would, in a proper case, decree the execution of a formal lease where no lease had been made and notwithstanding that the only agreement for a lease might be oral. When it was enacted that all leases for periods above three years should be by deed, it treated a written lease not under seal as evidencing an agreement for a lease, and would, in a proper case, decree specific performance of this agreement by the execution of a proper lease under seal. In the meantime, it would by injunction restrain the landowner from acting on the footing that the other party was merely a tenant at will or a tenant from year to year. After the passing in England of the Judicature Acts, which invested the superior courts with jurisdiction in both equity and common law, it was held that in a court which possessed the combined jurisdictions (although not in a court which had only a common law jurisdiction: Foster v Reeves [1892] 2 QB 255), a party to an agreement for a lease, if the lease was specifically enforceable (but not if it was not: Coatsworth v Johnson (1886) 54 LT 520; Inland Revenue Commissioners v Derby [1914] 3 KB 1186); could obtain against the other all the remedies which would be available to him if a proper lease had actually been executed: Walsh v Lonsdale (1882) 21 Ch D 9, although the agreement was not thereby converted into an actual lease: Borman v Griffith [1930] 1 Ch 493 at 497–8 … Prior to the introduction of s 127, if there was a lease but no agreement between the parties operative at common law to incorporate as part of it a provision that it was to continue for a term of years, or to be at will or for a periodic tenancy, then, in the contemplation of [page 722]

a court with jurisdiction to enforce only common law rights, although upon entry by the lessee the lease became a lease at will, upon payment of rent it ceased to be a lease at will and became a lease for the periodic tenancy of from year to year. It was to this s 127 was addressed, and what it provides is that where this state of things exists, the conditions which would previously have brought into existence a lease from year to year

shall instead bring into existence a lease at will terminable by a month’s notice expiring at any time. The phrase ‘and no agreement as to its duration’ means no agreement as to its duration which, at common law, is incorporated in the lease for all purposes: Larke Hoskins & Co Ltd v Icher (1929) 29 SR 142; Burnham v Carroll Musgrove Theatres Ltd (1929) 28 SR 169 at 179–80; (1928) 41 CLR 540 at 565–6. But there is nothing to indicate that it was intended to alter in any other respect the rules of the common law applicable in courts administering only that law. Hence, where the common law would previously have incorporated into the lease such of the terms of an agreement dehors the lease as were applicable to a lease from year to year, it will now incorporate such as are applicable to a lease at will terminable by a month’s notice, and where the agreement dehors the lease provides for a term of years, then, if when the period of that term comes to an end, the lease at will has not already been terminated by a month’s notice, it is now that lease which becomes automatically terminated without notice. I quite agree with Mr Saddington that it was illogical that the common law, being prevented by statute from giving effect to an agreement should nevertheless not only give full force and effect to most of the details of the agreement, but also treat one of its provisions as operating to terminate an independent legal relationship which it had itself brought into existence; but this argument was addressed to the Court in Doe dem Tilt v Stratton (1828) 4 Bing 446; 130 ER 839, and did not prevail … In the present case, the land is under the Real Property Act 1900. There was no registered memorandum of lease for the two-year period beginning on 1 November 1941; and it is obvious from the language of the special cl 6 that the notification by the lessee of his desire for a renewed lease did not bring into existence a lease in writing for two years signed by the lessor or his agent. There is no evidence that it was at the best rent reasonably obtainable, and hence the conduct of the parties cannot be regarded as evidencing an oral lease for two years: Larke Hoskins & Co Ltd v Icher (1929) 29 SR 142. But the possession and payment of rent after 1 November, 1941, pursuant to the agreement for a lease for two years constituted by the exercise of the option, brought into existence at common law a lease at will on such of the terms of the agreement as were applicable, which terminated at the end of the two years without notice since it had not been previously terminated by a month’s notice. I am of the opinion therefore that his Honour was right in holding that upon the undisputed facts the defendant had no defence to the action, and that the appeal should be dismissed with costs. Appeal dismissed with costs.

8.38

One explanation as to why judges engaged in what Jordan CJ

describes as ‘a process of judicial legislation’ in this area may be found in the historical context. Most leases at the time were of agricultural land, and the agricultural cycle was an annual one. Also, the vast bulk of tenants were illiterate, and would not have had access to legal advice. A strict adherence to

the requirements of the statute would have operated greatly to the disadvantage of tenants. The judicial activism may therefore be seen as an early form of consumer protection.

[page 723]

8.39

The decision in Dockrill v Cavanagh concerns the position at law

where the legislative formalities for the creation of leases at law have not been observed. Another example is where the lease is void. In Gnych v Polish Club Limited [2015] HCA 23 the lease was void because it breached the licensing requirements of the Liquor Act 2007 (NSW). The High Court held that a s 127 tenancy at will came into operation on the payment of rent under the terms of the void lease (at [33]). In proceedings in inferior courts and tribunals which do not have full equitable jurisdiction, the rights and liabilities of the parties may fall to be determined having regard to the incidents of the implied legal tenancy existing between them. Even where litigation is proceeding in a court having full equitable jurisdiction, it may still be necessary to determine the rights and liabilities of the parties under the implied common law tenancy if either specific performance is not sought or there is no evidence supporting a claim for specific performance.55 Where an implied lease at common law arises in the context of a specifically enforceable agreement to grant a lease, the tenant has both a legal and an equitable lease.56 8.40

The effect of s 127(1) Conveyancing Act 1919 (NSW) is to convert

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

8.41 Questions 1.

Suppose an agreement for lease for a term of five years contains a lessee’s repair covenant. Does the repair covenant become a term of the implied legal tenancy?

2.

What does Jordan CJ mean when he says ‘… when the common law would previously have incorporated into the lease such of the terms of an agreement dehors the lease as were applicable to a lease from year to year, it will now incorporate such as are applicable to a lease at will terminable by a month’s notice …’? In such a case as this, the common law implied tenancy will contain all those terms which would have appeared as terms in the lease if the legal formalities had been observed save for those which, by their nature, are not compatible with the implied legal tenancy. Thus, the repair obligation would become a term in the implied legal

tenancy. 3.

Did the tenant in Prudential Assurance Co Ltd v London Residuary Body have an implied lease? If so, what type of lease? What notice was necessary to terminate the lease?

[page 724]

8.42

Not all covenants in an agreement will be incorporated into the

implied lease. In Kemp v Lumeah Investments Pty Ltd,57 an agreement for lease for a term of five years contained a provision that if default occurred on the part of the lessee, the lessor had the option of converting the lease to a weekly tenancy terminable on one week’s notice to quit. The option to convert was held by Needham J to be ineffective as being inconsistent with a lease at will terminable by one month’s notice. 8.43

The meaning of the phrase ‘no agreement as to duration’ contained in

s 127(1) is not without difficulty. In Dockrill v Cavanagh, there was an agreement for lease for a duration of two years, and a submission that s 127(1) did not apply in those circumstances would have been plausible. The court held that ‘the phrase “no agreement as to duration” means no agreement as to duration which at common law, is incorporated in the lease for all purposes’.58 This presumably means that the agreement for the term of the lease must be contained in a lease that complies with the legal formalities, for example, ss 23B and 23D(2) of the Conveyancing Act 1919 (NSW). An agreement for duration in a lease that does not so comply will be irrelevant to

a consideration of the threshold question whether s 127(1) applies to the legal implied tenancy but will be relevant to a determination as to whether the rent paid is referable to an aliquot part of a year. Where rent is paid yearly but there are, in addition, other factors pointing to a yearly tenancy, such as the nature of improvements, the tenancy is, nonetheless, one to which s 127(1) applies since the nature of the improvements points towards a finding that the rent is paid by reference to an aliquot part of a year.59 8.44

The nature and derivation of the tenancy from year to year implied

from payment of rent was the subject of the High Court decision in Moore v Dimond (1929) 43 CLR 105.60 The lessor sued in the Local Court of Adelaide for a week’s rent due under an agreement for lease for five years. The Local Court judge held that the lessor was entitled to specific performance of the agreement and, in any event, there was a tenancy from year to year. In either case, the lessor was entitled to recover. On a case stated, the Supreme Court held that the Local Court had no jurisdiction to decree specific performance and that the tenancy at law was weekly, not yearly. The appeal to the High Court did not challenge the first holding and the High Court thus considered the rights of the parties at law. The High Court held the tenancy was one from year to year and thus the lessor was entitled to recover: … In principle there appears to be no reason why the circumstance that the rent paid under an agreement for a term of five years is weekly should displace this presumption in favour of the yearly tenancy. The doctrine which justifies reference to the period of the rent in order to ascertain the term no doubt is that the rent is a compensation for the land, and the parties have so understood it. A quarterly payment thus implies a yearly tenancy because it is part of the compensation for a year’s holding. When the parties agree for a five years’ holding with weekly

payments of the compensatory rent, their intention is not that each week’s rent shall represent a distinct and therefore terminable holding of a week. The weekly rent is part of the compensation for the entire period. Where the intention of the parties is to hold for a greater duration than a yearly tenancy would give them, and this intention fails because of

[page 725]

its want of appropriate expression or of formal demise, the presumption or assumption that a general holding is from year to year supplies the term. It should, perhaps, be added that the conclusion which has been thus reached appears to be supported by the views adopted in four of the Australian States in relation to the implication of tenancies from year to year … It follows that at law, whatever may be the position in equity, the respondent would be considered a tenant from year to year [per Knox CJ, Rich and Dixon JJ at 117].

Other implied periodic leases 8.45

In Turner v York Motors Pty Ltd,61 two parties were negotiating for a

lease, but had reached no concluded agreement as to its terms. Nevertheless, pending negotiations, the ‘tenant’ entered possession of the premises and remained there for some two and half years without final agreement ever being reached. The tenant at first paid rent on a weekly basis and then on a monthly basis. After all negotiations for a lease had broken down, a notice to quit was served on the tenant. In order to decide whether the notice was valid the High Court had to determine the character of the tenancy created in these circumstances. It was held by a majority that a monthly tenancy was created. It was stated that where an entry is effected pending agreement as to the terms of a lease the tenant is initially a tenant at will. He or she might

continue to be a tenant at will even if some compensation is paid to the landlord for the use of the premises. But as soon as rent is paid and accepted on a periodic basis in advance, a strong presumption arises that a periodic tenancy has been created. On the facts in this case, it was impossible to suppose that for over two years the tenant had remained on the premises provisionally pending the negotiations with the intention that he should be a mere tenant at will. The proper implication from the payment of rent was that a monthly tenancy had been created between the parties.62 The difference between the finding of an implied monthly tenancy in Turner v York Motors Pty Ltd and the conclusion reached in Moore v Dimond that an implied tenancy from year to year existed is referred to in the judgment of Kitto J: (1951) 85 CLR 55 at 90. The High Court also decided in Turner’s case that NSW, s 127 did not apply since the evidence did not support a presumption in favour of a tenancy from year to year arising from the payment of rent. If the only evidence before a court is that a tenant has been in possession for 18 months and has always paid rent by the week, it is likely that a weekly tenancy and not a tenancy from year to year would be implied.63 8.46

Where a lease for one year expires and the tenant remains in

possession paying rent on a weekly basis, the position is that the tenant is presumed to hold under a tenancy from year to year: Bank of Victoria v M’Hutchison and Box v Attfield.64 In many cases the problem of holding over will be regulated by the terms of the original lease. If a tenant holds over after the determination of a periodic tenancy (for example, after the expiration of a valid notice to quit) and pays rent with reference to the period of the former

tenancy, the presumption is that the same periodic tenancy has been revived.65

[page 726]

8.47C

Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544 New South Wales Court of Appeal

Glass JA: At all material times the plaintiff company was the registered proprietor under the Real Property Act 1900 of 158 acres of land at St Marys used as a stud for the breeding of race horses. A memorandum of lease of the said land purported to grant to the defendant a term of six years commencing on 1 July 1973. The memorandum of lease, though executed, was never registered. By its amended statement of claim the plaintiff alleged that the defendant was liable to it in damages for breach of his obligations under the said memorandum. When the proceeding came to trial before Carmichael J, the parties sought a separate determination of the issue of the defendant’s liability. That application having been granted, an agreed statement of facts was tendered. The trial judge found the issue of liability in favour of the plaintiff, and ordered that judgment be entered in its favour, with damages to be assessed. The defendant has appealed to this court, and submits that the judgment favouring the plaintiff is liable to be set aside for error of fact and law. The agreed facts which are relevant to the issues debated before us may be shortly set out. On 11 July 1973 the defendant executed the memorandum of lease and went into possession of the property. On 14 September 1973 the memorandum of lease was executed by the plaintiff company. On 16 December 1974 the plaintiff’s solicitors lodged the memorandum with the Registrar-General, together with duplicate certificates of title. For various reasons which are not material, the memorandum was never registered. Between 11 July 1973 and 8 March 1976 the defendant remained in occupation of the property and paid the rent reserved by the lease. On that date the defendant wrote a letter in the following terms: I would advise that in view of my selling of the horses presently on Leeholme Stud I will not be able to continue to pay the rental for such stud. Further in view of my being at present in arrears in relation to the payment of rent and in view of my not having the capability to pay additional rentals it is with regret that I will be vacating the property known as Leeholme Stud at St Marys leased from you and I shall be vacated from such property on the ninth day of April 1976. By letter of 12 March the plaintiff informed the defendant that it accepted his repudiation of the lease and expected to receive vacant possession on 9 April. It also

informed him of its intention to proceed against him for damages for breach of contract. On 9 April the defendant gave up possession and the plaintiff entered into possession of the subject property. In its statement of claim filed on 23 March the plaintiff claimed rent due to it under the memorandum for the balance of the term together with interest. In an amended statement of claim filed on 30 September it claimed damages for breach of contract. The first argument put to the court on behalf of the defendant involved a series of steps. Because the memorandum of lease was never registered it was ineffectual to pass any estate or interest in the land to the lessee: s 41 of the Real Property Act. However, by virtue of s 127 of the Conveyancing Act 1919, the defendant’s entry into possession and payment of rent gave rise to an implied tenancy at will determinable by one month’s notice in writing. There was, prior to 8 March, an agreement to give and take a lease for six years which was capable of specific performance by order of an equity court. However, the notice given by the lessee on 8 March determined, not only the tenancy at will, but also the whole of the relationship between the parties, including the pre-existing agreement. When asked for authority in support [page 727]

of the final proposition counsel could only answer that there was no authority to the contrary of what was being put. It was argued on general principles that the notice given by the lessee did not involve a repudiation of the agreement, but a lawful termination of it, since it was entitled by notice to terminate the tenancy at will. It was put that you could not have a lawful termination of the right to remain in possession by a notice which took effect as a wrongful repudiation of the agreement, thus entitling the lessor to sue for damages. The two positions were entirely inconsistent. The lessee could not be sued for doing something which he was lawfully entitled to do. In my view, the argument involves a misconception. The agreement and the tenancy at will are independent sources of rights. At no stage do they merge, so that the termination of the estate automatically extinguishes the agreement. The relevant principles are, in my view, as follows. A lease of land under the Real Property Act for a term exceeding three years creates no legal term unless it is both registrable and registered. But the informal instrument may be treated as evidencing an agreement for a formal lease: Carberry v Gardiner (1936) 36 SR (NSW) 559 at 568. The unregistered memorandum of lease operates merely as an agreement specifically enforceable in equity, but not itself creating a legal term in the land: Australian Provincial Assurance Association Ltd v Rogers (1943) 43 SR (NSW) 202 at 205. Entry into possession and payment of rent bring into existence a common law tenancy upon such terms of the unregistered memorandum as are applicable to the tenancy at will. But, in so far as the memorandum operates as an agreement, it re tains a separate identity as the repository of the substantial rights of the parties. The doctrine relevant for present purposes had been previously worked out in relation to demises which were void at law, not having been made by deed as required by the statute. The purported lease, nevertheless, took effect as an executory agreement for a lease enforceable in equity, and there entitling the lessee to a formal lease: Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 142–3; Butts v O’Dwyer (1952) 87 CLR 267 at

285. The existence or otherwise of a contract is determined exclusively by common law principle: Parkin v Thorold (1851) 2 Sim NS 1, 6; 61 ER 239 at 241. Accordingly, when these decisions allude to an informal lease operating as an agreement for a lease enforceable in equity, they affirm, not only the availability of equitable relief, but also the existence of a contract at law. If the innocent party deems damages to be adequate, there is no reason why the contract may not be enforced at law. But, in any event, the actionability at law of the executory agreement is supported by authority. Prior to the Judicature Act 1873 (Imp) actions for damages were successfully brought on instruments which for want of a seal were void at law as demises: Bond v Rosling (1861) 1 B & S 371; 121 ER 753. Given the availability of the legal remedy, the contractual position is entirely clear. The defendant, by executing the memorandum of lease, concluded an agreement to take a lease for six years. On 8 March, after being in occupation for under three years, he gave a notice which amounted to a wrongful repudiation of his obligations under that agreement. The plaintiff accepted the repudiation, and thereby elected no longer to be bound by the agreement. Upon such rescission, it became entitled to sue for damages for loss of its bargain: Heyman v Darwins Ltd [1942] AC 356 at 361. The trial judge ruled that the plaintiff, though unable to sue for damages at common law, could enforce the agreement in equity and obtain damages in lieu of specific performance. The defendant advanced arguments why his Honour should have held, on discretionary grounds, that equitable relief was not available to the plaintiff. In view of the conclusion I have reached, I find it unnecessary to consider these submissions. The defendant also submitted that the effect of the agreement for a lease was in some undefined way circumscribed by the necessity to obtain the consent of the mortgagee to the lease, and referred to the period of delay before this was done. In as much, however, as all necessary [page 728]

consents had been obtained before the repudiation, I cannot see that any default in this respect on the plaintiff’s part (assuming such occurred) provides any answer to the defendant. I would propose that the appeal be dismissed with costs, and that the proceeding be remitted to the Common Law Division so that the plaintiff’s damages for loss of its bargain may be assessed. [Mahoney JA delivered a separate judgment in which he gave similar reasons for agreeing with the proposed order. Hope JA agreed with Glass JA.] Appeal dismissed.

8.48

In the Leitz Leeholme case, the relationship between the parties was

primarily contract based and, therefore, a legal relationship. Registration of

the lease under the Real Property Act 1900 would have conferred a legal lease upon the lessee but would not have qualified or augmented the legal rights and obligations of the parties derived from the contract. While the proprietary interest existing between the parties might well have proved relevant in the event of a dispute with third parties, it was not necessary for the landlord to demonstrate his entitlement to equitable relief before claiming damages at law for breach of contract.66 8.49

In the light of the reasoning in Leitz, much of the argument in Moore

v Dimond was misconceived having regard to the relief sought by the lessor. Had the lessor been attempting to terminate the s 127 tenancy at will terminable by one month’s notice, the case law on yearly leases at common law would have been relevant. The case demonstrates that in situations where an implied lease originates in a specifically enforceable agreement for a lease, both a legal implied lease and an equitable lease co-exist.67

Tenancy by estoppel No title in landlord 8.50

It is a rule, usually characterised as a rule of evidence, that a tenant is

estopped from denying the landlord’s title and a landlord also may be estopped from denying the tenant’s title. It follows, for example, that a landlord cannot claim that a lease is invalid on the ground that the landlord lacked the title to create the lease. The rule may, in certain cases, operate to create a ‘tenancy by estoppel’. This occurs where a person, who has no estate in the land, purports to grant a leasehold interest in the land to any other

person. Since ‘the landlord’ has no estate in the land, the transaction cannot, of itself, create an interest in the land in the tenant. Nonetheless, the parties to the transaction may be estopped from denying that a tenancy was effectively created and thus, as between themselves and their successors in title, a landlord–tenant relationship will be deemed to exist.68

[page 729]

8.51

In Bruton v London and Quadrant Housing Trust,69 the respondents

were granted a licence by a local authority to use a number of properties that it had recently acquired for redevelopment as temporary accommodation for homeless persons. The appellant was offered accommodation by the respondents. The parties signed an agreement in which the appellant acknowledged that the trust held the property on licence, and he agreed to leave on reasonable notice if the local authority required the premises. Also, under the terms of the agreement the appellant was granted exclusive possession of the premises, and was required to pay a weekly rent. The House of Lords held that the appellant acquired a lease by estoppel. The granting of exclusive possession indicated the occupier was a lessee rather than licensee. As to the want of title in the landlord, Lord Hoffmann concluded as follows (at 406): In fact, as the authorities show, it is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel. The estoppel arises when one or other of the parties wants to deny one of the ordinary incidents or obligations of the tenancy on the ground that the landlord had no legal

estate. The basis of the estoppel is that having entered into an agreement which constitutes a lease or tenancy, he cannot repudiate that incident or obligation.

Lord Hobhouse added (at 418) that ‘[t]he estoppel is of the same character as that which estops a bailee from disputing the title of his bailor or the licensee of a patent from disputing the validity of the patent’. This result has special significance if the ‘landlord’ by estoppel subsequently acquires an estate in the land sufficient to support the ‘tenancy’ previously created. In this case, the acquisition is said to ‘feed the estoppel’ and in place of the tenancy by estoppel, an actual tenancy will spring up so that the tenant will now have a leasehold interest in the land. The doctrine may be called into force where the person granting the lease is acquiring an estate in the land, but acts prematurely and grants the lease before actual acquisition of the estate.70 It has been held that a tenant who has been in possession of the leased premises for the whole term of the lease is estopped from denying the landlord’s title during the period of possession unless faced with a claim based on title paramount. Thus, a tenant who had delivered up possession could not defeat the landlord’s claim for breach of the covenant to repair on the ground that the landlord did not have the legal title to the premises. While the landlord had not taken a conveyance of the legal title, it had acquired the beneficial interest and the tenant was not at risk of an adverse claim by the holder of the legal title.71 Note that third parties, such as the owner of the land, are not bound by the lease.72

Equitable estoppel 8.52

Another example of estoppel operating to give rise to a lease can be

seen in Waltons Stores (Interstate) Ltd v Maher where the High Court

recognised the creation of a lease by equitable estoppel.73 The question of a lease by estoppel commonly arises in the context of the

[page 730]

right of a tenant in possession who expends money on the premises in the expectation, induced by the landlord (or in Waltons by the tenant) of a new lease.74 A tenancy by estoppel does not arise from the receipt of rent by a receiver appointed by a mortgagee.75 Waltons v Maher was followed, on a similar set of facts, in Whittle v Parnell Mogas Pty Ltd (2006) 96 SASR 421; [2006] SASC 129. The plaintiffs expended money on the understanding, induced by the defendants, that the defendants would enter into a long-term lease of their service station. The court held that the defendant was estopped from denying the contract to create the lease. Compare BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2012] NSWSCA 224 where the landlord lodged a development application and undertook fit-out work following the tenant’s interest in leasing premises, but the court held that there was no estoppel as negotiations were preliminary to finalisation of position. Also, in DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 the appellant fitted out premises in the expectation that the respondent would take a sub-lease: held, no inducement by respondent, so no estoppel.

Concurrent leases 8.53

A landlord who has granted a lease to a tenant may grant another

lease in respect of the same land for the same or a different period. The landlord is said to have granted a lease of the reversion and to have created concurrent leases. In effect, the landlord has assigned the reversion for the period of the second lease and consequently the second lease must comply with the formalities required for an assignment of the reversion. The lease of the reversion creates the relationship of landlord and tenant between the lessee pursuant to the lease of the reversion and the original lessee. Thus, if L leases to T for 10 years and then leases to R for 15 years, R and T occupy the position of landlord and tenant so that T pays rent to R and R may enforce most of the covenants in the original lease.76 R will be entitled to possession of the land at the expiration of T’s lease. A lease of a reversion may, however, be for a term shorter than or equal to the term of the original lease, in which case the lessee of the reversion will not be entitled to possession at the expiration of the original lease.77 A concurrent lease must be distinguished from a future or reversionary lease to which we now turn.

Reversionary leases 8.54

Since a leasehold estate does not carry seisin, the common law

permitted the creation of ‘reversionary leases’. These are leases which provide that the actual term of the lease is not to commence until some future date. At common law, a term could be limited to commence at any time in the future.78 However, legislation has intervened to prevent the creation of leases where the term is to commence at a time that is too remote. The legislation provides that a term limited ‘to take effect more than twenty-one years from the date of the instrument purporting

[page 731]

to create it, shall be void, and any contract … to create such a term shall likewise be void …’.79 The section does not invalidate a contract to grant a lease at a date more than 21 years after the date of the contract if the lease the subject of the contract will not be a reversionary lease when granted.80

The doctrine of interesse termini 8.55

At common law, an entry by the lessee pursuant to the lease was

essential to the creation of a leasehold estate, unless the lease was created behind a use executed by the Statute of Uses. Before entry, the intended lessee merely had an interesse termini — an executory interest. The doctrine has generally been abolished.81

COVENANTS Introduction 8.56

With the exception of leases governed by specific legislative schemes,

such as in the residential and retail tenancies legislation (see 8.4ff), the parties are generally free to agree on such terms as meet their requirements. It is not uncommon for legislation to imply terms in leases but to allow these to be varied by the express agreement of the parties; see 8.89ff. The materials below illustrate the nature and scope of some of the more important covenants in leases.

8.57

The word ‘covenant’ is used in the law of landlord and tenant rather

more loosely than its strict meaning dictates. The word has come to mean any promise in a lease or agreement for lease rather than a promise under seal. Covenants in leases may be derived from any one of the following sources: 1.

covenants implied by law;

2.

covenants implied by statute;

3.

covenants by necessary implication; or

4.

covenants the subject of express agreement between the parties.

Covenants implied by law 8.58

Certain covenants are implied by the common law as a result of the

landlord–tenant relationship. Implied covenants cannot stand in the face of express covenants dealing with the same subject matter.82 The principal covenants implied at common law on the part of the landlord are quiet enjoyment, not to derogate from grant and a covenant that certain furnished dwellings are fit for habitation. The tenant impliedly covenants to use the premises in a tenant-like manner and to yield up possession when the lease expires. In the case of agricultural tenants, there was a further covenant to cultivate in a husband-like manner. Importantly, these

[page 732]

obligations have now been modified by statutory implied obligations which will be examined at 8.90ff. It is important to note how these various types of

covenants intersect. The common law implied tenancies only operate in the unusual situation where the implied statutory obligations on the same subject matter (see below at 8.94) have been excluded and no express covenant on the same subject matter has been included in the lease.

Quiet enjoyment 8.59

A landlord will be subject to an implied covenant not to interfere

with the tenant’s quiet enjoyment of the demised premises. This duty arises in all leases: Markham v Paget [1908] 1 Ch 697. This obligation requires the landlord to ensure that the tenant can occupy and enjoy the premises without disturbance or interference from the lessor or those for whom he or she is responsible: Hudson v Cripps [1896] 1 Ch 265 at 268. Acts which have been held to break this covenant are trespasses, such as the removal of the windows and doors of the demised premises: Lavender v Betts [1942] 2 All ER 72; and repeated threats to remove the tenant: Kenny v Preen [1963] 1 QB 499. The acts of disturbance or interference must be more than trivial. Merely writing letters demanding that the tenant vacate is not a breach of this covenant: David Jones Ltd v Leventhal (1927) 40 CLR 357. In Browne v Flower [1911] 1 Ch 219, the building of an external staircase which passed the tenant’s bedroom and so interfered with the tenant’s privacy was held not to constitute a breach of this covenant. The covenant for quiet enjoyment has been implied in a weekly tenancy: Lavender v Betts. 8.60

T leases a lock-up shop in a city building owned by L. During the

term of the lease L makes extensive structural alterations to the premises. The

contractor carrying out the work uses a hoist to remove debris and also erects a hoarding in the front of the shop. The hoarding remains in place for four months, obscuring the shop windows from the view of passers-by and prejudicially affecting T’s retail jewellery business. There is nothing unusual about the hoarding, given the work to be performed in L’s building. T sues for damages for breach of the covenant for quiet enjoyment in the lease. Is L liable for breach of the covenant for quiet enjoyment in these circumstances? These were the facts in JC Berndt Pty Ltd v Walsh [1969] SASR 34. The Supreme Court of South Australia held that the lessor was liable. Walters J reasoned: In the present case, the defendant actively participated in, and authorised, the consequences complained of and, in my view, it must be held in law responsible for them. By its covenant the defendant in effect guaranteed the plaintiff against any acts, or the consequences of any acts, done by it or with its authority which could disturb the plaintiff’s enjoyment of the premises. [It does not] avail the defendant to say that it is freed from any obligation to the plaintiff by reason of the erection of the hoarding under a licence granted by a statutory authority. The licence granted by the Corporation of the City of Adelaide merely authorised the erection of the hoarding, but it had nothing to do with the manner of execution of the building works carried out at the instance of the defendant; it certainly did not, and cannot, authorise consequences to the plaintiff which could follow from the erection of the hoarding.83

A covenant for quiet enjoyment in a lease was considered recently in AF Textile Printers Pty Ltd v Thalut Nominees Pty Ltd [2007] VSC 73. The landlord was held to have breached

[page 733]

this covenant when a contracted roof-repairer committed repairs involving negligent acts (including hosing asbestos-infected material off the roof) which then infiltrated the tenant’s premises and caused loss of enjoyment. 8.61

The fittings and goods in a shop leased by T are damaged when, after

a period of heavy rain, the downpipes are blocked by paper and other rubbish, water thus overflowing and seeping into the shop. T sues L, the landlord, to recover the value of the stock and other goods damaged. The evidence shows that there had been a similar incident some years before after which L had employed a plumber to perform certain work. However, no structural changes such as would prevent the drain openings being blocked were carried out, nor did L institute a regular system of inspecting or clearing the roof area. On these facts what causes of action are available to T? In his defence L relies on clauses in the lease which provide that (a) L should not be responsible for any damage caused through the accidental leakage or overflow of water and (b) L should not be liable for damage caused by reason of his neglect to do something to the building unless he had failed to comply within a reasonable time with a written request made by T. Do these clauses provide L with a defence? This question is based on the issues raised in Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd.84 Yeldham J of the Supreme Court of New South Wales held that the lessee had a cause of action for breach of the covenant for quiet enjoyment and a cause of action in negligence. His Honour also ruled that the clauses in the lease referred to were not apt to exclude the landlord’s liability for negligent acts and were not apt to exclude liability for acts on the part of the landlord not relating to the premises actually demised to the tenant.

8.62

The right to quiet enjoyment can be modified by agreement between

the parties. A lease provided that the landlord would have reasonable access to the premises in order to exhibit the premises to prospective purchasers. The lease also contained an express covenant for quiet enjoyment. It was held by the Supreme Court of New South Wales that the particular right conferred upon the landlord by the access clause qualified the right conferred upon the tenant by the covenant for quiet enjoyment which should be written down accordingly so far as was reasonably practicable: Famous Makers Confectionery Pty Ltd v Sengos (No 2) (1993) NSW ConvR ¶55-672.

Remedies 8.63

In Lavender v Betts [1942] 2 All ER 72 a tenant, who was protected

under the security of tenure legislation, recovered punitive damages against his landlord who, in an attempt to persuade the tenant to leave the premises, removed all the windows and doors. See also Drane v Evangelou [1978] 1 WLR 455; [1978] 2 All ER 437. In Perera v Vandiyar [1953] 1 All ER 1109, the landlord, with a similar objective in mind, cut off the tenant’s supply of gas and electricity. The Court of Appeal held that the tenant was entitled only to compensatory damages since, unlike the trespass in Lavender v Betts, the landlord’s act did not constitute a separate tort but merely a breach of the covenant for quiet enjoyment. Compare Chapman v Honig [1963] 2 QB 502; [1964] 2 All ER 513, where the Court of Appeal refused a remedy to a tenant whose landlord evicted him pursuant to a notice to quit solely because the tenant had given evidence against the landlord in a civil suit. Lord

Denning MR dissented. In McCall v Abelesz [1976] QB 585; [1976] 1 All ER 727, the Court of Appeal held that s 30(2) of the

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Rent Act 1965, which introduced the criminal offence of harassing a tenant with a view to forcing him or her to give up occupation, did not create a civil claim to damages. However, it was stated that a tenant who had been harassed by the landlord cutting off the gas supply would have an action for breach of the covenant for quiet enjoyment, or perhaps for breach of an implied term to keep the gas supply connected. Lord Denning also observed that Perera v Vandiyar would be decided differently today, as it is now settled that the courts can award damages for mental distress caused by the defendant’s conduct in breach of contract: see now Branchett v Beaney [1992] 3 All ER 910.

Obligation not to derogate from grant 8.64

At common law, the landlord impliedly, if not expressly, covenants

with the tenant not to derogate from the grant. The effect of such a covenant has been explained by Stirling J in Aldin v Latimer, Clark, Muirhead [1894] 2 Ch 437 at 444 in terms that: … 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 which would render the demised premises unfit for carrying on such business in the way in which it is ordinarily carried on, but that

this obligation does not extend to special branches of the business which call for extraordinary protection.

In Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200 the landlord was held to derogate from his grant where, having granted a lease for the purpose of storing explosives, he granted a lease over adjoining premises for a purpose which jeopardised the tenant’s statutory licence. In Aldin, one Munro, in 1878, sold the goodwill of his timber business to the plaintiff and leased to the plaintiff that part of his land on which the business was conducted. The lease was for 21 years and included a covenant by the plaintiff to carry on the timber business throughout the term and a covenant by Munro that the plaintiff would have quiet enjoyment of the premises. In 1888, Munro leased an additional shed to the plaintiff for the remainder of the period of the earlier lease on the same terms and conditions. In 1892, Munro died and his devisees sold the fee simple estate in the land subject to the leases to the defendants. The defendants also owned adjoining land and on that land they began to erect equipment for the supply of electricity to neighbouring areas. The plaintiff claimed that the defendants were interfering with the access of air to the drying sheds used in the timber business. The plaintiff sought an injunction to restrain further interference, arguing that the defendants’ acts were a derogation from the grants of 1878 and 1888 and also a violation of the covenants for quiet enjoyment contained in those leases. Stirling J held (at 447) that: Munro became subject to the obligation to abstain from doing anything on his adjoining property which would substantially interfere with the carrying on of that business in the ordinary course; and that obligation binds the present defendants, as assigns from him, subject to the existing lease.

By the instrument of 7 May 1888, which is under seal, and for which valuable consideration was given by the plaintiff, a like obligation became imposed on Munro, and to it the defendants are subject.

8.65

The principle of Aldin’s case was applied in Cable v Bryant [1908] 1

Ch 259; [1904–07] All ER Rep 937, in which a lessor granted a lease of a stable, retaining adjoining premises. It was held that the lessor and his successors in title could not derogate from the grant of the lease by constructing hoardings that interfered with the ventilation of the stable. It had been

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argued that no easement could have been created at the time of the lease, since at that time the adjoining premises were also subject to a lease and it is not possible to grant an easement in reversion.85 As in the case of the covenant for quiet enjoyment, the interference must be more than trivial. In Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2003] NSWSC 460 (upheld on appeal: (2005) NSW ConvR ¶56-116) the test of actionable interference with premises was held to be ‘substantial’ or ‘material’. It was held that there was no derogation on the facts, in part because the landlord was given the right in the lease to redevelop the retail complex of which the tenant’s premises were part, and it was agreed that if the tenant’s business suffered as a result, there would be no derogation from grant. Compare Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) 305 ALR 569 where, in the absence of an agreement, the landlord’s business, which

competed directly with the tenant’s, was held to derogate from the earlier grant. In Pourzand v Telstra Corp Ltd [2012] WASC 210 it was held that the carrying out of renovations was so extensive as to undermine the tenant’s rights giving the tenant a right to terminate. Where the landlord’s consent to a development application is required for the tenant to continue performing their obligations under the lease, as in the case of running licensed premises, the landlord who withholds consent will be held to have breached the covenant not to derogate from grant: Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380. 8.66

The difference in scope between the landlord’s covenant of quiet

enjoyment and the obligation not to derogate from the grant was referred to by Kirby P (with whom Hope and Samuels JJA agreed) in Lend Lease Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 208, where his Honour distinguished between ‘threats or other intolerable nuisances which offend the covenant for quiet enjoyment and user of the retained part which makes the demised premises less fit for the purpose for which they were let’. The latter was concerned with the implied covenant not to derogate from the grant. In this case the landlord was held to breach the covenant because they demolished part of a warehouse, which allowed burglars to break into the tenant’s premises. 8.67

In Telex (Australasia) Pty Ltd v Thomas Cook & Son (Australasia) Pty

Ltd [1970] 2 NSWR 257, the lessor was aware that the lessee required the premises for the distribution of hearing aids, servicing audiometric equipment, and the sale of dental and optical equipment. During the

currency of the term, the lessor received notice from the city council requiring alterations to the lift system and installation of automatic fire sprinklers. Later the lessor also installed an air-conditioning system for the building. The lessee complained that it could not carry on its work in such conditions. On legal advice the lessee ceased to pay rent and later vacated the building. The Court of Appeal upheld the trial judge’s finding that there was implied in the lease a condition that the lessor would do nothing to render the premises unfit for the purpose for which they were demised. It did not matter, so the court held, whether the condition was described as a covenant for quiet enjoyment or one against derogating from grant. Its categorisation was unimportant unless the covenant for quiet enjoyment were restricted to actual physical interference with the demised premises.

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8.68

In Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185,

Hill J was also sceptical about the difference between the two concepts: There will be a breach of the covenant for quiet enjoyment or alternatively the implied covenant not to derogate from the grant where the acts or omissions are such as to render the demised premises unfit for the purpose for which the leased premises are intended to be used [at [37]– [41]].

Note also the comments of Young CJ in Eq in Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 456: The essential result, whether one applies the covenant for quiet enjoyment or the principle against

derogation from the grant is virtually the same and accordingly I will not further overburden these reasons with a fuller discussion of the matter [at [29]].

Liability for acts of others 8.69C

Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 Queensland Court of Appeal (Full Court)

[In March 1992 the plaintiff signed an agreement for a lease of unit 5 of a commercial building. By cl 4 of the agreement, the plaintiff undertook not to use the premises for any purpose other than the ‘manufacturing or sale of new/repaired canvas awnings/annexes and camping equipment’. The lease was for a term of three years commencing on 1 April 1992 with an option for a further three years. Subsequently, adjacent premises were leased to Top Flight, a firm making timber staircases, for which it used power saws, sanders and other power tools. This work created dust, sawdust and noise which, according to the plaintiff, interfered with the conduct of its business. The two sets of premises were separated only by a narrow covered way; and the partition walls between them did not reach to the common roof of the building. Consequently, particles of sawdust passed into the plaintiff’s premises and its products both from Top Flight’s premises and from a bin outside the premises. The sawdust caused problems for the plaintiff’s working conditions, collecting on the floor, on the machinery, and on raw or finished materials. It frequently stained the plaintiff’s canvas products, so that they could not be sold at full price. Also, the noise from the power tools was so loud as to make ordinary speech and telephone messages inaudible in the plaintiff’s premises. Under the terms of Top Flight’s lease the tenant was obliged not to ‘do or permit any act or thing which might be a nuisance or cause damage or disturbance to any other tenant of the landlord’. The plaintiff sued the landlord for breach of an implied covenant for quiet enjoyment.] MacPherson JA: Lessor’s implied obligation The law governing the relevant obligations of a landlord to a tenant is less certain than might perhaps be hoped. It is, however, well settled that under a lease of land, whether it is a formal demise or a mere tenancy agreement, there is on the part of the lessor an implied covenant or agreement not to derogate from the grant, and a further such covenant or agreement for

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quiet enjoyment by the lessee. In some of the older decisions the liability of the landlord was treated as depending on the presence in the lease of words like ‘grant’ or ‘demise’; but in Australia it was settled by O’Keefe v Williams (1910) 11 CLR 171, by which we are bound, that the matter is properly one of implication of terms in order to give business efficacy to the contract. Speaking in that case of a lease by the crown, Griffith CJ said (at 191) that, where the lessor contracted to give exclusive occupation of land, ‘there is to be implied an obligation in the nature of a promise not to disturb him in that occupation’; and (at 192) that the obligation so implied was ‘that the lessor shall neither disturb the possession himself nor authorise its disturbance by others’. See also the reasons of Barton J, in the report of that case at 199–200; and of Isaacs J, at 211, who said that granting an exclusive right of possession ‘connotes that the grantor will not attempt to interfere with it’ … Extent of disturbance Two inquiries are involved. The first is whether the extent of the disturbance or disruption suffered by the plaintiff was such as to amount to a breach of the lessor’s implied obligation; the second is whether, although brought about by the actions of Top Flight, the defendant lessor can be held liable for it. As regards the first question, a frequent starting point is the statement of Parker J in Browne v Flower [1911] 1 Ch 219, at 226: … if the grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the particular purpose for which the grant or demise was made. In the present case the purpose of the lease to the plaintiff was evident from cl 4 of the agreement, which limited the use of the premises to the manufacture and sale of canvas goods … For my part, I do not consider that, in order to establish a breach of the lessor’s implied obligation recognised in O’Keefe v Williams (1910) 11 CLR 171, the law insists on ‘practical frustration’ of the purpose of the lease. At least that is so where, as here, the claim is for damages and not, as in Gordon v Lidcombe Investments, for an injunction to restrain the alleged disturbance in circumstances in which damages would be an adequate remedy for the breach. It was ultimately on this ground that relief was refused in that case, Street J. holding that the plaintiffs there had ‘failed to establish any equity entitling them to relief’. See [1968] NSWR 9, at 19. Whether they would have succeeded in a claim for damages may have raised considerations of a different kind. The further proposition in Browne v Flower [1911] 1 Ch 219, at 228, that to constitute a breach of the obligation there must be physical interference with enjoyment of the premises ceased to be tenable after the decision in Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 CA 200. See Port v Griffith [1938] 1 All ER 295, at 298; and Megarry & Wade, Law of Real Property (4th ed), at 679 n 1. Owen v Gadd, JC Berndt Pty Ltd v Walsh and Newman v Real Estate Debenture Corporation Ltd are all cases in which there was no direct physical impact on the premises. See also Haig v Chesney [1925] SASR 82, which was an interference with light. In any event the penetration into the leased premises of sawdust,

if not of the sound of the planer, was, on any view of it, a physical interference with the enjoyment of the premises. Breach of obligation The question remains whether, considered in the context of the law laid down in O’Keefe v Williams, the learned judge was correct in finding that there had been a disturbance or interference with the plaintiff’s occupation of the leased premises amounting to a breach of [page 738]

the defendant landlord’s implied obligation not to derogate from its grant. The question is one of fact (Kelly v Battershell [1949] 2 All ER 830, at 837), depending on inferences to be drawn by this Court from the evidence accepted in the court below, giving due respect and weight to the conclusion of the trial judge. As to that, her Honour found that there had been ‘a substantial interference’ with the right of occupation granted by the defendant rendering the premises ‘substantially less fit’ for the purpose for which they were let. In doing so, she accepted the evidence of Mr Freney that, by the end of 1993 when he discussed the problems with Mr Bendall on behalf of the defendant, the premises had become unsuitable, rather than simply ‘less than ideal’. The learned judge based her conclusion primarily on the evidence of the plaintiff’s witnesses, but particularly on that of the Departmental workplace health and safety adviser Mr B Groothoff … When all these matters are brought into account, they justify the conclusion of the trial judge that the plaintiff’s occupation of the leased premises was substantially interfered with by the activities of Top Flight conducted on the adjoining premises. The lessor’s liability It is another matter whether the defendant can in law be held liable for that interference or disturbance. The acts that produced it were not those of the lessor but of Top Flight, which was another tenant of the lessor. The older authorities suggest that in those circumstances the lessor is not liable for breach unless the acts in question were authorised by the lessor, or at least were reasonably foreseeable: see Harrison Ainslie & Co v Muncaster [1891] 2 QB 680, at 686, 689. In Malzy v Eicholz [1916] 2 KB 308, the landlord was acquitted of liability because it was not foreseeable that the other tenant would engage in an activity that not only constituted a nuisance but was also illegal. On the other hand, the lessor in Haig v Chesney [1925] SASR 82, and, at least to some extent, the landlord in Newman v Real Estate Debenture Corporation Ltd [1940] 1 All ER 131, were held liable for disturbance that was the reasonably foreseeable consequence of the reasonable foreseeable actions of another tenant. Some of the older decisions insist on proof of ‘authorisation’ or ‘active participation’ by the landlord in the act giving rise to the consequences complained of. The law, however, has moved some way since those decisions were given. A person may now be liable for acts done on his land creating a nuisance, even though they were done by the trespasser or resulted from natural causes, if he fails to take steps to eliminate or prevent them. See Sedleigh-Denfield v O’Callaghan [1940] AC 880, applied in Hargrave v Goldman (1963)

110 CLR 40; Wilkinson v Joyceman [1985] 1 Qd R 567; and R v Shorrock [1994] QB 279. In each of the first three cases liability depended on the defendant’s continued occupation and control of the land at the relevant time. In R v Shorrock the defendant parted with possession or occupation of land knowing that there was a real risk that the activities (a rock concert) that were going to be conducted there by others would constitute a nuisance. His conviction of the misdemeanour of public nuisance was affirmed by the Court of Appeal in a judgment that applied the principle in SedleighDenfield v O’Callaghan [1940] AC 880. See R v Shorrock [1994] QB 279, at 289. The result is that although, apart from any provision in the lease, a lessor generally loses control over premises once they are let to a tenant, he may nevertheless remain legally responsible for tortious acts done on the land by a tenant at least if at the time he agreed to part with possession and control, it was reasonably foreseeable that the tenant was likely to do those acts. In the lease (ex 30) of unit 15 from the defendant to Top Flight the permitted use of these premises was defined as ‘Manufacture of staircases and associated products’. By cl 7.1, headed Nuisance or Injurious Conduct, the lessee undertook not to do or permit any act or [page 739]

thing which might be a nuisance or cause damage or disturbance to any other tenant or to the lessor. By enforcing that provision of the lease, it would have been possible for the defendant to control the nuisance-making activities of Top Flight. In fact, repeated representations by the plaintiff to the defendant about Top Flight’s activities or their consequences elicited little improvement in the state of affairs complained of, although it was through the efforts of Mr Boyle, who was the defendant’s site manager, that Top Flight was prevailed on to cover the base of the hopper with shade cloth. Although there were letters of complaint from the plaintiff to the defendant about the sawdust from Top Flight’s operations coming into the plaintiff’s premises, Mr Boyle was never instructed by the defendant to conduct an inspection of the plaintiff’s premises nor to persuade Top Flight to remedy the problem. Mr Rebbechi, who is the defendant’s development manager, had been employed by Shonafield, which assigned the reversion to the defendant. Through him, the defendant knew the nature of the business of Top Flight, which had previously occupied other premises in the complex on the same site before it moved into unit 15. The defendant was aware of the sawdust problem and knew that Top Flight intended to expand its production, which was the reason why it moved into unit 15. According to Mr Rebbechi, it was because of this that a dust extractor was required and a more detailed lease in registrable form containing the ‘nuisance’ clause 7.1 was insisted upon by the defendant. It is evident that the defendant was aware of the problem with dust or saw dust even before Top Flight moved into unit 15 in early December 1992, and it must or ought reasonably to have foreseen that, unless controlled, it was likely to affect the plaintiff’s business of manufacturing and selling canvas goods … In these circumstances, it seems to me that the defendant adopted the noise nuisance created by Top Flight, and that it did so at least after the time of the meeting in

November 1993. The learned trial judge did not make any precise finding to that effect in her reasons; but she found that the plaintiff ‘gave the defendant many opportunities to remedy the situation but the defendant chose not to do so, not even conducting a thorough inspection of the problems’; and she went on to hold that the defendant was responsible for the acts of its tenant Top Flight, with the result that it was in breach of its implied obligation not to derogate from its grant. Having regard to the control that was capable of being exercised by the defendant over its tenant through the medium of cl 7(a) of the lease, her Honour’s conclusion on this point was justified and should not be disturbed. It is consistent both with the decision in R v Shorrock [1994] QB 279, and with recent appellate decisions on the subject in the United States in Blackett v Olanoff 358 NE 2d 817 (Mass 1997) and Bocchini v Gorn Management Co 515 A2d 1179 (Md 1986). In the leases of the other tenants in both of the American cases there were provisions prohibiting them from making excessive noise … The judgments in both cases repay study. In the circumstances prevailing here the defendant was rightly held liable for the sawdust and noise nuisance created by Top Flight which, although not shown to have been authorised or encouraged by the defendant, was capable of being corrected or terminated by active intervention on its part. [Fitzgerald P and Thomas J concurred.] Appeal allowed.

8.70

As Macpherson JA notes, the old law imposed less stringent duties

on landlords. Compare Aussie Traveller with the former leading authority of Malzy v Eichholz [1916] 2 KB 308. Eichholz was the lessee of a block of buildings comprising a licensed restaurant (the ‘Colonnade’), two shops and some offices. In May 1909, Eichholz sublet the restaurant to

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Malzy. Eichholz covenanted that Malzy, paying the rent and performing the covenants in the sublease, might occupy the premises during the term without any interruption or disturbance by Eichholz or any person claiming from, through or under him. In March 1913, Eichholz sublet one of the

shops to Castiglione for the purpose of carrying on the business of ‘a dealer in fine arts with power to sell by auction diamonds, jewellery, plate and Japanese curios’. Castiglione covenanted not to permit or suffer to be done any act which might be an annoyance to Eichholz or his tenants. In July 1913, Castiglione gave a licence to Dent to carry on mock auctions in the shop. Eichholz’s consent to this was not sought. Dent carried on the mock auctions in such a way as to be a public nuisance. Eichholz wrote to Castiglione to remonstrate but took no active steps to remedy the position. Malzy alleged that his business was seriously damaged by the disturbances thereby created. He brought an action against Eichholz and Castiglione for an injunction and damages. It was held that only where the grant of the lease would necessarily cause an interference with another tenant’s quiet enjoyment, or where the landlord ‘actively participates’ in the activity will he or she be liable. 8.71

Aussie Traveller represents a shift in approach by courts in marking

out the ambit of the covenant against non-derogation from grant (and by implication, the covenant for quiet enjoyment). Other recent case law indicates that courts are moving in the direction of imposing more exacting standards on landlords in cases of disturbance by other tenants of the landlord. In Chartered Trust Plc v Davies the landlord of a shopping mall was required to ensure that the public did not loiter in and around the premises of one tenant so as to interfere with an adjacent tenant’s business, Henry LJ concluding that ‘the law of nuisance has developed since 1917 when Malzy was decided’.86 In Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450, the landlord was held liable for breaching the covenant not to derogate from grant where the lawful use of premises as a brothel on one floor of a tenanted

building caused interference with the business on another.87 Nordern v Blueport Enterprises was considered in Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd (2005) NSW ConvR ¶56-116 where two judges considered that landlords will only be held liable for breach of the covenant not to derogate from grant by virtue of acts of their tenants only in ‘extreme circumstances’ (at [15]). In Southwark London Borough Council v Tanner [2001] 1 AC 1, the House of Lords held that noise arising from the ordinary use by tenants of neighbouring flats did not amount to a breach of the covenant of quiet enjoyment and refused to order the landlord council to rectify sound insulation. Compare the position where the neighbours generate abnormal levels of noise. 8.72

Aussie Traveller was distinguished on the facts in Fanigun Pty Ltd v

Woolworths Ltd [2006] QSC 28 where Mullins J held that crucial to the application of Aussie Traveller was that the landlord be in a position to take some remedial action. On the facts, however, Mullins J held (at [108]) that the landlord had no power to take such action since the tenant alleged to have committed the nuisance was disputing that it breached the term of an easement granted to it (along with the lease) in creating the nuisance. Aussie Traveller was also cited in Volley Investments Pty Ltd v Coles Myer Ltd [2005] WASCA 52, where the court emphasised that the event constituting the breach of covenant for quiet enjoyment must be ‘reasonably foreseeable’ before a landlord is liable. The court also held, following the long-established authority of Harrison, Ainslie & Co v Muncaster [1891] 2 QB 680 that the landlord will be liable for the

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acts of those ‘lawfully claiming by or from or under it’ (at [10]) such as a contractor whose negligence caused a roof to collapse, and the reasonably foreseeable consequence of which was interference with the tenant’s business. Aussie Traveller was applied in Demertjis v Chauhan (Rld) [2008] NSWADTAP 43, where it was held that lessors in a lease of retail shop premises were obliged to ensure that the lessee had access to toilet and running water facilities situated in an area outside the premises but within the same building (which the lessors owned) in circumstances where access to the toilet was blocked by hoardings erected by another tenant. 8.73

A distinction must be drawn between the obligation owed by a

landlord to a plaintiff tenant where another of his or her tenants has committed the nuisance, and a situation where the plaintiff is not a tenant who is victim of a nuisance. The general rule is that a landlord is not liable in nuisance to third parties for unruly tenants: Smith v Scott.88 The interplay between this rule and the more stringent rule in Aussie Traveller was most recently considered in Peden Pty Ltd v Bortolazzo [2006] QCA 350. The court held that it is necessary to distinguish between a lessor’s liability under nuisance and liability for breaching the covenant for quiet enjoyment or nonderogation from grant. For general liability in nuisance, the court held: ‘A lessor is not responsible for a nuisance created by a tenant unless the lessor let the premises for a purpose calculated to cause a nuisance, that is, by express authorisation of the nuisance or in circumstances where the nuisance was

certain to result from the purposes for which the property was being let’ (per McMurdo P and Philippides J at [29]). The court concluded at [32] that: The respondents’ case against the applicant insofar as it was based on the applicant’s responsibility to take action to alleviate the tenants’ nuisance was misconceived unless the respondents demonstrated that the applicant let the flat for a purpose calculated to cause a nuisance, that is, by either expressly authorising the nuisance or in circumstances where the nuisance was certain to result from the residential tenancy. Although that was not the case pleaded or conducted at trial, we will briefly deal with whether the respondents established a case in nuisance against the applicant on the evidence.

The court concluded that though the tenants in this case had caused a nuisance by drunken and unruly behaviour at all hours of the day and night, the barking of dogs, playing of loud music during the night, and excessive smoke due to burning off, there was no evidence that it was authorised by the landlord, or was certain to result from the nature of the letting. 8.74

Landlords will always be liable for those claiming under him of her if

their lawful acts cause interference, such as where the proper use of defective drains causes flooding;89 or where the use authorised in the lease of adjoining premises would necessarily cause nuisance to the tenant.90 According to Mandie J in AF Textile Printers Pty Ltd v Thalut Nominees Pty Ltd [2007] VSC 73, where a lessor is involved ‘directly’ in an act which interferes with quiet enjoyment, it is not strictly necessary that all the ingredients of a cause of action in negligence be present for there to be a breach of covenant for quiet enjoyment, as appears to have been assumed in Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd.91

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8.75

A landlord is not liable under an express or implied covenant for

quiet enjoyment for interference with the tenant’s possession of the premises caused by the exercise of a ‘title paramount’. In Jones v Lavington, the plaintiff obtained a sublease of certain premises that were subject to a restrictive covenant in the head lease forbidding their use for business purposes.92 The plaintiff had no notice of the covenant and carried on business on the premises until restrained by an injunction issued at the suit of the head landlord. It was held for several reasons, including the fact that the interruption to the plaintiff’s possession was pursuant to the exercise of title paramount, that the plaintiff had no remedy against his landlord for breach of the covenant of quiet enjoyment.93

Implied condition of fitness for habitation 8.76

At common law, a landlord impliedly covenanted to ensure that a

furnished dwelling house was fit for habitation at the commencement of the lease.94 This minimal restriction on landlords’ freedom was restricted in Hart v Windsor95 to furnished as opposed to unfurnished dwelling houses, and later decisions by which the landlord is relieved of liability for deterioration of the premises during the term of the lease.96 This approach reflects the laissezfaire economic philosophy of the nineteenth century. This rule is now largely obsolete, as it is only of relevance to that very narrow range of residential

tenancies that escapes the reach of the residential tenancies legislation: see 8.4. 8.77

Notwithstanding the unsympathetic approach shown by the common

law towards tenants of residential accommodation, the courts may be prepared to imply obligations on the part of the landlord to keep the premises in repair. The nature and extent of the implied obligations will depend on the circumstances. In Liverpool City Council v Irwin,97 tenants in a tower block withheld rent as a protest against the landlord council’s failure to repair the common areas of the building, such as lifts, staircases and passages. The only document relating to the leases was described as ‘conditions of tenancy’, which imposed obligations only on the tenants, not the landlord. It was held that there had to be implied, inter alia, an easement for the tenants and their licensees to use the stairs, lifts and passages. Since the common areas provided the means of access to the units in the building, the landlord was subject to an implied obligation to maintain them so that they were available for use. The obligation, however, was not absolute. The landlord was required to take reasonable care to keep the areas in ‘reasonable repair and useability’. On the facts this standard had not been breached as the tenants themselves were responsible for much of the disrepair. 8.78

L let premises to T under a lease containing a covenant by T not to

use the premises for the purpose of any trade or business other than that of boot and shoe makers. T later instructed the agent to find a subtenant for the premises. The agent found H who said she wished to use the premises for a confectionery business. The agent agreed that that would be all right. T’s

solicitors sent H’s solicitors a draft sublease containing a covenant by H not to

[page 743]

carry on certain trades on the premises, that of a confectionery business being excluded. H’s solicitors approved the draft and H executed the sublease. In due course L prevented H using the premises for a confectionery business. The lease between T and H contained a covenant for quiet enjoyment on the part of T. Did H have any remedy on these facts? The conclusion reached in Hill v Harris [1965] 2 QB 601; [1965] 2 All ER 358 was that there existed no implied warranty on the part of the landlord arising from a lease for a particular purpose that the premises could be lawfully used for that purpose. Russell LJ was of the view that ‘the ordinary and prudent course of investigation of title’ would have revealed the true position and the prohibition of the intended use in the head lease. 8.79

The caveat emptor approach reflected in Hill v Harris was confirmed

in Bradford House Pty Ltd v Leroy Fashion Group Ltd (1983) 68 FLR 1. In that case, the lessee failed to establish that the lessor’s agent had misrepresented the fitness of the building for the lessee’s purpose and failed to establish a breach of ss 52, 52(aa) and 53A of the Trade Practices Act 1974. In Bawofi Pty Ltd v Comrealty Ltd (1992) NSW ConvR ¶55-646, the lessee was unable to use the premises for the use permitted by the user covenant in the lease as a result of local council prohibition. To use the

premises for the only use permitted would have involved the commission of an illegal act. The lessee argued unsuccessfully that the lease provisions were unenforceable due to illegality. Giles J acknowledged that if a provision of the lease required the lessee to use the premises for the illegal use, the lease would have been unenforceable. But, in the circumstances of the case, the lessee was not obliged to use the lease for any purpose at all. A recent application of Hill v Harris is City of Subiaco v Heytesbury Properties Pty Ltd (2001) 24 WAR 146. Ipp J, with whom Malcolm CJ and Wallwork J agreed, held that a quiet enjoyment clause could not be construed to mean that premises were fit for a manufacturing business. The issue arose because Heytesbury considered that its ability to carry out a manufacturing business on premises leased to it by the city was impeded by a Town Planning Amendment procured by the City of Subiaco.

The obligation to repair 8.80

Subject to the limited obligation that the landlord must put furnished

premises into a state of repair at the commencement of the term and subject to the implications arising from the decisions in Northern Sandblasting Pty Ltd v Harris and Jones v Bartlett (see below at 8.83C), there is, at common law, no implied obligation to repair on the landlord.98 However, one aspect of an increasing tendency in the courts to view leases as contracts has been an inclination to imply an obligation to repair where this is seen to be necessary to give business efficacy to the agreement between the parties. Thus in Barrett v Lounova (1982) Ltd [1990] 1 QB 348; [1989] 1 All ER 351, the English Court of Appeal held that an obligation on the landlord to repair the

outside of premises could be implied into a lease which imposed an express obligation on the tenant to repair the inside. Kerr LJ (at QB 358; All ER 357) commented that it was obvious that ‘sooner or later the covenant imposed on the tenant in respect of the inside can no longer be complied with unless the outside has been kept in repair’. In Homebush Abattoir Corporation v Bermria Pty Ltd99 it was held that the lessor was subject to an implied obligation to repair or replace a defective refrigeration plant. The court based its decision on the fact that the lessee

[page 744]

was obliged to carry on a cold store business on the premises and that the lessor was entitled to terminate the lease if the lessee failed to do so.100 In considering whether an obligation on the landlord to repair the premises is implied in the lease, one should bear in mind the observations of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346: For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question. Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract.101

8.81

Where a lease relates to part only of the premises the landlord may

also be under an implied obligation to repair the common areas of the building which have been reserved for the use of all tenants, such as common access ways and stairs.102 Barrett v Lounova was considered by White J in Carrathool Hotel Pty Ltd v Scutti [2005] NSWSC 401 at [41]–[42]. White J held that there was a common intention that the landlord should effect certain repairs, and therefore rectification of the lease was permitted. Similarly, Greetings Oxford was considered on the issue of appropriate ambit of an express duty to maintain parts of the premises by Young CJ in Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 456 at [72]. Here an express duty to maintain was construed broadly. See also Ridis v Proprietors of Strata Plan 10308 (2005) 63 NSWLR 449 at [172] which concerned the ambit of an express covenant.

Duty to take reasonable care for the safety of occupants 8.82

Although there is no general duty on the part of the landlord to

provide premises fit for the purpose of the lease or to provide premises fit for habitation, the decisions of the High Court of Australia in Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 and Jones v Bartlett (2000) 205 CLR 166 recognised that the landlord is under a duty to take reasonable care for the safety of occupants. In the former case, a majority of the court (Brennan CJ, Toohey, Gaudron and McHugh JJ; Dawson, Gummow and Kirby JJ dissenting) found that the appellant landlord had breached its duty

to the plaintiff to take reasonable care for the safety of occupants of the demised premises. The appellant had conceded that it owed such a duty and all justices of the court appeared to accept that such a duty arose, in the form of a duty in tort rather than a duty arising from an implied covenant in the lease. The reasoning of Brennan CJ and Gaudron J was quite different from that of Toohey J and McHugh J. For this reason the court in Jones v Bartlett regarded it of limited authority: Gleeson CJ at 177 and 184, Gaudron J at 191, Gummow and Hayne JJ at 225–8, Kirby J at 233 and Callinan J at 248.

[page 745]

8.83C

Jones v Bartlett (2000) 205 CLR 166 High Court of Australia

[The appellant was seriously injured when he walked into a full length glass door in the house where he lived with his parents and which they leased from the respondents. The glass in the door was annealed glass 4 mm thick and was not toughened or laminated. When the house was built in the late 1950s or early 1960s the glass complied with the relevant Australian standard. At the time of the accident the Australian standards had been raised such that replacement glass or the glass in a new door was required to be 10 mm thick (if annealed glass) or toughened or laminated safety glass. The appellant alleged that the respondents were negligent in failing to have an expert inspect the premises before they were let to the appellant’s parents and in failing to have the glass replaced with thicker glass that would comply with the safety standards applicable to new buildings or to replacement glass at that time.] Gaudron J: The question whether, contract and statute aside, a landlord is under a duty of care was considered by this Court in Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313. Although no clear ratio emerges, it was decided in that case that a landlord was liable to the daughter of its tenants when she suffered injury as the result of defective electrical wiring in the leased premises in which she lived. It, thus, follows from

that case that, under the general law, a landlord of residential premises owes a duty of care to the members of his or her tenant’s household. What cannot be extracted from the reasons for decision in that case is the precise content of that duty. The injuries sustained by the tenants’ daughter in Northern Sandblasting were the result of the combination of two electrical defects. One, a defective connection of the earth wire at the power box, was present at the beginning of the tenancy and would have been discovered if an inspection had been undertaken by an electrician before the tenancy commenced. The other was defective wiring associated with the kitchen stove. The landlord had arranged for the stove to be repaired by an apparently competent electrician, but the repairs were done negligently. In Northern Sandblasting, Dawson, Gummow and Kirby JJ each held that the landlord did not owe the tenants’ daughter a duty of care with respect to either one of the electrical defects which combined to cause her injuries. Toohey and McHugh JJ held that the landlord had a non-delegable duty with respect to the stove repairs which it had undertaken to have carried out. Brennan CJ and I each held that there was a more general duty of care. Brennan CJ expressed the view in Northern Sandblasting that the duty owed by a landlord to his or her tenants and to those who occupy premises under and for the purposes of the tenancy is of the same standard as that identified by McCardie J in Maclenan v Segar. Maclenan v Segar concerned the duty of an occupier to those who enter upon premises with consent and for reward. And in that case, an occupier was held to be under a duty of care to see that the premises are as safe for the contemplated purpose of the entry as reasonable care and skill on the part of anyone can make them. However, in the view taken by Brennan CJ in Northern Sandblasting, the duty of a landlord is confined to ‘defects in the premises at the time when the tenant is let into possession’ and does ‘not extend to defects in the premises … discoverable only after the landlord parts with possession’. In Northern Sandblasting, I was of the view that the duty owed by a landlord is a duty ‘to take reasonable care for [the] safety [of those who constitute the tenant’s household] by putting and keeping the premises in a safe state of repair’. The duty was not, in my view, confined to [page 746]

defects existing at the commencement of the tenancy. However, what was reasonable would vary according to whether or not the tenants were in possession. Thus, before the tenancy commenced, it was reasonable both to inspect the premises and to remedy existing defects that gave rise to a foreseeable risk of injury. And in the case of defects or potential defects which posed special dangers (for example, electrical wiring and gas connections), it was reasonable to have an inspection carried out by persons skilled or expert in that regard. So far as concerns defects which were not present at the commencement of the lease, reasonable care required only the remedying of those defects of which the landlord was or ought to have been aware. Neither the duty of care recognised by Brennan CJ in Northern Sandblasting nor that which I considered should be recognised in that case avails the appellant in this case.

That is because the duty identified by Brennan CJ was confined to defects. And that which I thought should be recognised was simply a duty to put and keep the premises in a state of safe repair. The glass door in issue in this case was not defective and, not being defective, was not in need of repair. For the appellant to succeed in this case, there must now be recognised a duty on the part of a landlord of residential premises to ensure that those premises are as safe for residential use as reasonable care and skill on the part of anyone can make them. And it must also be held that it is reasonable, at least in the circumstances of this case, to replace items which, though not defective, involve a foreseeable risk of injury if safer items are available. The nature of the relationship between a landlord and the members of his or her tenant’s household is not such, in my view, as to require the imposition of a higher duty of care than that which I thought should be recognised in Northern Sandblasting. Gummow and Hayne JJ: … Northern Sandblasting proceeded on the basis of a concession by counsel for the owner of the premises that a duty of care was owed by the owner to the plaintiff, who was the child of the tenants. However, Dawson J pointed out, in a passage with which Gummow J agreed, that this concession was based on an acceptance of a statement of King CJ in Parker v Housing Trust (1986) 41 SASR 493 at 516–517 that the principle in Cavalier v Pope is inconsistent with the modern doctrine of liability for negligence as it has developed since Donoghue v Stevenson. All other members of the Court appeared to agree in this conclusion. The result is that in Australia it is no longer correct that a landlord never owes any duty in negligence to occupants in respect of the condition of residential premises. The rejection of the rule in Cavalier v Pope does not, however, go so far as necessarily to impose a duty upon the landlord to any person who may be on the premises at any given time. In Northern Sandblasting, the existence of some duty to the child of the tenants was assumed by the concession of the landlord. On the pleadings in the present case, the existence of any such duty was denied by the respondents. However, in their written submissions to this Court, the respondents conceded that they owed a duty of care to the appellant, the issues being its content and the presence of a breach of duty in the circumstances of the case. In our view, this concession was properly made, but to find the content of the duty in the particular case requires consideration of the wider question left unanswered in Northern Sandblasting. In doing so, it would be of no utility merely to conclude that the duty is to be expressed simply as one to take reasonable care to avoid a foreseeable risk of injury to a person in the situation of the appellant. That would be to leave unanswered the critical questions respecting the content of the term ‘reasonable’ and hence the content of the duty of care, matters essential for the determination of this case, for without them the issue of breach cannot be decided. [page 747]

The landlord’s duty to the tenant The starting point is to consider the relationship between the landlord and tenant. In

Northern Sandblasting, in a passage with which Gummow J agreed, Dawson J said of the duty of care between the landlord and a guest lawfully upon the premises that it was: … that which arises under the ordinary principles of the law of negligence, namely, a duty to take reasonable care to avoid foreseeable risk of injury to the respondent. The nature and extent of the duty in the particular instance depends upon the circumstances of the case. This statement also holds true of the duty between the landlord and tenant. However, it is only the beginning of the inquiry. The difficulty lies in determining the nature and extent of any duty that exists and that which constitutes a breach thereof. The ‘circumstances’ to be considered may differ between landlord and tenant and landlord and other persons. There is no necessary correlation between the respective duties, although the latter is likely to be less stringent than the former. This case, like Northern Sandblasting, is concerned with a letting for residential purposes. What follows is to be understood with that in mind. That which is required in respect of premises let for commercial or educational or other purposes may well differ, but that is not for decision in this case. … Lord Atkin in Donoghue v Stevenson asked whether the relations between the parties in question was so ‘close and direct’ that the act complained of directly affected the plaintiff as a person whom the defendant ‘would know would be directly affected by his careless act’. The relationship between landlord and tenant is so close and direct that the landlord is obliged to take reasonable care that the tenant not suffer injury. In considering the degree of care which must be taken, and the means by which a tenant may be injured, it must be borne in mind, as already discussed, that ordinarily the landlord will surrender occupation of the premises to the tenant. Thus, the content of any duty is likely to be less than that owed by an owner-occupier who retains the ability to direct what is done upon, with and to the premises. Broadly, the content of the landlord’s duty to the tenant will be conterminous with a requirement that the premises be reasonably fit for the purposes for which they are let, namely habitation as a domestic residence. Premises will not be reasonably fit for the purposes for which they are let where the ordinary use of the premises for that purpose would, as a matter of reasonable foreseeability, cause injury. The duty requires a landlord not to let premises that suffer defects which the landlord knows or ought to know make the premises unsafe for the use to which they are to be put. The duty with respect to dangerous defects will be discharged if the landlord takes reasonable steps to ascertain the existence of any such defects and, once the landlord knows of any, if the landlord takes reasonable steps to remove them or to make the premises safe. This does not amount to a proposition that the ordinary use of the premises for the purpose for which they are let must not cause injury; it is that the landlord has acted in a manner reasonably to remove the risks. What constitutes the taking of reasonable steps will, as Dawson J noted in Northern Sandblasting, depend on all the circumstances of the case. What is reasonable for premises let for the purpose of residential housing may be less demanding than for premises let for such purposes as the running of a school, or the conduct of a hotel or club serving liquor. Moreover, the reasonableness of steps to be taken will be affected by the terms of the lease, including the level at which the rental is pitched, the obligations the parties allocated inter se and any specification of limited purposes to which the

premises be put. It will also be affected by the terms of any applicable statutes, such as residential tenancy statutes. In some jurisdictions, [page 748]

there may be statutory requirements which supplant any common law duty or which impose a higher duty than the common law. The notion of reasonable fitness prompts three inquiries. The first concerns the presence of dangerous defects. The second, the taking of reasonable care to ascertain them. The third, the exercise of reasonable care to remove them or otherwise to make the premises safe. Dangerous defects and ordinary use What then may constitute a dangerous defect? The defective flooring in Cavalier v Pope and Voli v Inglewood Shire Council (1963) 110 CLR 74 would be obvious examples. So also the tap in Northern Sandblasting; a tap would not be expected to deliver an electrical shock to the person operating it. Likewise live wires or live electrical circuits that are misinstalled, or so exposed as to be liable to be brushed against accidentally, a light switch or light outlet that delivered a shock to one turning it on with dry hands; stairs that could not bear the weight of a person; and a roof that could not support a tenant authorised to be or to work upon it. It may also be that an untempered pane of glass prone to shatter or to explode when a door is opened or closed, or when wind blows against it, would be a dangerous defect. However, that is not this case. Some dangerous defects will exist at the time of entry into a tenancy agreement while others might develop during the course of the tenancy. It may be attractive to divide the class of ‘dangerous defects’ between these two heads, but the evidence may sometimes be insufficient to determine which of these is the case in respect of any particular dangerous defect. Rather, a better approach is to look at the origin of the defect, particularly whether it arises from faulty design or workmanship, at whatever stage, or whether it arises from a lack of repair. Those responsible for negligent design or building will ordinarily be liable as primary tortfeasors. Liability for disrepair will ordinarily fall upon the party with the obligation to repair. Liability for negligent repair ordinarily will fall on the repairer. The thread running through these cases is that a dangerous defect will, or may, cause injury to persons using the premises in an ordinary way. They are defects in the sense that they are more than dangerous; they are dangerous in a way not expected by their normal use. Many domestic items might be said to be dangerous: gas ovens, caged fans, hard floors, electrical circuits and panes of glass may cause serious or even fatal injuries. However, they are ordinarily only dangerous if misused. They will only be defective if they are dangerous when being used in a regular fashion and ordinarily would not be dangerous when so used. Moreover, the danger must appear in the course of the use of the premises for the purpose for which they were let. The reasonableness of the conduct engaged in by the person injured will be important. The danger may arise only to those performing acts unauthorised or uncontemplated as part of the purpose for which the tenancy was let. If

so, there ordinarily will not be a dangerous defect. The actions contemplated and authorised by the purposes of the lease will depend on all the circumstances of the case. Often they will be expressed by the instrument of lease itself. Thus, ordinarily it will not be an incident of use of residential premises to climb trees situated thereon; nor ordinarily will it be a reasonable use of premises if the tenants do something, such as perform repairs, which they are forbidden to do by the terms of the lease which grants occupancy. It is not necessary for present purposes to pursue this line of reasoning any further. The injury to the appellant was caused by his using the premises in the usual course of an occupancy of residential premises. The glass door, on the facts found by the Commissioner, was not a dangerous defect in the necessary sense. The premises were reasonably fit for the purpose of residential occupancy, both at the commencement of the tenancy (the relevant time according to the appellant) and at the time of the appellant’s injury. There was no breach [page 749]

of the respondents’ duty of care owed to the tenants. It is not suggested that any higher duty was owed to a permitted occupant such as the appellant. Ascertaining dangerous defects The diligence required to ascertain dangerous defects will not in the ordinary case require the institution of a system of regular inspection for defects during the currency of the tenancy … Nor is there a requirement for the engagement of experts in each of the fields, such as electrical wiring, and glass fabrication and installations, where such risks of defects could, in the nature of things, be seen as a possibility. The appropriate standard is indicated by a passage in the judgment of Ligertwood J in Watson v George [1953] SASR 219 … The defective gas bath-heater which caused the death by carbon monoxide gas poisoning of a paying guest at the defendant’s boarding house, when new, had been a safe and efficient appliance and it had been properly installed. Ligertwood J said (at 223–224): [The question is narrowed] to whether the defendant in a reasonable course of conduct towards her boarders should from time to time have had the bath-heater examined by an expert to see whether it was functioning properly. It is easy enough to say at this stage that she should have done so, but a bath-heater is a comparatively simple appliance, a defect in which would be expected to show itself to the ordinary user. The bulging of the water jacket was so rare an occurrence that the expert from the Gas Company had known it to happen on only one previous occasion. I do not overlook the fact that the heater had been in use for more than twenty years, but, even so, apart from the bulging of the water jacket, the heating portion was not in a state of disrepair. The accumulation of rust in the elbow of the secondary flue would appear to be equally unexpected. In these circumstances, I do not think I should hold that there was a failure on the defendant’s part to exercise reasonable care towards the users of the bathroom in not calling in an expert from

time to time to see that the bath-heater was functioning properly. It would have been better if she had done so, and it may have saved the life of the deceased, but to condemn the defendant on this ground is, I think, to be wise after the event and not to judge the affairs of mankind by the standard of ordinary reasonable human conduct. Watson v George based the duty in contract. While this does not necessarily translate into tort, it should now be considered to do so, particularly after the judgment of Windeyer J in Voli v Inglewood Shire Council. As Ligertwood J recognised in the above passage, where the existence of a dangerous defect was merely a possibility (albeit one later realised when the plaintiff was injured), the steps a landlord was required to undertake were only those that would be taken in the course of ‘ordinary reasonable human conduct’. The matter is not an exercise of hindsight. The identification of the requisite steps will depend, among other things, upon whether an ordinary person in the landlord’s position would or should have known that there was any risk; whether that person would or should have known of steps that could be taken in response to that risk; and the reasonableness of taking such steps. … Discharging the duty of care and delegability The duty of care encompasses an obligation to see to the removal of known defects rendering the residential premises unsafe and to make them reasonably safe by that removal. Many landlords, as a practical matter, will be unable to perform and, in some cases, be prohibited by law from performing the necessary repairs. Accordingly issues will arise as to whether it is sufficient for [page 750]

the landlord to engage a competent contractor to deal with the defects. Put another way, the question will be whether the duty to take reasonable care is ‘personal’ and ‘nondelegable’. To characterise a duty in this way involves, in effect, the imposition of strict liability. The content of the principle by which this characterisation is effected remains unclear. As Kirby J pointed out in Northern Sandblasting … Whereas, as a class, landlords might generally be in a better position than tenants, to carry the risk of unexpected harm in demised premises, this would not always be so. Finally, the position of a glass door in a house cannot be compared with a landowner bringing onto the land a dangerous substance or allowing a dangerous activity to be performed on the land. In Northern Sandblasting, a case involving electricity, five members of this Court rejected the submission that the landlord had been under a duty which was non-delegable in nature. (It will be convenient later in these reasons to indicate the standing of Northern Sandblasting in the light of the reasoning in this judgment.) The content of the landlord’s duty in a case such as the present is not one of strict

liability, to ensure an absence of defects or that reasonable care is taken by another in respect of existing defects. It is not a duty to guarantee that the premises are safe as can reasonably be made. It remains to consider whether a landlord owes to others upon residential premises a lesser duty than that owed to the tenants themselves. Other occupiers and entrants The general principle, consistently with Australian Safeway Stores Pty Ltd v Zaluzna is that liability for injury suffered by an entrant upon residential premises primarily will rest with the occupier. A tenant in occupation, rather than the landlord, has possession and control with power to invite or to exclude, to welcome in or to expel. Those asserting a duty often will be the guests or invitees of the tenant or persons present on the tenant’s business or for their business with the tenant. It will be the tenant who is best placed to inform such persons of any dangers or defects and the tenant who ‘is more directly in touch with emerging repair needs than a landlord who has surrendered possession’. However, dangerous defects are unlikely to discriminate between tenants and those on the premises whether as an incident of a familial or other personal relationship, as in this case, Cavalier v Pope, and Northern Sandblasting, or some other social or business relationship or occasion. The landlord’s duty to take reasonable care that the premises contained no dangerous defects, owed in the sense earlier described to the tenants, extends to those other entrants we have identified. Nevertheless, the duty of the landlord owed to these third parties, in many cases, will be narrower than that owed to them by an occupier such as a tenant. An example of facts not involving the placing of a duty on the landlord is a slippery floor, an unsecured gate to a fenced swimming pool may be another. The duty of care of the landlord to the third party is only attracted by the presence of dangerous defects in the sense identified earlier in these reasons. These involve dangers arising not merely from occupation and possession of premises, but from the letting out of premises as safe for purposes for which they were not safe. What must be involved is a dangerous defect of which the landlord knew or ought to have known. It is unnecessary here to pursue this aspect of the case further. This is because, as indicated above, in the present case treating the appellant as in as good a position as his parents, the tenants, there was no breach of duty by the respondents. The glass door was not a dangerous defect in the relevant sense.

[page 751]

8.84 Questions 1.

What is the ratio of Jones v Bartlett? To what extent, if at all, can it

be reconciled with Northern Sandblasting v Harris? 2.

Is the law now clear in relation to the obligations of landlords to tenants in tort? Are the obligations confined to tenants, or do they include members of the tenant’s family; invitees; all persons lawfully on the premises?

3.

What is the landlord’s duty in relation to dangerous defects? Is the duty owed by the landlord a delegable one?

8.85

Jones v Bartlett has already been applied in several cases.103 For

instance, the New South Wales Court of Appeal applied Jones in New South Wales Department of Housing v Hume (2007) Aust Torts Reports ¶81-879 but was careful to confine the scope of the duty narrowly. According to McColl JA (Basten JA concurring) the landlord is under a duty ‘to take reasonable care to avoid foreseeable risk of injury, but not to make the premises as safe as reasonable care could make them’ (at [88]).104 It followed that the appellant was not liable where the respondent fell from the steps leading down from the porch of a ground floor flat as she dislocated her knee. The landlord was not under a duty to install a handrail. In Sakoua v Williams (2005) 64 NSWLR 588 the plaintiff fell down the front steps of a residence. Mason P and Brownie A-JA agreed that though the steps were not as safe as they could have been (for instance, there was no landing at the top, and no handrail), they were not defective. Also, no-one had fallen down them in the past, so the landlord was not put on notice as to any foreseeable risk of injury. Jones was distinguished on the issue of interpretation of a particular provision

of the Real Property Act 1886 (SA) but not the core negligence issue by the court in John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc (2004) 88 SASR 334 at [67]. On the issue of non-delegability of a duty, Hayne J in the High Court in Leichhardt Municipal Council v Montgomery (2007) 233 ALR 200 made the following observation about Northern Sandblasting and Jones: In any event, recent authority of this court leans strongly against non-delegability and absolute liability in tort cases. Northern Sandblasting, which might suggest otherwise, has almost certainly been at least impliedly overruled by Jones [at [188]; footnotes omitted].

In Estate of Virgona v Lautour (2007) Aust Torts Reports 81-918; [2007] NSWCA 282 the tenant fell through the ceiling of the premises from a roof cavity. The court held that the landlord was not liable as this was not a place where the tenant would be reasonably expected to go. Ipp JA (Young CJ in Eq agreeing) concluded that ‘[t]here is no doubt the roof could have been made safer but that does not mean that it was dangerous or defective’ (at [54]). The potential liability of tenants to invitees is considered in Vasilikopoulos v New South Wales Land and Housing Corporation [2010] NSWCA 91. An occupant, who had had two knee constructions which led to restricted mobility, complained to the respondent landlord

[page 752]

about the accessibility of the shower in the premises of which her husband was a tenant. It was located above a deep bath. The landlord’s agent inspected the bath, but did nothing. She later fell and sustained serious injuries while

trying to have a shower. The court held that the landlord was not liable for her injuries because it was not under a duty to provide special facilities to tenants and their families. As Young JA concluded (at [15]–[17]; Sackville and Handley AJJA concurring): [I]n a normal case of landlord and tenant, if there be such a case, the law looks to the tenant to look after her own safety and if she does suffer some sort of disability and a relatively minor alteration can make things more safe then one would normally expect the tenants to do that. However, it is put in the instant case that this is public housing, that the tenants appear both to be pensioners and that the landlord of public housing is not in the same position as a ‘normal’ landlord. There is no authority put for that proposition and I must confess I find it difficult to accept it.

In Sheehy v Hobbs [2012] QSC 333, the stairs in the premises met the minimum standards of the Building Code of Australia, but they could have been rendered safer to avoid risk of harm to the tenant. It was held, however, that any defects were not obvious, and therefore the landlord was not liable. Compare the following case. 8.86C

Loose Fit Pty Ltd v Marshbaum [2011] NSWCA 372 New South Wales Court of Appeal

[A patron of a fitness centre was injured when she fell down stairs where no handrail was present, in contravention of the local building regulations. The stairs had been installed by the owners of the building without council permission. The tenants, who owned and ran the fitness centre, took possession of the premises some weeks before the patron fell down the stairs. The trial judge found the tenant liable for negligence.] Sackville AJA: As a general proposition, as between the tenant–occupier and the landlord of commercial premises, liability for injuries sustained by an entrant onto the premises will rest primarily with the former. That is because the tenant is generally in possession and has control of the premises and can determine who enters and under what

conditions: cf Jones v Bartlett, at 222 [195]. But everything must depend on the particular circumstances of each case. The circumstances of the present case are unusual. The Owners undertook substantial renovations of the premises in 2003. They neither sought nor obtained Council approval for the renovations. The reconstructed staircase was not built with a handrail as required by the approval given by Council to the construction of the original staircase in 1977. The approved plans, insofar as they required handrails, reflected the requirements at that time of Ord 70 (see [22] above). The primary Judge did not make a finding that the renovations carried out by the Owners required Council approval. However, Mr Kocx in his evidence accepted that he had never made any enquiries of the Council as to whether approval was required. Nor did he make any enquiries as to whether the work being carried out by the builder (who was unlicensed) complied with relevant safety requirements. In fact, as the experts agreed, the [page 753]

failure to install handrails on either level of the staircase contravened the BCA standards for staircases … Mr Kocx’s evidence was that he had never turned his mind, prior to the 2005 lease, as to whether a handrail should be installed on the staircase and that he had never been told that a handrail was required. However, in 2005, as the result of a request made on behalf of Loose Fit, Mr Kocx installed a handrail on the lower portion of the staircase as a safety measure. Since Mr Kocx was well aware that he had made no previous enquiries as to safety requirements for a staircase, the request clearly should have alerted him to the need to make enquiries to ascertain whether a handrail was needed on the upper level as well. He took no such steps. The Owners remained the occupiers of the staircase under the 2005 lease but Loose Fit became the occupier under the September 2006 lease. The Owners (by this time represented by Ms Hickie) still took no steps to install a handrail on the upper level or to make enquiries as to whether the staircase complied with safety standards … Other considerations support the primary Judge’s finding that a reasonable person would have installed a handrail on the upper level of the staircase. As the primary Judge pointed out, persons of different physiques, ages and stature were likely to use the fitness centre and the staircase. Mr Lucas accepted in his evidence that ‘all manner of people’ attended the centre, including ‘tall, short … fat people [and those] recovering from injury [emphasis added]’. As his Honour also pointed out, it must have been obvious that a short person would not be able to grip the stud wall as a means of support. Whether or not Mr Lucas consciously appreciated the danger posed to patrons, a reasonable person in his position should have recognised that the absence of a handrail would increase the risk that a short patron would fall as she was descending the staircase … Mr Cavanagh referred to a number of cases in which a claim based on the absence of a handrail on a staircase failed. These cases demonstrate no more than that an occupier’s

duty is only to take care which is reasonable in the circumstances. In Wilkinson v Law Courts, for example, the decision turned on the particular nature of the outside staircase (which ran a considerable distance from south to north and turned a corner to run a further distance from west to east). The Court took into account the expense and aesthetic drawbacks of installing an extensive network of railings. It was also relevant that other large public buildings in Sydney with similar configurations did not have handrailing installed. It can readily be accepted, as Heydon JA said in that case (at [32]) that ‘stairs are inherently, but obviously, dangerous [emphasis added]’. But occupiers are nonetheless obliged to take reasonable precautions to minimise the inherent risk. What is reasonable is a question of fact dependent on the circumstances of the case … Courts have been reluctant to find that a landlord breached the duty owed to entrants onto the leased premises where the risk to safety was ascertainable only by careful inspection of the premises prior to the lease being entered into. This is not such a case. The Owners created the risk to safety by carrying out the renovations on the premises in a manner that did not comply with safety standards. A simple enquiry, either at the time the staircase was installed or at any subsequent time, would have revealed the true position. At the time the 2006 lease was entered into, the Owners were aware that no enquiries had been made as to whether the staircase complied with safety standards. They clearly should have known that it did not. [page 754]

The Owners were aware in September 2006 that Loose Fit had used the premises as a personal training studio and gymnasium, this being the permitted use under the 2005 lease. Between June 2005 (when the 2005 lease commenced) and September 2006 (when the 2006 lease commenced), the Owners were the occupiers of the staircase. The Owners must have been aware that Loose Fit would continue to use the premises as a personal training studio and gymnasium after the 2006 lease commenced, since this was also the permitted use under that lease. The Owners therefore should have been aware that the staircase would continue to be used by Loose Fit’s clients once Loose Fit became the occupier of the staircase under the 2005 lease. If it matters, they also should have been aware that the clients might include people of short stature and of solid build. They were in at least as good a position as Loose Fit to appreciate that the absence of a handrail on the upper level of the staircase created a risk to the safety of patrons and that the risk was simple and inexpensive to eliminate. At one point in the argument it was suggested that the terms of the 2006 lease indicated that responsibility for installing a handrail rested with Loose Fit. However, there was no provision in the 2006 lease that imposed an obligation on Loose Fit to ensure that the premises complied with safety standards or to undertake work required to make the property safe for clients. Clause 7.4 of the lease imposed an obligation in certain circumstances on Loose Fit to perform structural work needed to make the property safe. However, cl 7.4 only applied if an authority required work to be done on the premises, something that never happened in this case. Even then, cl 7.4 provided that the work was the landlord’s responsibility, unless the work was required ‘only because of the way the

tenant uses the property’. The need for a handrail did not come about only because of Loose Fit’s use of the premises. In these circumstances, a reasonable person in the position of the Owners would have installed a handrail on the upper level of the staircase before entering into the 2006 lease. By failing to do so, the Owners breached their duty of care to the Plaintiff … Since the primary Judge dismissed the cross-claim he did not address the extent of contribution Loose Fit should recover from the Owners. It is necessary for the court to do so. The amount of contribution recoverable by Loose Fit from the Owners is that which is ‘just and equitable having regard to the extent of [the Owners’] responsibility for the damage’: Law Reform Act, s 5(2). In my view, the Owners have a substantial responsibility for the injuries caused to the Plaintiff. They created the risk in the first place and failed to make enquiries that would have established that the staircase contravened safety standards. They had more than one opportunity had they acted reasonably, to appreciate the nature of the risk and to eliminate it. Loose Fit also has a substantial responsibility for the injuries. It became the occupier of the staircase under the 2006 lease. Its representatives identified the risk created by the absence of the handrail on the lower staircase but did not turn their attention to the equivalent risk created by the absence of a handrail on the upper level. Although the accident happened within 10 weeks of the commencement of the 2006 lease, Loose Fit had ample opportunity to identify the risk and to take the simple remedial measures required. In my view, it is just and equitable that Loose Fit recover from the Owners a contribution of 50% of the damages payable to the Plaintiff. For these reasons, Loose Fit’s appeal against the Plaintiff should be dismissed, but its appeal against the Owners should be allowed. [Campbell JA and Handley AJA concurred.]

[page 755]

8.87 Questions 1.

When will tenants be liable to invitees in negligence for injuries sustained on the premises?

2.

Is the result in Loose Fit a fair one?

What should tenants do on inspecting premises to be used for 3. 4.

commercial purposes? Is the duty imposed on tenants of commercial premises higher than that of residential premises?

5.

Do you agree with Young JA that public housing tenants should not be owed a greater duty of care than tenants in private accommodation?

6.

How can Sheehy v Hobbs be reconciled with Loose Fit v Marshbaum?

Tenant’s obligation to use the premises in a tenant-like manner 8.88

Although the tenant also holds free of any implied obligation to

repair, a tenant at common law is obliged to use the premises in a tenant-like manner. In Warren v Keen [1954] 1 QB 15; [1953] 2 All ER 1118, the Court of Appeal firmly refused to extend this obligation to impose a general repair responsibility upon the tenant. Lord Denning commented that the meaning of the phrase could best be shown by illustrations: The tenant must take proper care of the place. He must, if he is going away for the winter, turn off the water and empty the boiler. He must clean the chimneys, when necessary, and also the windows. He must mend the electric light when it fuses. He must unstop the sink when it is blocked by his waste. In short, he must do the little jobs about the place which a reasonable tenant would do. In addition, he must, of course, not damage the house, wilfully or negligently; and he must see that his family and guests do not damage it and if they do, he must repair it. But apart

from such things, if the house falls into disrepair through fair wear and tear or lapse of time, or for any reason not caused by him, then the tenant is not liable to repair it.105

Tenant’s obligation to yield up possession 8.89

At the expiration of the term, the lessee is bound to deliver vacant

possession to the lessor. This obligation extends to subtenants and other occupiers and thus the lessee must see that all such persons have vacated the premises: Grainger v Williams [2005] WASC 286.

Covenants implied by statute 8.90

The legislation in the various states has been noted above in 8.54. In

New South Wales, it seems that the effect of s 74 of the Conveyancing Act 1919 is to ensure that the covenants and powers implied by ss 84 and 85 operate unless expressly negatived. Thus, the usual rule that implied covenants must give way to express covenants dealing with the same subject matter

[page 756]

may not apply to these statutory implied covenants. A short form of covenant is provided for by s 86 of the Conveyancing Act (NSW). If the covenant in the short form as set out in column one of Sch 4 to the Conveyancing Act is employed, the covenant will take effect according to the full and expanded version appearing in the second column. The short form covenants were once

very popular in commercial leases but with the advent of the word processor, are falling into disuse. Nonetheless, the wording of these covenants typifies the content of some of the express covenants to be considered below. The following paragraphs will deal with only the most significant of these implied statutory covenants. Importantly, residential tenancies legislation (see 8.212–8.231) implies many more obligations in tenancy agreements but these typically cannot be contracted out of by the parties.

Statutory implied obligation on tenant to repair 8.91

The law stated in Warren v Keen (8.88) hardly results in a satisfactory

accommodation of the interests of landlord and short-term tenant. The formulation of the tenant’s responsibility in that case may be contrasted with implied terms imposing obligations on tenants. For instance, s 84(1)(b) (NSW) implies a covenant in every lease, subject to any contrary agreement between the parties, by the lessee for himself or herself, his or her executors, administrators and assigns that he, she or they will: [A]t all times during the continuance of the said lease, keep and, at the termination thereof yield up the demised premises in good and tenantable repair, having regard to their condition at the commencement of the said lease, accidents, war damage and damage from fire, flood, lightning, storm and tempest, and reasonable wear and tear excepted.

Note that unlike an unqualified express covenant to repair, this implied covenant limits the obligation to the extent of the condition of the premises at the commencement of the term. Similar obligations arise in all states.106

Statutory implied right of landlord to inspect premises 8.92

Statute confers on landlords a general right to inspect premises to

view the state of repair. In New South Wales and the Australian Capital Territory, the landlord has a right to enter twice a year, but must give two days’ notice; while in Queensland and the Northern Territory, the landlord may enter at any time on giving two days’ notice. No notice is required in Victoria and Western Australia, though the landlord is restricted to one inspection per year at a reasonable time of day. Finally, in South Australia and Tasmania, the landlord may enter at all reasonable times without notice.107

Statutory implied right of re-entry 8.93

These important implied statutory covenants will be dealt with below

in relation to forfeiture of leases at 8.150–8.182.

[page 757]

Covenants by necessary implication 8.94

There are many cases in which the courts, acting on orthodox

contractual principles, imply terms into the lease in order to give effect to the intention of the parties gathered from the instrument as a whole. In Dillon v Nash [1950] VLR 293, for example, where there was a lease of a hairdressing

salon and there was only one convenience on the premises, access to which could be gained only by going through the landlord’s premises, a right of reasonable access to the convenience for the tenant, her employees and customers was implied.108 Compare Sleafer v Lambeth Borough Council [1960] 1 QB 43; [1959] 3 All ER 378, where the council’s standard form lease prevented the tenant from carrying out repairs or other work to the flat without permission and also authorised the council’s representative to enter the premises to carry out repairs. In Telstra Corporation Ltd v Capetan Pty Ltd (1996) 7 BPR 14,744 at 14,747, it was held that a clause in a commercial lease which provided that the lessee was not, without the previous consent in writing of the lessor, to install water, gas or electricity, air-conditioning, heating and cooling, was qualified by an implied condition that a commercial tenant was empowered to keep the demised premises to current Australian standards. A landlord will be under an implied obligation to consent to a development application if this is essential for the tenant’s ability to perform their obligations under the lease, such as operating licensed premises: Dogrow Pty Ltd v Teakdale Pty Ltd [2013] NSWSC 1380.

Express covenants 8.95

Some of the covenants commonly the subject of express agreement

between the parties will be studied in this section. These typically include: 1.

the covenant to repair;

2.

the covenant against assignment or subletting;

3.

the covenant as to user; and

4.

the covenant to pay rent.

Covenant to repair 8.96

A covenant to repair may be given by either the landlord or the

tenant as covenantor. Traditionally, it was the tenant who covenanted with the landlord to repair but more recently, for various reasons, landlords have been prepared to enter into repair covenants. Whether a court is construing a tenant’s repair covenant or a landlord’s repair covenant, certain factors are commonly taken into account in assessing the extent of the repair obligation. These include the nature and locality of the premises, their age, and the condition of the premises at the commencement of the lease. In Holding & Management Ltd v Property Holding & Investment Trust plc [1990] 1 All ER 938 at 945; [1990] 1 EGLR 65 at 68, Nicholls LJ spoke about the task of construction in these terms: This … involves considering the context in which the word ‘repair’ appears in a particular lease and also the defect and remedial works proposed. Accordingly, the circumstances to

[page 758]

be taken into account in a particular case under one or other of these heads will include some or all of the following: the nature of the building, the terms of the lease, the state of the building at the date of the lease, the nature and extent of the defect sought to be remedied, the nature, extent and cost of the proposed remedial works, at whose expense the proposed remedial works are to be done, the value of the building and its expected lifespan, the effect of the works on such value and lifespan, current building practice, the likelihood of a recurrence if one remedy rather than another is adopted, the comparative cost of alternative remedial works and their impact on the use and

enjoyment of the building by the occupants. The weight to be attached to these circumstances will vary from case to case.

A problem which causes not a little difficulty in the construction task is the distinction to be made between a repair and a renewal. Unless the lease makes it clear that the covenantor is liable for both, a covenantor who covenants to repair will not be liable to renew. A covenant to repair does not extend to giving to the covenantee a new and different thing or replacing the whole or substantially the whole of the demised premises: Lister v Lane [1893] 2 QB 212; Lurcott v Wakely & Wheeler [1911] 1 KB 905. In practice, the distinction is often a difficult one to make and the case law is extensive.109 A covenant to keep in repair is more extensive than a covenant to repair. In Chandos Developments Pty Ltd v Mulkearns [2008] NSWCA 62, the court held that the repairing covenant required the landlord to replace a church roof that had fallen badly into disrepair, on the basis that this was the only way to repair it. In some instances, repair will entail replacement of the damaged item. 8.97

Burchett AJ considered Lurcott in Callaghan v Merivale CBD Pty Ltd

[2006] ANZ ConvR 114; (2006) NSW ConvR ¶56-155 when considering a claim for breach of the standard form repair covenant in the schedule of the Conveyancing Act 1919 (NSW) (at [35]): Counsel for the cross-claimant referred me to Lurcott v Wakely & Wheeler [1911] 1 KB 905, an authoritative decision as to the effect of covenants to repair. In that case, Fletcher Moulton LJ said (at 919): [I]t is settled law that when a man undertakes to keep a thing in good condition or in thorough repair, and it is not in that condition when the demise commences, the covenant implies that he is to put it in that state as well as to keep it in that state.

To my mind, the form of covenant which clause 7 adopts from Schedule 4 to the Conveyancing Act is specifically designed to overcome this very conclusion. For it contains the important qualification expressed by the words ‘but having regard to the condition of the demised premises at the commencement of the lease’. If the premises were not then, to use his Lordship’s expression, ‘in good condition or in thorough repair’, the covenant has regard to that fact, so as not to impose a requirement to put the premises in a better state than that in which they were leased.

[page 759]

8.98C

Proudfoot v Hart (1890) 25 QBD 42 Court of Appeal of England and Wales

[A tenant covenanted to keep premises ‘in good tenantable repair’ and leave them in good tenantable repair at the expiration of the tenancy.] Lord Esher MR: What is the true construction of a tenant’s contract to keep and deliver up premises in ‘tenantable repair’? Now, it is not an express term of that contract that the premises should be put into tenantable repair, and it may therefore be argued that, where it is conceded, as it is in this case, that the premises were out of tenantable repair when the tenancy began, the tenant is not bound to put them into tenantable repair, but is only bound to keep them in the same repair as they were in when he became the tenant of them. But it has been decided — and, I think, rightly decided — that, where the premises are not in repair when the tenant takes them, he must put them into repair in order to discharge his obligation under a contract to keep and deliver them up in repair. If the premises are out of repair at any time during the tenancy the landlord is entitled to say to the tenant, ‘you have now broken your contract to keep them in repair’; and if they were out of repair at the end of the tenancy he is entitled to say, ‘you have broken your contract to deliver them up in repair’. I am of opinion that under a contract to keep the premises in tenantable repair and leave them in tenantable repair, the obligation of the tenant, if the premises are not in tenantable repair when the tenancy begins, is to put them into, keep them in, and deliver them up in tenantable repair … The result of the cases seems to be this: the question whether the house was, or was not, in tenantable repair when the tenancy began is immaterial; but the age of the house is very material with respect to the obligation both to keep and to leave it in tenantable repair. It is obvious that the obligation is very different when the house is fifty years older than it was when the tenancy began. Lopes LJ has drawn up a definition of the term ‘tenantable repair’ with which I entirely agree. It is this: ‘“Good tenantable repair” is such repair as, having regard to the age, character, and locality of the house, would make it

reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it’. The age of the house must be taken into account, because nobody could reasonably expect that a house 200 years old should be in the same condition of repair as a house lately built; the character of the house must be taken into account, because the same class of repairs as would be necessary to a palace would be wholly unnecessary to a cottage; and the locality of the house must be taken into account, because the state of repair necessary for a house in Grosvenor Square would be wholly different from the state of repair necessary for a house in Spitalfields. The house need not be put into the same condition as when the tenant took it; it need not be put into perfect repair; it need only be put into such a state of repair as renders it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it.

8.99

The case illustrates the width of the common repair covenant which

is perhaps more onerous than most lessees and their advisers would initially realise. Many repair covenants are qualified in that a lessee is made exempt from liability for damage caused by reasonable wear and tear. The effect of the ‘fair wear and tear’ exception was stated by Talbot J in Haskell v Marlow [1928] 2 KB 45 at 58–9, as follows: Reasonable wear and tear means the reasonable use of the house by the tenant and the ordinary operation of natural forces. The exception of want of repair due to wear and tear must be

[page 760]

construed as limited to what is directly due to wear and tear, reasonable conduct on the part of the tenant being assumed. It does not mean that if there is a defect originally proceeding from reasonable wear and tear the tenant is released from his obligation to keep in good repair and condition everything which it may be possible to trace ultimately to that defect. He is bound to do such repairs as may be required to prevent the consequences flowing originally from wear and tear from producing others which wear and tear would not directly produce.110

8.100

The reasonable wear and tear exception formulated in Haskell was

applied by Hodgson JA (McLelland CJ at CL concurring; Basten JA dissenting) in Alamdo Holdings Pty Ltd v Australian Window Furnishin gs (NSW) Pty Ltd (2007) NSW ConvR ¶56-167. At issue was whether damage to various bitumen areas adjacent to buildings leased to the respondent came within the fair wear and tear exception. His Honour concluded as follows (at [35]): Mr McHugh for Alamdo submitted that the primary judge was in error because he did not have regard to the evidence of experts. Mr Thom, who gave evidence for Alamdo, said that defects in the surface of the asphalt, such as ‘crocodile cracking’, must be immediately repaired because otherwise the defect will extend to the basecourse and/or sub-grade. Mr Colenbrander, giving evidence for AWF, said that only open potholes and unsealed surface areas involved more than reasonable wear and tear, but recognised that cracks in the asphalt layer would allow penetration resulting in further and more rapid deterioration. Mr McHugh submitted that the primary judge did not deal with a point raised in submissions, namely that a substantial part of the defects represented repairs which had actually been undertaken but which had subsequently deteriorated. The primary judge was also in error in holding that the pavement was at the end of its useful and expected life. This was irrelevant, and was wrong in relation to area 7, because, while the expert evidence was that this area would have a design life of 20 years, the area was in fact constructed in 1984. In my opinion, no material error by the primary judge is shown. The extent of the defects which went beyond mere surface defects was small, and it was well open to the primary judge to conclude that the state of the areas as a whole could be characterised as reasonable wear and tear. Such error as there was concerning the period during which area 7 had been used could not be considered as material. In my opinion, the principle in Haskell does not preclude this result. That principle applies where the ordinary operation of natural forces results in a condition which could be regarded as something to be dealt with by ordinary maintenance, and which would, if not attended to, cause damage going substantially beyond what could reasonably be considered reasonable wear and tear. In such cases, a tenant who has covenanted to maintain and repair, reasonable wear and tear excepted, will be required to carry out normal maintenance so as to prevent this kind of damage,

even though the initial condition could fall within the term ‘reasonable wear and tear’. I do not think the existence of surface cracking and a small amount of potholes which could in time lead to further deterioration meant that the existence of such features demonstrates either a failure to maintain or a condition that exceeds reasonable wear and tear so as to demonstrate error by the primary judge. The circumstance that maintenance had been carried out in the past by repair work such as filling potholes or the like does not affect this conclusion.

In Bentley v Chang Holdings Pty Ltd [2012] QSC 366 faults in the building’s lifts led to frequent loss of operation. It was held that the tenants were not liable as the faults were due

[page 761]

to fair wear and tear, rather than any direct cause by the tenants or other factors. In the absence of an exception for fair wear and tear, the tenant is obliged to repair damage that qualifies as fair wear and tear: Clowes v Bentley Pty Ltd [1970] WAR 20 at 27–8. In Bonafair Holdings Pty Ltd v Hungry Jack’s Pty Ltd [2016] NSWCA 276, the court rejected the landlord’s claim that the tenant was liable for the repair of the main electrical switchboard during the currency of the lease. The court held that the evidence showed that the deterioration was due to the operation of natural forces such as damp, and so came within the fair wear and tear exception. 8.101

Although a covenant to keep in repair also includes an obligation to

put in repair, regard must be had to the age, character, and locality of the building and to the type of tenant likely to lease the building. This caveat was

applied by the Court of Appeal of New South Wales in Abrahams v Shaw.111 The lessor complained that some sinks and draining boards in certain flats needed replacing and some of the bathroom mirrors needed resilvering. Applying the test formulated in Proudfoot v Hart, it was held the repair covenant had not been breached. The principle in Proudfoot v Hart was applied in Credit Suisse v Beegas Nominees Ltd [1994] 4 All ER 803. A covenant requiring the landlord to keep the building in ‘good and tenantable condition’ obliged the landlord to put the building in that condition, having regard to its age and locality, even if it had never been so. The standard of condition of repair was to be made, not judged against the condition of the building at the commencement of the lease, but rather, having regard to the objective requirements of the hypothetical reasonably minded tenant of the class likely to lease the demised premises. Proudfoot v Hart was distinguished in Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 on the grounds that where water had penetrated a basement because the sealing was defective, there was no obligation to repair it, as no damage to the building resulted. ‘Repair’ does not extend to renewing or reconstructing part or all of the premises: Lurcott v Wakely & Wheeler [1911] 1 KB 905. In Holus Bolus Pty Ltd v Wicko Pty Ltd [2012] NSWSC 497 the landlord was under an obligation to make repairs of ‘a structural nature’. It was held that council requirements for fire safety works were structural, therefore the landlord was liable for these particular repairs. 8.102

Is a covenantor in breach of a covenant to keep and put in repair the

moment the want of repair occurs or only after the expiration of a reasonable notice? In a line of authority culminating in the decision of the House of

Lords in O’Brien v Robinson [1973] AC 912; [1973] 1 All ER 583, it was held that a landlord is only in breach of a landlord’s covenant to keep in repair in circumstances where the landlord is aware of a defect that would put a reasonable landlord on notice that repairs were necessary and the repair work has not been done with reasonable expedition. However, where the landlord covenants to keep the whole building in repair and a defect occurs in a part of the building not comprising the demised premises, the general rule is that a covenant to keep in repair obliges the covenantor to keep them in repair at all times.112 Thus, there is a breach of this obligation as soon as a defect occurs. The authority in O’Brien v Robinson was seen as an exception to the general rule, confined to cases where there was a defect in the demised premises themselves. O’Brien was considered in Gration v C Gillan Investments Pty Ltd [2005] 2 Qd R 267. The court held that a landlord will be on notice if ‘put on inquiry’ as to the existence of relevant defects. The facts of the case involved the plaintiff alleging that the landlord had breached his obligation to repair under s 103(2)(c) of the Residential Tenancies Act. All judges held that the

[page 762]

obligation is not absolute; it will be breached when the landlord fails to repair a defect of which it was aware or of which it ought reasonably to have been aware. On these facts, it was held by Wilson J and Williams JA that a reasonable inspection of the stairs of the leased property at the start of the

tenancy would have revealed a defect which should have been repaired. Accordingly, judgment was rightly entered for the respondent and upheld on appeal.

Exception 8.103

In Bailey v J Paynter (Mayfield) Pty Ltd,113 the appellant lessor

alleged that the respondent lessee had breached the repair covenant in that a previous lessee had effected structural alterations to the premises which, although improving the value of the premises, were a technical breach of the repair covenant. Isaacs J in rejecting the appellant’s submission reasoned as follows (at 605–6): One can well understand and comprehend situations in which a breach of a covenant to repair and deliver up in good repair by a former tenant necessarily leaves the premises in a physically dilapidated and deteriorated state in the ordinary accepted connotation of those terms. If a tenant takes a tenancy of premises where by reason of user, decay, dilapidation or deterioration, floors are unsafe or rotting, windows are broken, locks missing, walls and ceilings dirty or plaster thereon broken and enters into a covenant to repair, keep in repair and deliver up in repair, that is one thing, then there is no reason why he should not be held to his covenant in the terms described by Lord Esher and Lord Justice Lopes [in Proudfoot v Hart]. But although this condition of the premises may be due to, or the result of, the breach of some earlier tenant’s covenant to repair, etc, the latter is irrelevant to the factual or physical state of the property at the time of the new lease. The nature of the repairs the new lessee is required to do to fulfil his covenant to repair is governed by the principles set out above relating to the condition and general state of the building and its location. It is not because some other lessee has allowed it to get into that condition in breach of the lessee’s covenant that gives rise to the new tenant’s obligation. His obligation to repair arises from the state of facts that actually existed at the time of the lease and the nature of the covenant that is entered into. Moreover, it is obvious that it is not every breach of the covenant to repair that results in the

premises being out of repair or in disrepair or not in tenantable repair at the termination of a lease vis-à-vis some new tenant. It may very well be so regarded as between the lessor and the former tenant inter se and for which the former tenant may be answerable in damages. But qua the new tenant whether he is aware or not of structural alterations done by the former tenant, such do not put the premises in a state of disrepair or out of repair or not in tenantable repair unless they produce a factual or physical state of deterioration and dilapidation. One can well imagine structural alterations which produce the diametrically opposite result — eg suppose a tenant breaks open a wall and puts in view windows which give a panoramic view of the harbour. This might well constitute a breach of covenant to repair and keep in repair and surrender in good repair by the tenant who did it. But, if he leaves the premises at or before the expiration of the lease and the landlord then leases it in that condition to a new tenant the premises and the view window and its surrounds then being in a perfectly sound state of repair and deliver up in repair, it would be ludicrous to suppose that the landlord could the very next day demand that the new tenant take out the view window and block it up, and that if he fails to do it, himself enter and carry out that work on the footing of the new tenant being in default.

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It would be a ludicrous law which would enable the landlord in those circumstances to say to his new tenant: ‘The place is out of repair because a former tenant with my consent put in that window’, and it would be no different if the former tenant made that alteration without the landlord’s consent.

Inherent defects 8.104C

Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567

High Court of Australia [The appellants were the lessees of the Markets Hotel in Sydney. They granted a sublease to C who assigned it to the respondent company. At the time when the sublease was granted there was a toilet in the basement of the hotel. The sublease contained a covenant to repair and to yield up in repair at the end of the term. During the term the lavatory was closed by the sublessee and another lavatory was installed in adjoining premises which were leased by the defendant. At the end of the term the premises were restored without a toilet at all. The plaintiffs claimed that the defendant was in breach of the covenant to yield up in repair and, upon the defendant refusing to reinstate a toilet in the hotel, sued for damages. The learned trial judge, Herron J, gave judgment for £100 damages in respect of certain minor matters, rejecting the contention of the plaintiffs that the covenant had been broken, that an expenditure of more than £3,000 had been incurred by the plaintiffs as a result of the breach, and that this expenditure was the measure of damages for the breach. Evidence at trial suggested that the toilet as constructed was dangerous to access and a health hazard. The Full Court rejected an appeal, so Graham appealed to the High Court.] Latham CJ: I call attention to the precise wording of the covenant. It is not only a covenant to repair a structure. It includes an express undertaking to maintain and keep all buildings, &c., with all necessary reparations, cleansings and amendments whatsoever ‘and the same so well and substantially … maintained … at the end expiration or sooner determination of the term … peaceably and quietly yield and deliver up to the lessors.’ The defendant took the premises with a lavatory upon them. The defendant was bound to maintain a lavatory upon them. Instead of maintaining the lavatory, the defendant abolished the only lavatory which existed upon the demised land. The defendant was bound to yield and deliver up the building containing a lavatory at the end of the term. Instead of doing so, the defendant yielded and delivered up the building without a lavatory. In my opinion there was clearly a breach of covenant by the defendant, unless certain arguments which commended themselves to the Full Court are to be accepted. In the Full Court the learned Chief Justice referred to the principles of law which take into account the age, condition, and general state of a building for the purpose of determining the extent of the obligation to keep a building in repair. If it was an old and rather broken down building, it need not be repaired in the same way as if, when demised, it was a new and up-to-date building. Thus, as his Honour said, if, when the building was taken over, it contained an inherent defect of a substantial kind, the covenant merely to repair does not impose an obligation to remove the defect, but only to maintain the structure subject to the defect so far as this can be effected by repair. His Honour referred to Lister v Lane & Nesham; Wright v Lawson; and Pembery v Lamdin. The learned Chief Justice agreed that altering the internal arrangements of a building was a breach of a covenant to repair. But he was of opinion that the lavatory handed over was a nuisance, that is, I take it, a nuisance at common law, and

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accordingly contained an inherent defect which the defendant was not bound to remedy under the terms of the covenant. Davidson J agreed with the Chief Justice that the lavatory was a nuisance and a danger. He pointed out that a reasonable user of the premises, having regard to their character, did not amount to a breach of a covenant to repair. He shared the opinion of the Chief Justice that what the sub-lessee did in abolishing the lavatory consisted in abating a nuisance, which was a lawful act which could not be the subject of a complaint. It is true that if a lavatory had been under construction at the time when the sub-lease was granted it would have been necessary to conform to the requirements of the by-law for an external wall abutting upon an open space. The lavatory as existing did not have such an external wall, but, as I have said, the by-law did not operate to make lavatories unlawful which had previously been approved under the by-laws of the Metropolitan Water, Sewerage, and Drainage Board. It prescribed requirements only in the case of construction of new water closets. There was no defect in the physical structure of the lavatory such as to render it incapable of maintenance by means of ordinary repairs as required from time to time. Accordingly there was no ‘inherent defect’ in the lavatory which can be relied upon as diminishing the extent of what would otherwise have been the obligation to repair and to yield up in repair. This being so, it is irrelevant, so far as the covenant is concerned, to say that the lavatory constituted a nuisance. The act of keeping the lavatory in good repair could not itself amount to creating a nuisance and could not be unlawful. But, in view of the expressed opinion of the Full Court, I think it proper to say that, in my opinion, there is no evidence that the lavatory when the sublease was granted was a nuisance, either at common law or under any statutory provision. There is no evidence whatever that it was offensive in any respect, though it was not upto-date and had an inconvenient approach. Further, the abolition of all sanitary accommodation in the hotel and the transference, for the convenience of the sub-lessee, of such accommodation to the annexe, went much further than abating any nuisance, even if such a nuisance existed. But, as I have already said, the subject of nuisance does not appear to me to be relevant to the determination of the obligations of the sub-lessee in this case. I am therefore of opinion that the findings of fact of the learned trial judge showed that there was a breach of covenant by the defendant and that the defendant is accordingly liable to pay damages to the plaintiffs in respect of that breach. The breach of covenant consisted in failing to yield up the hotel premises with sanitary accommodation thereon. As a direct consequence of that breach it was necessary to install such accommodation upon the demised land. Williams J: A building contains an inherent defect where ‘it is of such a kind that by its own inherent nature it will in course of time fall into a particular condition. The effects of that result are not within the tenant’s covenant to repair’ (Lister v Lane & Nesham; Wright v Lawson; Pembery v Lamdin). In the present case the hotel is a comparatively modern building constructed in 1910. If Costin had left the lavatory in the basement there would have been no difficulty in keeping the lavatory in repair during the sub-lease or delivering it up in a proper state of repair upon its expiry. But Costin in breach of covenant chose to

remove the lavatory off the demised premises on to other land. As a result of this voluntary act the demised premises were delivered up to the plaintiffs on the conclusion of the sub-lease bereft of a lavatory for the public bar. In order to remedy the breach the defendant must therefore pay whatever sum is required to reinstate upon the demised premises a lavatory equivalent to that which was removed, namely, a lavatory in working order consisting of two pedestals and a urinal stall. This will amount merely to the restoration of a subsidiary part of the premises (Lurcott v Wakely & Wheeler), and the making good the damage so as to leave the subject as far as possible as though it had not been damaged (Anstruther-Gough-Calthorpe v McOscar). Judgment for the plaintiff landlord with costs.

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8.105

The existence of an inherent defect as an exception to the lessee’s

liability under the ‘standard’ repair covenant was endorsed in Clowes v Bentley [1970] WAR 24 at 27. Also, in Sparta Nominees Pty Ltd v Orchard Holdings Pty Ltd [2002] WASC 54, Murray J held that there was no obligation to remedy inherent defects even where the tenant was under an express obligation to keep premises in ‘good and substantial repair’ (at [54]).114 English courts have taken a different approach to the inherent defects doctrine. In Ravenseft v Davstone a building was constructed of concrete with an external cladding of stone. The stones began to bow away from the wall due to the different co-efficients of expansion between stone and concrete and the absence of expansion joints. The landlord claimed to recover the cost of reparation from the tenants. The tenants denied liability under the repair covenant alleging the problem was caused by an inherent defect in the building. Forbes J held that the tenant was liable on the grounds that, taking into account the cost of inserting the expansion joints was small by

comparison to the cost of overall repairs, which in turn was small when set against the cost of the building. It followed that the landlord would not be getting back a wholly different building from the one he originally let. He cited with approval the statement of Sir Herbert Cozens-Hardy MR in Lurcott’s case [1911] 1 KB 905 at 914–15: It seems to me that we should be narrowing in a most dangerous way the limit and extent of these covenants if we did not hold that the defendants were liable under covenants framed as these are to make good the cost of repairing this wall in the only sense in which it can be repaired, namely, by rebuilding it according to the requirements of the County Council.

In Quick v Taff-Ely BC [1986] 1 QB 809; [1985] 3 All ER 321, Lawton LJ commented that he was satisfied that the approach of Forbes J in the Ravenseft case was right. Ravenseft was distinguished in Post Office v Aquarius Properties Ltd [1987] 1 All ER 1055 in which the Court of Appeal held that a tenant was not obliged to repair a defect in the premises which was the result of a design fault and which had caused no damage to the building which was in the same state as when it had been built. Which of the approaches to inherent defects is more satisfactory? 8.106

The making of structural alterations by the tenant to the demised

premises constitutes a breach of the repair covenant: Bailey v J Paynter (Mayfield) Pty Ltd.115 Legislation in New South Wales and Queensland provides that if there is a covenant against the making of ‘improvements’ without the consent of the lessor, the covenant is to be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that consent is not to be withheld unreasonably.116 The relevant provision in New South Wales (s 133B(2)) was considered in Skiwing Pty Ltd

v Trust Company of Australia [2006] NSWCA 276. The issue was whether consent was unreasonably withheld for a proposed construction of a balcony by the tenant, and whether expansion of the premises was an ‘improvement’ for the purpose of s 133B(2) and the lease. Spigelman CJ, in the leading judgment, held it was an improvement and that consent was unreasonably withheld. On the issue of s 133B(2), Spigelman CJ said (at [100]): However, s 133B(2) of the Conveyancing Act superimposes a specific proviso onto cl 7.01 of the lease between the parties, which proviso operates as a constraint on the ability of Stockland to withhold its approval. The effect of s 133B(2) is to convert such a provision from a shield for the lessor, to a sword for the lessee.

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Measure of damages 8.107

If the action for breach of the covenant to repair is brought during

the term of a lease, the measure of damages is the decrease in the value of the landlord’s reversion caused by the breach: Conquest v Ebbetts [1896] AC 490; [1895] All ER Rep 622. The reason for this rule is that the landlord is not obliged to appropriate the damages to putting the premises in repair and it is therefore not fair to let him or her have the cost of the repairs as damages. If the action for breach is brought after the determination of the term, whether by effluxion of time or otherwise, the measure of damages is the cost of carrying out the required repairs: Joyner v Weeks.117 If the required repairs amount to a substantial reconstruction of the premises, the measure of damages is the cost of rebuilding, less any increase in the value of the

premises when rebuilt: Strang v Gray (1952) 55 WALR 9. It will be observed that the rule in Joyner v Weeks may lead to injustice in that the landlord is able to recover the cost of repairs, even though the failure to repair may not have affected the value of the reversion. To overcome this problem legislation has been enacted in New South Wales and Queensland to the effect that in no case shall damages exceed the value of the reversion and, moreover, in the case of a covenant to leave or put premises in repair at the termination of the lease, if the tenant shows that the premises are about to be demolished the landlord can recover no damages at all.118 New South Wales and Queensland impose a further restriction on the landlord’s right to recover damages for breach of the covenant to repair by requiring that the landlord first serve a notice specifying the breach and requiring its remedy.119 The landlord will also be entitled to damages for any lost rent during the time taken to repair: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272. This case is also authority for the proposition that the landlord is entitled to the cost of restoring the premises to their original condition in the case of unauthorised improvements.120 8.108

Some of the authorities on damages were considered by Barrett J in

Waterways Authority of New South Wales v Coal and Allied Operations Pty Ltd [2005] NSWSC 1285. His Honour noted the default rule in Joyner v Weeks, but stated that this would not always be applicable: There may, however, be circumstances in which the cost of putting the premises into the contracted state does not represent the applicable measure of damages. That will be so where, for example, the lessor does not, in reality, want or require premises in the contracted state and is well content to have and enjoy the premises in the state in which they actually exist at the end of the

term. As is recognised in cases such as James v Hutton and J Cook and Sons Ltd [1950] 1 KB 9 and Re Zis; O’Donnell v Keogh [1961] WAR 120, such a lessor does not suffer through the breach damages commensurate with the cost of causing the premises to be in the contracted state, although that lessor may suffer damage to the extent of any reduction in the value of the reversion and, if there is no basis on which the court can come to that conclusion, damages will be nominal only.

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The covenant against assignment or subletting 8.109

Since a leasehold interest is proprietary, the lessee may assign the

lease or grant a sublease. Unless the lease otherwise provides, the lessee may assign or sublet without the consent of the lessor. This is true even of periodic tenancies such as weekly tenancies.121 However, the landlord usually wishes to retain control of the identity of the person in possession for the time being of the leasehold premises, particularly in the case of an assignment of the lease since the assignee may not have the same financial capacity or other qualities as the original tenant. Consequently, landlords almost invariably include a covenant in the lease prohibiting an assignment or underletting by the tenant. The covenant may take the form of an absolute prohibition against assigning, underletting or parting with possession, without any provision for the landlord consenting to a particular assignment or other parting with possession. In this case any assignment by the tenant is in breach of the covenant, even if the assignee is proved to be a solvent and respectable person and no reasonable objection could be taken to the assignment. It is, however,

always open to the landlord to waive the application of the covenant in a particular case by specifically consenting to the proposed assignment. At one time the landlord could not waive a particular breach without waiving the operation of the covenant for all time. This was an application of the doctrine in Dumpor’s case,122 which held that covenants were indivisible and consequently a waiver of one breach by the landlord rendered the covenant nugatory. The position has now been changed by legislation which permits, inter alia, the landlord to assent to a particular assignment without prejudicing his or her rights as to the future.123 The approach of the courts to a covenant preventing assignment or subleasing has generally been one of strictly construing the terms of the covenant against the landlord. There will be no breach of the covenant unless the tenant has voluntarily disposed of the leasehold interest inter vivos. Thus, the usual form of covenant is not infringed if the tenant bequeaths the interest by will or if the leasehold is assigned involuntarily as on a bankruptcy. It has also been held, for example, that the grant of a licence does not amount to a sublease124 and that an equitable mortgage by deposit of title deeds does not infringe a covenant not to assign or underlet.125 8.110

The covenant usually takes the form of a qualified prohibition,

preventing an assignment or other parting of possession ‘without the consent of the lessor’. At common law, the lessor in such a case could refuse consent to a proposed assignment quite arbitrarily unless the covenant specifically provided that consent was not to be unreasonably withheld. In some states it is now enacted that where the covenant prohibits assignment or other parting of possession without the consent of the lessor, it is to be implied in every

such covenant that the lessor’s consent shall not be unreasonably withheld unless the lease contains an express provision to the contrary.126 In these states the legislation has very little practical effect since most leases — certainly standard form leases — exclude the operation of the legislation. New South Wales and Queensland state that the implication is to be made notwithstanding any express provision

[page 768] to the contrary in the lease.127 But compare the situation where a clause prohibiting assignment without consent was subject to a proviso that before assignment the tenant should offer to surrender the lease to the landlord; held: proviso did not contravene s 133B.128 The legislation also provides that where the lease prohibits assignment without the consent of the lessor, then in the case of a building lease for more than 40 years which has more than seven years to run, an assignment may be made without the consent of the lessor provided that written notice is given of the assignment. This is so notwithstanding any contrary provision in the lease. It is to be noted that none of these sections applies to a covenant which absolutely prohibits all assignments: Re Giles and McConachy’s Lease.129 8.111

Even if the landlord is not entitled to refuse consent to an

assignment arbitrarily, the tenant is in breach of the covenant if the tenant assigns without first seeking the landlord’s consent. This is so notwithstanding that the landlord could not have reasonably refused to

consent to the proposed assignment had he or she been asked. An assignment in breach of covenant is effective to pass the leasehold estate to the assignee, but if the lease permits the landlord to forfeit upon breach this remedy may be exercised against the assignee.130 If the tenant proposes to assign in breach of covenant and the landlord acts promptly enough, the tenant may be restrained by injunction: McEacharn v Colton [1902] AC 104. The same principles apply to subleases in breach of covenant and to the case where the tenant is refused permission to assign by a landlord who is entitled to refuse consent on any ground but, despite the refusal, the tenant proceeds with the assignment. If a landlord is obliged not to withhold consent unreasonably, the tenant, as has been seen, must first seek the landlord’s consent to the proposed assignment. If the landlord refuses consent the tenant has two courses open. He or she may apply to the court for a declaration that the landlord is unreasonably withholding consent. This is the safer procedure and in certain cases the tenant may be able to take advantage of a summary jurisdiction in the court to have the matter heard speedily.131 Alternatively, the tenant may proceed with the assignment, accepting the risk that the court might hold, in proceedings brought by the landlord, that refusal of consent was reasonable. If the tenant guesses correctly that the court will hold that the landlord’s consent to the proposed assignment was unreasonably withheld, no liability will be incurred for the assignment, but the tenant will not be able to recover damages against the landlord: Yared v Spier.132 8.112

In determining whether or not the landlord’s refusal is reasonable,

the principle once applied was whether the refusal was based on the character

of the proposed assignee or the nature of his or her proposed occupation of the premises. If not, the refusal was said to be unreasonable, so that refusal was unreasonable where the landlord refused consent on the ground that the proposed assignees leased adjoining premises from him and he would lose them as tenants,133 or where the assignee was the purchaser of the tenant’s business,

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was a respectable and responsible person and was equally protected by the security of tenure legislation.134 However, this test has been said to be too narrow.135 In 2001, the House of Lords in Ashworth Frazer Ltd v Gloucester City Council approved the earlier broad test of Lord Denning in Bickel v Duke of Westminster to the effect that reasonableness should be measured by ‘all the circumstances of the case’.136 So, refusal has been held to be reasonable where the assignee would obtain a tenancy or sub-tenancy protected by rent restriction legislation;137 or where the assignee’s purpose was to participate in a development scheme by the landlord of an area including the demised premises.138 A clearer case of reasonableness of refusal was evident in Barina Properties Pty Ltd v Bernard Hastie Pty Ltd, where the proposed sublessee intended to use the premises for a purpose prohibited by the user covenant and the terms of the sublease made it clear that a breach must occur.139 8.113

Where a lease provides that the lessor’s consent is not to be

unreasonably withheld to an assignment or sublease or a statutory provision

such as NSW, s 133B applies, the lessor is entitled to consider his or her own interests in deciding whether to grant or withhold consent. Nonetheless, it is unreasonable for the lessor to withhold consent if any disadvantage incurred by the lessor on an assignment is minimal and out of proportion to the harm that would be suffered by the lessee if the consent were refused: International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513; [1986] 1 All ER 321; JA McBeath Nominees Pty Ltd v Jenkins Development Corporation [1992] 2 Qd R 121. A lessee proposed to assign a lease of a flat to an American resident in the United States. The lease provided that the lessor’s consent was required to an assignment or sublease. Until the assignee’s retirement some years hence, he contemplated a series of shortterm subleases. The lessor considered this might upset other tenants in the building and accordingly refused consent to the assignment. Was the consent unreasonably withheld? See Rayburn v Wolf (1985) 50 P & CR 463. 8.114C

Hamilton Island Enterprises Pty Ltd v Boss [2010] 2 Qd R 115; [2009] QCA 229 Queensland Court of Appeal

[The landlord refused to consent to an assignment unless the assignee agreed to abide by an extensive set of regulations concerning use of the premises in a deed that comprised what Hamilton Island Enterprises called the ‘Building and Siting Guidelines’ (‘the Building Guidelines’), ‘Tree Preservation Policy’ and ‘Hamilton Island Rules and Regulations’ (‘the Rules’). In the judgment, these provisions were referred to by the compendious term ‘HIE’s regulations’.]

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Fraser JA (Chesterman JA and Wilson J concurring): … The trial judge cited authorities for the principle expressed by Balcombe LJ in International Drilling Fluids Ltd v Louisville

Investments (Uxbridge) Ltd that: ‘a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease …’. The trial judge held that in particular cases it may be reasonable for a landlord to consider the impact of a proposed assignment upon the landlord’s proprietary or financial interest apart from the landlord’s interest under the lease, and that in particular cases a landlord might withhold consent on the basis of a use which the proposed assignee intends to make of the premises even though that use is not forbidden by the lease or the law. As an example, the trial judge cited Young CJ in Eq’s conclusion in Tamsco Ltd v Franklins Ltd [(2001) 10 BPR 19,077] that the landlord was reasonable to consider the effect of the proposed assignee not being an ‘anchor tenant’ upon ‘the good of the [landlord’s] shopping centre and [its] tenants’. The trial judge said: In the present case there is a sufficient connection with the subject matter of the lease. HIE’s concern is largely with the potential for the demised premises to be used in a way which it regards as disadvantageous to its interests. In particular, it is concerned that the land could be built upon or cleared in ways which could detract from the enjoyment of other land of which HIE is either a landlord or is in possession. To some extent the same applies to HIE’s concern to have the lessee bound by the Rules. That connection exists although the landlord’s concern is with the impact of a use of the demised premises upon other property. The trial judge then observed, ‘But that, of course, is not the end of the matter. The reasonableness or otherwise of HIE’s stance must be assessed’. As the trial judge concluded, the reasonableness or otherwise of HIE’s withholding of consent was a question of fact to be decided with reference to all the circumstances. So much appears, for example, from the terms of Lord Bingham of Cornhill’s second principle in Ashworth Frazer Ltd v Gloucester City Council, that: Secondly, in any case where the requirements of the first principle are met, the question whether the landlord’s conduct was reasonable or unreasonable will be one of fact to be decided by the tribunal of fact. There are many reported cases. In some the landlord’s withholding of consent has been held to be reasonable (as, for example, in Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547 and Bickel v Duke of Westminster [1977] QB 517), in others unreasonable (as, for example, in Bates v Donaldson [1896] 2 QB 241, Re Gibbs & Houlder Brothers & Co Ltd’s Lease [1925] Ch 575 and the International Drilling case [1986] Ch 513). These cases are of illustrative value. But in each the decision rested on the facts of the particular case and care must be taken not to elevate a decision made on the facts of a particular case into a principle of law. The trial judge accepted that, as Kelly SPJ said in JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd: ‘landlords were entitled to consider the effect which the transactions might have upon their ability in the future to let satisfactorily the different parts of their property.’ After accepting that HIE’s regulations might be regarded by a person in its position as reasonable, the trial judge referred to authority for the propositions that a landlord was not entitled to refuse consent for the purpose of acquiring a commercial benefit

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by replacing the lease with alternative contractual arrangements more advantageous to the landlord, even though that would be in accordance with good estate management, and that a landlord was not entitled to insist upon further terms which would change ‘the character’ of the lease. In holding that HIE’s withholding of consent was unreasonable the trial judge concluded that: (a) HIE’s Building Guidelines and Tree Preservation Policy would impose obligations upon the sub-lessee which had the potential to substantially affect what the sublessee could do with the land, including requiring any building or further development to be only as HIE permitted. Those obligations were ‘well outside the contract’ in the sub-lease; (b) HIE’s Rules were also well outside the terms of the sub-lease. They would permit HIE to ‘very seriously erode the sub-lessee’s right of quiet enjoyment, by permitting HIE to refuse entry to persons or to have them removed from the island’; (c) HIE did not seek to impose those new terms for reasons personal to Northaust, but in implementation of its general policy of requiring intended assignees to bind themselves to HIE’s regulations whenever its consent to assignment was sought; (d) It might be that in a particular case a landlord might reasonably refuse consent except on such a condition; but in a case where the proposed new terms could affect the substance of the tenant’s position, and where those new terms were not sought to be imposed for reasons personal to a particular assignee, the landlord’s refusal to consent except upon those terms would rarely be reasonable; (e) HIE sought to deprive the sub-lease of its assignability by insisting that every intended assignee first agree to vary the terms in a way that substantially affected the enjoyment of the land. This was a case in which, as the trial judge concluded, HIE sought to obtain a substantially more advantageous contractual position than that upon which it had insisted at the time of the grant. On the trial judge’s findings which I would affirm, HIE withheld its consent to the proposed assignment to Northaust by insisting upon the imposition of new terms which would substantially erode the rights conferred by the sub-lease; and HIE imposed the condition not because of any characteristic of Northaust but because HIE believed that it was in its own interests to impose the condition in all cases and regardless of any assignee’s personal characteristics. I have rejected HIE’s arguments that HIE merely sought to ‘uphold the status quo and to preserve the existing contractual arrangements’. Rather, HIE sought to put into effect an entirely new and very extensive contractual regime which was well outside the contemplation of the sub-lease. In those circumstances, what in substance would be assigned would not be the sub-lease, qualified only by covenants designed to overcome any potential disadvantage to HIE arising from the manner in which Northaust might exploit the rights granted by the sublease, but the sub-lease so heavily qualified as to alter the legal effect of essential rights of the sub-lessee granted by the sub-lease. I therefore agree with the trial judge’s conclusion that HIE sought to deprive the sub-lease of its assignability by insisting that every intended assignee first agree to vary the terms in a way that substantially affected the enjoyment of the land. In those circumstances, the authorities cited by the trial judge, and many other authorities, plainly justified his Honour’s conclusion that HIE’s

withholding of consent to the proposed assignment was unreasonable even if the withholding of consent would be in accordance with good management by HIE of the island generally. Appeal dismissed.

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8.115

A covenant against assignment or subletting will sometimes provide

that the lessor is not to refuse consent to a responsible and respectable assignee or sublessee. See, for example, the short form covenant No 16 in Sch IV of the Conveyancing Act 1919 (NSW). Such a covenant was considered in Moat v Martin [1950] 1 KB 175; [1949] 2 All ER 646, where the lessor submitted that s 19(1)(a) of the Landlord and Tenant Act 1927 (UK), which provided that the lessor’s consent was not to be unreasonably withheld, enabled the lessor to refuse consent to an assignment even to a respectable and responsible assignee if the lessor had reasonable grounds for withholding consent. The Court of Appeal rejected the submission. The covenant as construed by the court either did not require the lessee to seek consent if the assignee were respectable and responsible or, if the lessee were obliged to seek consent, the provision in the covenant was not ‘to the contrary’ of the proviso that the consent was not to be unreasonably withheld and, therefore, s 19(1) (a) did not apply. 8.116

Although there may be some doubt in the judgment of the Master

of the Rolls in Moat v Martin whether the consent of the type noted in 8.108 applies at all where a lessee proposes to assign to a respectable and responsible assignee, it was held by the Full Court of the Supreme Court of

Western Australia in Richardson v Somas [1967] WAR 109 that the lessee should seek the lessor’s consent in all cases. It was further held that the lessor was entitled to a reasonable time to consider the application for consent. Since the lessee had assigned without waiting for the lessor’s reply to the application, which, in any case, the lessor had not had time to consider, the assignment constituted a breach of the lease. In Scarcella v Linknarf Management Services Pty Ltd (in liq) (2005) NSW ConvR 56-106; [2004] NSWSC 360, Hamilton J noted that tardiness in replying by the lessor could be a factor suggesting unreasonableness in withholding consent. 8.117

If the lessee seeks the consent of the lessor to an assignment or

sublease to a respectable and responsible assignee or sublessee and the lessor refuses, what remedy has the lessee? Is the lessee entitled to damages? In Yared v Spier [1979] 2 NSWLR 291, Waddell J of the Supreme Court of New South Wales held that the lessee, having first sought consent, was entitled to assign or sublet to a respectable and responsible assignee or sublessee. However, the lessee was not entitled to recover damages from the lessor for a failure to grant consent because the term in the lease relating to assignments and subleases to respectable and responsible persons was a qualification on the lessee’s covenant not to assign or sublet without consent and did not amount to an express promise by the lessor not to refuse consent in these circumstances: Treloar v Bigge (1874) LR 9 Exch 151, followed.

Covenant as to user 8.118

The lessee is free to use the demised premises in any way thought fit

(subject to special legislation and environmental planning instruments) unless the lease restricts the use of premises: Direct Factory Outlets Pty Ltd v Westfield Management Ltd (No 2) (2005) 144 FCR 23 at [47]. Most leases contain a covenant restricting the user of the premises. In a case where a lease contains a covenant not to alter the use of the premises without consent of the landlord, the legislation of some states provides that the covenant shall be subject to a proviso that no fine (premium) shall be payable in respect of such consent. However, the landlord may demand payment for damage to or diminution in the value of the premises and legal expenses: NSW, s 133B(3); Qld, s 121. In Barina Properties Pty Ltd v Bernard Hastie (Australia) Pty Ltd [1979] 1 NSWLR 480, the majority took a narrow view of what constituted

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a demand for the payment of a fine: it was not enough that the lessor indicated it was prepared to consent to a change of user on payment of a higher rental.

Covenant to pay rent 8.119

The landlord has the right at common law to recover a reasonable

sum from any person occupying the land as tenant for the use and occupation of that land: Gibson v Kirk (1841) 1 QB 850; 113 ER 1357. Although the payment of rent may be an almost invariable provision in a lease, it is not

necessary for a lease to provide for the payment of rent.140 It is usual, nonetheless, for the lease to contain an express covenant by the tenant to pay a specified rental and in this case the landlord will rely on the express covenant in any action based on failure by the tenant to pay rent. However, if there is a lease and the lessee is not in possession, the ability of the lessor to recover rent from the person in possession will depend upon whether that person is an assignee and not a subtenant or licensee. Occupation of the premises does not, without more, render the occupier liable to pay rent by way of restitution for unjust enrichment: National Mutual Life Nominees Ltd v Travellers (NSW) Pty Ltd (1993) NSW ConvR ¶55-688. The rent need not be a fixed amount, but may vary with circumstances, as in Walsh v Lonsdale. It is enough that the amount of rent is capable of being rendered certain.141 The promise to pay rent is crucial to the enforceability of an agreement to lease and, therefore, it is vital to ensure that the rent is the subject of concluded agreement between the parties or failing agreement the rent is capable of being fixed by some third person or by some machinery: Randazzo v Goulding [1968] Qd R 433.142 Of particular importance to commercial leases is the rent review clause. In times of high inflation, economic instability and rising rents, it is important that the lessor be able to review rent regularly. There are many cases dealing with the complexities of rent review clauses. One important issue is whether a person appointed to determine the rent failing agreement between the parties is to act as an arbitrator or an expert valuer.143 In construing rent review clauses the courts may regard an unambiguous clause that produces an ‘absurd’ result as having been made in error and imply words into the clause to avoid that result: Westpac Banking

Corporation v Tanzone Pty Ltd (2000).144 The remedies of the landlord for non-payment of rent are dealt with in 8.183Cff. In all jurisdictions, there is a statutory implied obligation to pay rent, which like other statutory implied obligations can be varied by express agreement between the parties. For instance, the Victorian provision (s 67(1) (a)) states: … that the lessee will pay the rent reserved by the lease at the times therein mentioned and all rates and taxes which may be payable in respect of the leased property during the

[page 774]

continuance of the lease, except in so far as the same are or shall be payable exclusively by the owner of the property under any Act now or hereafter in force relating to local government.145

Option to renew 8.120

Options to renew the term of the lease are commonly conferred on

the basis that the option is exercisable only so long as there are no existing breaches or failure to observe the covenants in the lease. Such options are strictly construed and may be lost to the lessee by reason of a trivial breach, as in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122. On strict construction of options to renew, Buildev Development Pty Ltd v Pic Sales Pty Ltd (2004) 11 BPR 21,445 followed Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd. Campbell J held that even though the lessee purported to exercise a right of extension of the option period by written notice by the

specified date, and the inclusion of a personal cheque, the right was lost because the lease required a bank cheque: ‘It is well established that the conditions for exercise of an option must be precisely fulfilled’ (at [14]). See, however, Photo Art and Sound (Cremorne) Pty Ltd v Cremorne Centre Pty Ltd (in liq) (1987) 4 BPR 9436. The exercise of the operation need not be in a particular form. So, in C&P Syndicate Pty Ltd v Reddy (2013) 16 BPR 31,771 a lessee successfully exercised the option by email. 8.121

Several states have legislated to provide for relief against the loss of

the lessee’s option to renew in such circumstances. The legislation requires the lessor to serve a notice on the lessee, specifying the breach and stating that the lessor proposes to treat the breach as precluding the lessee from exercising the option. The lessee then has a specified period within which to apply to the court for an order for relief against the effect of the breach in relation to the option.146 Where an option contains a clause requiring an arbitrator, failing agreement between the parties, to determine a rent that is ‘fair and reasonable in all the circumstances’, what happens if the tenant, during the initial period of the lease, makes substantial capital improvements at his or her own expense? Should a ‘reasonable’ rental be assessed taking into account those improvements, thus requiring a higher rental? In Ponsford v HMS Aerosols Ltd [1978] 2 All ER 837, where the option clause referred to ‘a reasonable rent for the demised premises’, the House of Lords, by a majority, held that the rent should be based on the market value of the premises without consideration of who paid for the improvements. Where a lease contains a rent review clause (which may be distinct from an option to renew), the presumption is that the timetable specified in the clause for

determining the fresh rent is not of the essence of the contract: United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904; [1977] 2 All ER 62. 8.122

The authorities on timetables and rent review clauses were reviewed

by Burchett AJ in Callaghan v Merivale CBD Pty Ltd [2006] ANZ ConvR 114; (2006) NSW ConvR ¶56-155. In this case, Burchett JA (at [15]) emphasised that the terms of the contract may displace the presumption suggested in United Scientific Holdings: What these authorities establish is that rent review clauses are dichotomous in nature. On the one hand, some rent review clauses may be seen as simply establishing a machinery of review, or a series of steps to be taken to enable a review to be carried out. On the other

[page 775]

hand, other rent review provisions may declare the consequences of default in the taking of some step, or may express the necessity to take the step, in terms which make it clear that more than machinery is involved and contractual rights and obligations may depend upon strict and timely compliance with the procedure laid down. In the former case, the whole procedure may be merely directory and a particular non-compliance may have no serious effect upon rights or obligations; in the latter case, the procedure is mandatory and time is essential, whether or not it is expressly stated to be so. Although the House of Lords gave voice in United Scientific Holdings Ltd v Burnley Borough Council to an inclination to construe rent review clauses in the former sense, they also made it clear that the language of the lease, the way its provisions operate in connection with each other and other aspects of context may well lead to a different conclusion. In subsequent cases, it has been pointed out that the contrast between lenity in one respect and strictness in another of the provisions of the lease may emphasise that the strict provisions are intended to mean what they say.

In this particular case, Burchett JA considered that time was of the essence because of the particular words used requiring the lessor not to serve a notice before the stipulated time.147

The enforceability of covenants after assignment 8.123

The materials earlier in this chapter are concerned with the

covenants implied in leases and those customarily expressed in written leases. It is necessary to consider the problems arising when it is sought to enforce the covenants in leases. The question of enforceability may arise between the original parties to the lease, in which case the problem is governed by contractual principles. Alternatively, the question may arise after the original lessor (L) has assigned the reversion or the original lessee (T) has assigned the lease or sublet the premises. Strictly speaking, a covenant is a promise made in a deed, but the question also arises as to the enforcement of promises between L and T not contained in documents under seal.

Privity of contract 8.124

A lease is a contractual arrangement between L and T which has the

effect of creating an interest in the land in T. Privity of contract exists between the parties to the lease. Privity of contract remains even after L assigns the reversion or T assigns the lease. Assignment of either the lease or reversion will terminate the privity of estate (the landlord–tenant relationship) between L and T, but any liability which arises from the

contractual relationship remains. Once T assigns the lease, continued liability under the covenants of the lease depends upon the wording of the covenant. If the lease is framed, as it usually is, so that T covenants on behalf of himself or herself and successors in title to observe the provisions of the lease, T is contractually liable to L for any future breaches of covenant by the assignee or other successor in title. The reason is simply that, as a matter of construction, T has contracted that the covenants will be observed during the entire period of the lease whether or not T remains as tenant during that time. If, on the other hand, the tenant’s obligation is expressed to continue only while T continues to be the tenant, contractual liability ceases when the lease is assigned. This is because, as a matter of construction, the tenant has agreed only that he or she should be liable for breaches of covenant occurring during the tenancy.

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8.125

It is now provided in some states that a covenant relating to land

shall be deemed to be made by the covenantor on behalf of himself or herself and successors in title, unless a contrary intention appears in the instrument. This relieves the draftsperson from expressing on each occasion, that the tenant is covenanting on behalf of himself or herself and successors in title, although the provision is usually spelled out anyway.148 In covenanting on behalf of successors in title, the covenantor cannot bind them contractually, for they are not parties to the contract; their liability under the lease must depend upon privity of estate. Thus, if L leases land to T for 25 years, T

covenanting to observe the lease on behalf of himself or herself and successors in title, and T assigns to A after two years, T will be contractually obliged to pay L the rent if A defaults. L cannot recover the rent from both T and A, and T will be entitled to be indemnified by A. Nevertheless, T remains contractually liable despite the assignment.149 It matters not that the term of the lease has been extended by the assignee’s exercise of an option to renew the lease: Baker v Merckel [1960] 1 QB 657; [1960] 1 All ER 668. Further, if the rent is increased pursuant to a rent review provision during the assignee’s term, the original tenant is liable to pay the increased rent.150 In speaking of the covenantor’s contractual liability it has been assumed the tenant is the covenantor. Precisely the same principles apply where the landlord or the assignee is the covenantor. Thus, in Estates Gazette Ltd v Benjamin Restaurants Ltd [1995] 1 All ER 129, the assignee covenanted with the lessor ‘to pay the rents reserved by the lease at the time and in manner therein provided for and to observe and perform all the covenants on the lessee’s part therein contained’. Under the terms of this clause, it was held that the assignee as covenantor was liable for the rent reserved by the lease for the whole of the term which included that part of the term assigned to a subsequent assignee who defaulted in payment of rent.

Assignment of the lease — privity of estate 8.126

The common law principle, established in Spencer’s case (1583) 5 Co

Rep 16a; 77 ER 72, was that upon assignment of the lease the burden and benefit of covenants which ‘touched and concerned’ the land passed to the

assignee. Thus the assignee of the lease could enforce covenants answering this description against the original landlord (or in the circumstances which will be described below, against the landlord’s successors in title). Similarly, the landlord (or in certain circumstances his or her successors in title) could enforce covenants which touched and concerned the land against the assignee. This principle of privity of estate clearly represented a qualification to the notion of privity of contract. There have been many decisions as to whether particular covenants can be said to run with the lease. The test applied by the courts in determining whether a covenant touches and concerns the land is whether the covenant affects the landlord ‘qua landlord’ or the tenant ‘qua tenant’.151

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8.127

Covenants which have been held to touch and concern the lease are:

to renew the lease: Weg Motors Ltd v Hales [1961] Ch 176; not to build on adjoining land: Ricketts v Enfield Churchwardens [1909] 1 Ch 544; to supply premises with water: Jourdain v Wilson [1821] 4 B & Ald 266; to pay rent: Parker v Webb (1693) 3 Salk 5; 91 ER 656; to repair: Williams v Earle (1868) LR 3 QB 739; to insure against fire: Vernon v Smith (1821) 5 B & Ald 1; 106 ER 1094; to use as a dwelling house: Wilkinson v Rogers (1864) 2 De GJ & S 62; 46 ER 298; and not to assign without consent: Cohen v Popular Restaurants Ltd [1917] 1 KB 480. An option to purchase the reversion does not touch and concern the land: Woodall v Clifton [1905] 2 Ch 257; Griffith v Pelton [1958] Ch 205; [1957] 3 All ER 75; nor does a covenant requiring the

landlord to compensate the tenant for non-renewal: Re Hunter’s Lease [1942] Ch 124. This is also the case with a ‘put’ option where, in certain circumstances, the lessor is entitled to require the lessee to purchase the reversion: Denham Bros Ltd v Freestone Leasing Pty Ltd [2003] QCA 376. A covenant to repair chattels on the land does not touch and concern: Williams v Earle (1868) LR 3 QB 739; nor does a covenant to pay an annual sum to a third person; Mayho v Buckhurst (1617) Cro Jac 438. In order for the assignee of the lease to obtain the benefit of an option to purchase the reversion, the option should be separately assigned as property and as a chose in action, although the courts will sometimes recognise such an assignment as effective by implication.152 As to options to purchase the reversion contained in leases registered under the Torrens system, see 8.136 for the special provisions in the Torrens legislation of some jurisdictions. 8.128

Mercantile Credits and Woodall v Clifton were considered in

Sandhurst Trustees Ltd v Australian Country Cinemas Pty Ltd [2006] QSC 165. Here, the defendant was assignee of a lease. In the original lease, the lessee had been granted a right of first refusal to purchase the part of the premises where the lessee operated a cinema business. When the lease was assigned, the original landlord executed another deed of covenant granting the assigned lessee the same right of first refusal. The original lessor subsequently sold the reversion to the plaintiff, who then sought to sell to a third party. However, before the original lessor sold, it made an offer to the defendant to purchase, but was partly conditional on finance. The plaintiff, which subsequently bought the land, sought a declaration stating that it did not have to offer the defendant the right to purchase the demised premises

first; held: a right of pre-emption does not touch and concern the land, therefore did not bind the assignee of the reversion. 8.129

The requirement that covenants must touch and concern the land to

be binding upon successors in title where the relationship of privity of estate exists appears no longer to apply in the case of Torrens title land. In Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235 (see 5.56), the respondent lessor (BC) leased premises to a lessee, W. The land was under the provisions of the Real Property Act 1900 (NSW). Before the lease was registered, the lease was assigned to A1, and the assignment was then registered. Later, A1 assigned to K, the appellant, and this assignment was also registered. Later again, K assigned to C. This assignment was not registered. C later defaulted in the payment of rent, and BC brought an action for arrears of rent and damages for repudiation against W, A1, and K. The original lessee and assignees brought actions seeking indemnities. Section 51 of the Real Property Act 1900 (NSW) provides at follows.

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8.130E

Real Property Act 1900 (NSW)

51 Interest and rights of transferor pass to transferee Upon the registration of any transfer, the estate or interest of the transferor as set forth in such instrument, with all rights, powers and privileges thereto belonging or appertaining, shall pass to the transferee, and such transferee shall thereupon become subject to and liable for all and every the same requirements and liabilities to which the transferee would have

been subject and liable if named in such instrument originally as mortgagee, chargee or lessee of such land, estate, or interest.

8.131

In his discussion of the liability of the assignees in Karacominakis v

Big Country Developments Pty Ltd (2000) 10 BPR 18,235, Giles JA (with whom Handley and Stein JJA concurred) considered the ambit of s 51: The effect of s 51 is that the transfer of a lease creates privity of estate and privity of contract between the lessor and the transferee of the lease: a statutory replication of the privity of contract coexistent between the lessor and the original lessee … In my opinion, s 51 subjects the transferee of a lease to the lessee’s obligations only while the transferee is registered as proprietor of the lease, so that following further transfer the transferee is no longer liable under the lease [at [135] and [141]; emphasis added] …

It follows that all of the obligations in the original contract, whether they touch and concern the land or not, are enforceable by and against the registered assignee, for as long as there is privity of estate between the assignee and the landlord. Also, although s 51 refers to transfers of leases, but not reversions, the High Court has held that the provision applies equally to landlords and tenants: Measures v McFadyen (1910) 11 CLR 723. 8.132C

Moule v Garrett (1872) LR 7 Ex 101; (1861–73) All ER Rep 135 Court of Exchequer Chamber

[The plaintiff was lessee of premises under a lease containing a covenant to repair. He assigned the lease to B, who assigned it to the defendants. In each assignment, the assignees expressly covenanted with the assignors to indemnify them against all subsequent breaches of the covenants in the lease. Whilst the defendants were in possession they breached the covenant to repair. The lessor recovered damages from the plaintiff in respect of this breach. The plaintiff brought an

action against the defendants to recover the damages he had paid. The Court of Exchequer held that the plaintiff was entitled to succeed and the defendants appealed to the Court of Exchequer Chamber.] Cockburn CJ: I am of opinion that the judgment of the Court of Exchequer is right, and that it must be affirmed. The defendants are the ultimate assignees of a lease, and the plaintiff, who is suing them for indemnity against the consequence of a breach of a covenant contained in that lease, is the original lessee. There is no doubt that the breach of covenant is one in respect of which the defendants, as such assignees, are liable to the lessor, and that they [page 779]

have acquired by virtue of mesne assignments the same estate which the plaintiff originally took. And I think that taking this estate from the assignee of the plaintiff, their own immediate assignor, they must be taken to have acquired it, subject to the discharge of all the liabilities which the possession of that estate imposed on them under the terms of the original lease, not merely as regards the immediate assignor, but as regards the original lessee. Another ground on which the judgment below may be upheld, and, as I think, a preferable one, is that, the premises which are the subject of the lease being in the possession of the defendants as ultimate assignees, they were the parties whose duty it was to perform the covenants which were to be performed upon and in respect of those premises. It was their immediate duty to keep in repair, and by their default the lessee, though he had parted with the estate, became liable to make good to the lessor the condition of the lease. The damage therefore arises through their default, and the general proposition applicable to such a case as the present is, that where one person is compelled to pay damages by the legal default of another, he is entitled to recover from the person by whose default the damage was occasioned, the sum so paid. This doctrine, as applicable to cases like the present, is well stated by Mr Leake in his work on Contracts, p 41: Where the plaintiff has been compelled by law to pay, or, being compellable by law, has paid money which the defendant was ultimately liable to pay, so that the latter obtains the benefit of the payment by the discharge of his liability; under such circumstances the defendant is held indebted to the plaintiff in the amount. Whether the liability is put on the ground of an implied contract, or of an obligation imposed by law, is a matter of indifference: it is such a duty as the law will enforce. The lessee has been compelled to make good an omission to repair, which has arisen entirely from the default of the defendants, and the defendants are therefore liable to reimburse him. [Willes, Blackburn, Mellor, Brett and Grove JJ took the same view.]

Judgment affirmed.

8.133

Moule v Garrett was affirmed in Teparyl Pty Ltd v Willis (2010) 30

VR 485; [2010] VSCA 318, where the court held that the original tenant has rights of recoupment not only against the assignee, but also the assignee’s guarantor. It is important in determining whether a landlord can enforce the covenants in the lease against successors in title of the original tenant to distinguish between an assignment of the lease and a sublease. In the case of an assignment, the tenant transfers the entire interest in the land (the unexpired portion of the leasehold estate) to the assignee, who steps into the original tenant’s shoes as the new tenant of the landlord. The original tenant ceases to have any interest in the land. On the other hand, a tenant granting a sublease retains the leasehold interest but creates a new leasehold estate in the land of lesser duration dependent on the continuance of the tenant’s interest: see 8.10. The distinction between a sublease and an assignment may be vital since an assignment destroys privity of estate between the landlord and the assignor and creates privity of estate between the assignee and the landlord. A sublease does not affect privity of estate between landlord and sublessor, nor does it create privity of estate between landlord and sublessee. Although the landlord cannot directly enforce covenants against the sublessee, he or she may enforce those covenants indirectly by exercising the right of forfeiture conferred by the head lease. In certain cases the sublessee may be entitled to relief against forfeiture: see 8.166Cff.

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8.134

A squatter who bars the title of a tenant by a period of adverse

possession is not an assignee of the tenant (since the tenant’s interest is extinguished and not conveyed to the squatter) and is accordingly not liable for breach of the terms of the original lease: Tichborne v Weir (1892) 67 LT 735; [1891–94] All ER Rep 448. However, in later cases it has been pointed out that in certain circumstances a squatter may, by conduct, become estopped from denying the terms of the original lease. Thus, in Ashe v Hogan [1920] 1 IR 159, the lease contained a provision that if the lessee observed all the covenants, the rent would be reduced by half. Since the adverse possessor sought to take advantage of this provision, he was estopped from denying that he was subject to the burden of the covenants in the lease. 8.135

At common law the doctrine of covenants running with the land

applied only to covenants under seal, but it now appears the covenant may be enforced by and against the assignee if the original lease was valid at law, even if made in writing or orally: Boyer v Warbey [1953] 1 QB 234; [1952] 2 All ER 976. The question of the enforceability of covenants where either the original lease is equitable or the assignment of the lease is effective in equity only is critical. A broad approach was taken by Lord Denning in Boyer v Warbey, who suggested that the fusion of law and equity had ‘obliterated’ the distinction between agreements under hand and agreements under seal in relation to the running of covenants. This approach, however attractive as policy, is not supported by the authorities, and was expressly rejected recently

in Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] V ConvR 54-834; [2013] VSCA 106 (at [24] per Neave JA, Nettle JA agreeing). In Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235, the court assumed that the distinction between legal and equitable assignments continued to operate so that the ultimate assignee (Chadlace) who was not registered, and therefore had an assignment effective in equity only, could not be sued on the covenants in the lease as there was no privity of estate between him and the landlord. By contrast, Karacominakis, the registered assignor of the lease, remained liable because there was still privity of estate between him and the landlord.153 In exceptional cases, if the assignee of an equitable lease, or the equitable assignee of the legal lease, goes into possession and pays rent, the court may be prepared to infer the existence of a new tenancy on the same terms as the old lease, thus permitting enforcement of the covenants in the original lease by and against the assignee on the basis of privity of contract: Buckworth v Simpson (1835) 1 C M & R 832; 149 ER 1317; Manchester Brewery Co v Coombs [1901] 2 Ch 608. 8.136

A lease by deed of land under the Torrens system (Real Property

Act 1900 (NSW)) was informally assigned by the lessees. The assignment was in writing but was not registered nor was it by deed. It was held by Fox J in Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481 (FCA) that s 23B of the Conveyancing Act 1919 (NSW) applied to unregistered interests in land under the Torrens system and, as a result, since the assignment of an oral lease was not by deed, it was ineffective at law. His Honour further held that the lessor could not enforce a rent review clause in the lease against the assignee since there was no privity of estate between the

lessor and the assignee. In reply to the lessor’s submission that the doctrine of Walsh v Lonsdale (1882) 21 Ch D 9 assisted the lessor to establish privity of estate with the assignee, Fox J held (at 489): There is then reliance upon the doctrine of Walsh v Londsdale, supra. Counsel did not cite any authority in support of his submission that that doctrine could be applied so as to convert

[page 781]

what was taken to be an equitable assignment into a legal one. In my view the contention is unsound. Walsh v Lonsdale was applied in a situation where there was a specifically enforceable promise to grant a legal lease, and was applied as between the parties thereto, so that the promisee could be treated as if he was lessee at law. These elements are lacking in the present case. If the intention were that there be an assignment effective at law, the present applicants would probably have a right to specific performance and, on that footing, they would be regarded as having a subsisting equitable interest in the tenancy. There would be no privity between the applicants and the respondent. Equitable doctrine may well operate as between assignors and assignees so as to overcome the lack of formality, but that doctrine does not apply in relation to third parties (here, the lessor). The parties used writing without a deed to carry out what they had intended, or, conceivably, as an incident in carrying out their purpose. Assuming that there was an equitable assignment, it would run counter to fundamental principle, and the distinction drawn by the Conveyancing Act, to treat it as a legal assignment.154

8.137 Questions By a document under seal L leases premises to T for a term of 14 years, commencing 1 January 2014. T covenants that the premises will be kept in repair: 1.

On 1 January 2015, T assigned the balance of the term to A1 by a

document under seal. If the premises are in disrepair at the time of the assignment, can L successfully sue either T or A1? See Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] Ch 592; [1959] 2 All ER 176. If the premises are in repair at the time of the assignment and A1 subsequently breaches the covenant to repair, can L successfully sue either T or A1? If L can sue T, has T any right to indemnity against A1? 2.

On 31 January 2016, A1 assigned the balance of the term to A2. A2 breaches the covenant to repair. Is L able to sue, at his option, T, A1 and A2? If L is able to sue T, has T any right to indemnity against A1? Legislation sometimes implies in an assignment of a lease for valuable consideration a covenant by the assignee to indemnify the assignor against liability for breaches of covenant committed during the remainder of the term, whether by the assignee or his or her successors in title: Vic, s 77(1)(c); Transfer of Land Act 1958 (Vic) s 67(2) (liability only for the assignee’s acts or omissions); Transfer of Land Act 1893 (WA) s 95; Real Property Act 1886 (SA) s 152.

3.

On 31 May 2016, A2 sublet the premises for five years to S. S breaches the covenant to repair. Is L able, at his option, to sue T, A1, A2 and S? If L succeeds against T, does T have any right of indemnity against S?

4.

Would the result in Bailey v Paynter have been any different if the respondent had been an assignee and the repair covenant had been breached by the assignor? Consider this after studying the material

on assignment of leases above in 8.123ff.

[page 782]

Assignment of the reversion 8.138

The Grantees of Reversion Act 1540, which pre-dated Spencer’s

case, provided that the benefit and burden of covenants having reference to the subject matter of the lease should run with the reversion. The modern form of the legislation in Victoria is as follows (Vic, ss 141, 142): 8.139E

Property Law Act 1958 (Vic)

141 Rent and benefit of lessee’s covenants to run with the reversion (1) Rent reserved by a lease, and the benefit of every covenant or provision therein contained, having reference to the subject matter thereof, and on the lessee’s part to be observed or performed, and every condition of re-entry and other condition therein contained, shall be annexed and incident to and shall go with the reversionary estate in the land, or in any part thereof, immediately expectant on the term granted by the lease, notwithstanding severance of that reversionary estate, and without prejudice to any liability affecting a covenantor or his estate. (2) Any such rent, covenant or provision shall be capable of being recovered, received, enforced and taken advantage of, by the person from time to time entitled, subject to the term, to the income of the whole or any part as the case may require, of the land leased. (3) Where that person becomes entitled by conveyance or otherwise, such rent, covenant or provision may be recovered, received, enforced or taken advantage of by him notwithstanding that he becomes so entitled after the condition of reentry or forfeiture has become enforceable, but this subsection shall not render enforceable any condition of re-entry or other condition waived or released before such person becomes entitled as aforesaid. 142 Obligation of lessor’s covenants to run with reversion (1) The obligation under a condition or of a covenant entered into by a lessor with reference to the subject matter of the lease shall, if and as far as the lessor has

power to bind the reversionary estate immediately expectant on the term granted by the lease, be annexed and incident to and shall go with that reversionary estate, or the several parts thereof, notwithstanding severance of that reversionary estate, and may be taken advantage of and enforced by the person in whom the term is from time to time vested by conveyance, devolution in law, or otherwise; and, if and as far as the lessor has power to bind the person from time to time entitled to that reversionary estate, the obligation aforesaid may be taken advantage of and enforced against any person so entitled.155

8.140

The effect of these provisions is that the benefit (Vic, s 141) and the

burden (Vic, s 142) of every covenant in the lease which has ‘reference to the subject matter of the lease’ runs with the reversion. The phrase ‘having reference to the subject matter of the lease’ is the equivalent of the phrase ‘touching and concerning the land’ and has a similar meaning.156

[page 783]

8.141C

Re Hunter’s Lease; Giles v Hutchings [1942] Ch 124; [1942] 1 All ER 27 Chancery Division

Uthwatt J: The effect of the judgment on the construction of the lease which I have already delivered is that, at the expiration of the term of five years granted by the lease, the lessor came under an obligation to pay to the lessee £500 subject to the qualification that, if the lessor did not for any reason wish to pay that sum and the lessee was willing to acquiesce in non-payment, the lessee might continue in occupation, whereupon the lessor became bound to grant to the lessee a further lease of the demised property for a further term of five years, such new lease to contain all the provisions of the original lease. I have now to determine whether the reversioner is bound, under that covenant, to pay £500 to the lessee, for the lessee did not desire to continue in occupation at the expiration of the second term and insisted on performance of that obligation. In the lease, ‘the lessor’ is defined as including ‘the estate owner or estate owners for the time being of the reversion of the premises hereby demised expectant on the term hereby granted’. Thus, the lease by its term as a matter of English throws on the lessor for the time being the obligation to pay the £500. But that is not conclusive. The question is

whether the burden of that obligation passes on the assignment of the reversion. The position, as I understand the matter, is that at common law the assignee of a reversion is not liable to the lessee in respect of any of the covenants and conditions in the lease. That appears to be the orthodox view and is so stated in William’s Notes to Saunders’ Reports, vol i, p 300, note (10). In those circumstances the statute of 32 Henry VIII, passed in 1540, provided, in substance, that lessees were to have the like remedies on covenants and conditions contained in the lease against assignees of the reversion as they had against the original grantor of the lease. That Act was replaced by s 11 of Conveyancing Act 1881, and the provision now in force is in s 142 of the Law of Property Act 1925. Before the passing of the Conveyancing Act 1881, it had been decided that the burdens of covenants by the lessor contained in a lease did not pass to his assignee unless those covenants touched and concerned the thing demised, and there is authority for the view that the Conveyancing Act 1881 and the Law of Property Act 1925 have left the law as it was before the Act of 1881. There arises, therefore, the old question, whether the covenant touches and concerns the thing demised. On the question whether particular covenants by lessees touch and concern the thing demised there is a wealth of authority. There is less authority in the case of covenants by lessors, which are less common than covenants by lessees, but it appears to me that the principles governing the two classes of case are the same. Several authorities have been cited to me directed to showing what is meant by the phrase ‘touch and concern the thing demised’. One important authority is Thomas v Hayward (1869) LR 4 Ex 311; [1861–73] All ER Rep 290, the headnote of which is: Where in a lease, the lessee having covenanted to use the demised premises as a public house, the lessor covenants not to build or keep any house for the sale of spirits or beer within half a mile of the demised premises; the lessor’s covenant does not run with the land so as to enable the assignee of the lease to sue him upon it. [page 784]

Channell B put the point of the decision quite shortly. He said: A covenant runs with the land only when it touches, that is, when its operations directly, and not merely collaterally, affects the thing demised. It cannot be said that this covenant does so. That case was approved by the Court of Appeal in Dewar v Goodman [1908] 1 KB 94; [1908–10] All ER Rep 188. I have no doubt that, if the covenant in the present case had been merely a covenant by the lessor to pay a sum of £500 on the expiration or sooner determination of the lease, the burden of it would not have fallen on the assignee of the reversion. The interest included in the demise would not be affected by such a covenant. Valuable as such a covenant might be to the lessee, it would not in any sense touch and concern the interest which is subject matter of the lease. As I understood Mr Bowles, he was not prepared to dispute this … But he contended that his covenant for the payment of £500 was never intended to stand alone, that it was merely part of the arrangement which governed the continued occupation by the lessee of the premises under the lease,

that it is erroneous to regard the lessee as having a lease for a term of five years only, and that in truth what the lessee had in substance was much more, namely a lease of five years which he had a right to continue, the lessor being entitled to avoid that right by paying £500. He argued, with some force, that, if a covenant for renewal touches and concerns the things demised, this covenant, too does so. I regret that I cannot accept that argument. I must bear in mind what was said by the Court of Appeal in Woodall v Clifton [1905] 2 Ch 259 at 279; [1904–7] All ER Rep 268 at 271–2. In that case Romer LJ, delivering the judgment of the court on the question whether an option to purchase contained in a lease runs with the land so that an assignee of the lease could take advantage of it, said: The covenant is aimed at creating, at a future time, the position of vendor and purchaser of the reversion between the owner and the tenant for the time being. It is in reality not a covenant concerning the tenancy or its terms. Properly regarded, it cannot, in our opinion, be said directly to affect or concern the land, regarded as the subject matter of the lease, any more than a covenant with the tenant for the sale of the reversion to a stranger to the lease could be said to do so. It is not a provision for the continuance of the term, like a covenant to renew, which has been held to run with the reversion, though the fact that a covenant to renew should be held to run with the land has by many been considered as an anomaly, which it is too late now to question, though it is difficult to justify. An option to purchase is not a provision for the shortening of the term of the lease, like a notice to determine or a power of re-entry, though the result of the option, if exercised, would or might be to destroy the tenancy. It is, to our minds, concerned with something wholly outside the relation of landlord and tenant with which the statute of Henry VIII was dealing. One has, therefore, the authority of the Court of Appeal on two points — first, that an option to purchase given to the lessee does not touch and concern the thing demised and, secondly, that the rule which treats as running with the land the benefit of a covenant for renewal is difficult to justify. Returning to the covenant which I have to consider here, the primary obligation is the obligation of the lessor to pay £500 on the expiration or sooner determination of the lease. If he [page 785]

does not wish to pay it and the lessee acquiesces, the lessee may continue in possession and require a new lease, but that is merely an alternative and needs the concurrence of both parties to bring it into operation. Neither party can force on the other a renewed tenancy. To hold that the burden of the covenant here in question runs with the reversion would be to extend the operation of the rule stated by the Court of Appeal to be anomalous that a covenant to renew touches and concerns the thing demised. I hold, therefore, that the reversioner is not personally responsible for the payment of the £500. Accordingly, I will declare that, on the true construction of the lease the lessee, without prejudice to his rights against the original lessor, is not entitled to recover that sum against the reversioner. I do not propose to make any order as to costs.

Declaration accordingly.

8.142C

Ashmore Developments Pty Ltd v Eaton [1992] 2 Qd R 1 Supreme Court of Queensland (Full Court)

Ryan J: This is an appeal from a judgment of a Judge of District Courts by which he ordered that judgment be entered against the first and second-named first defendants for the sum of $46,626.97 together with interest thereon and costs. The plaintiff, Ashmore Developments Pty Ltd issued a writ of summons in May 1988 claiming $49,969.41 against the first defendants for moneys, namely, arrears of rental and outgoings for the period 1 April 1987 to 26 February 1988 owing to the plaintiff pursuant to an agreement for lease between the plaintiff as lessor and the first defendants as lessees; and against the second defendants as sureties for that sum on a guarantee in writing by each of them addressed to the plaintiff. Only the first and second named first defendants were served. The plaintiff was the registered proprietor of an estate in fee simple of land situated in Surfers Paradise. On 1 April 1982, the plaintiff leased a part of a building erected on the land to Axlong Pty Ltd for a period of three years terminating on 1 April 1984 at an annual rental of $48,636 payable calendar monthly in advance by payments of $4,053. On 19 November 1984, Axlong Pty Ltd with the consent of the plaintiff assigned by deed all of its right, title and interest to and in the lease to A. C. and K E Robertson. The Robertsons duly exercised the option for renewal of the lease provided for in the original lease. In February 1986, the Robertsons, with the consent of the plaintiff, duly assigned all their right, title and interest to and in the lease to the first defendants. On 1 November 1987, a contract of sale was executed by Ashmore Developments Pty Ltd of the land to certain purchasers. The date for completion was 26 February 1988. Clause 14 of the contract of sale is in these terms: The rents and profits of the property hereby sold shall belong to the vendor up to and including the date of possession and thereafter to the purchaser and shall be dealt with as follows — (a) all unpaid debts and profits in respect of any period terminating on or prior to the date of possession shall not be apportioned between the parties on completion but shall be receivable by the vendor who shall have the right to recover payment thereof; [page 786]

(b) all rents and profits paid in advance of the date of possession shall be apportioned between the parties on completion; (c) all rents and profits payable in respect of any period current at the date of possession which shall not be paid at the date of completion shall be

apportioned when received by either party. By the defence, the defendants alleged that on or about 28 February 1988 the plaintiff ceased to be the registered proprietor of the relevant land. They then alleged: In the premises, by reason of the provisions of s 117 of the Property Law Act, the plaintiff is not and was not at the date of commencement of these proceedings entitled to maintain them as against the first and second named first defendants in respect of arrears of rental and outgoings for the period referred to in the Statement of Claim. Section 117 of the Property Law Act 1974 provides, so far as is relevant: (1) Rent reserved by a lease, and the benefit of every covenant, obligation or provision therein contained, touching and concerning the land, and on the lessee’s part to be observed or performed, and every condition of re-entry and other condition therein contained, shall be annexed and incident to and shall go with the reversionary estate in the land, or in any part thereof, immediately expectant on the term created by the lease, notwithstanding severance of that reversionary estate, and without prejudice to any liability affecting a covenantor or his estate. (2) Any such rent, covenant, obligation, or provision shall be capable of being recovered, received, enforced, and taken advantage of, by the person from time to time entitled, subject to the term, to the income of the whole or any part, as the case may require, of the land leased. (3) Where that person becomes entitled by conveyance or otherwise, such rent, covenant, obligation or provision may be recovered, received, enforced or taken advantage of by him notwithstanding that he becomes so entitled after the condition of re-entry or forfeiture has become enforceable, but this subsection does not render enforceable any condition of re-entry or other condition waived or released before such person becomes entitled as aforesaid. This section is in the same terms as s 141 of the Law of Property Act 1925 (UK). In Flight v Bentley (1835) 7 Lim 149; 58 ER 793, it was decided that the assignee of a reversion was not entitled to arrears of rent which became due prior to the assignment. Accordingly, a purchaser of the reversion whose conveyance was executed in July 1832 could not sue for the previous June quarter’s rent, but only the vendor, the reason given being that that rent had been severed from the reversion and was a mere chose in action. That decision was referred to by Lord Denning MR in In re King dec’d [1963] Ch 459. In an examination of the historical background to s 141 of the Law of Property Act 1925, he pointed out that prior to 1540, when a lessor assigned his reversion to a purchaser, the assignee did not get the benefit of any of the express covenants in the lease, and could not even sue for breaches that occurred after he bought the premises, because he was a stranger to the covenant between the lessor and the lessee. Privity of estate gave the assignee the right to sue the lessee in debt for rent that occurred in his own time, but no right to sue on the express covenants. By an Act 32 Henry 8 c 34, assignees of the reversion were given the same advantages, benefits and remedies as the heir. The heir could sue for rent falling due in his own time, but failure

[page 787]

to pay rent during the assignor’s time was a breach which caused damage to the assignor exclusively. Accordingly, as Flight v Bentley decided, the assignor alone could sue for it and not the assignee. His Lordship thought that s 141 of the Law of Property Act 1925 had not changed the previous law, and Flight v Bentley was still good law. A different view was expressed by Upjohn L.J and Diplock LJ. Upjohn L.J stated his opinion as being that Flight v Bentley was not very satisfactory, and said that the reasoning in that case that rent which issued out of the land became severed after it had become due did not apply to a covenant. Diplock LJ did not refer to Flight v Bentley, but he expressed the view that the effect of s 141 was that after the assignment of the reversion to a lease, the assignee alone is entitled to sue the tenant for breaches of covenants contained in the lease whether such breaches occurred before or after the date of the assignment of the reversion. The issue in In re King was whether s 141 conferred upon an assignee of the reversion the right to damages for breach of a covenant to rebuild a factory, where the covenant had already been breached by the lessee before the assignment. It was held that it did. That case was not concerned with the applicability of s 141 to the question of rent in arrear at the date of the assignment of the reversion. That issue did arise however in London & County Ltd v W. Sportsman Ltd [1971] 1 Ch 764, when it was decided that Flight v Bentley was not now the law. Russell LJ with whom other members of the Court agreed said that the language of s 141 was such as to indicate plainly that an assignee of the reversion may sue and re-enter for rent in arrears at the date of the assignment when the right of re-entry had arisen before the assignment. The position is therefore that an assignee of the reversion acquires the right to sue for breaches of covenant committed before the assignment, and the assignor loses that right. That was recognised by his Honour, but he considered that by virtue of cl 14(a) of the contract of sale the plaintiff was entitled to recover against the first defendants. He referred to a passage in Halsbury, 4th ed, vol 27 para 403 where it is stated: After an assignment of the reversion it is accordingly the assignee who alone may sue for rent and for breaches of covenant whenever they have occurred, at any rate unless the assignee and the assignor have agreed to the contrary. In support of that statement, reference was made to a passage in the judgment of Upjohn LJ in In re King at 488, where it is said: The assignor has by the operation of s 141 assigned his right to the benefit of the covenant and so has lost his remedy against the lessee. Of course, the assignor and assignee can always agree that the benefit of the covenant shall not pass in which case the assignor can still sue, if necessary, in the name of the assignee. Though his Honour purported to apply the principle stated by Upjohn LJ he overlooked the significance of the words which made it necessary for the assignor to sue in the name of the assignee. That was not done in this case though the defence had raised specifically the issue of the entitlement of the plaintiff to maintain the proceedings. In my opinion

the failure was fatal to the assignor’s right to bring the action. The agreement between the assignor and assignee in cl 14 of the contract of sale was one which bound them, but which did not affect the lessee. The lessee was obliged by s 141 to pay the rent to the assignee. The assignee agreed with the assignor that the rent up to the date of possession would belong to the assignor. The result of this arrangement was to effect an equitable assignment of the debt from the assignee (who became the assignor of the debt) to the assignor (who became the assignee of the debt). [page 788]

There is nothing to show that notice of the assignment from the purchaser to the vendor of the rents was given to the lessee prior to the bringing of the action. The position is therefore as it was stated by Atkinson J in Holt v Heatherfield Trust Ltd [1942] 2 KB 1 at 41: Until notice be given the assignment is an equitable assignment, but it is an assignment which requires nothing more from the assignor to become a legal assignment. The assignee may himself give notice at any time before action brought, and further than that, even before notice, he may sue in his own name provided that he makes the assignor a party to the action, as plaintiff if he consents, and as defendant if he does not consent. This is made quite clear in Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1, where Viscount Cave LC said (at p 14): ‘No action can now be defeated by reason of the misjoinder or nonjoinder of any party; but this does not mean that judgment can be obtained in the absence of a necessary party to the action, and the rule is satisfied by allowing parties to be added at any stage of a case.’ In this case, as in Performing Right Society Ltd v London Theatre of Varieties Ltd, the plaintiff has taken its stand upon a supposed right to sue alone. In the circumstances, I consider that nonjoinder of the purchaser of the reversion was fatal. Accordingly I would allow the appeal, set aside the judgment below and in lieu thereof order that judgment be entered for the first and second-named first defendants dismissing the plaintiff’s claim with costs to be taxed. [Macrossan CJ in a separate judgment allowed the appeal. Byrne J dissented.] Appeal allowed.

8.143

Ashmore v Eaton was applied in DS Queen Street Mall Pty Ltd v

Texrose Pty Ltd [2006] QCA 429. Privity of estate is a relationship at law. Under the original statute of 1540, an assignee of the reversion could sue or

be sued only if the head lease were under seal and the assignment complied with the legal formalities. However, the modern Australian legislation reenacting the provisions of the 1540 legislation is wider than the original. Thus, in Dalegrove Pty Ltd v Isles Parking Station Pty Ltd (1988) 12 NSWLR 546, the assignment of the reversion of a lease, title to which was under the Real Property Act 1900 (NSW), was not complete at law when the reversioner issued a notice under the lease based upon the benefit of a covenant allegedly subsisting in the reversioner. It was submitted for the lessee that the notice was issued prematurely given that the reversioner was only an assignee in equity. Bryson J, in rejecting this submission, held that s 117 of the Conveyancing Act 1919 (NSW) introduced a substantive change to the common law in that any person entitled to the income of the leased land had the benefit of every covenant having reference to the subject matter of the lease. In his Honour’s view, the language of the section admitted a right to the benefit of a covenant as a right not limited to association with the legal estate in the land but including an entitlement to income based upon an equitable or even contractual interest in the leased land. Compare Qld, ss 117, 118; Tas, ss 10, 11; Vic, ss 141, 142; WA, ss 77, 78. 8.144

Section 141 of the Victorian Act and Dalegrove were considered in

G & A Lanteri Nominees Pty Ltd v Fishers Stores Consolidated Pty Ltd (2005) V ConvR 54-708. The plaintiff landlord assigned the reversion but sued the defendants, who were assignees of the plaintiff’s former tenants for a breach of covenant to keep a supermarket open in a shopping mall. The defendants argued that s 141 meant that the right to sue was assigned to the reversioner, and

[page 789]

since the defendants had entered into an agreement with the new reversioner to surrender the lease and make a one-off payment, they were relieved from further liability. Bongiorno J considered the interpretation of s 141 extensively at [15]–[25]. The plaintiff submitted, relying on Bryson J’s reasoning in Dalegrove, that the benefit of s 141 may be waived by the assignee. In this case, a particular clause of the contract of sale stated that any damages from a suit initiated by the plaintiff against the defendants for breach of the particular covenant would be the ‘sole and absolute property’ of the plaintiffs. Bongiorno J held that this effectively negatived s 141 and assigned the right to sue back to the plaintiff, who was able to sue in its own name. And because the plaintiff as equitable assignee of the right to sue joined the assignor as defendant to the action, it avoided the problem in Ashmore v Eaton. This conclusion is consistent with statements in Re King (at 488) and Ashmore v Eaton (at 7) that it is possible to oust s 141 in this way. 8.145

While s 141 and its equivalents allow the assignee of the reversion

to enforce the assignor’s rights even if the assignment is equitable only, can the assignee of the reversion enforce the burden of covenants against an assignee of the lease where the lease is equitable only? 8.146C Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd (2013) 46 VR 447; [2013] V ConvR 54-834; [2013] VSCA 106 Supreme Court of Victoria – Court of Appeal [The respondent purchased from the Afzals land that was subject to a three-year lease. Before

registration of the transfer the respondent agreed in writing to grant a new lease to the existing lessees (the Pereras) on largely the same terms. Before the purchaser was registered, the lessees assigned the unexpired lease to the appellant as well as the new lease. The appellant/assignee decided to vacate the premises at the end of the lease, and not exercise their rights to the new lease. The now-registered respondent sought to enforce the new lease against the appellant/assignee.] Neave JA: Although the original lease was not registered, it was a legal lease. That was so because section 66 of the Transfer of Land Act 1958 (‘TLA’) provides for the registration of only those tenancies which are for a term in excess of three years and because the original lease was for a term of not more than three years. As a legal lease, the original lease conferred on the Pereras a legal estate with which both the benefit and burden of the lease covenants could run. Consequently, it was open to the Pereras to assign both their rights and obligations under the original lease; and, hence, by execution of the Transfer of Lease of 1 June 2010, Cooma became both entitled to the benefit and subject to the burden of the original lease covenants. In contrast, the letter of 5 May 2010 and the acceptance of its terms by the Pereras, gave rise only to an equitable lease between CID and the Pereras; and, under general law, an equitable lease does not create a legal estate with which the benefit and burden of lease covenants may run. So, while a party to a contract for a lease may assign the benefit of the contract, the burden of it cannot be assigned. It follows that, although the Transfer of Lease of 1 June 2010 was effective as an assignment of the benefit of the executory contract for the grant of a new lease commencing on 1 January 2011, as a matter of general law it was incapable of subjecting Cooma to the burden of the contract. And, under general law, that would have remained so even after Cooma later entered into possession under the original lease and paid rent under the original lease. [page 790]

Here [in Australia where Boyer v Warbey has not been accepted] it remains that, until and unless an order for specific performance has been made and carried into effect, the holder of an equitable estate has no interest at law. Accordingly, while it is competent for a party to a contract for the grant of a lease to assign the benefit of the contract, the absence of privity of estate as between the putative lessor and the assignee means that the assignor is incapable of assigning the burden of the agreement to the assignee. After the Transfer of Lease was executed between the Afzals, the Pereras and Cooma, on 1 November 2010 CID acquired the legal reversion upon registration as proprietor of the Premises. Under sections 141 and 142 of the Property Law Act 1958 (‘PLA’), the rights and obligations of a lessor under a lease comprise part of the reversionary estate. It follows that, upon CID’s registration as proprietor, CID became entitled to the benefit and subject to the burden of the original lease covenants. Additionally, by reason of s 154 of the PLA, a contract for lease is a lease within the meaning of sections 141 and 142. It follows that, if the Afzals had entered into a contract to grant a new lease to the Pereras

commencing on 1 February 2011, on registration of CID as proprietor CID would have become entitled to the benefit and burden of the contract. The difficulty with that, however, as has been observed, is that the contract for new lease was made not made between the Afzals and the Pereras, but rather as between CID and the Pereras; and, consequently, although the Pereras (by means of the Transfer of Lease of 1 June 2010) were able to assign the benefit of the contract to Cooma, as a matter of general law they were incapable of assigning the burden of it. Certainly, by the Transfer of Lease, Cooma explicitly: Acknowledge[d] and consente[d] to terms and conditions for the renewal of Lease on 1 February 2011. Like the Vice President, we construe that as a promise by Cooma to the Afzals and possibly also the Pereras to observe the provisions of the executory contract for new lease between CID and the Pereras, of which the benefit was assigned to Cooma by means of the Transfer of Lease. But it has not been argued, and it could not be under general law principles, that the Afzals thereby contracted with Cooma to grant Cooma a new lease commencing on 1 February 2011. The promise to create the new lease was made by CID and was always intended as such. Such rights as the Afzals acquired by reason of Cooma’s acknowledgment and consent were rights acquired otherwise than under a contract for a lease entered into by the Afzals. As a matter of general law, therefore, such rights would not have formed part of Afzal’s reversionary estate which passed to CID upon its acquisition of the legal reversion. Afzals might perhaps be regarded as having received the benefit of Cooma’s acknowledgement and consent on trust for CID. But the right to enforce the acknowledgment and consent against Cooma would still have lain with the Afzals. Hence, in order to enforce the acknowledgment and consent, it would have been necessary for the Afzals in their own names to seek specific performance of it on behalf of CID; or, if the Afzals declined to adopt that course, for CID to have instituted proceedings under the acknowledgment and consent against Cooma and joined the Afzals as further defendants to the proceeding. Alternatively, CID might have sued the Pereras as obligors under the contract for new lease and left it to the Perreras to pursue their rights over against Cooma under the Transfer of Lease (assuming that Cooma’s acknowledgment and consent was intended to operate as an acknowledgment and consent in favour of the Pereras). As it happens, none of that was done. [Nettle JA concurred.]

[page 791]

8.147

Also relevant to the rights and liabilities of assignees are the Torrens

provisions in relation to the registration of assignments. These provisions apply to leases as well as mortgages. Section 62 of the Queensland legislation and Measures v McFadyen (1910) 11 CLR 723 were considered most recently in Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81. The appellant, French, was a transferee from the original mortgagee, but then assigned the mortgages to Marminta. French then sought to recover debts owing by the mortgagor. According to Maxwell P, McFadyen was considered to ‘read down’ the vesting provision so that the assignor, not the assignee, is able to sue for past breaches (at [46]). The High Court unanimously accepted the correctness of McFadyen. It appears from McFadyen that there is conflict between s 117 and s 51, the former requiring that the right to sue for preassignment breaches does pass to the assignee, while the latter provides that the right remains in the assignor. Arguably s 117 prevails on the ground that it is the later statute, thereby repealing pro tanto the Real Property Act as it is expressed to apply by s 116 to Torrens land.157 The position in other states will therefore depend on the timing of the enactment of the relevant statutes. 8.148

L leases premises to T, a company. D, a director of T, guarantees

performance of the lease by executing the lease, which is expressed to be made with ‘L its successors and assigns’. L transfers the reversion to R and the transfer is registered. D is aware of the transfer, but there is no express assignment to R of the benefit of the guarantee. T defaults. Is the guarantee enforceable by R? In Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5, Yeldham J held that a guarantee contained in a lease does not run with the land and therefore was not enforceable by the assignee of the reversion unless expressly assigned in compliance with those

legislative provisions dealing with the assignment of choses in action at law: s 12 of the Conveyancing Act 1919 (NSW). However, in Kumar v Dunning [1989] QB 193; [1987] 2 All ER 801, the English Court of Appeal enforced a guarantee in similar circumstances. The court applied the test of Best J in Vyvyan v Arthur (1823) 1 B & C 410 at 417; [1814–23] All ER Rep 349 at 352, which was that ‘if the performance of the covenant be beneficial to the reversioner, in respect of the lessor’s demand, and to no other person, his assignee may sue upon it’.158 Some of the authorities on whether a guarantee can be enforced by an assignee of the reversion were discussed in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237. In particular, the court unanimously approved the decision in Ryde Joinery Pty Ltd v Zisti (1997) 7 BPR 97,638 as authority for the proposition that a covenant by way of guarantee could ‘touch and concern the land’ and be enforced by the assignee of the reversion without express assignment if it were clearly intended to run with the land: that is, to benefit not only the lessor, but also successors and assigns. Here, the guarantees were expressed to be for the benefit of subsequent lessors, as well as the initial lessor. The High Court held that the guarantees were enforceable even though the subsequent lessors were not in privity of contract with the guarantors. If the guarantee is expressed to secure compliance of covenants which themselves touch and concern the land, such as the covenant to pay rent, the guarantee will be enforceable by a successor of the landlord.159

[page 792]

8.149

The landlord may choose not to assign the reversion in its entirety,

but may sever the reversion. One method of severance is to grant a concurrent lease (see 8.53) so that the assignee becomes lessee of the reversion. It follows that the lessee of the reversion becomes the landlord of the original tenant and is entitled to the ‘reversionary estate immediately expectant upon the term granted by the lease’. The effect is that the lessee of the reversion may sue and be sued on all covenants in the lease which have reference to the subject matter of the lease. The second method of severing the reversion is to assign the landlord’s interest in part only of the leased land. Under the 1540 Act, rent was apportionable between the two reversioners, and covenants could run with the land assigned if they related to that land. However, since conditions (as opposed to mere covenants) were not divisible at common law, an assignee of the landlord’s interest in part of the land could not enforce any condition in the lease. It is not usual in modern times to impose terms in leases by way of condition, but in any event legislation now provides for apportionment of conditions in the case of assignment by the landlord of an interest in part of the land. Legislation also permits the assignee in such a case, where appropriate, to give a notice to quit to, or exercise a right of re-entry against, the tenant of that land assigned to the assignee. However, the tenant has a reciprocal right to terminate the tenancy of the whole land.160

REMEDIES Forfeiture of lease by landlord 8.150

The landlord’s primary remedy lies in his or her capacity to bring

the lease to an end prior to the expiry of the term. This remedy is known as forfeiture of the lease. Because of the drastic nature of this remedy, particularly in the case of long-term leases, a number of strict procedural requirements are placed on landlords giving the tenant the opportunity to make good any breaches before this right may be exercised. The steps to be taken by landlords may be summarised as follows. First, there must be an express right to forfeit in the lease itself, or a right to forfeit implied by statute. Second, the tenant must have breached the lease. Third, the landlord must serve a notice on the tenant unless the lease or breach comes within an exception to the notice requirement. Fourth, the breach must still be current at the expiry of the notice period. Fifth, the landlord must effectively forfeit the lease. Sixth, the tenant must not have been granted relief against forfeiture.

Enforcement of the right of re-entry 8.151

At common law, the landlord had no implied right to bring the

lease to an end prior to its natural determination by effluxion of time. But a lease will typically confer an express power on the landlord to terminate in the event of breach by the tenant. Given the extreme nature of this right, it came to be regulated tightly by equity and now by statute. So, if the tenant

breached the covenant to pay rent, the landlord was not entitled to forfeit the lease unless a formal demand was made for the rent in accordance with detailed common law rules, or unless the landlord is exempted from the requirement of making a formal demand by express stipulation in the lease. It is the invariable practice of landlords to include a clause in the lease

[page 793]

dispensing with the requirement of a formal demand. Even if the lease does not dispense with the requirement, legislation now provides that where onehalf year’s rent is in arrears, re-entry may be effected without formal demand: Landlord and Tenant Act 1899 (NSW) s 8; (see also NSW, ss 85(1)(d), 85(2), providing that where the rent is more than one month in arrears no demand is necessary for the exercise of the implied right to forfeit); Supreme Court Act 1986 (Vic) s 79; Landlord and Tenant Act 1936 (SA) s 4. 8.152

Where the tenant breaches a covenant other than to pay rent,

legislation provides some protection for the tenant by requiring the service of a notice as a condition to the exercise of the landlord’s right of re-entry. The Victorian provision (Vic, s 146), for example, is as follows. 8.153E

Property Law Act 1958 (Vic)

146 Restrictions and relief against forfeiture of leases and under-leases (1) A right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for a breach of any covenant or condition in the lease, including a breach amounting to repudiation, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice —

(a) specifying the particular breach complained of; and (b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and (c) in any case requiring the lessee to make compensation in money for the breach — and the lessee fails, within a reasonable time thereafter, or the time not being less than fourteen days fixed by the lease to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.161

8.154

Section 146 creates exceptions to the operation of s 146(1); for

example, s 146(9) where the tenant has breached a condition in certain leases by being declared bankrupt.162 Subject to these exceptions, the section has effect notwithstanding any stipulation to the contrary: s 146(13).163 It is specifically provided that the section is not to affect the law relating to forfeiture in case of non-payment of rent: s 146(12).164 In New South Wales and Queensland, there is a further exception to the notice requirement in the case of leases of one year or less.165 The object of the notice is to allow the tenant to remedy the breach, if it is possible to do so, before the matter reaches the court.166 The procedure must be followed even if the breach is irremediable, although in such a case the notice need not require the breach to be remedied:

[page 794]

Horsey Estate Ltd v Steiger [1899] 2 QB 79; [1895–99] All ER Rep 515. The fact that the landlord reasonably believes that the tenant will be incapable of affording the repairs is no justification for not serving the notice: Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242. The

requirement of demanding compensation is not mandatory, as the landlord is not obliged to claim compensation if he or she does not want it: Rugby School (Governors) v Tannahill [1935] 1 KB 695; 1 KB 87 (appeal). The breach should be specified, so that a notice which merely identifies a breach of the repair covenant without detailing the damage will be ineffective: Gerraty v McGavin (1914) 18 CLR 152. In Macquarie v Area Health Authority the respondent landlord issued a notice to the appellant tenant identifying various alleged breaches of a repair covenant. However, it was held that the notice was insufficient to meet the requirements of s 129, the court concluding that: In the present case, the notices did not express any requirement to do anything. Even accepting that they can be read with cl 16 of the Car Park Lease and cl 17 of the Hospital Lease, they did not alert Macquarie as to whether Area Health was asserting that the breaches were remediable by payment of money (and if so, what was ‘all money necessary to remedy the Event of Default’), or were remediable other than by payment of money (and if so, by what), or were not remediable (and if so, what compensation would be to the reasonable satisfaction of Area Health). Specifically, the notices did not indicate whether Area Health was claiming interest on money that had not been paid at the times required by the agreements, or was claiming that the failure to complete the car park or substantially commence the hospital by 31 June 1999 caused loss entitling Area Health to compensation even if Macquarie proceeded in response to the notice to do these things [at [325]–[326]].

Accordingly, the notices did not convey to Macquarie what Area Health claimed Macquarie needed to do to avoid the failure referred to in s 129(1) which would then permit Area Health to exercise its right of re-entry or forfeiture. 8.155

The effect of a breach incapable of remedy (assignment without

consent) is discussed in Scala House and District Ltd v Forbes [1974] QB 575;

[1973] 3 All ER 308. In such instances, the notice operates to give the tenant the opportunity to consider his or her position. In the case of an assignment without consent, the notice must be directed to the assignee, since the assignment is effective notwithstanding the breach: Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd [1979] 3 All ER 504; Chelfield Pty Ltd v Goldsea Pty Ltd [2003] 2 Qd R 243. In Expert Clothing Service v Hillgate House [1986] 1 Ch 340 at 358; [1985] 2 All ER 998 at 1010, Slade LJ took the view that breaches of positive, albeit, ‘once and for all’ covenants normally will be capable of remedy. Slade LJ posited the following test: In my judgment, on the remediability issue, the ultimate question for the court was this: if the s 146 notice had required the lessee to remedy the breach and the lessors had then allowed a reasonable time to elapse to enable the lessee fully to comply with the relevant covenant, would such compliance, coupled with the payment of any appropriate monetary compensation, have effectively remedied the harm which the lessors had suffered or were likely to suffer from the breach? If, but only if, the answer to this question was ‘No’, would the failure of the s 146 notice to require remedy of the breach have been justifiable.

This test was applied to breach of a negative covenant by the English Court of Appeal in Savva v Houssein [1996] NPC 64, where the tenant had breached a covenant not to display

[page 795]

and not to make alterations without consent. In the light of this decision, it may be that the authority of the previous Court of Appeal decision in Scala House and District Ltd v Forbes [1974] QB 575; [1973] 3 All ER 308, that

breach of a covenant not to sublet is never capable of remedy, might be called into question.167 8.156

In each jurisdiction, the tenant must be given ‘a reasonable time to

remedy the breach’.168 A reasonable time is usually three months: Penton v Barnett [1898] 1 QB 276, although reasonableness will depend on the circumstances. In Billson v Residential Apartments [1992] 1 AC 494, 14 days was held sufficient because the tenants had disregarded all prior warnings indicating no intention whatsoever to remedy the breach. In the case of irremediable breaches, a shorter period is allowed. In Civil Service Cooperative Society Ltd v McGrigor’s Trustee [1923] 2 QB 79, 14 days was deemed reasonable between service and re-entry. In Giacomi v Nashvying Pty Ltd (2008) Q ConvR ¶54-684; [2007] QCA 454, a 30-day period was considered too short to remedy the breach (failure to obtain a quarrying licence which evidence indicated normally took 6–9 weeks to secure). 8.157

The courts generally resist attempts to circumvent the legislation

providing for service of the statutory notice as a prelude to forfeiture. In Plymouth Corp v Harvey [1971] 1 WLR 549; [1971] 1 All ER 623, the tenant was required by the landlord to execute a deed of surrender of the lease in escrow. The deed was to become effective if the tenant breached a particular covenant in the lease. It was held that the deed of surrender provided for forfeiture in the guise of surrender and that since the landlord had not complied with the statutory requirements for forfeiture, the purported surrender was void. In Holden v Blaiklock [1974] 2 NSWLR 262, a residential lease in standard form provided that upon breach by the tenant,

the tenancy should, at the option of the landlord, become a tenancy from week to week, terminable upon one week’s notice. This provision was held to be within NSW, s 129, and therefore could not be enforced unless the landlord complied with the requirements of the section. The decision was followed in Kemp v Lumeah Investments Pty Ltd (1983) NSW ConvR ¶55162; 3 BPR 9203; and to the same effect, which was not challenged on the point, is the decision of McLelland CJ in Eq in Hace Corp Pty Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326.

No right to forfeit if breach waived 8.158

If the landlord elects to treat the lease as still in force the landlord is

said to waive the breach. The waiver may be express or implied. It is implied if the landlord is aware of the tenant’s breach of covenant and performs some act clearly recognising the continuance of the tenancy, such as accepting rent after learning of the breach. But once the landlord has finally and unequivocally elected to treat the lease as forfeited, no subsequent act amounts to a waiver. In NGL Properties Pty Ltd v Harlington Pty Ltd [1979] VR 92, for example, it was held that the issue and service of a writ by the landlord claiming possession on the ground of the tenant’s

[page 796]

breach was effective to terminate the lease notwithstanding subsequent discontinuation of the action.169 What conduct by the landlord will amount

to waiver of the breach? In Lidsdale Nominees Pty Ltd v Elkharadly [1979] VR 84, the landlord’s solicitors wrote to the tenant on 15 March as follows: In view of the fact that we have been instructed by [the landlord] to terminate the lease and that last Friday, 10 March, a Supreme Court writ for possession was issued and did thereby forfeit the said lease, your tender of $297.50 being intended March rent, is accepted on account of mesne profits.

It was held by Lush J of the Supreme Court of Victoria that the lease was not effectively terminated until both issue and service of the writ for possession. In applying Croft v Lumley (1858) 6 HLC 672; 10 ER 1459, his Honour held (at [90]) that an acceptance of money which the tenant tendered as rent for a period after the date of the breach of covenant by the tenant amounted to a waiver of the breach by the landlord. It was not to the point that the landlord purported to accept the payment as mesne profits: The reason why the members of the House of Lords in Croft v Lumley hesitated to endorse the judge’s opinion in respect of waiver in that case was that they were doubtful whether on the facts the lessor had received the payment as rent. It may be that this case is stronger on the facts than Croft v Lumley because in that case the lessor advanced his view before accepting the money and indicated that this was a condition of his acceptance, while in the present case the assertion that the money was accepted as mesne profits was no more than a part of the communication of the fact of acceptance.

Since the abrogation of the rule in Dumpor’s case, a waiver of a covenant or condition does not operate as a general waiver of all breaches, but extends only to the particular breach in question. 8.159

In Cornillie v Saha (1996) 28 HLR 561, the lessor, after learning

that the lessee had sublet in breach of covenant, took proceedings for access

and damages for failure to grant access. Subsequently, she purported to forfeit the lease for breach of the covenant not to sublet. Aldous LJ, delivering the judgment of the English Court of Appeal, was of the view that the act of the lessor in seeking access was an unequivocal act of recognition of the subsisting lease and was made with knowledge of the fact that the lessee had sublet in breach of covenant. This amounted to a waiver in law.170 8.160

Where a lessee assigns the lease, taking covenants from the assignee,

the lessee may reserve a right of re-entry for breach of those covenants. The right of re-entry so reserved is enforceable even against subsequent lessees or subtenants of the premises against whom the covenants are not directly enforceable by the original lessee: see Shiloh Spinners Ltd v Harding [1973] AC 691; [1973] 1 All ER 90, where the assignee covenanted to observe stipulations relating to the fencing and support of buildings in respect of which the assignor retained its leasehold estate.

[page 797]

Forfeiture must be effective 8.161C

Moore v Ullcoats Mining Co Ltd [1908] 1 Ch 575 Chancery Division

[In 1900 Moore leased iron ore mines to the defendants for a term of 23½ years. The lessees covenanted, inter alia, to keep accounts and plans and to produce them upon request for the inspection of the lessor, to work the mine in a proper manner and to allow the lessor and his agents at all reasonable times to inspect the mines. The lease provided that upon default by the

lessees in performing the covenants of the lease, the lessor might re-enter upon the leased premises and thereupon the lease was to determine absolutely, without prejudice to the recovery of rent due and any right of action that might have arisen prior to the re-entry. The lessor died in 1907 and the plaintiffs were appointed his executors. In April 1907 the duly authorised agent of the plaintiffs was refused permission by the lessees to inspect the mines. Shortly thereafter the plaintiffs gave notice to the lessees that the lease had been determined by the lessees’ breach and that the plaintiffs intended to re-enter. On 3 May 1907 the plaintiff served a notice on the lessees formally demanding possession of the mines. On 4 May 1907 the plaintiffs issued a writ against the lessees claiming (1) possession of the mines; (2) mesne profits; (3) an injunction to restrain the lessees from further working the mines so as to occasion damage thereto; (4) an order permitting inspection; (5) a receiver; (6) damages; (7) costs. At the trial Warrington J held there had been no breach by the lessees of the working covenants in the lease and therefore the claim for damages failed. However, he also held that the lessees had breached the covenant to allow inspection of the mines. He then considered whether the plaintiffs were entitled to recover possession of the mines in consequence of the breach by the lessees.] Warrington J: … Now, two questions arise; the first is: Is the writ issued on 4 May a reentry within the words of the proviso for re-entry or equivalent to a re-entry? I think that it is now settled that under a proviso for a re-entry, such as the one in the present case, a writ claiming possession simpliciter, and any further relief which is incidental to a claim for possession, would be equivalent to a re-entry, and if this writ is to be regarded as a writ of that nature, then there has been a sufficient re-entry within the meaning of the covenant, and the lease is terminated. The question I have to determine on this part of the case is this: Is this writ an unequivocal claim for possession, a claim by which both parties are bound? It is argued on behalf of the plaintiffs that claims 3 and 4 of the writ must be read as claims for interlocutory relief only, and that not only is an opposite construction a wrong construction to put upon them, but it is so impossible a construction that it is quite absurd to suppose that those claims can have any such meaning. I think the real question that I have to consider is whether this writ is in such a form that it would not have been open to the plaintiffs thereafter, if they had considered that their most convenient course, to ask for relief on the footing of the lease being in existence, and to abandon their claim for possession. I think I am bound to come to the conclusion that this writ was equivocal … It seems to me, therefore, that the writ was not an unequivocal demand for possession. I think the writ was so framed that it might have been possible for the plaintiffs, if they had been so minded, to say: ‘We will go for the other relief expressed in the writ; we will not go for possession’: in other words, I think that the claim for possession and the claim for an injunction and for the order expressed in claim 4 are inconsistent, and therefore the plaintiffs cannot obtain possession in this present action …

[page 798]

Then the plaintiffs contend that if the writ was not an unequivocal demand there was a previous expression of their election contained in the two notices of 29 April and 3 May, to which I have already referred. I am of opinion upon the authorities … that where the condition in the lease is that the landlord may re-enter he must actually re-enter, or he must do that which is in law equivalent to re-entry, namely, commence an action for the purpose of obtaining possession. Parke B in Jones v Carter (1846) 15 M & W 718 at 725; 153 ER 1040 at 1043, puts that quite plainly. In the particular case to which he was referring the proviso for re-entry was in a different form to that in the present case — a form which one sometimes finds, namely, that upon breach the lease shall be determined. What he says is this: ‘An entry, or ejectment, in which an entry is admitted’ — that is, having reference to the old form of procedure — ‘would be necessary in the case of a freehold lease, or of a chattel interest, where the terms of the lease provided that it should be avoided by re-entry. Whether any other act unequivocally indicating the intention of the lessor would be sufficient to determine this lease’ — that is, the lease in the form of the one with which he was dealing — ‘which is made void at the option of the lessor, we need not determine, because an ejectment was brought, and processed with to the consent-rule, by which the defendant admitted an entry, and the entry would certainly be an exercise of the option’. In Fenn v Smart (1810) 12 East 444 at 448; 104 ER 173 at 175 Bayley J — although it is only a dictum in the course of the argument, but it shews the view he took — said: Must not the necessity of an entry depend upon the wording of the condition? If the words be, that upon the doing of such an act, the reversioner may enter, there must be an entry to avoid the estate; but if the estate be granted upon condition that if the grantee do such an act, the estate shall thereupon immediately cease and determine, there no entry is necessary. He there draws a distinction between the two classes of cases. In my opinion the present case falls within the first class, and I do not see how it is possible, on any construction of this proviso for re-entry, to say that the lessors have re-entered, when all that they have done is to give a notice of their intention to re-enter, founded on a statement that the lease had determined, which had not in fact happened, or a demand for possession founded on that notice. I think the only thing here that could be relied upon as equivalent to actual re-entry was the issue of the writ. In my opinion the issue of that writ, for the reasons I have stated, was not unequivocal, and therefore the plaintiffs are not entitled to possession. The result is, in my view, that the action fails altogether, and there must be judgment for the defendants with costs. Judgment for defendants.

8.162

The decision in Moore v Ullcoats Mining Co Ltd and cases following

it was subjected to some critical analysis by the Full Court of the Supreme Court of Queensland in Ex parte Whelan [1986] 1 Qd R 500. Their Honours noted conflicting authorities in Australia and the United Kingdom and preferred, as a matter of principle, the view that physical re-entry or re-entry by writ were not the exclusive methods of effecting a forfeiture. In their Honours’ view, an unequivocal demand communicated to the lessee was sufficient to effect re-entry and a law that prescribed physical dispossession as necessary was undesirable. In Queensland, Western Australia (Fremantle Trades Hall Industrial Association v Victor Motor Co Ltd [1963] WAR 201) and Victoria (Rosa Investments Pty Ltd v Spencer Shier Pty Ltd [1965] VR 97), Moore

[page 799]

v Ullcoats Mining Co Ltd may not represent the law. The position is otherwise in New South Wales where there are decisions clearly in support: Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607, where Young J was critical of the decisions in other states which deviated from Moore v Ullcoats Mining Co Ltd. By implication, the speech of Lord Templeman in Billson v Residential Apartments Ltd [1992] 1 AC 494 at 534, 535; [1992] 1 All ER 141 at 144, 145 supports the New South Wales position and the decision in GS Fashions Ltd v B & Q plc [1995] 4 All ER 899 is to the same effect.171 8.163

In Billson v Residential Apartments Ltd [1992] 1 AC 494 at 534,

535; [1992] 1 All ER 141 at 144, 145 and GS Fashions Ltd v B & Q plc [1995] 4 All ER 899 it was acknowledged that a landlord may forfeit the lease consequent upon the tenant’s breach of covenant by peaceable re-entry or by issue and service of the writ. The legal effect of the adoption of either method is to determine the lease and not merely to evince an intention to do so. In the case of re-entry by writ, if the pleadings admit an entitlement to forfeit, the service of the writ effects the forfeiture which is complete and cannot be undone by the landlord.172 8.164

The obligations of the tenant under the lease in Moore v Ullcoats

Mining Co Ltd were framed in the usual way. That is, they were framed as ‘covenants’, with the lease containing an express proviso for forfeiture of the lease in case of breach of covenant by the tenant. The effect of a proviso for forfeiture or re-entry on breach by the tenant is to render the lease voidable at the option of the landlord should the tenant breach one of the covenants. A breach as such never renders the lease void even if it is expressly stated that upon forfeiture the lease shall be void: Jones v Carter (1846) 15 M & W 718; 153 ER 1040; Massart v Blight (1951) 82 CLR 423; [1951] ALR 401. In the absence of an express proviso for forfeiture a breach of covenant does not entitle the landlord to re-enter. However, a proviso for re-entry may be implied: see 8.93. It is possible for the tenant’s obligations to be expressed as conditions rather than covenants: Rede v Farr (1817) 6 M & S 121; 105 ER 1188, although it is unusual for leases to be drafted in this way, particularly as drafting covenants as ‘essential obligations’ now achieves the same effect given the recent alignment by the courts of contractual and leasehold

remedies as discussed at 8.183C and following. The effect of making an obligation a condition in the lease is to convert it into an essential or fundamental term. 8.165

If the landlord decides to forfeit the lease upon a breach by the

tenant, the lease is determined from the date the landlord unequivocally elects to forfeit the lease. As from that date the tenant is a trespasser, liable to pay mesne profits for occupation of the premises: Elliott v Boynton [1924] 1 Ch 236; [1923] All ER Rep 174. (Mesne profits are damages for trespass and may be claimed only from a trespasser. If the person in possession is a tenant, the appropriate action is for arrears of rent or, if no rental has been agreed, for a reasonable sum in respect of the use and occupation of the premises.) However, as Moore v Ullcoats Mining Co Ltd shows, a landlord, on becoming aware of the tenant’s breach, is put to an election. He or she may proceed to forfeit the lease or, alternatively, may elect to treat the lease as still continuing.

[page 800]

The forfeiture may be enforced, subject to legislation, either by a peaceable re-entry on to the premises (see Clifton Securities Ltd v Huntley [1948] 2 All ER 283) or by the issue of a writ containing an unequivocal demand for possession. Where the landlord proceeds to forfeit the lease by way of a writ claiming possession, the Court of Appeal has held that the re-entry is effected by issue and service of the writ, not merely by the issue of the writ:

Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433; [1970] 2 All ER 795, overruling (in part) Elliot v Boynton. Thus the landlord is entitled to claim rent until the date of service of the writ and mesne profits thereafter until possession is relinquished. Mesne profits will be calculated by reference to the rent provided that the rent reflects the market value of the premises. If the market value is higher than the rent, mesne profits will be calculated at the higher rate: Bradbrook and Croft, 411–13. Under Imperial legislation or modern equivalents a landlord may be able to recover double the yearly value of the leased premises if the tenant, following notice given by the landlord, wilfully and contumaciously holds over after determination of the term: see, for example, Landlord and Tenant Act 1958 (Vic) s 9.

Relief against forfeiture 8.166C

Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 New South Wales Court of Appeal

Moffitt P: The appellant is the lessee under an unregistered lease for five years, commencing 1 January 1976, of premises used by it for the construction of fibreglass boats. Pursuant to a power provided in the lease the respondent lessor forfeited the lease for breaches of the covenant to pay rent. The proceedings at first instance were by the lessor for an order for possession and a cross-claim of the lessee for relief against forfeiture. The judge at first instance (Needham J) dismissed the cross-claim and directed entry of judgment for the plaintiff lessors. The lessee undertook at first instance to pay the rent outstanding and has since done so. Putting aside matters which the respondent sought to raise by way of notice of crosscontention, the breaches of covenant regarding non-payment can now be set to one side. The question raised by the appeal is whether the learned trial judge was in error in refusing relief against forfeiture by reason of conduct and circumstances other than such as related to breach of the covenant to pay rent. The conduct, later to be referred to, was in relation to lack of care in the use of the premises, including storage of inflammable

liquids in contravention of the Inflammable Liquid Act 1915 as amended so as to provide a risk of fire, leading to the inability of the lessors to have insurance against fire maintained. The question which arises at the outset is as to what circumstances warrant refusal of relief when breaches concerning payment of rent are remedied. Despite the practice of a court of equity to grant relief against forfeiture for nonpayment of rent upon payment of all rent in arrears and costs, it is clear upon the authorities that there is no absolute rule to that effect. Open to debate is the definition of the occasions warranting departure from the usual practice of granting relief. It is sufficient to start with Gill v Lewis ([1956] 2 QB 1). In each of the two judgments (Jenkins LJ and Hodson LJ, with which Singleton LJ agreed) it was acknowledged that in ‘exceptional’ or ‘very exceptional’ cases (Jenkins LJ) and in ‘an appropriate case’ (Hodson LJ) [page 801]

relief might be refused. Jenkins described such cases as being those ‘in which the conduct of the tenants has been such as, in effect, to disqualify them from coming to the court and claiming any relief or assistance whatever’. He instanced, as the ‘kind of case’ where relief might be refused, a case where the tenant ‘was notoriously using (the premises) as a disorderly house’ and stated that the basis for such a refusal was that the court by its order would not further the immoral purposes. The example selected is somewhat ambiguous. The continued use in question might adversely affect public morals so the ground for refusal is based on public policy. If the use is notorious, it might adversely affect the premises and hence the interest of the owner, so that refusal is based upon detriment to the owner if the lease is restored. Hodson LJ more precisely, and it would seem, in wider terms, referred to the type of case where relief might be refused. He said: That being the case, it must, I think, necessarily follow that, as equity reserves to itself the right to refuse relief in an appropriate case, the only remaining question is whether this is an appropriate case. I am confirmed in the view I have formed by the observations of Sir James Wigram V-C in Bowser v Colby (1 Hare 109, 130 et seq). Although I respectfully agree with what has fallen from my brother Jenkins and with his reference to the fact that breaches of covenant have to be read in the light of the present requirements of notice since the Conveyancing Acts, Wigram V-C clearly had in mind that which I think the court must always keep in mind, that there may be cases where the court will refuse relief because the conduct of the applicant for relief is such as to make it inequitable that relief should be given to him. Particularly must that be so where his conduct is in relation to the premises in question — as in the instance which my brother gave, where a tenant is supposed to have been conducting the premises as a disorderly house; it could hardly be thought, I should suppose, in such a case, that the court would grant relief. (supra, at 17). He emphasised that the relief sought is relief in equity. It follows that the court

considers whether it is ‘inequitable’ that relief be granted to him. Accordingly the court looks to the conduct between the parties, and in particular that of the plaintiff in relation to the defendant and in relation to the subject matter, namely the premises. As Needham J points out, the observation of Hodson LJ found approval in Platt v Ong [1972] VR 197 and in Belgravia Ins Co Ltd v Beah [1964] 1 QB 436 at 446. However, it is to Shiloh Spinners Ltd v Harding [1973] AC 691, that one must ultimately turn, should there be an inclination to treat the relief against forfeiture on the ground in question as almost automatic once the rent and costs are paid, as in effect was the submission made on behalf of the appellant. Relief against forfeiture based on non-payment of rent has always been regarded as in a special category in that the provision for forfeiture is considered to be security to ensure payment of rent. However, some of the observations of their Lordships must be regarded as of general application to the jurisdiction to relieve against forfeiture. Lord Simon of Glaisdale in his speech said: The last hundred years have seen many examples of relaxation of the stance of regarding contractual rights or obligations as sacrosanct and exclusive of other considerations: though these examples do not compel equity to follow — certainly not to the extent of overturning established authorities — they do at least invite a more liberal and extensively based attitude on the part of courts which are not bound by those authorities. I would therefore, myself, hold that equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties. What [page 802]

have sometimes been regarded as fetters to the jurisdiction are, in my view more properly to be seen as considerations which the court will weigh in deciding how to exercise an unfettered jurisdiction (cf Blunt v Blunt [1943] AC 517; Kara v Kara and Holman [1948] P 287 at 292). Prominent but not exclusive among such considerations is the desirability that contractual promises should be observed and contractual rights respected, and even more the undesirability of the law appearing to condone flagrant and contemptuous disregard of obligations. Other such considerations are how far it is reasonable to require a party who is prima facie entitled to invoke a forfeiture or penalty clause to accept alternative relief (eg money payment or re-instatement of premises) and how far vindication of contractual rights would be grossly excessive and harsh having regard to the damage done to the promisee and the moral culpability of the promisor. (I do not intend this as an exhaustive list.) It is these internal considerations which may limit the cases where courts of equity will relieve against forfeiture rather than any external confine on jurisdiction. Lord Wilberforce in his speech at 723 said: But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and

where the forfeiture provision is added by way of security for the production of that result. The word ‘appropriate’ involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach. It is not necessary for present purposes to seek to define, in the case of forfeiture for nonpayment of rent, the precise limits for the proper exercise of the power to grant relief. It is not necessary to consider the special case where the conduct of the lessee urged as the reason for refusal of relief is breach of covenant capable of remedy which has not been the subject of a notice under s 129 of the Conveyancing Act. Where the damage is done or continuing and is not capable of remedy or the detriment is not one which falls within s 129, different considerations apply. It is sufficient to state first that in my view it is conduct of the lessee in relation to the subject matter of the lease and such as to affect the interests of the lessor which may provide ground to refuse relief which otherwise would be granted. This view is consistent with principle, with the speeches in Shiloh, and the test of Hodson LJ in Gill v Lewis, and on one view may not be inconsistent with the comment of Jenkins LJ in the same case. Counsel for the appellant, in the face of these authorities, submitted, however, that the conduct of the lessee must be such that some recognised equity arises between the parties in relation to their contract which justified refusal of relief. If one were to take the test applied by Jenkins LJ or even of Hodson LJ in Gill v Lewis it may be arguable that it is sufficient for the judge in his judicial discretion at first instance simply to regard the conduct of the lessee as making it exceptional to the extent that it is just between the parties that relief be refused. However, on the assumption that some recognised equity to refuse relief must be shown, counsel for the appellant then submitted that there was no such equity as there was no covenant by the appellant in relation to insurance of the premises other than to pay a higher [page 803]

premium in certain circumstances. Hence, it was argued, there was no relevant breach of covenant other than that relating to the payment of rent. If, however, the appellant owed to the respondent an obligation at law or in equity in relation to the subject matter in dispute, namely the leased premises, then a relevant non-fulfilment of that obligation could provide a basis in equity to refuse equitable relief. Against this background I make some reference to the facts which are more fully referred to in the judgment at first instance … [His Honour concluded that in view of the evidence which showed that the lessee had stored quantities of dangerous and inflammable liquids upon the demised premises, in excess of the permitted quantities, thus jeopardising the lessor’s insurance, and had further exhibited a complete and persistent disregard of ordinary care to minimise the risk of fire, it would be unjust

to the lessor to grant the lessee’s application for relief against forfeiture. Hutley and Glass JJA also agreed that the appeal should be dismissed with costs.] Appeal dismissed with costs.

8.167

The legislation in Australia governing the equitable jurisdiction to

relieve against forfeiture for non-payment of rent follows the English pattern.173 The jurisdiction applies where the forfeiture is effected by peaceable re-entry on the part of the landlord: Howard v Fanshawe [1895] 2 Ch 581; [1895–99] All ER Rep 855. In what circumstances will a court refuse to grant relief against forfeiture for non-payment of rent? Is it enough that the tenant, although it has paid all arrears of rent, has entered a scheme of arrangement with creditors and may not be able to pay future rent? In Greenwood Village Pty Ltd v Tom the Cheap (WA) Pty Ltd [1976] WAR 49, the court thought not, Jackson CJ taking the view that, despite the scheme of arrangement, there was no evidence that rent would not be paid in the future. The position was said by his Honour to contrast with that of the lessee in Direct Food Supplies (Victoria) Pty Ltd v DLV Pty Ltd [1975] VR 358 where the lessee’s position was said to be quite hopeless and where there was no or little prospect of rent being paid in the future: cf Platt v Ong [1972] VR 197. Direct Food Supplies was cited with approval by Campbell J in Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685 at [24]: However, such a rare case can occur if the tenant is unable to pay future rent, or may reasonably be expected to become so: Direct Food Supplies Victoria Pty Ltd v DLV Pty Ltd [1975] VR 358; Tannous v Cipolla Bros Holdings Pty Ltd [2001] NSWSC 236 at [38]. If there is a sufficiently serious risk that the tenant will not be able to perform its obligations in the future, it may be that the consequence is that it is not unconscionable for the landlord to insist on its strict legal right.

8.168

In Hayes v Gunbola (1986) 4 BPR 9247, Young J of the New South

Wales Supreme Court held that NSW, s 128, by referring to an agreement to lease ‘where the lessee has become entitled to have his lease granted’, gave the court jurisdiction to grant relief from forfeiture of an equitable lease.174 Young J also observed that the court has discretion to refuse relief where

[page 804]

the conduct of the lessee in relation to the premises makes it unjust to grant relief. In Wynsix Hotels (Oxford St) Pty Ltd v Toomey (2004) 17 BPR 32,633; [2004] NSWSC 236 one of the factors that induced the court to grant relief was the fact that otherwise landlords would get a windfall from renovations made by lessees (per Young CJ in Eq at [70]).175 8.169

Of what relevance is it that the tenant has committed breaches of

the lease which if relied upon as entitling the lessor to forfeit, would require the service of the prescribed statutory notice? What does Moffitt P mean when he says: ‘Where the damage is done or continuing and is not capable of remedy or the detriment is not one which falls within NSW, s 129 different considerations apply’? Breaches of a lease requiring service of a notice under NSW, s 129 ought not to be taken into account when considering relief against forfeiture for non-payment of rent: Hayes v Gunbola (1986) 4 BPR 9247. Where a s 129 notice is required and is defective, relief from forfeiture will be granted: Dalla Costa v Beydoun (1991) NSW ConvR ¶55-558; (1990)

5 BPR 11,379. This issue was raised by Brereton J in Mineaplenty Pty Ltd v Trek 31 Pty Ltd (2006) 17 BPR 32,645; [2006] NSWSC 1203 at [68]: The position is well established in this state: a lessor is ordinarily entitled to rely on breaches of covenant other than that for which the re-entry was effected only if the lessor is entitled to effect a forfeiture by reason of those breaches, which cannot be said of a breach of which notice under s 129 is required but has not been given.

8.170

The equitable jurisdiction to relieve against forfeiture applied only

to leases forfeited for breach of the covenant to pay rent. The jurisdiction of the court to grant relief has now been extended to cases where the tenant has breached other covenants in the lease. Vic, s 146(2), for example, provides as follows. 8.171E

Property Law Act 1958 (Vic)

146 Restrictions and relief against forfeiture of leases and under-leases … (2) Where a lessor is proceeding, by action or otherwise, to enforce or has enforced without the aid of the Court or the County Court such a right of re-entry or forfeiture, the lessee may apply to the Court for relief; and the Court may grant or refuse relief, as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances thinks fit; and in case of relief may grant it on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court, in the circumstances of each case, thinks fit.176

[page 805]

8.172

Under this section the application for relief must be made prior to

the landlord obtaining possession of the premises by way of execution of the court’s order: Rogers v Rice [1892] 2 Ch 170. There is no such time limit if the landlord has enforced the right of re-entry without the aid of the court. The court has a broad discretion to grant relief on such terms as it thinks fit. The principles upon which the court should exercise its discretion were discussed by the Court of Appeal and the House of Lords in Hyman v Rose [1911] 2 KB 234; [1912] AC 623; [1911–13] All ER Rep 238. The courts are less reluctant to grant relief in these cases than where the forfeiture is for non-payment of rent. Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 1 WLR 1048; [1972] 3 All ER 610, is a striking example of the width of the court’s discretion to grant relief from forfeiture. In that case the Court of Appeal (Buckley LJ dubitante), obiter, approved a decision to relieve from forfeiture a tenant who had been convicted of keeping a brothel in the demised premises. 8.173

In Gill v Lewis [1956] 2 QB 1; [1956] 1 All ER 844, the lessor had

forfeited the lease for non-payment of rent. The lessees were bad payers and one of them was serving a term of imprisonment for an indecent assault which had been committed upon the demised premises. The Court of Appeal granted relief from forfeiture, the arrears of rent and costs having been paid. In answer to a submission pressed by the lessor’s counsel that breaches of other covenants should be considered, Jenkins LJ noted that early cases cited in support of the submission were decided before the legislation requiring service of a prescribed notice as a prerequisite to re-entry for breach of a nonrent covenant. Semble, for the lessor to rely upon such breaches, a proper

notice should be served although the breaches may be considered as part of equity’s overall discretion to grant or withhold relief. See Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562. 8.174

The courts have construed a re-entry clause for non-payment of rent

as collateral to the covenant to pay rent. The object of such a re-entry clause is to secure the payment of rent and accordingly, where all rent and costs have been paid, relief against forfeiture will normally be granted unless it would be inequitable in the circumstances: Chandless-Chandless v Nicholson [1942] 2 KB 321 per Lord Greene MR at 323. In Hace Corp Ltd v F Hannan (Properties) Pty Ltd (1995) 7 BPR 14,326 at 14,329, McLelland CJ in Eq spoke in these terms: The general principles on which an application for relief against forfeiture is dealt with may be briefly stated as follows. The court treats a power to forfeit a lease for nonpayment of rent as security for the rent and, generally speaking, on payment of an outstanding rent the court will grant relief against any such forfeiture on such conditions as it may consider appropriate in the particular circumstances, which will usually involve payment of the lessor’s costs and expenses. Although relief against forfeiture is a discretionary remedy, the burden of establishing that a forfeiture for non-payment of rent should not be relieved against, where all arrears of rent have been paid and where no interests of third parties have intervened, is a very heavy burden and normally involves demonstrating that by reason of the conduct of the lessee or for some other reason, the grant of relief against the forfeiture would be inequitable …

A relevant factor for the court to consider will be whether the lessee would suffer a disproportionate penalty having regard to the value of the lease if relief were refused: Di Palma v Victoria Square Property Co Ltd (1983) 48 P & CR 140.

[page 806]

8.175

A statement of principle from which it may be inferred when relief

will be granted has not emerged from the cases. Indeed, the courts have emphasised the width of the courts’ discretion in granting relief and the importance of not fettering this discretion. See the speech of Earl Loreburn LC in Hyman v Rose [1912] AC 623. However, the jurisdiction to grant relief from forfeiture must be exercised judicially. The nature of discretion was considered by Burt CJ in Love v Gemma Nominees Pty Ltd (1983) ANZ ConvR 68 at 69–70: Burt CJ: The jurisdiction to relieve against forfeiture of a lease following upon a breach by the tenant of a covenant which in the terms of the lease works a forfeiture is undoubtedly discretionary. This is so whether the jurisdiction is based upon the statute or upon the ordinary law and practice of the Courts of Equity. The discretion is sometimes said to be unfettered. That cannot be taken literally. It is a jurisdiction which must be exercised judicially and this at least means that in the exercise of it one must have regard to the purpose to be achieved by it and one cannot have regard to matters which are foreign to that purpose. The purpose can only be expressed in general terms as by saying that it is to be exercised ‘to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged …’. See Hyman v Rose [1912] AC 623 at 631 per Lord Loreburn LC. His Lordship was there speaking of a statutory jurisdiction similar to that conferred upon this Court by s 81(2) of the Property Law Act 1969 [WA] but the statement is, I think, equally true of the equitable jurisdiction. It is not the purpose of the jurisdiction ‘to relieve against men’s bargains’. Shiloh Spinners Ltd v Harding [1973] 2 WLR 28 at 38, per Lord Wilberforce. On the contrary, the general rule is that ‘contractual promises should be observed and contractual rights respected’. Lord Simon of Glaisdale in Shiloh Spinners, at 41 of the report. To obtain relief a person seeking it must show that relief is ‘appropriate’ and that ‘involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity of the value of the property of which forfeiture is claimed as

compared with the damage caused by the breach’. Shiloh Spinners, supra, at 38 of the report, per Lord Wilberforce. And there may, no doubt, be other considerations and no one consideration can be decisive. Hyman v Rose at 631 per Lord Loreburn LC.

His Honour granted relief from forfeiture notwithstanding what he termed were grave breaches of the lease by the tenant. He did this because of the disparity between the value of the work performed by the tenant on the demised premises resulting in an improvement of the reversion and the damage caused by the tenant’s breach. See also Australian Mutual Provident Society v 400 St Kilda Rd Pty Ltd [1990] VR 646 and generally, Bradbrook and Croft, 437–54. For recent examples, see Melksham v Archerfield Airport Corp [2004] QSC 164 (relief granted because breach ‘not in calculated disregard’ and forfeiture would be ‘disproportionately punitive outcome’ (at [47])) and Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 (relief not granted because of tenant’s repeated failure to deal with municipal fire safety standards as required in the lease, as well as failure to defray the costs of land tax as agreed upon by the parties). 8.176

The New South Wales legislation (s 129(2) of the Conveyancing

Act 1919) was considered by Windeyer J in Ladies Sanctuary v Parramatta (1997) 7 BPR 15,156, who was of the view (at 15,161) that the statutory jurisdiction gave the court a wide discretion and that

[page 807]

the statement in Shiloh Spinners Ltd v Harding [1973] AC 691; [1973] 1 All ER 90 to the effect that wilful breaches should only be relieved against in exceptional circumstances was not authority for the basis of the exercise of the statutory jurisdiction. The application for relief is made under s 129(2) of the Conveyancing Act 1919. This gives the court a wide discretion as to the considerations which should guide the exercise of such discretion: see Hyman v Rose [1912] AC 623, those considerations being somewhat different when the event giving rise to forfeiture is breach of covenant other than the covenant for payment of rent. Considerable reliance was placed by the defendant on the leading case of Shiloh Spinners Ltd v Harding [1973] AC 691 which has been referred to and in effect generally followed in this country; see for example Stieper v Deviot Pty Ltd (1977) 2 BPR 9602; Hayes v Gunbola Ltd (1986) 4 BPR 9247. It is however important to remember as it was pointed out by the authors in Meagher Gummow & Lehane, 3rd Edition, in para 1807 and in Southern Depot Company v British Railways Board [1990] 2 EGLR 39 at 39 that the jurisdiction for relief here being a statutory one, the statement in Shiloh as to wilful breach of covenant only justifying relief in exceptional cases is not authority for the basis of exercise of discretion in statutory cases, although the wilfulness of the breach is something to be taken into account in determining whether or not relief ought to be granted. It is important to take it into account as otherwise the court might be thought to encourage breach of the covenant against assignment without consent [the breach of the covenant the subject of the litigation] if no additional considerations were to be taken into account on a relief against forfeiture claim than those to be taken into account in determining whether consent to assignment was wrongly withheld.

8.177

In Gill v Lewis [1956] 2 QB 1 at 10; [1956] 1 All ER 844 at 850,

Jenkins LJ acknowledged the general principle that relief against forfeiture will not be granted so as to prejudice the rights of innocent third parties who have acquired an interest in the demised premises after the forfeiture: … where parties have altered their position in the meantime, and in particular where the rights of third parties have intervened, relief ought not to be granted where the effect of it would be to

defeat the new rights of third parties or be unfair to the landlord having regard to the way in which he has altered his position.

Where the court is prepared to grant relief to the tenant or mortgagee notwithstanding the intervention of third parties, relief may take the form of a lease subject to the new interest, so that the tenant’s lease becomes, in effect, a reversionary lease or the tenant’s lease may take priority over the third party interest. The form of relief will depend to some extent on whether or not the third party has notice of the tenant’s application for relief. Thus, in Bank of Ireland Home Mortgages v South Lodge Developments [1996] 1 EGLR 91, a new lease was granted after the mortgagee commenced proceedings for relief against forfeiture. As the claim for relief was commenced within the statutory six-month period (see 8.167), it was held that the new tenant should have known of the mortgagee’s entitlement to claim relief and, therefore, was judged to have had sufficient notice. The mortgagee was entitled to have, at its election, either a reversionary lease or a lease unencumbered by the new lease. 8.178

The general and inherent jurisdiction of equity to relieve against

forfeiture was confirmed and enlarged by the High Court in Legione v Hateley (1983) 152 CLR 406; 46 ALR 1 where the court ordered relief against forfeiture of a purchaser’s equitable interest

[page 808] under a contract for sale of land.177 Legione has been held to extend to leases

in general and to Crown leases in particular: McPherson v Minister for Natural Resources (1990) 22 NSWLR 671. The mortgagee of a lease forfeited pursuant to the lessee’s default may be granted relief from forfeiture in appropriate circumstances: Commonwealth Development Bank of Australia v Eagle Hotels (1990) NSW ConvR ¶55-506.178

Forfeiture and subleases 8.179

The general principle is that if the head lease is forfeited any

sublease falls with it. Legislation now confers a broad jurisdiction on the court to grant relief to subtenants where the landlord ‘is proceeding by action or otherwise to enforce or has enforced a right of re-entry or forfeiture under any covenant, proviso or stipulation in a lease, or for non-payment of rent’. The court has a discretion and, in the broader form of the legislation, may make an order vesting the lease in the subtenant, but not for a period exceeding that of the sublease, on such conditions as the court thinks fit. Relief may be granted under this legislation even though the tenant (the subtenant’s immediate landlord) is not entitled to relief. However, in such a case the subtenant must prove that he or she has not participated in the breach and has acted reasonably.179 In addition, the legislation regulating the equitable jurisdiction to relieve against forfeiture for nonpayment of rent (see 8.167) extends the jurisdiction to application by subtenants. 8.180

In recent years the courts have indicated a readiness to allow relief

from forfeiture of a licence provided that on general equitable principles an equitable interest in the land is coupled with the licence. These interests most commonly arise by estoppel in circumstances where it would be

unconscionable for the licensor to terminate the licensee’s right to occupy the land. For instance, in Proctor v Milton (1989) NSW ConvR ¶55-450, the licensee had expended money in making improvements to the property in reliance on the licensor’s representation that she could remain on the property for her life. In Silovi v Barbaro (1988) 13 NSWLR 466, a licensee who had invested more than $100,000 in planting Cocos palms and installing irrigation equipment was held to have an interest in the land. 8.181

In Federal Airports Corporation v Makucha Developments Pty Ltd

(1993) 115 ALR 679, M entered into a licence agreement with F for the use of a car park on F’s land. The agreement specifically provided that ‘the rights created in this agreement are contractual only and do not create in or confer upon [M] a tenancy or any estate or interest whatsoever in or over the car park to the intent that the rights of [M] are those of a licensee only’. M incurred considerable expense making improvements to the land. It was also a term of the agreement that M should provide a performance bond of $50,000 as security for its obligations under the agreement and to execute a counterpart of the agreement by a certain date. These obligations were expressed to be fundamental terms of the agreement. M did not meet these obligations within the requisite

[page 809]

time and F terminated the agreement. M sought relief from forfeiture. Davies J of the Federal Court of Australia held that the inherent jurisdiction of

equity to relief against forfeiture in order to prevent unconscionable behaviour applied to the circumstances of the application before him. In granting relief, the court considered that the licensor contributed to the breach, the breach was not a significant one, that there were no adverse consequences to the licensor resulting from the breach and that specific performance would be an adequate safeguard for the licensor.

Self-help 8.182

The two major forms of self-help available to landlords at common

law were the right to levy distress and the right to retake physical possession of the premises after termination or expiration of the lease. Distress, broadly speaking, was the right to seize and sell chattels found on the demised premises in order to meet arrears of rent: see Walsh v Lonsdale (1882) 21 Ch D 9; 4.31C. The remedy has been abolished in most Australian states.180 However, distress continues to be available as a useful if controversial remedy for landlords in South Australia (commercial tenancies) and Tasmania. The origin and remedy of distress and its application where the tenant is insolvent are outlined in Guthleben, ‘Distress for Rent’ (1995) 17(2) Adel LR 301. The general law relating to the retaking of possession of premises occupied by a trespasser has been referred to in 2.61C–2.71. See also Argyle Art Centre Pty Ltd v Bond & Freestores Co Pty Ltd [1976] 1 NSWLR 377 (the institution of court proceedings to obtain possession against an overholding tenant may preclude the physical taking of possession by the landlord). The Poverty Commission recommended abolition of the landlord’s right of peaceable re-

entry in relation to residential premises: Law and Poverty in Australia, 84. This recommendation has been adopted in all jurisdictions in residential tenancy legislation: see below at 8.212.

Remedies of landlord and tenant in contract 8.183C

Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17 High Court of Australia

[The appellant was the lessee under an unregistered memorandum of lease of land under the provisions of the Real Property Act 1900 (NSW). The appellant did not pay rent for a period of two months at the commencement of the lease and from May to October 1978. The respondent commenced proceedings by statement of claim seeking an order for possession, judgment for outstanding rent and interest, mesne profits and damages. The primary judge awarded damages for the loss of the covenant to pay rent and an appeal to the New South Wales Court of Appeal was dismissed.] Mason J: … [the primary judge] held that the appellant was in breach of the covenant to pay rent and in breach of the covenant to maintain and repair and that the breaches had not been rectified. He rejected the appellant’s case for relief against forfeiture, observing that the breach [page 810]

of the covenant to pay the rent was in respect of a substantial amount and had been persisted in over a long period. Moreover, he found that in various respects the appellant’s breaches of the covenant to maintain and repair and the covenant against subletting had shown a disregard on the part of the appellant for the premises and for the respondent’s interest in them. His Honour, following the majority decision of the Court of Appeal in Shevill v Builders Licensing Board, a decision which was later reversed in this court ((1982) 149 CLR 620; 42 ALR 305), concluded that, although a lessor could not recover rent after forfeiture, he could recover damages for loss of the benefit of the covenant to pay rent. Assuming that a period of six months approximately would elapse before the respondent would succeed in

reletting the premises, his Honour awarded $85,000 damages for breach of the covenants to pay rent and to pay outgoings … It follows that the rights of the parties in the present case are to be determined on the footing that as between them, notwithstanding the failure to register the memorandum of lease, it brought into existence an equitable term of the duration which it specified and subject to the conditions which it contained. The question which arises is the extent, if at all, to which the relevant rights, duties and liabilities of the parties to the memorandum of lease fall to be determined by reference to the ordinary principles of contract law. In Shevill Gibbs CJ (149 CLR at 625) assumed, without deciding, that the ordinary principles of contract law, so far as they are relevant to the questions that arose in that case, applied to leases. He acknowledged that a contrary view had been expressed in Total Oil v Thompson Garages [1972] 1 QB 318, where the English Court of Appeal held that the principle that acceptance of a repudiation brings a contract to an end had no application to a lease because the lease was more than a contract — it created an estate or interest in land. The consequence in that case was that the lessee’s claim that the lease for a term had been terminated by the lessee’s acceptance of conduct of the lessor amounting to a repudiation failed. Lord Denning MR (with whom Edmund Davies and Stephenson LJJ agreed) placed some reliance (at 324) on the opinion expressed by Lord Russell of Killowen and Lord Goddard in Cricklewood Property and Investment Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221 at 234 and 244, that frustration does not bring a lease to an end. However, recently in National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, the House of Lords held that the doctrine of frustration was in principle applicable to leases … Their Lordships quoted the following passage from the judgment of Laskin J in Highway Properties Ltd v Kelly (1971) 17 DLR (3d) 710 at 721: It is no longer sensible to pretend that a commercial lease, such as the one before this court, is simply a conveyance and not also a contract. It is equally untenable to persist in denying resort to the full armoury of remedies ordinarily available to redress repudiation of covenants, merely because the covenants may be associated with an estate in land. Laskin J drew attention to the decision of this court in Buchanan v Byrnes (1906) 3 CLR 704 where it was decided that upon abandonment by a tenant, in breach of covenant, of a hotel property the subject of a lease for 15 years, the landlord was entitled to claim damages over the unexpired term of the lease … For the sake of completeness I should mention that Buchanan was followed in Hughes v NLS Pty Ltd [1966] WAR 100; affd on different grounds 120 CLR 583, and that the New South Wales Court of Appeal has favoured the view that the doctrine of repudiation applies to a lease (Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544). [page 811]

The decisions in Australia and Canada, and the speeches in Panalpina, reflect the point made by William O Douglas and Jerome Frank in ‘Landlords, Claims in

Reorganizations’ (1933) 42 Yale LJ 1003, in footnote 6, that, as the law of landlord and tenant had outgrown its origins in feudal tenure, it was more appropriate in the light of the essential elements of the bargain, the modern money economy and the modern development of contract law that leases should be regulated by the principles of the law of contract. Accordingly, the balance of authority here as well as overseas, and the reasons on which it is based, support the proposition that the ordinary principles of contract law, including that of termination for repudiation or fundamental breach, apply to leases. However, it has been suggested that the presence of an express proviso for re-entry in a lease excludes any other right of termination of the lease by the lessor. Thus, in Rosa Investments Pty Ltd v Spencer Shier Pty Ltd [1965] VR 97, it was held that at common law re-entry is necessary to forfeit a lease unless dispensed with by contract. The better view is, in my opinion, that re-entry is essential only where the parties stipulate that advantage shall not be taken of a forfeiture except by an entry upon the land (Liddy v Kennedy (1871) LR 5 HL 134 at 151). If it be accepted that the principles of contract law apply to leases, it is not easy to see why the mere presence of an express power to terminate should be regarded as excluding the exercise of such common law rights as may otherwise be appropriate. It is, of course, open to the parties by their contract to regulate the exercise of the common law right to determine for repudiation or fundamental breach. But in this case the parties have not attempted to do so … What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way (Shevill, at 625–7). Likewise, the primary judge’s finding does not amount to a finding that there was a fundamental breach of contract in the sense that the party at fault, though wishing to perform the contract, was guilty to such default in performance that the breach went so much to the root of the contract that it made commercial performance of it impossible. Whether fundamental breach is but another illustration of repudiation, as Mahoney JA thought in Honner v Ashton (1979) 1 BPR 9478 at 9490, or is a separate category, is a question which may be put to one side. Repudiation or fundamental breach of a lease involves considerations which are not present in the case of an ordinary contract. First, the lease vests an estate or interest in land in the lessee and a complex relationship between the parties centres upon that interest in property. Secondly, this relationship has been shaped historically in very large measure by the law of property, though in recent times the relationship has been refined and developed by means of contractual arrangements. Thus, traditionally at common law a breach of a covenant by a lessee, even breach of the covenant to pay rent, conferred no right on the lessor to re-enter unless the lease reserved a right of re-entry. And in Equity the proviso for re-entry was treated as a security for the payment of the rent so that on payment of the rent Equity would relieve against the forfeiture. The object and effect of s 129 of the Conveyancing Act was to give further protection to the lessee and to preclude forfeiture of his interest in property within the sphere of the section’s operation, except in accordance with its terms. These incidents of the law of landlord and tenant indicate that mere breaches of covenant on the part of the lessee do not amount to a repudiation or fundamental breach. Indeed, it is of some significance that the instances in which courts have held that a

lessee has repudiated his lease are cases in which the lessee has abandoned possession of the leased property. But too much should not be made of this as very few cases of repudiation by lessees have come before the courts. I would therefore specifically reject the appellant’s submission that abandonment of possession is necessary to constitute a case of repudiation by a lessee. On the [page 812]

other hand, it should be acknowledged that it would be rare indeed that facts which fell short of abandonment would properly be seen as constituting repudiation by the lessee in the case of a long lease at a rental which was either nominal or but a fraction of the amount which could be obtained in the market place … [His Honour reviewed the evidence and noted various breaches of covenants in the lease in addition to the failure to pay rent. His Honour concluded that the evidence supported a finding that the appellant had repudiated the lease or had committed a fundamental breach of its obligations under the lease.] Brennan J: When a lease is determined prior to the expiry of the term, the covenant to pay rent for the unexpired portion of the term ceases to bind the lessee. Once the lease is determined, the lessee commits no breach of covenant by reasons of his non-payment of rent for that unexpired portion: Jones v Carter (1846) 15 M & W 718 at 726 [153 ER 1040 at 1043]. A lessor who, under a proviso for re-entry, serves the lessee with process for recovery of possession is entitled to mesne profits for the period during which the lessee remains in possession after service (Canas Property Co Ltd v K L Television Services Ltd [1970] 2 QB 433). The lessor may thereby recover an amount equal to the rent in respect of that period. But mesne profits are damages for trespass: mesne profits are not rent, nor are they damages for breach of the covenant to pay rent. A lessor can recover damages for loss of the benefit of a lease only where the lessee has repudiated the lease before determination of the term. Such a repudiation is not necessarily established by proving a default in the payment of rent. In Shevill v Builders Licensing Board (1982) 149 CLR 620; 42 ALR 305 … The Chief Justice stated the general principles governing the rescission of contract for anticipatory breach (at (CLR) at 625–6; at (ALR) at 308) … In the present case, the lessee’s breaches of covenant are said to show an intention to act and to act only, in a manner substantially inconsistent with his obligations under the lease. For the reasons stated by Mason J I think that the lessee did show such an intention and that the lessee repudiated the contract embodied in the lease. That conclusion makes it necessary to decide in this case what was assumed but not decided in Shevill v Builders Licensing Board, namely, whether the general contractual principles relating to rescission for anticipatory breach and damages for the loss of benefit of a contract apply when a lessee, by words or conduct, repudiates his obligations under the lease. It is the character of a lease as a demise which may be thought to exclude the

operation of those principles. For reasons that I shall state presently I would hold that ordinary contractual principles do apply to a lease, but that the character of a lease as a demise distinguishes the consequences of their application from their application to a contract that is not also a demise. If ordinary contractual principles apply to a lease, a fortiori they apply to an agreement to grant a lease or to an unregistered memorandum of lease which is not effective to convey a legal leasehold interest (cf Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544). It is therefore appropriate to consider the question on the footing that the memorandum of lease was effective to convey such an interest. The parties agreed that Lusher J should decide the matter on the footing that the memorandum had been registered and that agreement requires the question to be considered on the footing that a legal interest was conveyed to the lessee … [Certain authorities do not] support the proposition that a lessor may determine a lease by mere acceptance of a lessee’s repudiation of his obligations under the covenants of a lease where the lessee’s interest in the land is not liable to forfeiture. It would be a curious law [page 813]

which permitted a lessee in breach of covenant to seek relief against forfeiture while denying the prospect of relief to a lessee who had committed an anticipatory breach. A lessor’s inability to determine a lessee’s interest except where it is liable to forfeiture precludes the lessor from rescinding the lease for anticipatory breach, but it does not follow that the ordinary contractual principles relating to anticipatory breach do not apply to a lease where the lessee’s interest is liable to forfeiture … A promisor cannot, by repudiating his obligations, unilaterally alter the legal relationships between himself and the promisee. Until the promisee accepts the repudiation, the rights and obligations arising from the partial execution of the contract and causes of action that accrue from its breach continue unaffected (McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477). The promisee’s acceptance of the repudiation is an essential element in the cause of action for damages for anticipatory breach. That is because the liability in damages is substituted for the executory obligations to which acceptance of repudiation puts an end. Lord Diplock explained in Lep Air Services v Rolloswin Ltd [1973] AC 331 at 350: ‘Generally speaking, the rescission of the contract puts an end to the primary obligations of the party not in default to perform any of his contractual promises which he has not already performed by the time of the rescission. It deprives him of any right as against the other party to continue to perform them. It does not give rise to any secondary obligation in substitution for a primary obligation which has come to an end. The primary obligations of the party in default to perform any of the promises made by him and remaining unperformed likewise come to an end as does his right to continue to perform them. But for his primary obligations there is substituted by operation of law a secondary obligation to pay to the other party a sum of money to compensate him for the loss he has sustained as a result of the failure to perform the primary obligations. This secondary obligation is just as

much an obligation arising from the contract as are the primary obligations that it replaces …’ Acceptance of a surrender by a lessee who has repudiated a lease is at once an acceptance of the repudiation and a determination of the lessee’s interest in the land. Where the lessee repudiates but does not give up possession, a lessor’s acceptance must take some other form. Unless the lessee’s interest in the land is determined in some way, there can be no rescission of the contract, for the lessee continues to enjoy the benefit of the demise and to be liable to perform at least those covenants which touch and concern the land. So long as the lessee retains the interest which he took under the demise, neither party can put an end unilaterally to the executory obligations under the lease. Total Oil v Thompson Garages, supra, was an instance of a lessor, an oil company, failing to observe the credit terms for the supply of petrol contained in a lease of a tied service station. It was held that the service station operator, remaining in possession of the site, was not entitled to put an end to the tie, though it was not enforceable by the oil company until the company mended its ways. Edmund Davies LJ said ([1972] 1 QB at 325): ‘The defendants were admitted to the premises solely upon the terms of the lease containing several components which are unseverable, in my judgment. They stand or fall together. Despite the repudiation by the plaintiffs of part of the lease and the defendants’ acceptance thereof, I cannot accept that, as to the latter’s occupancy during the remainder of the 14-year term, they would be able to say, “We are entitled to remain in possession without regard being paid to where we obtain our petrol supplies”’. Where the lease is liable to forfeiture, as it was in the present case, enforcing the forfeiture both determines the lessee’s interest in the land and constitutes the lessor’s election to accept the repudiation. Conversely, a waiver of the forfeiture constitutes the lessor’s election to keep the lease on foot. It is not necessary to consider the possible effects of statutory restrictions on the enforcing of a forfeiture or of the granting of relief against forfeiture, except to bear [page 814]

in mind that the condition on which the lessee’s liability in damages for repudiation arises is that he ceases to be liable to perform the executory obligations resting on him under the lease. Once the lessee’s interest is determined, there is no reason why damages should not then be recoverable, provided the lessor has not previously made an election to keep the lease on foot. Where it is necessary for a lessor to determine a lease by re-entry under a proviso for re-entry contained therein, does his reliance on the proviso evidence an election to keep the lease on foot? … [In the event of the lessee remaining in possession] a lessor who enforces a forfeiture in accordance with the lease as soon as he is entitled to do so after he has knowledge of the lessee’s anticipatory breach cannot be taken to elect not to enforce a claim for damages. The mere continuance of the lease pending forfeiture is not an election either way. The election to be made by a lessor is between continuing to bind the lessee to performance of his executory obligations and putting an end to those obligations so that the substitutionary liability in damages will arise. Enforcing a forfeiture may be an

effective means of accepting a repudiation by anticipatory breach, though the power to enforce the forfeiture may depend upon some other breach of covenant or upon some event (for example, going into liquidation) which is no breach of covenant. In the present case it was conceded that the service of the statement of claim determined the lessee’s interest in the land. The statement of claim clearly accepted the lessee’s repudiation and sought damages accordingly. Thus the elements of the lessor’s cause of action were established. The assessment of damages by Lusher J conformed to principle … Perhaps there is procedural difficulty in joining a claim for damages for anticipatory breach with a claim for possession where the services of the writ or other originating process is the means by which the forfeiture of the lease is enforced. In such a case, it may be objected that the cause of action for damages accrues contemporaneously with the service but after issue of the writ or other originating process (see Wigan v Edwards (1973) 47 ALJR 586: 1 ALR 497). No objection of this kind was taken to the award in the present case, and it is not necessary to consider it. I would dismiss the appeal. [Deane, Wilson and Dawson JJ also agreed that the appeal should be dismissed with costs.] Appeal dismissed with costs.

8.184

Progressive Mailing House v Tabali Pty Ltd attenuates differences

between the law of landlord and tenant and the law of contract. Moreover, the fact that the source of the parties’ rights and obligations was an agreement for lease was irrelevant: there is no difference in principle between an agreement for lease and an executed lease. It follows from this decision that where the tenant has repudiated the obligations under the lease, the landlord may accept the repudiation as discharging both parties from further performance, terminate the lease and recover loss of bargain damages for the loss of the lease: see also India v Florlim Pty Ltd [2003] SASC 161. But, consistent with orthodox contractual principles, the landlord is under a duty to mitigate loss, for example, by attempting to find a replacement tenant. 8.185

Assessing the amount of loss of bargain damages depends on the

circumstances. For instance, where the lessor sells the premises after

accepting the tenant’s repudiation, and before the end of the unexpired term, the damages will be usually be loss of rent up until the date of sale: Janos v Chama Motors Pty Ltd [2011] NSWCA 238. Also, if the landlord takes over the tenant’s business, as in the case of a licensed hotel, the landlord will not be entitled to the difference between the former rent and the profits made for the balance of the term on the

[page 815]

ground that it is not clear if the loss is due to the lessee’s breach of an essential term, or ‘as a consequence of its own decision to retake possession and run the hotel business itself’: Gigi Entertainment Pty Ltd v Schmidt (2013) 17 BPR 32,611; [2013] NSWCA 287 (at [85] per Ward JA; Beazley P and Sackville AJA agreeing). 8.186

In Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105.

Samuels, Priestley and McHugh JJA held that the principles of contract law will generally apply to leases and that if the lessee’s breaches of covenants in the lease are, in all the circumstances, repudiatory, the lessor will be entitled to damages for the loss of the lease. A surrender by operation of law of the lease does not negate the normal legal consequences flowing from the lessee’s repudiatory conduct.181 8.187

In National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675;

[1981] 1 All ER 161, it was held that the doctrine of frustration applies to leases but that it would be a rare case indeed where the facts would justify a

holding that a lease was frustrated but the decision supports the assimilation of the law of landlord and tenant with the general principles of the law of contract. In Maori Trustees v Prentice [1992] 3 NZLR 344, the court held that the fact that a use is unprofitable is not sufficient for frustration. Use of the property would need to be impossible for the doctrine of frustration to apply. In Ooh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd [2011] VSCA 116 a licensee claimed that the contract had been frustrated because the roadside hoarding over which the licence was held had become obscured by the construction of a large new building, leading to business reducing substantially. The Victorian Court of Appeal, following Subiaco v Heytesbury Properties Pty Ltd (2001) 24 WAR 146, held that it was for the parties to protect themselves against eventualities of this kind in their contracts. The sign could still be used, if less efficiently, so the contractual licence was not frustrated. It follows that frustration is difficult to establish in the context of leases. In Subiaco, despite changes in planning legislation preventing the intended use of the site, the lessee was still able to use the land for some purposes, so the court found that there was no frustration. 8.188

Following the tenant’s repudiation, the landlord may accept the

repudiation as discharging both parties from further performance and terminate the lease. Until the repudiation is accepted, the lease remains on foot. As Leeming JA put it in Duncan v Big Country Developments Pty Ltd [2016] NSWCA 163 at [44], Basten and Ward JJA concurring: ‘Repudiatory conduct does not of itself bring the lease to an end; that is why “an unaccepted repudiation is a thing writ in water and of no value to anybody”: Howard v Pickford Tool Co Ltd [1951] 1 KB 417 at 421’ (italics in original). On the

other hand, the landlord may choose to keep the lease on foot and commence proceedings for the recovery of rent as it falls due. If the landlord adopts the latter course, there is no duty to attempt a re-letting on behalf of the tenant or to otherwise take steps to mitigate loss. So much should follow from the application of orthodox contractual principle: Tall-Bennett & Co Pty Ltd v Sadot Holdings Pty Ltd (1988) 4 BPR 9522; J & S Chan Pty Ltd v McKenzie [1994] ANZ ConvR 610.182 8.189

In Shevill v Builders’ Licensing Board (1982) 149 CLR 620; 42 ALR

305, the tenant frequently fell into arrears with payment of rent. The landlord re-entered and determined the lease pursuant to a re-entry clause. At the date of re-entry, the amount of rent outstanding

[page 816]

was not a large sum. There was no dispute about the validity of the termination but the tenant resisted the landlord’s claim for damages for the loss of the lease. The High Court held that if a contract is terminated pursuant to an express power, damages for loss of bargain will only be recoverable if there is some nexus between the promisor’s breach and the loss of the contract. That is to say, the promisor’s breach must have effectively deprived the promisee of the whole or a substantial part of the benefit of performance. In Shevill, the tenant’s conduct fell short of repudiation and the court found that the lease was lost as a result of the landlord’s election to reenter pursuant to the re-entry clause rather than any conduct attributable to

the tenant. See especially the judgment of Gibbs CJ at 628–8. The decision is of considerable importance to the law of landlord and tenant and the law of contract generally. Re-entry clauses permitting the landlord to re-enter and determine a lease for breach of any covenant, however important, are common in all types of leases but after Shevill the landlord will not be able to recover loss of bargain damages unless the parties have either (i) agreed to such a course, either expressly or by designating one or more covenants in the lease as ‘essential’ or ‘fundamental’ terms; or (ii) the tenant’s breach has been repudiatory. Covenants designated in this way as essential terms have come to be known as ‘anti-Shevill clauses’.183 A covenant to pay rent in advance is not, without more, an essential obligation of the lease and a failure to pay rent will not entitle the landlord to terminate the lease and recover loss of bargain damages unless the tenant’s breach is of such a magnitude as to have effectively deprived the landlord of the substance of the bargain, or is demonstrative of an intention not to be bound by the lease: J & C Reid Pty Ltd v Abau Holdings Pty Ltd [1988] NSW ConvR ¶55-416.184 In Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd the High Court had its first opportunity to consider the consequences of the ‘anti-Shevill clause’: that is, the breach of a fundamental or essential term. 8.190C Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 High Court of Australia [The landlord granted the tenant a lease of a shop in a shopping centre for a term of 15 years. The lease was registered, containing a number of provisions which made it clear that the

obligation to pay rent was an essential term. By 1999, the tenant was in arrears with rent. The parties entered into a deed which varied the lease, by allowing the landlord, as attorney for the tenant, to grant a sublease over part of the leased premises, to secure a reduction of the rent payable by the tenant. The deed required the tenant to pay the arrears of rent, the rent payable under the sublease and a reduced rent. A sublease of part of the leased premises was duly granted for a term of three years, with two options to renew. In October 2001, the subtenant assigned its interest to Woolworths. In the meantime, in September 2001 the landlord assigned the reversion to Gumland. From July 2002, when the initial term of

[page 817]

the sublease expired, Woolworths remained in possession but paid only half the rent payable under the sublease, which resulted in the tenant being in breach of the deed. The landlord terminated the lease for this breach and claimed the unpaid rent and damages for loss of bargain.] Gleeson CJ, Kirby, Heydon, Crennan and Kiefel JJ: Proper construction of lease as a whole: The first argument of the Lessee was that on the proper construction of the lease as a whole, in view of the fact that a tenant’s failure to pay rent is not necessarily repudiatory, the obligation to pay rent within the time limited by cll 3 and 7.1.1 was not truly a fundamental or essential term. It was not enough to ‘attribute a particular legal characterisation’ to a term, and it was not enough that the contract ‘labels’ the term ‘essential’. A fundamental difficulty with the lessee’s submission is that it is not correct to describe the appellant’s claim to loss of bargain damages as one which depends on treating cl 7.1.1 only as attributing to the obligation to pay rent a characterisation as ‘essential’. Nor is it correct to say that cl 7.1.1 merely fixed a ‘label’ to that effect. The essentiality of the obligation in cl 3.3 does not rest only on cl 7.1.1. It is reinforced by several other provisions. One is the stipulation in cl 1.13 that it was a ‘fundamental obligation’ of the lessee to ensure that the lessor received the rental. Another is cl 12.1, giving the lessor the right to re-enter the demised premises and determine the lease where the lessee is in arrears for seven days in the payment of rent, without formal demand. A third is the acknowledgment by the lessee in cl 16 of the fundamental obligation imposed on it by cl 13. Further, essentiality is not waived by the lessor accepting arrears or late payment: cl 7.2. The duty of the lessee to pay damages — loss of bargain damages — for breach of an essential term is the subject of a specific covenant in cll 7.3, 7.5, and 7.7, as well as cl 16. The lessor’s entitlement to recover damages is not to be affected or limited by any of the events described in cl 7.6. Whether or not the mere description of a covenant in a lease as essential, however trivial it may be thought to be, can make it essential is a question which need not be decided. The duty to pay rent punctually is not in itself necessarily a trivial one, and this congeries of provisions reveals it as having the characteristic of essentiality in this lease. As the

appellant submitted, the lease reveals a ‘preoccupation’ with the issue, which is scarcely surprising in a commercial lease creating an economic relationship. Hence, if the issue is treated simply as one of construction, many clauses point overwhelmingly to the conclusion that on the true construction of the lease the covenant to pay rent was an essential term. Mischaracterisation of transactions: The lessee supported its proposition that a covenant in a lease cannot be made essential merely by reason of the parties’ agreement that it is by alluding to authorities holding, for example, that to describe what would otherwise be a licence as a ‘lease’, or vice versa, does not prevent the courts from going behind the label and assessing the true nature of the transaction. Cases of that kind are often cases where the parties have attempted to gain the advantage of some statutory regime or other rule of law applying to one particular type of relationship by saying their relationship is of that type. There was no attempt of that kind here. There is no doubt what the legal relationship of the parties was; the only question is whether one term of that relationship was ‘essential’. Interdependency of grant of possession and right to rent: The lessee submitted that a lease imposed on the landlord the obligation to grant the tenant exclusive possession over the whole term, and that that obligation was interdependent with the tenant’s obligation to pay rent over the whole term. If the landlord decided to terminate the lease for reasons other than repudiation or fundamental breach, the damage flowing from loss of bargain was not [page 818]

caused by the tenant’s breach, but by the landlord’s decision to terminate. So expressed, the argument was a causation argument. The lessee supported the argument by reference to AMEV-UDC Finance Ltd v Austin and Esanda Finance Corporation Ltd v Plessnig. It is true that in these cases there are passages that say in reference to chattel leases, as Gibbs CJ said in the AMEV-UDC case: ‘[I]t is the actual damage which flowed from the breach which alone can be recovered.’ And in the same case Mason and Wilson JJ said: The point is that when the lessor terminates pursuant to the contractual right given to him for breach by the lessee, the loss which he can recover for non-fundamental breach is limited to the loss which flows from the lessee’s breach. The lessor cannot recover the loss which he sustains as a result of his termination because that loss is attributable to his act, not to the conduct of the lessee. But that case, like Shevill’s case, was a case where there was no fundamental breach, repudiation or breach of an essential term, and as Mason and Wilson JJ said in the passage immediately succeeding the last one quoted: It is otherwise in the case of fundamental breach, breach of an essential term or repudiation.

They were distinguishing between termination pursuant to a contractual right to do so and termination on grounds of breach of condition (ie breach of an essential term). For the proposition last quoted, Mason and Wilson JJ cited what Mason J said in Progressive Mailing House Pty Ltd v Tabali Pty Ltd. His Honour there said that loss of bargain damages could be recovered for repudiation or ‘fundamental breach’. He defined ‘fundamental breach’ to mean ‘breach of a condition or breach of another term or terms which is so serious that it goes to the root of the contract’. The second sense of the term ‘fundamental breach’ as used by Mason J corresponds with what this Court recently described as ‘a sufficiently serious breach of a non-essential term’. Mason J said, contradicting the Lessee’s submission, that it cannot be said in the case of repudiation or fundamental breach (as he defined it, including breach of a condition) that: … loss of the bargain is attributable to the innocent party’s exercise of his contractual power to terminate. It is different in the case of termination for nonessential breach, as Shevill demonstrates, because, by terminating pursuant to the contract at that stage, the innocent party puts it beyond his power to insist on performance, thereby bringing to an end any possibility of repudiation or fundamental breach with consequential damages for loss of bargain. The two passages quoted in the last paragraph from the reasons for judgment of Mason and Wilson JJ in the AMEV-UDC case were also quoted with approval by Brennan J in a passage relied on by the Lessee in Esanda Finance Corporation Ltd v Plessnig. Mason and Wilson JJ also said in the AMEV-UDC case that: … in Shevill v Builders Licensing Board there were indications that, if the lease clearly provided that whenever a lessor exercised the right of re-entry conferred by the lease he was able to recover such loss as he may have suffered by reason of the premature termination of the lease, such a provision might be effective. [page 819]

The present case is one in which cll 7.2, 7.3, 12 and 16 do clearly provide for the outcome described in that passage. It is thus plain that the authorities relied on by the lessee do not establish the point which the lessee sought to make, and in fact contradict it. And in Shevill’s case Gibbs CJ said: … [I]t would require very clear words to bring about the result, which in some circumstances would be quite unjust, that whenever a lessor could exercise the right given by the clause to re-enter, he could also recover damages for the loss resulting from the failure of the lessee to carry out all the covenants of the lease. In this case there are very clear words, and, although the failure of the lessee’s commercial venture, caused partly by Woolworths’ stark breach of its obligations, naturally attracts sympathy, there is no basis upon which a court could properly do otherwise than to give effect to the obligations to which the parties had bound themselves.

The lessee’s argument thus fails when considered as a causation argument. But the argument was also put in another form. The landlord, it was said, could not have it both ways: the landlord could not both regain possession and recover damages for unpaid future rent which would only have been received if possession had not been regained. But why not? It is not the case that the appellant in this case by its conduct in terminating and suing for loss of bargain damages put itself in a position better than it could have been in if it had kept the lease on foot and sued from time to time for arrears of rent as they piled up. The appellant could not unjustly advantage itself in that way. Clause 7.8 echoed the general law in obliging the lessor to take reasonable steps to mitigate loss. The lessor could not have got both damages (namely, the present value of the unpaid rent from the time of termination until the expiry of the lease) and in addition any rent capable of being earned by a re-letting of the demised premises. The lessor was only entitled to obtain, as damages, the present value of any difference between the rent not paid by the lessee and the rent received or to be received on re-letting. That is all that the trial judge allowed. To some extent the lessee’s argument rested on an idea of repugnancy — that there was a repugnancy between landlords having possession of property, but also being given a monetary equivalent for the rent they would have got had they not taken possession of the property and instead continued to allow it to be leased. But there is no true repugnancy. There can be no double recovery by landlords. If landlords obtain possession, they can only recover loss of bargain damages if they have tried unsuccessfully to obtain a new tenant at the rent stipulated in the terminated lease. The monetary equivalent of what they would have got if they had not taken possession of the property reflects the fact that they cannot obtain tenants, or cannot obtain tenants who promise to pay as much as the defaulting tenants promised. The group of submissions under consideration did not comprise submissions based on the words used in the lease. In one version they involved a submission that some rule of law stopped the clear meaning of those words from being given effect. Thus the lessee submitted: [The parties] can agree on things but the question of what are the legal consequences of what they agree upon and what are the legal consequences of action taken in accordance with their agreement is something that is governed by the law, not by their particular intention. What proposition of law is referred to? This question was never answered. Save for any applicable statutory requirements or rules of law, there is no reason in law why general contractual principles do not apply to leases in this respect. Under general contractual [page 820]

principles, an innocent promisee can terminate the contract, and recover loss of bargain damages, where there is repudiation, or a fundamental breach, or a breach of condition — ie a breach of an essential term. And under these principles it is possible by express

provision in the contract to make a term a condition, even if it would not be so in the absence of such a provision — not only in order to support a power to terminate the contract, which the lessee concedes, but also to support a power to recover loss of bargain damages. No convincing reason was given to explain why the former outcome was sound in law but the latter was not … Right to loss of bargain damages does not touch and concern the land: The second submission was that a right to loss of bargain damages did not ‘run with the land’ because it did not have ‘reference to the subject-matter’ of the lease — it did not touch and concern the land. The lessee referred to the test stated in Rogers v Hosegood: … [T]he covenant must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land. The lessee submitted that an entitlement to loss of bargain damages is an entitlement which arises, if at all, upon termination of a contract between particular parties privy to the contract; that it is a personal right which does not satisfy either limb of the Rogers v Hosegood test; that it does not affect the landlord and tenant in their capacities as such; and that it is an entitlement to compensation based not upon a covenant but upon a secondary obligation imposed by law. It submitted that a legal obligation designed to secure performance of some other obligation which touches and concerns land does not necessarily take on from that relationship the same characteristics as regards transmissibility to or against successors in title. Those arguments must be rejected. As the lessee correctly conceded, a covenant to pay rent touches and concerns demised land. It would be a strange result if the rights to enforce that covenant did not also touch and concern the land, whether they be rights to sue for arrears, to re-enter and terminate the lease, or to sue for loss of bargain damages. Application of the general tests as to whether or not a covenant touches and concerns the land indicates that that strange result does not follow in this case. In P & A Swift Investments (A Firm) v Combined English Stores Group plc, Lord Oliver of Aylmerton said that the relevant matters for consideration were these: … (1) the covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land. The lessee did not dispute the correctness of these tests, which have been much applied in Australia. Applying these tests to the lease in turn, first, the covenants in cl 3 benefit the reversioner for the time being only, and if separated from the reversion they cease to be of benefit to the covenantee. This is because in cl 1.1 the term ‘Lessor’ is defined as

meaning ‘the Lessor its successors and assigns’, and in cl 1.2 the term ‘Lessee’ is defined as meaning ‘the Lessee [page 821]

and the executors administrators successors and permitted assigns of the Lessee’. Further, the covenant in cl 3.1 to pay rent opens: ‘The Lessee covenants for himself, his heirs, executors administrators and assigns with the Lessor to pay unto the Lessor, his executors, his administrators or assigns’. Secondly, while the covenant does not affect the nature, quality or mode of user of the reversioner’s land, it does affect its value. If Diplock LJ was correct to say that the measure of damages for breach of a covenant which runs with the land is ‘the diminution in the value of the reversion consequent upon the breach’, which with respect he was, breach of a covenant to pay rent which is an essential term can diminish the value of the reversion. However, a seller of Blackacre at a time when a tenant of Blackacre is not in breach of any covenant to pay rent should obtain the same price, as reflecting the value of the land, as the seller would if the tenant committed a breach of that covenant just before sale, but the seller had the right to sue for loss of bargain damages, and assigned that right. Leaving aside questions of opportunity cost and of the tenant’s solvency, the recovery of damages will overcome the diminution in the value of the reversion; if there were no right to recover damages, there would be diminution in the value of the reversion. But if there were no assignment, and if the right to sue for loss of bargain damages were held not to touch and concern the land, so that the transferee of the reversion could not sue under s 117, the diminution in the value of the land, whether it takes place just before completion or earlier, will be uncompensated. That there is a diminution in value of the land if the covenant is not enforceable by a transferee of the freehold supports the conclusion that a covenant to pay rent which is an essential term is in truth a covenant which affects the value of the land. Thus Lord Oliver’s second test is satisfied. Thirdly, because of the terms of cll 1.1, 1.2 and 3.1, the covenant is not expressed to be personal: it is not given only to a specific reversioner, nor in respect of the obligations of a specific tenant. Fourthly, although the covenant in relation to which the right to sue for loss of bargain damages arises is a covenant to pay sums of money, and although it is not connected with anything to be done with or to the land, those factors do not prevent it from touching and concerning the land, because the first three conditions are satisfied and the covenant is connected with something to be done in relation to the land … Despite the ingenuity of the lessee’s arguments and the skill with which they were advanced, the decisive questions must be answered adversely to the lessee. In the end the problems for the respondents derived from the language of the lease, as varied, and the guarantees. From their point of view this language was not propitious. Adhering to the obligations which the parties accept in writing is a purpose of the law to which this Court must give effect.

8.191 Questions 1.

Assume a lease does not contain a re-entry clause and the tenant evinces an intention not to pay rent at any time in the future. Can the landlord terminate the lease? Assume instead that the lease does contain a re-entry clause which is to be activated by breach of any covenant in the lease. The tenant evinces a general intention not to be bound by the lease without refusing to perform any specified covenant. Can the landlord terminate the lease? The views of Mason and Brennan JJ may not provide consistent answers to these questions but the issues

[page 822]

were addressed by the New South Wales Court of Appeal in Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447; see 8.193C below. 2.

On what basis did the High Court in Gumland justify the enforcement of covenants against the lessee by the landlord’s assignee?

3.

Can the assignee sue for loss of bargain damages, a contractual remedy, if they are not in a contractual relationship with the lessee?

4.

Can it now be said that guarantees touch and concern the land in all circumstances?

5.

After Gumland is it possible for parties to characterise even the trivial obligations, and trivial breaches, as essential terms?

6.

Do the same principles now apply to repudiation, fundamental breach and breach of an essential term in relation to the termination of leases?

8.192

A more recent example of how the differences between repudiation

and breach of an essential term operate emerges from the decision of the Tasmanian Supreme Court in CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2011] TASSC 71. In this case, cl 14.1 of a lease, described as an ‘essential term’, stated that the lessee was obliged to keep the premises in good repair and condition and promptly repair any damage. Clause 17.2 of the lease defined ‘Event of Default’ as including repudiation, fundamental breach and failure by the lessee to comply with its obligations under the lease. Clause 17.3 gave the lessor a right to terminate by re-entry or notice following an ‘Event of Default’. The clause added that the lessor would give notice under Conveyancing and Law of Property Act 1884 (Tas) s 15(1) if that section applied. The lessee breached the obligation to repair imposed by cl 14.1 of the lease. On 28 April 2011, the lessor sent the lessee a letter described as a notice under Conveyancing and Law of Property Act 1884 (Tas) s 15(1). Significantly, the letter added that the lessor was not waiving its contractual rights to terminate the lease on the basis of the tenant’s repudiation. The letter also stipulated that failure to comply with certain demands (including submitting a timetable for repairs within 16 days, which

was not something required by the lease) would mean the lease would come to an end either through forfeiture or acceptance of repudiation. On 16 May 2011, the lessor purporting to terminate the lease, re-entered the premises and locked the lessee out. One critical issue considered in the case was how to characterise the tenants’ breaches for the purpose of the exercise by the landlord of common law rights. The court assumed the orthodox distinction between termination for breach of an essential term and termination by acceptance of repudiation. It went on to hold that notwithstanding the considerable damage caused to the premises by the lessee and which it did not repair, in the circumstances of the case the lessee did not repudiate its obligations under the lease. Nonetheless, relying on Progressive Mailing House Pty Ltd v Tabali Pty Ltd, the court held that the lessor had a common law right to terminate the lease for breach of an essential term, and this right was unaffected by cl 17.3. This demonstrates the value of the anti-Shevill clause.

[page 823]

8.193C

Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447 Supreme Court of New South Wales (Court of Appeal)

[The appellant entered into an agreement to lease a retail site in Jindabyne, New South Wales from the Council of the Shire of Snowy River for a term of five years. The agreement provided for three options to renew, each for terms of five years. The lease was not registered. The history of the relationship between the council and the appellant was one of continuous dispute over a number of matters including the obligation of the appellant to pay council rates. On 21 June 1993, the appellant purported to exercise the first option under the agreement for lease.

Subsequently, and after continuing disputes between the parties, the council notified the appellant that he was required to vacate the relevant land within seven days of the notification. The appellant did not vacate the land and on 24 May 1994 and the council sent to the appellant a notice of termination of the statutory tenancy at will effective on 30 June 1994 requiring him to vacate the property on that date. On receipt of this notice the appellant lodged a caveat over the land.] Kirby P: No notice was given to Mr Marshall by the Council pursuant to s 129 of the Conveyancing Act, 1919. This section states, relevantly, that: ‘129. (1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice — (a) specifying the particular breach complained of; and (b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and (c) in the case the lessor claims compensation in money for the breach, requiring the lessee to pay the same, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach … (8) This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.’ Section 128 of the Act defines a ‘lease’ for the purposes of s 129 as including ‘an original or derivative under-lease, also a grant at a fee farm rent, or securing a rent by condition, and an agreement for a lease where the lessee has become entitled to have his lease granted’. On 5 July, 1994, Mr Marshall tendered payment of $6090.74 for outstanding rates for the seven year period between 1988 and 1994. He did not include the Council’s legal costs in preparing the lease. The Council, however, refused to accept the cheque. By this time it had had enough. It was resolved to terminate the unfruitful relationship with Mr Marshall which had produced neither rates nor charges nor the recreational facility which the Council had contemplated. The Council, by this time, relied on its legal rights. Was the notice of termination effective? The appeal should be dismissed, basically for the reasons given by Meagher JA. A fundamental impediment to Mr Marshall’s success in this appeal is that the agreement for lease was never registered pursuant to the terms of the Real Property Act. Consequently, at law, Mr Marshall had only a statutory tenancy at will. This was determinable at one month’s notice. The notice of termination given to Mr Marshall provided the requisite one month’s notice. It thus fulfilled the requirements of s 127 of the Conveyancing Act 1919. That section provides that one month’s notice is all that is necessary to terminate a statutory tenancy at will. It was given. The statutory tenancy at will was thus lawfully terminated. [page 824]

Section 129 of the Conveyancing Act did not apply.

Mr Marshall, however, invoked s 129 of the Conveyancing Act. He complained that its protective provisions had not been complied with by the Council. There are two preliminary hurdles that Mr Marshall has to overcome: 1.

2.

Section 128 of the Act states that s 129 applies to an ‘agreement for a lease where the lessee has become entitled to have his lease granted’. Has Mr Marshall become entitled to have his lease granted? Does it mean that s 129 would only apply if Mr Marshall had already secured a decree of specific performance to have the agreement to lease registered? The only logical interpretation of the section is that s 129 applies to an agreement for a lease where the lessee is entitled to have his lease granted. That is, where the agreement for a lease is susceptible to an order for specific performance. It would be surprising if s 129 were only to apply to agreements for lease where the lessee has already been granted a decree of specific performance by a court exercising equitable jurisdiction. Parliament cannot have intended s 129 only to apply after the parties had already secured relief from a court. This would narrow the applicability of s 129 of the Act to a handful of cases. The Courts have not interpreted s 129 in this narrow way: see for example Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17 at 34, where Mason J assumed the applicability of s 129 in circumstances where no order of specific performance had been made. On 10 May 1994, the Council served its notice of termination on Mr Marshall. As between the parties, there might have been an equitable lease under the principle in Walsh v Lonsdale. However, this equitable lease is dependent upon the availability of specific performance. In my view, no court exercising equitable jurisdiction would have granted specific performance of the agreement to lease between Mr Marshall and the Council. I say this in view of Mr Marshall’s persistent refusal to pay rates which constituted a continuing repudiation of his obligations under the agreement to lease. At the time the notice to quit was served upon Mr Marshall, there was only a statutory tenancy at will between the parties. As there was no equitable lease under the principle of Walsh v Lonsdale, s 129 of the Conveyancing Act did not apply. The notice of termination which provided the requisite one month’s notice required by s 127 of the Conveyancing Act was therefore sufficient to terminate the statutory tenancy at will. Furthermore, s 129(8) of the Conveyancing Act expressly states that the section does not apply to re-entry or forfeiture or relief in case of non-payment of rent. The agreement for lease deemed rates and outgoings as rent. I do not consider that this provision was forbidden by s 7 of the Conveyancing Act which defines ‘rent’ to include ‘yearly or other rent, toll, duty, royalty or other reservation by the acre, the ton, or otherwise’. For these reasons s 129 of the Conveyancing Act 1919 was of no avail to Mr Marshall in the circumstances …

Meagher JA: On 10 May 1994 the respondent served a notice of termination on the appellant. On 30 June 1994 it re-entered following expiry of the notice of termination. It is not disputed that the notice and re-entry sufficiently complied with s 127 of the Conveyancing Act, if that were all which was involved. However, the appellant contends that he should be restored to possession of the land, and if necessary be granted relief against forfeiture, because s 129 of the Conveyancing Act had not been complied with. It is this submission which was rejected, and rightly so, by his Honour. It was a somewhat

curious submission, as it is difficult to see why the fragile statutory legal tenancy at will was not destroyed by the notice of 10 May 1994, and the right to specific performance had been rendered impossible by a refusal to comply with the terms of the ‘lease’, and as equitable relief evaporated so did any equitable estate. An [page 825]

examination of the decision of the High Court of Australia in The Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17, particularly per Deane J at 55, demonstrates that, a lease being a contract, when one party to it repudiates it or commits a fundamental breach or a breach of one of its essential terms, the other party may ‘accept’ the repudiation or breach and terminate the lease. In such a case the lessor, presuming him (as in the present case) to be the innocent party, will have two rights: first, a contractual right to terminate the lease by re-entry for breach of covenant (in this case contained in CL4 of the lease), and secondly on the application of the ordinary principles of contract law to terminate for breach. If he relies on the former right, he must comply with s 129 of the Conveyancing Act before re-entering; if, as here, he relies on the latter right, s 129 becomes an irrelevance. In my view, the appeal should be dismissed and the orders proposed by Kirby P made. [Powell JA agreed that for the reasons expressed in the judgment of Meagher JA the appeal should be dismissed.] Appeal dismissed with costs.

8.194

The decision in Marshall v Council of the Shire of the Snowy River

exemplifies the current judicial thinking in relation to leases as contracts. Yet the policy behind legislative provisions such as s 129 of the Conveyancing Act 1919 (NSW) and comparable legislation in other states (see 8.153E) is to prevent the ending of the lease by the landlord unless and until the landlord has given the tenant reasonable notice of the breach and the opportunity of remedying the breach. This policy is effectively outflanked by the interpretation given in Marshall to s 129 as being predicated upon an ending of the lease based upon forfeiture or re-entry and not including contractual termination. The current thinking of the Court of Appeal is to be contrasted

with the opinions of Priestley and McHugh JJA in Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 132 and 144 who held that a s 129 notice was required in cases of repudiation. 8.195

The conclusion in Marshall was considered in Apriaden Pty Ltd v

Seacrest Pty Ltd (2005) 12 VR 319; [2005] V ConvR 54-704. Did failure to give notice under s 146 of the Victorian Act negate effective acceptance of the repudiation and termination? The tenant was in persistent breach of the rental covenant by unilaterally deciding to reduce the rent by one-third in response to what it considered inadequate management by the lessor of the shopping plaza where the demised premises were located. The court (Williams AJA, with Ormiston and Batt JJA concurring) held that this breach amounted to repudiation and, following Marshall, held that the failure to give notice under s 146 was not a bar to termination. The Victorian Parliament responded quickly to this decision by amending s 146(1) to read as follows: A right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for a breach of any covenant or condition in the lease, including a breach amounting to repudiation, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice.

It follows that in Victoria, unlike other states, a statutory notice must be given before the lease can be terminated and loss of bargain damages awarded for repudiation. However, it is not entirely clear that the term ‘repudiation’ is broad enough to cover termination for ‘fundamental

[page 826]

breach’ and termination for ‘breach of an essential term’.185 In Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, Hodgson JA concluded as follows: It was submitted by Mr Burton that the conduct of Macquarie constituted fundamental breaches of the leases and the Construction Deed, and that it also constituted the repudiation of them; and that Area Health did not have to rely on contractual rights to terminate the leases on that basis, but could do so in reliance on its general law rights: Marshall v Council of the Shire of Snowy River (1994) 7 BPR 14,447 at 14,457. Even on the narrower view taken in World Best Holdings Limited v Sarker [2010] NSWCA 24 at [42]–[44], Area Health was entitled to terminate the leases by accepting Macquarie’s repudiation of them, without having to comply with s 129(1). The decision in World Best proceeds on the assumption that there is a distinction between fundamental breaches of contract (which entitle the other party to terminate), and repudiation of a contract (which entitles the other party to terminate by acceptance of the repudiation): see Sanpine at [44], [47]– [49]. In general repudiation is constituted by communications or conduct manifesting unwillingness or inability to render substantial performance of the contract; and while some fundamental breaches would do this and thus amount to repudiation, this is not so in all cases. For example, it is open to parties to agree that a particular obligation under a contract is essential, in which case a breach of that obligation will be treated as a fundamental breach entitling the other side to terminate (Sharjade at [46]); but breach of such an obligation will not necessarily manifest unwillingness or inability to render substantial performance of the contract. In my opinion, as accepted in World Best, where a landlord terminates for breach of an obligation agreed by the parties to be essential, but where the breach does not amount to repudiation in the sense I have explained, a re-taking of possession would be the exercise of a ‘right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition or agreement (express or implied) in the lease’ within s 129(1) (at [295]–[296]) [Allsop P and McFarlan JA agreed].

Does this mean that whether s 129 applies depends on the type of contractual breach? How is it possible to distinguish a fundamental breach that is a repudiation and one that is not?

8.196

If a landlord has repudiated obligations under the lease, it was once

a moot point whether the tenant could accept the repudiation and terminate the lease and recover loss of bargain damages. The judgment of Mason J in Tabali and the reasoning of the New South Wales Court of Appeal in Marshall would lend support to the view that such an action may be maintained by the tenant. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; 85 ALR 183; 63 ALJR 372 the lessor failed to register the lease despite constant prompting from the lessee’s solicitor. The lessee’s solicitor gave written notice to the lessor’s solicitor to register the lease within 14 days. The lessor’s failure to comply was held to be a repudiation entitling the lessee to terminate the lease. In Scarcella v Linknarf Management Services Pty Ltd (in liq) [2004] NSWSC 360 Hamilton J found that there was persistent unreasonable withholding of consent, contrary to s 133B(1) for various reasons (including tardiness of replying and demanding directors’ guarantees from the assignee when none had been demanded of the assignor), but went on to find that the withholding of consent was not a breach of contract which constituted repudiation.

[page 827]

In Douglas v Cicirello [2006] WASCA 226, the appellant lessee terminated the lease because of an alleged repudiation by the respondent lessor. There was an implied term in the lease that the lessor would make structural repairs to the property within a reasonable time to keep it fit for habitation. The premises sustained some serious damage, and the lessor failed to carry out the

necessary repairs in a reasonable time. Steytler P and McLure JA held that this implied term was an essential term of the lease but the landlord had on the facts not failed to remedy in a reasonable time. The tenant’s termination was therefore wrongful. In Duncan v Big Country Developments Pty Ltd [2016] NSWCA 163 a tenant entered into a management agreement with a catering business. When the business ran into financial difficulties, voluntary administrators changed the locks of the premises. The landlord later nailed shut an unlocked side door. The tenant alleged that the landlord had repudiated; the landlord alleged abandonment by the tenant. The court held that the tenant had abandoned by failing to take steps to regain entry to the premises and failing to pay rent. The landlord did not repudiate because it did not authorise the changing of the locks, and the nailing of the door was to secure the premises while a new tenant was sought. If a landlord elects to accept the repudiation by the lessee, the question arises as to whether the lessee may then seek relief against forfeiture.

Repudiation, notice and relief against forfeiture 8.197C

Batiste v Lenin (2002) 11 BPR 20,403 Supreme Court of New South Wales (Court of Appeal)

[In November 1996 a lease of the Great Northern Hotel, Newcastle (the Hotel) was entered into between the defendant and the second plaintiff (Hazaran) for a term of six years with an option to renew for a period of six years and an option to purchase. At the time the lease was granted the hotel was in a severely deteriorated state. It required substantial refurbishment to be suitable for

use as a hotel. There were significant breaches of the lease, including failures to complete works relating to fire stairs; failure to repair the external woodwork; and a long continuing pattern of arrears of rent, commencing soon after 1 January 1999. Also, the conditions of a rent-free period specified in the lease had not been satisfied. The trial judge, Bryson J, found that the rent outstanding on 31 October 2001 was approximately $202,000. These breaches evinced an intention of the lessee not to comply with the terms of the lease. The trial judge concluded that the lessee had repudiated the lease. The plaintiffs commenced proceedings against the lessor seeking relief from forfeiture of the lease and of the option to purchase. The trial judge rejected the lessee’s claim as there was no evidence that outstanding debts could be paid and the relationship between the parties was such that it should not be continued. The plaintiffs appealed.] Sheller JA: Bryson J found that Mr Lenin had a clear right to re-enter based on Art 13 of the lease and the failure to pay rent for long periods, including any rent at all from June 2001 onwards. His right to possession was perfected by the commencement of the first cross-claim which had the same effect as an actual re-entry to terminate the lease. A further ground for his right of re-entry was failure to pay outgoings which was admitted on the pleadings. The speech of Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691 at 725–6 is most [page 828]

instructive. That case turned upon whether a right of entry could be validly reserved on an assignment of a leasehold property when the assignor retained no reversion. It having been held that it could there was a question of whether the Court should grant relief against the exercise of that right. Lord Wilberforce said: Failures to observe the covenants having occurred, it would be right to consider whether the assignor should be allowed to exercise his legal rights if the essentials of the bargain could be secured and if it was fair and just to prevent him from doing so. It would be necessary, as stated above, to consider the conduct of the assignee, the nature and gravity of the breach, and its relation to the value of the property which might be forfeited. Established and, in my opinion, sound principle requires that wilful breaches should not, or at least should only in exceptional cases, be relieved against, if only for the reason that the assignor should not be compelled to remain in a relation of neighbourhood with a person in deliberate breach of his obligations. In this light should relief have been granted? The respondent’s difficulty is that the Vice-Chancellor, who heard the witnesses and went into all the facts, clearly took the view that the case was not one for relief. I should be reluctant, in any event, except on clear conviction to substitute a different view of my own. But I have examined in detail the evidence given, the correspondence over a period of four years, the

photographs and plans of the site. All this material establishes a case of clear and wilful breaches of more than one covenant which, if individually not serious, were certainly substantial: a case of continuous disregard by the respondent of the appellants’ rights over a period of time, coupled with a total lack of evidence as to the respondent’s ability speedily and adequately to make good the consequences of his default, and finally a failure to show any such disproportion between the expenditure required and the value of the interest involved as to amount to a case of hardship. In my opinion the case is not, on established principles, one for relief. With that speech the others members of the House of Lords agreed. The arguments against Bryson J’s refusal to grant relief turn upon two matters to which he referred. In the first place his Honour said that when he raised Hazaran’s ability to pay rent up to date, Ms Batiste’s evidence was that, for the rent from 1 January 1999 on, Hazaran could not pay the rent up to date if it had to, but possibly Provident Capital Limited (Provident Capital), a company of substance, which was described as the ‘funder for the property’, could. This was not accompanied by any evidence of willingness by the finance company to make the necessary advances. As to the rent for the period up to 1 January 1999, Ms Batiste said that if the Court decided that Hazaran was not entitled to a rent holiday, Provident Capital would pay the rent. From this his Honour understood, correctly I would have thought, that Hazaran could not pay that rent except with finance from its funder. Bryson J found that the plaintiffs had not shown, in a clear way, whether Provident Capital had given any commitment to fund the arrears of rent and the first two years rent if the need arose. He went on to refer to breaches of covenant which extended far beyond failures to pay money and the plaintiffs’ failure to express any readiness to comply with the covenant relating to the fire stairs. To my mind, particularly in a case with a history of non-payment of rent such as was revealed here, it was well open to Bryson J in his discretion to refuse relief. In doing so his Honour referred to the fact that there was no offer to overcome the failure to comply with the breach of covenant requiring the performance of works. To that end, the plaintiffs’ contention was that the works covenanted were impossible. It was accepted [page 829]

on behalf of Mr Lenin that s 129(1) of the Conveyancing Act 1919 provides that the right of re-entry for breaches of covenant other than the non-payment of rent is not enforceable by action, except where the lessor serves on the lessee a notice in the form set out in the sixth schedule or to similar effect and the lessee fails within a reasonable time thereafter to remedy the breach or pay reasonable compensation, as the case may be. No such notices were given. Subsection (8) provides that the section does not affect the law relating to re-entry or forfeiture or relief in case of nonpayment of rent. The appellants argued that as no notices had been given Bryson J should not have taken into account breaches of covenant requiring the performance of works in determining whether relief should be granted. The appellants relied upon what was said by Hope J, as his Honour then was, in

Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 97,145 at p 9576. After referring to the judgments of members of the English Court of Appeal in Gill v Lewis [1956] 2 QB 1 at 13 and 17 Hope J said: These statements seem to me to justify the view that breaches of other covenants should generally not be taken into account if the lessor is not entitled to effect a forfeiture by reason of those breaches. Indeed, this follows from what Wigram VC said [in Bowser v Colby [1841] 1 Hare 109; 66 ER 969], for he considered that the breaches of other covenants would be relevant where they would have occasioned the forfeiture of the lease. Section 129 of the Conveyancing Act 1919, as amended, requires that the lessor give a notice complying with the section before effecting a forfeiture, and the lessee is consequently given an opportunity of remedying the breaches. Where such notice has not been given, or where it has been given but the breaches have been remedied, the lessor is not in a position to effect a forfeiture. No notice was given by the lessor in the present case so that it would seem that the breaches of the covenants other than the covenants to pay rent and royalties should not preclude the granting of relief in the present case. Hope J did not consider that this was inconsistent with the decision of AH Simpson CJ in Eq in Langley v Foster (1909) 10 SR (NSW) 54, where notices under the then equivalent legislation had been given by the lessor, and the decision of the Privy Council in Greville v Parker [1910] AC 335, which concerned the exercise of an option to renew. In two cases — Hayes v Gunbola Pty Ltd (1986) 4 BPR 97,263 and Dalla Costa v Beydoun (1990) 5 BPR 11,379 — Young J agreed with and applied what Hope J said, to the effect that where there had not been a proper notice given under s 129 of the Conveyancing Act one did not take into account breaches of the lease, other than nonpayment of rent, when considering relief against forfeiture. In Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 97,311 at 9638 Meagher JA, with whose judgment Priestley and Clarke JA agreed, in upholding an appeal from a decision to refuse relief against forfeiture so that the Court was required to exercise that discretion afresh, said: Before this court can adequately perform that exercise, it will be necessary to determine what, if any, effect can be given to the circumstance that the lessee was in breach of the covenant requiring it to obtain the mortgagee’s consent which undoubtedly did take place although the notice under s 129 had not specified that breach. This is a matter which is the subject of one decision by this Court viz the decision of Hope J (as he then was) in Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd. In that case, after a careful review of the authorities, his Honour concluded that where a notice is issued specifying one breach a court cannot, unless there are [page 830]

special circumstances, take into account other breaches which have not been referred to in the notice. His Honour did not decide that in no circumstance can a

court take into account such other breaches, and such a conclusion would be surprising in view of the ample discretion of the court. Indeed, in some cases (for example where there have been continued and repeated breaches of covenants after the notice has been served) a court of Equity, asked to relieve against any forfeiture, would necessarily have to take into account unspecified breaches. Nevertheless, in my view his Honour in that case correctly laid down the law applicable, and in the present case I do not see any special circumstances which could enable us to take into account the lessor’s failure to obtain the mortgagee’s consent to the sub lease in question. I accept, as this Court did in Tutita Pty Ltd v Ryleaco Pty Ltd, that the Court when asked to grant relief against forfeiture would not ordinarily take into account breaches which for want of a notice under s 129(1) did not allow a right of re-entry or forfeiture to be enforced by action. But, as Meagher JA pointed out, the Court’s discretion in considering such an application is not necessarily fettered in a case such as the present. Bryson J found that Hazaran had repudiated the lease as the result of very significant breaches of covenant. These led his Honour to the conclusion that Hazaran had evinced an intention not to comply with the terms of the lease. It would, in my opinion, be quite unjust to the lessor to ignore such breaches in considering whether to exercise the discretion to grant relief. The claim to possession was based not merely on breaches of conditions in the lease but also on the lessee’s repudiation of the lease. Nor do I think that his Honour wrongly took into account the relationship between the parties as a further ground for refusing relief. To adapt the language from the passage I have quoted from the speech of Lord Wilberforce, the lessor should not be compelled to remain in a relation of neighbourhood with a lessee in deliberate breach of its obligations. In large measure that relationship was poisoned by Hazaran’s habitual and long continued lateness in paying rent to the point, as his Honour noted, of not paying it at all since the proceedings were begun in July 2001 and making claims for contribution which were not on any reasonable view based on any obligation the lessor actually had. I am not persuaded that his Honour’s discretion in refusing relief against forfeiture miscarried particularly when the lessee’s repudiation of the lease is brought into account. It is not necessary to consider relief against forfeiture in connection with the lessor’s acceptance of the lessee’s repudiation of the lease as a separate basis for the order for possession of the hotel; compare Progressive Mailing House Property Limited v Tabali Property Ltd at 43 per Brennan J and see Abidogun v Frolan Health Care Ltd [2001] EWCA Civ 1821. [Giles and Santow JJA concurred.]

8.198

In CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd

[2011] TASSC 71 the court held that the tenant was not entitled to relief against forfeiture on the ground that although the lessee’s breaches were not wilful in the sense of being deliberate, the lessee was aware of the damage it

had caused and its own failure to rectify it. The lessee’s breaches were substantial and grave and had the effect of diminishing the value of the property. A tenant was successful in being granted relief against forfeiture in Liristis Holdings Pty Ltd v Walville

[page 831] Pty Ltd (2001) 10 BPR 18,801.186 The sublessor terminated for breaches of ‘essential terms’ without having given the statutory notice. The sublessee was granted relief against forfeiture. Barrett J relied on the High Court’s decision in Legione v Hateley187 and applied the following considerations: (1) Did the conduct of the lessor contribute to the lessee’s breach?; (2) Was the lessee’s breach (a) trivial or slight; and (b) inadvertent and not wilful?; (3) What damage or other adverse consequences did the lessor suffer by reason of the lessee’s breach?; (4) What is the magnitude of the lessee’s loss and the lessor’s gain if the forfeiture is to stand?; and (5) Is specific performance with or without compensation an adequate safeguard for the lessor? Because the tenant was in a position to pay arrears of rent, breaches of the requirement to insure the marina did not jeopardise the head landlord’s interest, and the sublessor would get a windfall if relief were not granted while the subtenant would lose his business, relief was granted on condition that the unpaid rent be fully paid up (the insurance requirement having been rectified in the meantime).

8.199 Questions 1.

Was the decision of the court in Marshall v Snowy River inconsistent with the requirement in provisions in every jurisdiction, such as NSW, s 129(10) that prohibits contracting out of the Act’s requirements?

2.

Is the Victorian legislature’s response a reasonable one?

3.

Is the term ‘repudiation’ broad enough to cover fundamental breach and breach of an essential term? Does it give too many rights to defaulting parties, especially given that the breach is a fundamental one?

4.

Is the approach in Wood Factory v Kiritos and the English Court of Appeal to the notice requirement preferable?

5.

What is the effect, if any, of a repudiatory breach on the lessee’s right to relief against forfeiture?

6.

Will a repudiatory breach always disentitle the tenant from relief against forfeiture?

7.

What relevance to the decision to grant relief against forfeiture is the existence of breaches of covenant in respect of which no statutory notice is given?

8.

Is the approach of the court in Batiste v Lenin consistent with that of the court in Marshall v Snowy River?187

9.

Should other states follow Victoria’s lead, and require notice before termination for repudiation by tenants?

10. It is highly unlikely that a tenant who has been held to have repudiated the lease, as opposed to committing a fundamental breach or breach of an essential term, will be able to get relief against forfeiture. Why?

[page 832]

The plea of set-off 8.200

If a landlord or tenant breaches a covenant in the lease, the innocent

party may bring an action at law for damages, or in equity for an injunction or specific performance. Such a remedy may seem chimerical to an impecunious tenant. The more obvious course for the tenant to take is to withhold rent but such a course may be fraught with difficulties. By withholding rent, the tenant may be committing a breach of the lease that would render it liable to forfeiture. Set-off when pleaded allows the defendant to set-off any moneys owing to the defendant from the plaintiff against moneys owed to the plaintiff by the defendant. If the plea operates as a substantive defence, it operates effectively to reduce or extinguish the plaintiff’s demand. The significance of the plea of set-off in the context of a landlord and tenant dispute is obvious. If the tenant can plead the damages flowing from the breach of a landlord’s covenant as a set-off against the landlord’s claim for rent, then the claim for rent may be extinguished or diminished. The nature of the plea of set-off and its role in

landlord and tenant litigation was discussed by Forbes J in British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd, below. 8.201C British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1979] 3 WLR 451; [1979] 2 All ER 1063 Queen’s Bench Division [The plaintiffs (the landlords) held a 99-year building lease of land in Suffolk. Under the lease they were obliged to construct a number of warehouses and factories in accordance with approved plans. In June 1973 the landlords agreed to construct a warehouse (warehouse no 1) on part of the land and to grant a sublease to the defendants (the tenants). The agreement provided that the landlords would make good any defects in the floor of the building caused by inadequate design or faulty materials or workmanship occurring within two years of the completion date. The clause was to remain in force notwithstanding grant and acceptance of the sublease. A sublease was executed in April 1974 for a term of 21 years from December 1971 at an initial annual rental of £109,020. In fact, the tenants commenced occupation in September 1972 and warehouse no 1 was completed in December 1972. The sublease contained no covenant by the landlords for repair. The parties entered into a second agreement in 1975 relating to the construction of warehouse no 2 on adjacent land. This warehouse was completed in December 1973, the tenants went into possession in March 1974 and the sublease was executed in May 1975. The initial rental for warehouse no 2 was £92,500 per annum. Again the sublease contained no covenant to repair by the landlord. In this action the landlords claimed possession, unpaid rent and mesne profits. The tenants admitted owing £540,000 in rent, subject to set-off and counterclaim. The defendants’ counterclaim was based on breaches of the landlord’s alleged obligations in the two agreements and the subleases relating to the condition of the floors in the two warehouses. The tenants claimed that serious defects to the floor of warehouse no 1 became apparent in April 1973 and that these were due to design defects. Similar defects occurred in warehouse no 2 in August 1974. The claims made by the tenants, which were disputed by the landlords, were for amounts exceeding £1 million. The landlords had become insolvent.

[page 833]

In these proceedings an order had been made for trial of preliminary issues which included the following question: Are the defendants (tenants) … entitled in law and/or in equity to deduct and/or set-off against the admitted liability for rent and/or mesne profits, the sums claimed against the plaintiffs (landlords) for breaches of the (agreements and subleases)? Forbes J: [His Lordship said that the starting point in any question involving set-offs must be the ‘masterly account’ of Morris LJ in Hanak v Green [1958] 2 QB 8:] It is clear from the judgment in Hanak v Green that there are in general three occasions on which set-off is permissible. (1) Set-off under the Statutes of Set Off … (2) What might be called abatement in certain cases at common law and (3) equitable set-off. The first requires that, and quote: ‘… the claims on both sides had to be liquidated debts or money demands which could be ascertained with certainty at the time of pleading’ per Morris LJ in Hanak v Green [1958] QB 9 at 17. The second are cases within the principle of Mondel v Steel (1841) 8 M & W 858; 151 ER 1288, which are confined to those concerned with goods sold and delivered with a warranty, goods agreed to be supplied according to a contract and actions for work and labour done. The principle only operates in such cases if the defendant can show that, by reason of the breach of contract by the plaintiff, the goods or the work are diminished in value. To that extent the defendant can obtain ‘an abatement of price’ as a form of defence. The third occasion on which set-off is permissible arises where ‘a court of equity would have regarded the cross claims as entitling the defendant to be protected in one way or another against the plaintiff’s claim’ per Morris LJ in Hanak v Green [1958] 2 QB 9 at 23. It is thus necessary to consider in what circumstances a court of equity before the Judicature Act 1873 would have afforded such protection to a defendant. The locus classicus for the principle involved is the judgment of Lord Cottenham LC in Rawson v Samuel (1841) Cr & Ph 161 at 178; 41 ER 451: We speak familiarly of equitable set-off, as distinguished from the set-off at law; but it will be found that this equitable set-off exists in cases where the party seeking the benefit of it can show some equitable ground for being protected against his adversary’s demand. The mere existence of cross demands is not sufficient … And then ‘Several cases were cited in support of the injunction; but in [all except one] it will be found that the equity of the bill impeached the title to the legal demand’. It is this feature that the equity must go to the very root of the plaintiff’s claim that is the essential attribute of a valid equitable set-off. An obvious example, as was emphasised in later cases, was Piggott v Williams (1821) 6 Madd 95; 56 ER 1027, where the fees which the solicitor claimed were in relation to a suit which would never have been necessary but for the solicitor’s own negligence. The principle is clear though there may have been

difficulty in applying it correctly to different sets of circumstances. A felicitously expressed statement of the principle occurs in the judgment of Parker J in Compagnia Sud Americana de Vapores v Shipmair (The Teno) [1977] 2 Lloyd’s Rep 289 at 297: ‘… where the cross claim not only arises out of the same contract as the claim but is so directly connected with it that it would be manifestly unjust to allow the claimant to recover without taking into account the cross claim there is a right of set-off in equity of an unliquidated claim.’ … Now originally Mr Harman argued that principle of equitable set-off did not apply where what was sought to be set off was unliquidated demand, but Bankes v Jarvis [1903] 1 KB 549, is a distinct authority for the proposition that unliquidated damages may be set-off against a claim for debt … [page 834]

Mr Harman, driven from that point, still argues that at any rate the sum must not be so vague as to be unquantifiable at the time of the claim. He cited no authority for this proposition and I can find no warrant for it in any broad legal principle. It is of the nature of unliquidated damages that they may remain unquantified until an award is made. A set-off of unliquidated damages is a defence to so much of the claim as is represented by the eventual amount of the award made. If the defendant in some way limits his damages to a sum less than that claimed, then it is obvious that there is no defence to the balance over and above the sum so limited and, no doubt, summary judgment could be obtained for this balance. But where the damages claimed to be set-off are at large and it is claimed bona fide, as is here admitted, that they over-top the claim, then even though not precisely quantified, it seems to me that the set-off amounts to a complete defence to the whole claim. Mr Harman’s next point, and it is an important one, is that there can be no set-off, equitable or otherwise, against rent. He starts by asserting that there is in landlord and tenant law a settled principle that a tenant may claim an abatement of rent similar to the abatement in certain other cases as explained in Mondel v Steel where he has either been dispossessed by his landlord or he has paid money for which his landlord was certainly liable. This principle he says is not one of equitable set-off at all but is rather a common law principle similar to that in Mondel v Steel … On a consideration of these cases it seems to me that Taylor v Beal (1591) Cro Eliz 222; 78 ER 478, is authority for the proposition that there are at least two sets of circumstances in which at common law there can be a set-off against rent, one where the tenant expends money on repairs to the demised premises which the landlord has covenanted to carry out, but in breach has failed to do so (at any rate where the breach significantly affects the use of the premises), and the other where the tenant has paid money at the request of the landlord in respect of some obligation of the landlord connected with the land demised. To this proposition there must be added two riders. First, that as the landlord’s obligation to repair premises demised does not arise until the tenant has notified him of want of repair, such notification must have been given before the set-off can arise; and secondly that the set-off must be for a sum which is not to be regarded as unliquidated damages, that is, it is a sum certain which has actually been paid and in addition its quantum has either been acknowledged by the landlord or in

some other way can no longer be disputed by him, as for instance, if it is the subject of an award on a submission to arbitration. The latest expression of opinion about this matter is in Lee-Parker v Izzet [1971] 1 WLR 1688; [1971] 3 All ER 1098. In that case Goff J was dealing among other things with a claim to a lien, the basis of which was laid on an argument that the tenants were entitled to treat a payment of the cost of repairs, for which the landlord was liable, as a payment of rent and reliance was placed on Taylor v Beal. Goff J discussed the principle of Taylor v Beal and he said: I do not think this is bound up with technical rules of set-off. It is an ancient common law right. I therefore declare that so far as the repairs are within the express or implied covenants of the landlord, the third and fourth defendants are entitled to recoup themselves out of future rents and defend any action for payment thereof. It does not follow, however, that the full amount expended by the third and fourth defendants on such repairs can properly be treated as payment of rent. It is a question of fact in every case whether and to what extent the expenditure was proper. I do not think that there is any difference between the principle as seen by Goff J and that which I have set out above save for this. Goff J took the view that it was money properly expended which could form a subject of this right. My view is that the right was slightly more restricted, namely, that it could only be exercised when the sum was certain and its amount [page 835]

could not really be disputed by the landlord. This restriction which I think should be made arises from a consideration of the judgment of Lord Kenyon CJ in Weigall v Waters (1795) 6 Term 488; 101 ER 663, which was not quoted to Goff J. In that case the tenant had in fact paid but Lord Kenyon CJ still regarded the cross claim as one for uncertain damages. It seems the quantum of the sum must have been either unchallenged or unchallengeable before it could be regarded as deductible … The principle appears to be that the money paid is regarded either as paid at the request of the landlord or to his use, but in either case can be treated as a defence. I agree with Goff J that this is strictly not a set-off as such, since set-off is a creature of statute and the principle appears to antedate the reign of George II, but rather a case where at law the payment was regarded as payment pro tanto of the rent. Nevertheless, it is clearly a defence to a claim for rent. In this case such a defence is not open to the defendants as they had not in fact paid anything. Their cross claim is for damages … [I]f the facts were such that this defence was available to a tenant equity would not assist him, because he had a perfectly good defence at law. but in other circumstances, where as here, the common law defence is not available because the defendant’s cross claim is not founded on payment but on unliquidated damages, one still has to consider whether or not equity would intervene. Then Mr Harman argues that rent is something special, that it is invested with something almost in the nature of an aura. He says rent issues out of the land. It is a

debt due which has attached to it many special rights such as the right to distrain and the right of forfeiture, without previously serving a notice under s 146 of the Law of Property Act 1925. These two rights, he argues, are unique examples of self-help remedies which it is not surprising ought not to be interfered with by any set-off … [After analysing a number of cases Forbes J proceeded:] A consideration of all these cases leads me to the conclusion that except in cases of distress or replevin equity has never refused to interfere to protect a tenant whose landlord was bringing proceedings based on non-payment of rent, if the tenant had a bona fide cross claim for unliquidated damages against the landlord, provided that he was not covered by an existing common law remedy and that the ordinary rules pertaining to equitable set-off were obeyed. I referred to these earlier in this judgment … [The approach of Lord Denning MR in Federal Commerce and Navigation Co Ltd v Molena Alpha Ltd [1978] QB 427; [1978] 3 All ER 1066, is] one more refutation of Mr Harman’s contention that the ancient common law remedies attached to rent should govern in the fourth quarter of the twentieth century, one’s approach to a tenant’s claim to equitable relief. While I am satisfied that it is proper in principle to allow that a cross claim could be effective as an equitable set-off against a claim for rent, it by no means follows that such a defence is available in all circumstances. The important qualification is that the equity must impeach the title to the legal demand, or in other words go to the very foundation of the landlord’s claim. This seems to me to involve consideration of the proposition that the tenant’s cross claim must at least arise under the lease itself, or directly from the relationship of landlord and tenant created by the lease. The landlord’s covenant to repair contained in the lease, if broken, might found, as has been seen earlier, the ancient common law defence to a claim for rent if the tenant had been forced to pay for repairs to maintain the premises in a state fit for the purpose for which they were let. If instead of paying for the repairs the tenant cross claims for damages for breach of the covenant, there is no common law defence, but there must, in my view, be an equitable right to setoff the unliquidated damages. But in this case, there is no covenant [page 836]

by the landlord to repair contained in the lease, and it is necessary to see how the defendants put their case on this aspect … [Forbes J acknowledged that the tenants’ claim was based on the agreement rather than the sublease. However, it was not necessary that the tenants’ claim should arise under the sublease itself or out of the same contract as the landlord’s claim. The question was whether the two matters were so closely connected that the principles affecting equitable set-off could be said to apply. In reaching a conclusion it was necessary ‘to drive from one’s mind the insidious

promptings of generations of common lawyers that there is something special about rent’. The solution was to be determined by what was ‘obviously fair or manifestly unjust’.] Applying these principles in the light of what is fair dealing between the parties, I have come to the conclusion that despite the insistence on preserving the agreement as an entity separate from the underlease, there is nevertheless here that close connection between claim and cross claim which equity requires. The agreement was, inter alia, an agreement to enter into the underlease, the terms of which were set out in the form annexed to the agreement. The special provisions relating to the floor were obviously as much in the minds of the parties when making the agreement as any of the other terms. It would in my view be manifestly unjust to allow the landlords to recover the rent without taking into account the damages which it alleged the tenants have suffered through failure by the landlords to perform their part of the agreement. Not only is there in my view an adequate connection between the transactions giving rise to claim and cross claim, there is also the fact that the breach by the landlords is said to render the premises unfit at least in part for the purpose for which they were let. For both these reasons, it seems to me that the defendant’s cross claim can be said to impeach the title to the plaintiffs’ legal demand. I therefore answer the first of the preliminary issues, and the only one on which so far there has been argument, in this way. The defendants are entitled to defend the plaintiffs’ claim for rent and mesne profits by raising as set-off or defence a like sum of the moneys claimed by the defendants against the plaintiffs as damages for breach of the agreements (but not of the underleases) …

8.202 Questions 1.

In what circumstances is a tenant entitled to set-off claims for breach of covenant against the liability to pay rent? See Knockholt Pty Ltd v Graff [1975] Qd R 88 for an Australian case raising similar issues to the British Anzani case.

2.

Does the British Anzani case support the view that a tenant who claims that the landlord is in breach of covenant is entitled to withhold rent to the extent of his or her claim?

3.

What must a tenant show in order to establish a defence by way of set-off to an action for rent?

4.

Does it matter whether the landlord is proceeding in a court which lacks equitable jurisdiction?

5.

What risks are involved in withholding rent?

6.

What is the significance of the principles discussed in the British Anzani case for residential tenants? What self-help measures can such tenants take if the landlord fails to keep the premises in repair?

[page 837]

8.203

The common law right of deduction arising under Taylor v Beal

(1591) Cro Eliz 222; 78 ER 478 was recognised by Goff J in Lee-Parker v Izzet [1971] 1 WLR 1688; [1971] 3 All ER 1099 as still good law. This right, of course, will be of limited benefit to the tenant if the defect in the premises due to want of repair is at all significant.189 In Batiste v Lenin (2002) 11 BPR 20,403 (see 8.197C) the tenant argued that it had a right of set-off. The court held that Lee-Parker was good law, but that the landlord was under no obligation to repair. 8.204

In Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd

[1980] NSWLR 514, the New South Wales Court of Appeal held that the plea of set-off at law under the Statutes of Set-Off (2 Geo II c 22 and 8 Geo II c 24) was purely procedural. The consequences of a finding that set-off at law operates procedurally is to suggest that the existence of a set-off at law does not extinguish or reduce the plaintiff’s claim until judgment has been

given in the proceedings. Thus, if a tenant wishes to negate the landlord’s demand by pleading set-off, the tenant may be obliged to have recourse to the equitable doctrine of set-off. The equitable doctrine is, of course, narrower than the one at law in that the set-off must impeach, that is, go to the root of, the plaintiff’s demand. The following case illustrates what ‘impeach’ means in this context. 8.205C Norman; Re Forest Enterprises Ltd v FEA Plantation Ltd (2011) 280 ALR 470 Federal Court of Australia [The Forest Enterprises Australia group of companies (the FEA Group) ran a number of managed investment schemes. Forest Enterprises Australia Ltd (FEA) was the parent company of the FEA Group. Internal leases were granted within the FEA Group which required FEA Plantations Ltd (FEAP), as the responsible entity of the schemes, to obtain a sublease of certain land for the investors in each of the schemes. The trial judge found that under a series of lease chains, FEA was lessor to FEAP. The obligation on FEAP to pay rent to FEA was contained in a document called the ‘2003 Master Head Lease’. Clause 2(a) of the head lease provided that the lessee must pay rent ‘without any deductions whatsoever’. FEAP held an Australian Financial Services Licence pursuant to s 601FA of the Corporations Act 2001 (Cth) which included conditions requiring it to meet its ‘cash needs requirement’, for instance, by preparing and maintaining ‘cash flow projections for the ensuing 3 months and hold in “cash” 20% of the amount of the expected outgoings for that period’. ‘Cash’ was defined to include ‘a commitment to provide cash from an eligible provider that can be drawn down within 5 business days and has a maturity of at least a month’. After what FEAP’s lawyers identified as a ‘procedural breach’ of its licence conditions, FEA gave to FEAP a letter of commitment under which FEA agreed to provide FEAP with sufficient cash to meet its ongoing financial obligations and to satisfy FEAP’s cash needs requirements. On 14 April 2010, administrators were appointed to FEAP and other companies in the FEA Group. On the same day, banks which held a debenture charge over

[page 838]

the assets and undertaking of the FEA Group appointed receivers and managers of the property of FEA. On 29 April 2010, the solicitors for FEAP wrote to FEA calling upon FEA to pay $5.5 million to FEAP pursuant to the letter of commitment. On 7 September 2010, notices were served on FEAP for default in respect of rent payable by FEAP to FEA and other FEA Group companies. At first instance, the trial judge found that the letter of commitment created a legally binding obligation on FEA to provide funds to FEAP to enable FEAP to meet its financial obligations, including rent. His Honour further found that FEAP was entitled to assert an equitable set off for amounts due to it under the letter of commitment against its obligation to pay rent and that this entitlement was not excluded by FEAP’s obligation under the lease to pay the rent ‘without any deductions whatsoever’.] Jacobson, Nicholas and Yates JJ: The judgment of Forbes J in British Anzani also supports the proposition that the tenant’s cross-claim may give rise to an equitable set off even if the cross-claim does not arise from the lease itself, or directly from the relationship of landlord and tenant, provided that the claim for rent and the cross-claim arising from another contract are so closely connected that the principles affecting equitable set off can be said to apply: see British Anzani at QB 154–5; All ER 1075–6. Although some of the authorities to which Forbes J referred in support of that proposition employed language which departed from the orthodox principle stated in Rawson, it seems to us that the proposition which Forbes J distilled from the authorities is correct. This may be seen from the emphasis which Forbes J put upon the essential attribute that the equity must ‘go to the root’ of the plaintiff’s claim and that it must impeach the title to the legal demand: see British Anzani at QB 145, 152 and 156; All ER 1068, 1074 and 1077. His Lordship’s approach is consistent with the formulation of the principle stated in Hill and Redman’s Law of Landlord and Tenant and with the approach adopted by the New Zealand Court of Appeal in Grant and Hamilton; see also Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642 at 658–9. The cross-claim in British Anzani arose out of an agreement which Forbes J held to be sufficiently connected with the lease of a warehouse as to impeach the title to the demand for rent. By contrast, in Hamilton, the cross-claim arose out of a separate contract under which the tenant agreed to refurbish other premises. There was no ‘practical or conceptual linkage’ between the claim for rent and the claim for damages for breach of the contract for refurbishment. That was why the title to the demand for rent was not impeached and the distinction between equitable set off and counterclaim would have been ‘blurred almost to the point of extinction’ if the tenant were permitted to maintain a set off. The discussion in R Derham’s The Law of Set-Off, 3rd ed, Oxford University Press,

2003, at [5.57] of the cases in which equitable set off against rent has been permitted also support the proposition that the doctrine is not limited to cross-claims arising under the lease. Similarly, the extensive discussion of the authorities by Woodward J in Galambos suggests that the cross-claim need not arise under the original contract so long as there is a ‘direct connection’ between the claims. That approach appears to be accepted by the authors of the 4th edition of Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies, p 1054 [37-040]. Whether FEAP was entitled to maintain an equitable set off In coming to the view that equitable set off could be maintained in the present case, the learned primary judge correctly described the relevant test in accordance with the principles stated above. [page 839]

His Honour was of the view that the ‘relevant impeachment’ exists in this case notwithstanding that the claim for rent and the cross-claim under the letter of commitment do not arise out of the same transaction. This was because, as he said at [45], the stated purpose of the letter of commitment was to enable FEAP to meet its ongoing financial obligations, of which, no doubt, FEAP’s largest recurring obligation was to pay rent. We agree that, as a matter of principle, a claim made by FEAP under the letter of commitment could be capable of impeaching a demand made by FEA against FEAP for the payment of rent. This is because, even though the claim under the letter of commitment does not arise under the lease, or out of the relationship of landlord and tenant, the evident purpose of the letter of commitment was to enable FEAP to meet financial obligations such as the demand for rent made by FEA. It would follow from this that, depending upon all the circumstances relating to the claim by FEA for rent, and the cross-demand by FEAP for funds to meet its financial obligations, the cross-demand could impeach the claim for rent. However, the difficulty which arises in the present matter is that the facts that were in evidence before the primary judge did not enable his Honour to draw the conclusion that the necessary impeachment of the title to the legal demand for rent was made out. The title to the legal demand was to be found in the claim by FEA for payment of rent for the month of August 2010. Notice of Default was served for the outstanding rent for that month. In addition, there was evidence in Mr Norman’s affidavit that rent was owing by FEAP to FEA for the months of May, June and July 2010, although the affidavit is silent as to whether default notices were issued for those months. As a minimum, what was required for FEAP to impeach the title to FEA’s demand for the month of August was a claim by FEAP on FEA for sufficient funds to meet such of its ongoing financial obligations, or to satisfy such of its cash needs requirements, as consisted of its obligation to pay rent to FEA for that month.

But the only evidence relied upon by FEAP as giving rise to such an obligation on the part of FEA was the claim made in general terms for $5.5 million for each of the months of April and May 2010 made in the solicitors’ letters of 29 April 2010 and 5 May 2010. It seems to us to be clear that these claims made by FEAP under the letter of commitment did not go to the root of, were not essentially bound up with, and did not impeach the title of FEA to make its legal demand for rent for the month of August 2010. This is because the evidence before the primary judge did not show what financial obligations or cash needs were encompassed within the request for $5.5 million for each of the months of April and May 2010. It is true that the primary judge considered that the payment of rent was FEAP’s largest obligation, or at least its largest recurring obligation. It is also true that the evidence in the table in Mr Norman’s affidavit suggests that the rent payable by FEAP to FEA, FEA Carbon and Tasmanian Plantations amounted to less than $1 million so that, if FEA had paid FEAP the full amount of $5.5 million as requested, there would have been more than sufficient funds to meet other creditors. The difficulty in drawing that conclusion is that the evidence does not establish what other creditors FEAP needed to pay by way of recurring obligations or to otherwise satisfy its cash needs requirements for April and May 2010, those months being the particular months for which the request for funds was made. We doubt whether, upon its proper construction, the letter of commitment extended to a request by FEAP to FEA to meet all of its ongoing financial commitments or future cash needs without any limit as to the point of time at which those obligations or cash needs arose. [page 840]

More particularly, we doubt whether FEAP was permitted to claim $5.5 million in April or May to meet obligations due to arise in August. Whether or not this was so was not the subject of argument in the appeal and we do not decide the matter by reference to it. Be that as it may, Senior Counsel for FEAP, Dr Pannam QC, accepted that there was no direct evidence that even if the $5.5 million were paid by FEA, then FEAP would have paid the rent commitment to FEA. In our view, it was for FEAP to establish facts and matters which impeached the title to the demand for rent for the month of August. For the reasons set out above, it did not do so. Appeal allowed.

8.206

The right of equitable set-off may be excluded by agreement

between the parties: Hong Kong and Shanghai Banking Corp v Kloeckner & Co AG [1990] 2 QB 514; [1989] All ER 513. However, clear and explicit words must be used so that a provision in a lease to the effect that rent is to be paid ‘free and clear of exchange or any deduction whatsoever’ is not sufficient to exclude set-off: Grant v NZMC Ltd [1989] 1 NZLR 8; New Zealand Factors Ltd v Farmers Trading Co Ltd [1992] 3 NZLR 703. Compare the contrary opinion expressed in Famous Army Stores v Meehan [1993] 1 EGLR 73. The Court of Appeal in Connaught Restaurants Ltd v Indoor Leisure Ltd has elected to adopt the New Zealand approach in similar circumstances; [1994] 1 ELR 501; ANZ ConvR 463. In Highwater Nominees Pty Ltd v Mead [2006] WASC 17, while the words of the clause were very clear in excluding a set-off, Hasluck J said that in this case, because of a possible fiduciary relationship, the lessor might be precluded from relying on such an exclusion clause if he or she has acted unconscionably: The Connaught case (above) and the other cases cited by him concern circumstances where there was a set-off in respect of the breach of some other covenant of the lease. Neither the Connaught case (above), nor the other cases he cited, bore directly upon the more complex situation where, because of a rather intricate relationship between the lessor and the lessee, especially in the context of a trust situation, it might be said that fiduciary duties are owed. One can envisage a case in which it is established that the lessor and those associated with him are acting in a way which is eventually characterised as unconscionable and gives rise to a form of equitable relief which will preclude that party from relying upon an exclusion clause in the subject lease of the kind I mentioned a moment ago [at [48]].

8.207

Compare the discussion of the Full Federal Court in Norman; Re

Forest Enterprises:

‘Without any deductions whatsoever’: It is not necessary for us to decide the question of the meaning and effect of the words ‘without any deductions whatsoever’ because of the view we have reached as to the unavailability of equitable set off in the present case. However, we will deal briefly with the issue of construction of this phrase. The primary judge followed the approach taken by the Court of Appeal of England and Wales and the New Zealand Court of Appeal rather than the contrary approach adopted in a number of first instance Australian authorities. His Honour did so because he thought it preferable to follow the appellate authorities, although he said at [48] that if the issue were not covered by authority, it was likely that he would have reached a contrary conclusion. The appellate authorities are Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501; [1994] 4 All ER 834 (Connaught Restaurants) and Grant. We referred to Grant in our discussion of the principles underlying equitable set off. The reasons given by Somers J, who delivered the reasons of the court, in Grant at 13 and the reasons of Waite LJ at WLR 509–10; All ER 842–3 and

[page 841]

Neill LJ at WLR 511; All ER 844 (Simon Brown LJ agreeing with both) in Connaught Restaurants are stated in slightly different terms but four propositions may be extracted from those authorities. First, a tenant’s right of equitable set off against rent may be excluded by the terms of the lease but clear words are needed to do so: see also Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717–18 and 723; [1973] 3 All ER 195 at 215–16 and 220. Second, the word ‘deduction’ is a flexible term, the meaning of which is heavily dependent upon its context. Third, in the absence of contextual considerations to the contrary, the words ‘without deduction’ are not sufficiently clear to exclude a tenant’s equitable right of set off against rent. Fourth, added words of exception or qualification are relevant to the construction of the phrase in question, but they are also subject to the general requirement of clarity. The reasons of Williams J in Re Partnership Pacific Securities Ltd [1994] 1 Qd R 410 at 424–5 (Partnership Pacific) are to the same effect as the decisions in Connaught Restaurants and Grant. His Honour found the observations of Mr Andrew Waite in an article, ‘Disrepair and Set-off of Damages against Rent: The Implication of British Anzani’ [1983] The Conveyancer and Property Lawyer 373 to be

compelling. There, the author stated that a phrase such as ‘without any deduction’ is inapt to cover equitable set off, which is a true defence that requires impeachment of title so that rent is no longer due. The authorities pointing against that approach are collected by Murphy J in Sandbank Holdings Pty Ltd v Durkan [2010] WASCA 122 at [35] (Sandbank). His Honour there set out the line of authority for the proposition that the words ‘clear of all deductions’ and cognate phrases such as ‘without deductions’ are to be given their literal and ordinary meaning, and that they exclude any right of set off or recompense. His Honour went on to refer to the other line of authorities, namely Connaught Restaurants, Grant and Partnership Pacific which stand for the proposition that the word ‘deduction’ does not, on its own, embrace equitable set off. In Sandbank it was not necessary for the Western Australian Court of Appeal to resolve the divergence of authority because the words used, namely ‘without set-off (whether arising at law or in equity)’ and in addition ‘free and clear of all deductions whatsoever’, were unambiguous and precluded any potential for equitable set off against liability for rent: see Sandbank at. Perhaps the clearest statement of the line of authority in favour of the proposition that the words ‘without deduction’ exclude set off is to be found in the observation of Bryson J in Batiste v Lenin (2002) 10 BPR 19,441; [2002] NSWSC 233 (Batiste). His Honour there said that in his opinion the literal meaning of those words make it clear that there is no room for reliance on any right of recoupment and the purpose of the words is to prevent the tenant from relying on rights or claims to be entitled to set off, recoup or otherwise withhold payment of rent. He also said at [105] that: … if the use of the words ‘without deduction’ did not achieve this result I cannot see what they would achieve as the ordinary obligation of a debtor is to pay the whole debt. An appeal from Bryson J’s orders was dismissed: Batiste v Lenin (2002) 11 BPR 20,403; [2002] NSWCA 316 (Batiste). However, Sheller JA (with whom Giles JA and Santow JA agreed) said at [49] that he was not persuaded that Bryson J’s view of the meaning of ‘without deduction’ was correct, although he did not go on to decide the question. The weight of appellate authority therefore does not support the view that ‘without deduction’ excludes equitable set off. Nevertheless, we see considerable force in the remarks of Bryson J set out above. In any event, the words in question in the present case are, ‘without any deductions whatsoever’. In accordance with the principles stated by Waite LJ in Connaught Restaurants at WLR 510; All ER 843, the word ‘whatsoever’ is an added word of exception which is

[page 842]

relevant to the construction of the phrase used in the leases. When considered in light of these principles, it is difficult to see how the words ‘without any deductions whatsoever’ are consistent with an entitlement to maintain an equitable set off. A commonsense businesslike approach to the construction of what reasonable people would understand by this expression is that the parties intended that FEAP could not make any deduction of any kind from rent, including a deduction by way of equitable set off. As Bryson J said in Batiste, when construing the phrase, which did not include the emphatic word whatsoever’, it is difficult to see what else the parties to the lease would have achieved by the use of this phrase. Accordingly, even if we were of the view that FEAP could, on the facts of the case, assert an equitable set off, we would have concluded that its entitlement to do so was excluded by the phrase ‘without any deduction whatsoever’.

8.208

A tenant was awarded damages against the landlord for breach of

the covenant of quiet enjoyment. Before these damages were paid, the landlord defaulted under its mortgage and the mortgagee went into possession. Does the tenant have a right to set off the damages against rent owed to the mortgagee in possession? Since the right to damages is a personal right and not an interest in land, such a right cannot defeat the mortgagee’s statutory right to rent consequent upon taking possession: Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168. This principle was affirmed by Brereton J in Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd (2011) 80 NSWLR 686. In Eller v Grovecrest Investments Ltd [1994] 4 All ER 845, the Court of Appeal held that in circumstances where the landlord committed alleged acts of nuisance and breach of covenant, the tenant was entitled to invoke a right of set-off by way of an arguable claim for damages for breach of covenant by the landlord against a claim by the landlord to levy distress. There is no right of equitable set-off of current

liabilities against a landlord’s breaches of covenant in a previous lease. So, in Palermo Seafoods Pty Ltd v Lunapas Pty Ltd (2014) 17 BPR 33,047 a landlord was in breach of repair in previous lease. The court held that rent arrears in the renewed lease could not be set off against earlier breach.

Bonds 8.209

Leases, both of commercial and residential property, often require

the tenant to pay a security deposit or bond as an assurance that the tenant will comply with all the covenants contained in the lease and will pay the rental reserved by the lease. The landlord is usually given power by such a clause to forfeit the security deposit in the event of breach by the tenant. In NLS Pty Ltd v Hughes (1966) 120 CLR 583, Barwick CJ characterised a clause in this form as neither a penalty nor a pre-estimate of damage, but ‘an earnest of performance which, on default, may be retained and credited against the damage suffered’. Accordingly, the High Court rejected an argument that the landlord was precluded from claiming more than the amount of the security deposit as compensation for the tenant’s breach of covenant. Legislation now regulates bonds paid in respect of residential tenancies: see 8.212.

Statutory remedies 8.210

The Competition and Consumer Act 2010 (Cth) affords extensive

relief and protection to consumers of land and this includes, of course, consumers of leasehold estates. The consumer protection provisions of the

Act are contained in the Australian Consumer Law, which is set out in Sch 2 of the Act. The study of this legislation is highly specialised and a

[page 843] detailed treatment of the Act is beyond the scope of this book.190 The Act provides for a range of remedies where it can be established that misleading, deceptive or unfair conduct has occurred on the part of either corporations or individuals: Australian Consumer Law ss 4, 18 and 30. These federal provisions are supplemented at the state level by a range of fair trading legislation, which applies to land in addition to other forms of commodity. 8.211

In New South Wales, the Contracts Review Act was enacted in

1980 following Professor Peden’s report on harsh and unconscionable contracts: Report on Harsh and Unconscionable Contracts, 1976. The Act establishes a regime of principal relief (s 7) and ancillary relief (s 8) where the court finds a contract unjust having regard to the circumstances relating to the contract at the time it was made. ‘Unjust’ is defined to include ‘unconscionable’, ‘harsh’ or ‘oppressive’. ‘Contract’ is not defined and recourse in this respect must be made to the general law. The form of relief is flexible and includes a power to declare all or part of the contract void (s 7(1)(b)), a refusal to enforce all or part of the contract (s 7(1)(c)) or the making of an order varying in whole or in part any provision of the contract (s 7(1)(a)). Relief is confined to what may be described as domestic contracts (s 6(2)) and is available only to individuals. Residential leases are clearly within the ambit

of the legislation as s 7(1)(d) empowers the court to terminate or vary a ‘land instrument’. ‘Land instrument’ is defined to mean an instrument that transfers or creates a title to land or is a dealing within the meaning of the Real Property Act 1900 (s 4). Note that the provisions of s 7(1)(a), (b), (c) are made subject to s 19 which provides that an order under any of those subsections has no effect against interests in land registered under the Real Property Act 1900. In the case of a lease registered under the Act, the court should make an order under s 7(1)(d) requiring the defendant to execute a dealing in registrable form. The provisions of s 19 are clearly designed to preserve the sanctity of the register and the concept of indefeasibility of title.

RESIDENTIAL TENANCIES Introduction 8.212

As we have seen above, at common law the various rights and duties

of both landlord and tenant were generally determined by agreement by the parties to the lease. The creation of leases was governed by the principle of freedom of contract, subject only to some minor limitations, generally directed to regulate the forfeiture of leases. In contrast, residential tenancies legislation is based on the principle of consumer protection. Pursuant to recommendations of the Poverty Commission in 1975191 legislation has introduced a comprehensive set of rights and duties which, in general, parties cannot contract out of with a view to protecting tenants from unfair dealing. But this statutory regime differs significantly from the earlier, post-war

legislation such as the Landlord and Tenant (Amendment) Act 1948 (NSW), principally because it does

[page 844]

not control rent or provide security of tenure, which are much more radical ways of regulating the tenancy market. A further aspect of consumer protection is the establishment of specialised informal tribunals to hear disputes arising under the legislation. This legislation has completely superseded the common law in relation to lettings of residential premises whether the landlord is the state in the case of public housing, or a private person or corporation. Although the legislation in each jurisdiction contains a detailed set of rights and responsibilities for residential landlords and tenants, the law in this area has not been completely codified. The legislation is not expressed to be an exclusive statement and source of rights for residential landlords and tenants. It follows that, in accordance with the general rule of construction, the common law will be deemed to continue to apply (that is, unless the statute expressly excludes it): Hocking v Western Australia Bank (1909) 9 CLR 738 per Griffith CJ at 746. This conclusion also follows from the fact that: (i) the Act repeatedly uses technical terms from the common law, such as ‘merger’, ‘frustration’, and ‘mitigation of loss’ which are not defined and so retain their traditional meaning as developed in case law; (ii) certain provisions of the relevant property law statutes are expressly excluded

(implying that others are not); and (iii) that certain matters are not dealt with at all, such as rights of co-owners, or the position of an assignee where the assignment is in breach.192 It follows that some of the concepts and case law discussed above will continue to be relevant to residential tenancy law. As there is insufficient space below to examine the legislation in each jurisdiction, the legislation in New South Wales will be primarily examined, with reference to some of the major divergences in other jurisdictions. While the general structure of the legislation is uniform, there are minor differences across the jurisdictions.

What is a residential tenancy? 8.213

The legislation in each jurisdiction defines a residential tenancy. In

New South Wales, for example, by s 13 of the Residential Tenancies Act 2010 (NSW),193 it means a ‘right to occupy residential premises under a residential tenancy agreement’. A residential tenancy agreement is ‘an agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose for use as a residence … An agreement may be a residential tenancies agreement … even though (a) it does not grant a right of exclusive occupation’. Residential premises are defined as any premises or part of premises (including any land occupied with the premises) used or intended to be used as a place of residence: s 3. It is immaterial for the purpose of this definition whether the right of occupation is a right of exclusive possession.194 From this definition it is clear that a residential tenancy is much broader than a common law lease. There is no

requirement of exclusive possession.195 It follows that even if an occupant is a licensee at common law, he or she will be a tenant under the legislation. But not all licensees of residential premises will be tenants. The Act draws a distinction between

[page 845]

exclusive or non-exclusive occupation, to which the Act applies, and agreements ‘under which a person boards or lodges with another person’: s 8(1)(c). These terms are not defined in the Act, so it is necessary to examine how they have been defined at common law. In Noblett and Mansfield v Manley [1952] SASR 155 Mayo J (at 158) defined ‘boarder’ to mean ‘one who has his food, or food and lodging at the house of another for compensation’. The New South Wales Court of Appeal in Roberts v Waverley Municipal Council (1988) 14 NSWLR 423 considered whether women in a refuge were boarders, concluding they were given that they were provided with ‘food and lodging at a fixed price’. In Torrisi v Oliver [1951] VLR 380, Coppel J (at 385) held that the term ‘lodger’ meant an occupant where ‘the landlord retains control of the rooms in question’. Also, there is no requirement under the legislation that a residential tenancy be for a fixed term or a term capable of being fixed as is the case at common law. 8.214

As in all other jurisdictions, there are further classes of residential

tenancy agreements excluded from the NSW Act by s 8(1). For instance, where the residential tenancy agreement arises out of ‘an agreement made in

good faith for the sale or purchase of the residential premises’: s 8(1)(f). A purchaser under a contract of sale is sometimes allowed to take possession of premises pending completion either as a tenant at will (Kater v Kater (No 3) [1964] NSWR 987), or as a licensee: Sanders v Cooper [1974] WAR 129. Also, tenancies in a mortgage are excluded, where mortgagor and mortgagee are expressed to be a simultaneous relationship of landlord and tenant: s 8(1) (g). Tenancies under a company title scheme whereby leases are granted to shareholders are not covered by the Act (s 8(1)(i)), though a lease to a nonshareholder, or a sublease by a shareholder is covered. Equally excluded by the Act are residential tenancy agreements entered into in good faith for a period of not more than three months for the purposes of a holiday: s 8(1)(h). Finally, if a tenancy agreement is for no value, it is exempt: s 13. There is a second class of excluded agreements. They are agreements to lease particular sorts of residential premises: ss 7, 8(1), (2). These include residence agreements under the Holiday Parks (Long-term Casual Occupation Act 2002 (NSW); agreements under the Retirement Villages Act 1999 (NSW); protected tenancies under the Landlord and Tenant (Amendment) Act 1948 (NSW); any part of a hotel or motel; any premises ordinarily used for holiday purposes; any part of an educational institution, hospital or nursing home; or homes and hostels governed by Commonwealth aged and disabled persons legislation.196 An important exception in Victoria is an agreement exceeding five years or longer where there is no right to shorten the term: Vic, s 6.

Creating residential tenancies

8.215

Unlike at common law, no formalities are required by the Act for

the creation of a valid residential tenancy agreement. For example, NSW s 13 provides that a residential tenancy agreement may be express or implied; may be oral or in writing; or may be partly oral and partly in writing. Even though a valid agreement can be created without formality, unlike the position at common law, a number of obligations are imposed. A failure to follow these requirements will not result in the interest being invalid, but in criminal penalties. Section 15 provides for a standard form of residential agreement. The standard form contains the non-variable terms required by the Act. It is possible to include additional terms in the agreement but only as

[page 846]

long as they do not conflict with the terms in the prescribed standard form: s 15(4). Moreover, s 21 provides that any term which is inconsistent with the terms included in the agreement by the Act is void. Section 219 provides that the rights and duties specified in the Act cannot be annulled, varied or excluded by agreement between the parties.197

Types of tenancies 8.216

There are only two types of residential tenancies expressly capable of

creation under the New South Wales Act: a fixed-term tenancy or a continuing tenancy. A fixed-term tenancy, unlike the position at common law, does not automatically terminate by effluxion of time but must be

brought to an end by notice on the part of the landlord or the tenant where the notice specifies a day for delivery up of the premises not less than 30 days for the landlord (or 14 days for the tenant) from the date it was given, or the day the term ends, whichever is later: ss 84, 96. Where a fixed-term tenancy comes to an end, and no statutory notice has been given, a periodic tenancy comes into existence, regardless of the rental period: s 86. It too can be brought to an end by notice. In the case of the landlord, the notice period must be not less than 90 days; for the tenant the notice must be not less than 21 days: ss 86, 97.

Parties’ obligations 8.217

As noted above, contracting out of the legislation is prohibited, and

any term inconsistent with an obligation imposed by the Act is void. The most important of the statutory obligations are outlined below.

Quiet enjoyment 8.218

As at common law, the tenant has a right to ‘quiet enjoyment’ of the

premises. This common law term retains its meaning as it is not defined in the legislation, but in New South Wales, for example, the Act builds on this definition by also requiring the landlord not to ‘interfere, or cause or permit any interference, with the reasonable peace, comfort or privacy of the tenant in using the premises’: NSW, s 50. The phrase ‘permit’ requires landlords to take action to prevent third parties, such as other tenants of the landlord, from causing the interference. However, in Eliezer v Residential Tribunal

(2001) 53 NSWLR 657 McLellan J held that the obligation does not extend to requiring the landlord to take steps against other occupants in a strata scheme building who cause a nuisance to the tenants. In Victoria, s 67 provides that ‘a landlord must take all reasonable steps to ensure that the tenant has quiet enjoyment of the rented premises during the tenancy agreement’.198

Repairs 8.219

The legislation has overturned the common law’s caveat emptor rules

in relation to repair obligations. For example, Vic, s 68 provides:

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8.220E

Residential Tenancies Act 1997 (Vic)

68 Landlord’s duty to maintain premises (1) A landlord must ensure that the rented premises are maintained in good repair. (2) A landlord is not in breach of the duty to maintain the rented premises in good repair if — (a) damage to the rented premises is caused by the tenant’s failure to ensure that care was taken to avoid damaging the premises; and (b) the landlord has given the tenant a notice under section 78 requiring the tenant to repair the damage. (3) If a landlord owns or controls rented premises and the common areas relating to those rented premises, the landlord must take reasonable steps to ensure that the common areas are maintained in good repair.

8.221

By section 52 of the NSW Act, a landlord must provide the

premises in reasonable state of cleanliness and fit for habitation by the tenant, as well as provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises. In Northern Sandblasting v Harris (1977) 188 CLR 313, the daughter of a tenant was electrocuted due to serious deficiencies in an electric stove and also in the wiring in the house. A majority of the High Court held that only tenants, not members of their families, have the benefit of the section. Gummow and Dawson JJ also held that for the landlord to be liable under this section, he or she must be notified of the relevant damage for liability to arise. As noted above at 8.82–8.87 a landlord may still be liable in negligence to tenants and their invitees. The tenant’s primary responsibility is to keep the premises clean. The Residential Tenancies Act 1995 (SA) s 69 specifies the tenant’s responsibility as follows: 8.222E

Residential Tenancies Act 1995 (SA)

69 Tenant’s responsibility for cleanliness, damage and loss (1) It is a term of a residential tenancy agreement that the tenant — (a) must keep the premises and ancillary property in a reasonable state of cleanliness; and (b) must notify the landlord of damage to the premises or ancillary property; and (c) must not intentionally or negligently cause or permit damage to the premises or ancillary property.198

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8.223

Section 3(1) defines ‘ancillary property’ as property that does not

form part of the premises but which is provided by the landlord for the use of the tenant.

Urgent repairs 8.224

There are special provisions relating to urgent repairs.200 These

provisions go far beyond the remedy of set-off.201 In New South Wales, where the need for urgent repairs has not been the result of a breach of the agreement by the tenant, and they have not been carried out by the landlord or nominated person within a reasonable time after notification, the tenant may authorise the carrying out of the repairs by a qualified person. In these circumstances, the landlord must reimburse the tenant within 14 days of notification of the sum incurred up to a maximum of $500. Urgent repairs include burst water services, blocked or broken lavatory systems, serious roof leaks, dangerous electrical faults, flooding or serious flood damage, serious storm or fire damage and failure or breakdown of gas, electricity and water supply: s 62. A further innovation of the legislation is the obligation on the part of the landlord to ensure that the premises are secure. NSW, s 70, for example, requires the landlord to provide and maintain such locks or other security devices as are necessary to ensure that the residential premises are reasonably secure.202 The landlord will therefore be liable for losses the tenant incurs from a burglary if this was occasioned because locks were faulty.

Rent Introduction 8.225

The basic principle underpinning residential tenancies legislation in

relation to rent is that rents are determined by the parties, or more generally market conditions. In this way, rents are not ‘controlled’, as was the case under the post-war legislation such as Landlord and Tenant (Amendment) Act 1948 (NSW). The legislation contains no general provisions for amending the initial rent agreed by the parties by reference to the tenant’s ability to pay. Nonetheless, the legislation in all states tightly regulates the manner of payment of, and increases in, rent. It also contains provisions for reduction of rent in certain circumstances. Exceptionally, South Australia allows tenants to challenge the rent originally agreed upon by the parties on the grounds that it is excessive. The matters that the court will take into account are the same as those listed below considered when rent increases are alleged to be excessive.203 In all jurisdictions, in the case of continuing tenancies, rent may only be increased if the landlord has given 60 days’ notice in writing prior to the increase. The notice must contain the amount of the increased rent and the date from which it is payable. Rent may only be increased during a fixed-term agreement if there is a provision to this effect in the agreement, if the

[page 849]

parties have expressly agreed on the amount of the increase, or a method for

calculating it, and the landlord has given 60 days’ notice in writing prior to the increase. In this case also, the notice must contain the amount of the increased rent and the date from which it is payable.204 Tenants have a right to challenge the agreed rent in two circumstances: where a rent increase is excessive; and where the rent is excessive by reference to a withdrawal of services. In considering whether a rent increase is excessive, matters the tribunal or court may have regard to are the general market level of rents for comparable premises in the same or similar locality, the value of the premises, landlord’s outgoings, services, fittings, amenities and goods provided, the condition of the premises and any work done to premises by the tenant at the landlord’s request.205

Bonds 8.226

Each jurisdiction has legislation dealing with bonds. Bonds are

deposits made by tenants to landlords to secure compliance with obligations under the agreement, which may be retained by landlords in the event of breach, and credited against the damage incurred. As the Poverty Commission noted, bond disputes were one of the most significant areas of complaint for tenants on the ground that they were effectively without redress because of court costs and delays.206 One study in an area of Sydney has shown that over a seven-year period up to the enactment of the Landlord and Tenant (Rental Bonds) Act 1977 (NSW) not a single action was brought by a tenant in the Local Court for return of a bond.207 The legislation deals with bonds by requiring that an independent body retain them, rather than the

landlord, or the landlord’s agent. In Queensland, for example, s 116 provides that ‘a person receiving a rental bond must, within 10 days of receiving it — (a) pay it to the [Residential Tenancy] authority; and (b) give the authority a notice, in the approved form, about the rental bond’.208 There are penalties for failure to comply with the provisions of the Act.

Termination 8.227

One of the most radical changes to the common law lies in the

legislation’s regulation of the procedures necessary to bring a residential tenancy to an end. Agreements can be terminated in a number of ways: by agreement; by notice; by abandonment on the part of the tenant; by repudiation; by acquisition by a person with superior title; by order of the court or tribunal.209

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Termination by notice: without any ground 8.228

There is no security of tenure for tenants under the residential

tenancies legislation. Landlords may bring to an end either a continuing or periodic tenancy by notice without any ground, while a fixed-term tenancy may terminate by effluxion of time. One of the most important protections offered to tenants by the legislation is that if the tenant does not voluntarily deliver up vacant possession, the landlord must approach the court or tribunal for an order for possession. In the case of continuing, or periodic, tenancies,

the notice to be given by the landlord varies from 14 days to 26 weeks. Tenants can bring periodic tenancies to an end by notice varying from 14 to 21 days.210

Termination by notice: following breach 8.229

A landlord or a tenant may give notice of termination where the

other party has breached the agreement. This position contrasts with the common law, where, as we have seen above (at 8.183C) a tenant can only terminate for breach if it amounts to a repudiation by the landlord of the contract. In the case of the obligation to pay rent, the rent must generally be at least 14 days in arrears before the landlord can give notice. The notice of termination must generally be at least 14 days.211

Order for termination and possession 8.230

Where the tenant fails to deliver up possession of premises on the

day specified in the notice of termination, the landlord has no right to take possession of the premises, but must apply to the court or tribunal for an order of termination.212

Tribunal 8.231

In five jurisdictions (the Australian Capital Territory, New South

Wales, Queensland, South Australia and Victoria) disputes between parties to a residential tenancy are dealt with by a specialised, informal tribunal. In New South Wales, for example, the relevant forum is the Consumer, Trader

and Tenancy Tribunal. The tribunal has a wide discretion in the conduct of proceedings before it. In proceedings before the tribunal the rules of evidence do not apply and it may inform itself on any matter relating to the proceedings in such manner as it sees fit: Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) s 27(2). The tribunal must act with as little formality as the circumstances of cases permit, and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms: s 27(3). Under Pt 5A of the Act, the tribunal is given wide powers to encourage parties to

[page 851] resolve disputes by conciliation or mediation.213 In order to facilitate this process the tribunal is under an obligation not to make an order in respect of an application made to it until it has brought, or used its best endeavours to bring, the parties to a settlement acceptable to all of them: s 49(1). If such a settlement is reached, the tribunal must make an order giving effect to the terms of the settlement: s 49(2). Applications may be heard and determined in the absence of parties on the basis of documents or other material lodged with the tribunal (s 31(1)), and prescribed periods for the making of applications or other steps in proceedings may be extended even if those periods have expired: s 27(6). The tribunal may refer questions of law to the Supreme Court, and parties may appeal on a point of law to the Supreme Court: s 61.214

1.

Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17 at 51.

2.

See 1.76.

3.

Gray and Gray, 5th ed, 307; Western Australia v Ward (2002) 191 ALR 1 at [482] per McHugh J.

4.

Wik Peoples v Queensland (1996) 187 CLR 1 at 177. See in particular Toohey J (at 101–12) for the historical context of creation of pastoral leases. For a general historical account, see Reynolds and Dalziel, ‘Aborigines and Pastoral Leases — Imperial and Colonial Policy 1826–1855’ (1996) 19(2) UNSWLJ 315.

5.

For a general overview, see Lang, Crown Land in New South Wales, (Butterworths, 1973).

6.

See Kessler, ‘Contracts of Adhesion — Some Thoughts About Freedom of Contract’ (1943) 43 Col LR 629, for a classic statement of the issues.

7.

See 8.203ff.

8.

See Leases (Commercial and Retail) Act 2001 (ACT); Business Tenancies (Fair Dealings) Act (NT); Commercial Tenancies Act 1979 (NT); Retail Leases Act 1994 (NSW); Retail Leases Act 2003 (Vic); Retail Shop Leases Act 1994 (Qld); Retail Commercial Leases Act 1995 (SA); Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 (Tas); Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA). For a comprehensive overview, see Webb, ‘The Productivity Commission Inquiry Report: The Market for Retail Tenancies in Australia’ (2009) 16 APLJ 219.

9.

Agricultural Tenancies Act 1990 (NSW) (this applies only to land of minimum size of one hectare used solely or mostly for agricultural purposes); Property Law Act 1974 (Qld) ss 153–167; Pastoral Land Act (NT).

10. Lang, Crown Land in New South Wales, (Butterworths, 1973). 11. Milmo v Carreras [1946] KB 306; [1946] 1 All ER 288. 12. Lonsdale Pty Ltd v Carra [1974] VR 887. 13. Oxley v James (1844) 13 M & W 209; 153 ER 87; Skelton (William) & Son Ltd v Harrison & Pinder Ltd [1975] QB 361; [1975] 1 All ER 182. 14. Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 at 50–1. 15. Mitchell v Wieriks; Ex parte Wieriks [1975] Qd R 100. 16. Say v Smith and Fuller (1530) 1 Plow 269; 75 ER 410 (per Anthony Brown J at 272; 415). 17. [1944] KB 368; [1944] 1 All ER 305.

18. Bishop v Taylor (1968) 118 CLR 518. 19. Mangiola v Costanzo (1980) ANZ Conv R 331. 20. [1992] 2 AC 386; [1992] 3 All ER 504. 21. In Prudential Assurance Co Ltd v London Residuary Body [1992] 3 All ER 504, Lords Griffiths, Browne-Wilkinson and Mustill questioned whether there is any good reason for retaining the general rule and recommended that the Law Commission should consider the issue. Compare Sparkes, ‘Certainty of Leasehold Terms’ (1993) 109 LQR 93. 22. Borambil Pty Ltd v O’Carroll [1972] 2 NSWLR 302; Haslam v Money for Living (Aust) Pty Ltd (2008) 172 FCR 301 (where Middleton J relied on Zimbler v Abrahams [1903] 1 KB 577). 23. See Dayeian v Davidson [2010] NSWCA 42; Celermajer Holdings Pty Ltd v Kopas (2011) 16 BPR 30,735 at [431]–[436] (held: no life tenancy intended on facts). 24. [1971] Ch 725; [1971] 1 All ER 1007. 25. Centaploy Ltd v Matlodge Ltd [1974] Ch 1; [1973] 2 All ER 720. 26. (1909) 9 CLR 89. 27. Zegir v Woop [1955] VLR 394. See also Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6 by Chernov JA (at [21]) (landlord has defence to claim by tenant who pays rent by mistake if tenant enjoyed exclusive possession of land). 28. [1904] AC 405; [1904–07] All ER Rep 203. 29. [1958] 1 QB 513; [1957] 3 All ER 563. 30. Rakus v Energy Australia (2004) 138 LGERA 373; Georgeski v Owners Corporation SP 49833 (2005) 12 BPR 22,573; Brambles v Commissioner of State Revenue [2004] VCAT 1755. 31. Somma v Hazlehurst [1978] 1 WLR 1014; [1978] 2 All ER 1011. See Note (1979) 42 Mod LR 331. See also Goldsworthy Mining Ltd v Commissioner of Taxation (Cth) (1973) 128 CLR 199; 47 ALJR 175. 32. AG Securities v Vaughan [1990] 1 AC 417; Aslan v Murphy [1990] 1 WLR 766. 33. (1987) NSW ConvR ¶55-367. This view was quoted with approval and adopted by Davies J in FAC v Makucha Developments (1993) 115 ALR 679 at 700; see also National Outdoor Advertising Ltd v Wavon Pty Ltd (1988) 4 BPR 9732. 34. (1992) 6 WAR 441 at 454. See generally Bradbrook and Croft, 56–67. 35. Errington v Errington [1952] 1 KB 290; [1952] 1 All ER 149; Isaac v Hotel de Paris Ltd [1960] 1 All ER 348.

36. Cobb v Lane [1952] 1 All ER 1199. 37. For a critical analysis, see Hargreaves, ‘Licensed Possessors’ (1953) 69 LQR 466; see also Murray, Bull & Co Ltd v Murray [1953] 1 QB 211; [1952] 2 All ER 1079; Barnes v Barratt [1970] 2 QB 657; [1970] 2 All ER 483; Shell-Mex and BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612; [1971] 1 All ER 841; Heslop v Burns [1974] 1 WLR 1241; [1974] 3 All ER 406. 38. King v David Allen & Sons, Billposting Ltd [1916] 2 AC 54; [1916–17] All ER Rep 268. 39. See Joseph Abraham Pty Ltd v Emelin [1960] NSWR 362; Lewis v Bell [1985] 1 NSWLR 731. 40. [1985] 2 WLR 877; [1985] 2 All ER 288. 41. Claude Neon Ltd v Melbourne and Metropolitan Board of Works (1969) 43 ALJR 69. 42. Streatfield v Winchcombe Carson Trustee Co (Canberra) Ltd [1981] 1 NSWLR 519. 43. Compare ACT, ss 201, 202, 203; NT, ss 9, 10, 11; Qld, ss 10(1), (2)(b), (2)(c), 11(1)(a), 12; SA, ss 28(1), (2 (c), (2)(d), 29(1)(a), 30, 31(c); Tas, s 60(1), (2)(a), (3), (4), 5(c); Vic, ss 52(1), (2)(c), (2)(d), 53(1)(a), 54, 55(c); WA, ss 33(1), (2)(c), (2)(d), 34(1)(a), 35, 36(c). In the remainder of this chapter, the following Acts are hereafter referred to by the abbreviation of the state enacting them: Civil Law (Property) Act 2006 (ACT); Conveyancing Act 1919 (NSW); Land Title Act 1994 (NT); Property Law Act 1974 (Qld); Law of Property Act 1936 (SA); Conveyancing and Law of Property Act 1884 (Tas); Property Law Act 1958 (Vic); Property Law Act 1969 (WA). 44. Bolton v Tomlin (1836) 5 Ad & E 856; 111 ER 391. 45. Kushner v Law Society [1952] 1 KB 264; [1952] 1 All ER 404. 46. Haselhurst v Elliott [1945] VLR 153; Abjornson v Urban Newspapers Pty Ltd [1989] WAR 191. 47. Houison v Metropolitan Mutual Permanent Building and Investment Association Ltd (1899) 20 LR (NSW) 316 at 321. 48. (1882) 21 Ch D 9. 49. [1977] QB 580; [1977] 2 All ER 293. 50. Warmington v Miller [1973] QB 877; [1973] 2 All ER 372; 4.76. 51. Marshall v Snowy River Shire Council (1994) NSW ConvR ¶55-713; 8.193C. 52. Masters v Cameron (1954) 91 CLR 353; D’Silva v Lister House Development Ltd [1971] 1 Ch 17; [1970] 1 All ER 858; Competitive Funerals Pty Limited v Gurmit Singh Rai trading as Blacktown City Funerals [2005] NSWSC 1171. 53. Branca v Cobarro [1947] KB 854; [1947] 2 All ER 101; Godecke v Kirwan (1973) 129 CLR 628; 1 ALR 457.

54. NT, s 144; Qld, s 129(1); WA, s 71. For an application of Qld, s 129(1) Palmdale Insurance Limited v Sprenger [1988] 1 Qd R 414. 55. Kemp v Lumeah Investments Pty Ltd (1983) 3 BPR 9203. 56. See further, Leitz Leeholme Stud v Robinson at 8.47C. 57. (1983) 3 BPR 9203; (1984) NSW ConvR ¶155-162. 58. The court cited Larke Hoskins & Co Ltd v Icher (1929) 29 SR (NSW) 142 as authority. 59. Cram v Bellambi Coal Co Ltd [1964–65] NSWR 897. 60. Distinguished in Swanville Investment Pty Ltd v Riana Pty Ltd [2003] WASCA 121. 61. (1951) 85 CLR 55; [1951] ALR 1055. 62. See also D’Silva v Lister House Development Ltd [1971] 1 Ch 17; [1970] 1 All ER 858. 63. Solomon v Bray (1873) 8 SALR 128. 64. Bank of Victoria v M’Hutchison (1881) 7 VLR (L) 452; Box v Attfield (1886) 12 VLR (L) 574. Compare Adler v Blackman [1953] 1 QB 146; [1952] 2 All ER 945, refusing to follow the Victorian cases, where a weekly tenancy was found in similar circumstances. 65. Burnham v Carroll Musgrove Theatre Ltd (1928) 41 CLR 540. 66. Where the tenant in a situation like that in the Leitz Leeholme case repudiates the lease, the remedies available to the landlord are discussed below in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; 57 ALR 609; 8.183C. See also Shevill v The Builders’ Licensing Board (1982) 149 CLR 620; 42 ALR 305; Wood Factory Pty Ltd v Kiritos Pty Ltd [1985] 2 NSWLR 105. 67. For a further exposition, see Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17; 57 ALR 609 per Mason J, reproduced at 8.183C. 68. Lee v Ferno Holdings Pty Ltd (1992) 33 NSWLR 404 (CA). 69. [2000] 1 AC 406. 70. See Bucknell v Mann (1862) 2 SCR (NSW) 1; Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402; [1965] 3 All ER 673; Chatsworth Properties Ltd v Effiom [1971] 1 WLR 144; [1971] 1 All ER 604; Prichard, ‘Tenancy by Estoppel’ (1964) 80 LQR 370; Noyes v Klein (1985) 3 BPR 9216. 71. Industrial Properties (Barton Hill) Ltd v Associated Electrical Industries Ltd [1977] QB 580; [1977] 2 All ER 293. 72. Kay v Lambeth London Borough Council [2004] 3 WLR 1396, noted in P Butt, ‘Leases, Licences

and the Modern “Contractual Tenancy”’ (2005) ALJ 143 at 146. 73. (1988) 164 CLR 387; 76 ALR 513; 4.151C. 74. See Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 1 All ER 897; Photo Art and Sound (Cremorne) Pty Ltd v Cremorne Centre Pty Ltd (in liq) (1987) 4 BPR 9436. 75. Commonwealth Bank of Australia v Baranyay [1993] 1 VR 588. 76. Minister for Interiors v Brisbane Amateur Turf Club (1949) 80 CLR 123 at 148 per Latham CJ, at 162 per Dixon J; Richardson v Landecker (1950) 50 SR (NSW) 250 at 258; Chief Commissioner of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462 at [72]–[74]; 8.123ff. For a general discussion, see D Klineberg, ‘Concurrent Leases in Commercial Transactions’ (2004) 10 APLJ 222. 77. NSW, s 120A(5); NT, s 115(7); Qld, s 102(5); Vic, s 149(5); WA, s 74(5). See generally Neale v Mackenzie (1836) 1 M & W 747; 150 ER 635; Richardson v Landecker (1950) 50 SR (NSW) 250. 78. Abjornsen v Urban Newspapers Pty Ltd (1986) 4 SR (WA) 225; see also Bradbrook and Croft, 26– 9. 79. NSW, s 120A(3); Qld, s 102(3); Vic, s 149(3); WA, s 74(3). 80. Re Strand and Savoy Properties Ltd [1960] Ch 582; [1960] 2 All ER 327; Weg Motors Ltd v Hales [1962] Ch 49 at 66–8; [1961] 3 All ER 181. 81. NSW, s 120A(1); Qld, s 102(1); SA, s 246; Vic, s 149(1); WA, s 74(1). 82. Malzy v Eichholz [1916] 2 KB 308; Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207. 83. See also Dowse v Wynyard Holdings Ltd [1962] NSWR 252; Telex (Australasia) Pty Ltd v Thomas Cook & Son (Australasia) Ltd [1970] 2 NSWR 257. 84. [1976] 2 NSWLR 15. See also Kohua Pty Ltd v Tai Ping Trading Pty Ltd (1986) 3 BPR 9705. 85. See also Frederick Betts Ltd v Pickfords Ltd [1906] 2 Ch 87; Elliott, ‘Non-Derogation from Grant’ (1964) 80 LQR 244. 86. Chartered Trust Plc v Davies (1997) 76 P & CR 396 at 407–8. 87. See also, Harris v Commissioner for Social Housing (2013) 8 ACTLR 98; Rissman, ‘The Price of Quiet Enjoyment’ (1999) 7 APLJ 155; Wilkinson, ‘The Sound of Peace: Quiet Enjoyment’ [1984] NLJ 1124. 88. [1973] Ch 314; [1972] 3 All ER 645. See also Russell, ‘Nuisance by Landlords’ (1977) 40 Mod LR 651.

89. Sanderson v Berwick-upon-Tweed Corporation (1884) 13 QBD 547. 90. Malzy v Eichholz [1916] 2 KB 308. 91. [1976] 2 NSWLR 15. 92. [1903] 1 KB 253. 93. See also Markham v Paget [1908] 1 Ch 697. 94. Smith v Marrable (1843) 11 M & W 6; 152 ER 693. 95. (1843) 12 M & W 68; 152 ER 1114; [1843–60] All ER Rep 68; Cruse v Mount [1933] Ch 278; [1932] All ER Rep 781. 96. Sarson v Roberts [1895] 2 QB 395; Pampris v Thanos [1968] 1 NSWR 56. 97. [1977] AC 239; [1976] 2 All ER 39. 98. Liverpool City Council v Irwin [1977] AC 239; [1976] 2 All ER 39; Mint v Good [1951] 1 KB 517; [1950] 2 All ER 1159. 99. (1991) 22 NSWLR 605. 100. See also Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33 and the cases cited in 8.94. 101. See also Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349. 102. Liverpool City Council v Irwin [1977] AC 239; [1976] 2 All ER 39; Miller v Emcer Products [1956] Ch 304; [1956] 1 All ER 237; Dowse v Wynyard Holdings Ltd [1962] NSWR 252. 103. Baulkham Hills Shire Council v Pascoe [1999] NSWCA 431 at [12]; North Sydney Council v Plater [2002] NSWCA 225 at [43]–[44]; Owners Strata Plan 30889 v Perrine [2002] NSWCA 324; Brock v Hillsdale Bowling & Recreation Club Ltd [2007] NSWCA 46; Ahluwalia v Robinson [2003] NSWCA 175. 104. For some recent commentary on the issues in Jones v Bartlett, see Butt, ‘Landlord’s Liability for Defective Premises’ (2006) 80 ALJ 284; Handford, ‘Through a Glass Door Darkly: Jones v Bartlett in the High Court’ (2001) 30 UWALRev 75. 105. See also Regis Property Co Ltd v Dudley [1958] 3 All ER 491; Reilly v Liangis (2000) 9 BPR 17,509; W Duncan and S Christensen, ‘Exemptions from a Tenant’s Express Obligation to Repair: Is the Landlord Responsible by Implication?’ (2004) 9 Deakin Law Review 621. 106. SA, s 124(b); Tas, s 66(b); Vic, s 67(1)(b); WA, s 92(ii). Note that in the Northern Territory and Queensland the obligation is limited to leases that exceed three years for the purpose or primarily for the purpose of human habitation: NT, s 117; Qld, s 105(1)(b). In the case of shorter leases, the

obligation is to care for the premises in the manner of a reasonable tenant: NT, s 118; Qld, s 106. 107. The relevant provisions are ACT, s 120(1)(a); NSW, s 85(1)(a); NT, s 119(1)(a); Qld, ss 107(a); SA, s 125(b); Tas, s 67(a); Vic, s 67(1)(c); WA, s 93(1). 108. See also Dikstein v Kanevsky [1947] VLR 216; Jenkins v Levinson (1929) 29 SR (NSW) 151; Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381. 109. See Hood, ‘The Extent of the Modern Covenant to Repair in Commercial Leases’ (1997) 5 APLJ 53. 110. This statement was approved by the House of Lords in Regis Property Co Ltd v Dudley [1959] AC 370; [1958] 3 All ER 491, and applied by Mitchell J in Bunyip Buildings Pty Ltd v Gestetner Pty Ltd [1969] SASR 87; aff’d [1969] SASR 94. 111. (1969) 72 SR (NSW) 225. 112. British Telecommunications plc v Sun Life Assurance [1996] Ch 69; [1995] 4 All ER 44. 113. [1966] 1 NSWR 596. 114. See also Cugg Pty Ltd v Gibo Pty Ltd (2001) 10 BPR 18,641 per Hodgson CJ in Eq at [80]–[82]. 115. [1966] 1 NSWR 596; 8.103. 116. NSW, s 133B(2); Qld, s 121(2). 117. [1891] 2 QB 31; Re Zis [1961] WAR 120. 118. NSW, s 133A(1); Qld, s 112(1). See Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567. 119. NSW, s 133A(2); Qld, s 112(2). Vic, s 147 gives limited relief to tenants in respect of decorative repairs. 120. For discussion of this case and earlier litigation, see Butt, 354. 121. Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47. 122. (1603) 4 Co Rep 119(b); 76 ER 1110. 123. NSW, ss 120, 123; Qld, s 119; Landlord and Tenant Act 1936 (SA) s 47; Tas, s 16; Vic, ss 143, 148; WA, s 73. 124. Chaplin v Smith [1926] 1 KB 198; see also Swan v Uecker [2016] VSC 313 (on facts, not licence but lease); 8.25C. 125. Doe d Pitt v Hogg (1824) 4 Dow & Ry 226; 171 ER 1144. 126. Vic, s 144(1); WA, s 80(1). 127. NSW, s 133B(1); Qld, s 121.

128. Creer v P & O Lines of Australia (1971) 125 CLR 84; [1972] ALR 226. Creer’s case was followed by the Court of Appeal in Bocardo SA v S & M Hotels Ltd [1980] 1 WLR 17; [1979] 3 All ER 797. 129. [1953] VLR 273; Creer v P & O Lines of Australia (1971) 125 CLR 84; [1972] ALR 226. 130. See generally Barrows v Isaacs [1891] 1 QB 417; Massart v Blight (1951) 82 CLR 423; Old Grovebury Manor Farm Ltd v W Seymour Plant Sales & Hire Ltd (No 2) [1979] 2 All ER 504. 131. See, for example, Vic, s 137; cf NGL Properties Pty Ltd v Harlington Pty Ltd [1979] VR 92. 132. [1979] 2 NSWLR 291. 133. Houlder Bros & Co v Gibbs [1925] Ch 198; aff’d [1925] Ch 575; [1925] All ER Rep 128. 134. McKenzie v McAllum [1956] ALR 576. 135. Swanson v Forton [1949] Ch 143; [1949] 1 All ER 135; McKenzie v McAllum [1956] VLR 208; Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180. 136. Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 2180 per Lord Roger of Earlsferry at 2201. 137. Lee v K Carter Ltd [1949] 1 KB 85; [1948] 2 All ER 690; West Layton Ltd v Ford [1979] QB 593; [1979] 2 All ER 657. 138. Pimms Ltd v Tallow Chandlers Co [1964] 2 QB 547; [1964] 2 All ER 145, followed in J A McBeath Nominees Pty Ltd v Jenkins Development Corporation [1992] 2 Qd R 121. 139. Barina Properties Pty Ltd v Bernard Hastie Pty Ltd [1979] 1 NSWLR 480. 140. Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47; Francis Longmore & Co Ltd v Stedman [1948] VLR 322; Burns v Dennis (1948) 48 SR (NSW) 266; Hayes v Seymour Johns (1981) 2 BPR 9366; WA Club Inc v Nullagine Pty Ltd (1992) 6 WAR 441. 141. Walsh v Lonsdale (1882) 21 Ch D 8; Daniel v Gracie (1844) 6 QB 145; 115 ER 56 (rental of marl and slack pit fixed at 1/8d per thousand bricks produced); Tanner v Stocks and Realty (Premises) Pty Ltd [1972] 2 NSWLR 722 (rental fixed by reference to variations in the consumer price index). 142. As to what happens if the third person refuses to act or the machinery breaks down, see Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600; 43 ALR 68, distinguished in State of NSW v Banabelle (2002) 54 NSWLR 503 at 530–1. 143. See Edmund Barton Chambers (Level 44) Co-operative Ltd v Mutual Life and Citizens Assurance Co Ltd (1985) 6 NSWLR 312; Thomas Cook Pty Ltd v Commonwealth Banking Corp (1986) NSW ConvR ¶55-286; 4 BPR 97,254.

144. See also Callaghan v Merivale CBD Pty Ltd [2006] ANZ ConvR 114; (2006) NSW ConvR ¶56155. 145. The equivalent provisions in other jurisdictions are: ACT, s 119(a); NSW, s 84(1)(a); NT, s 117(1); Qld, s 105(1) (a); SA, s 124; Tas, s 66; WA, s 92(i). 146. NSW, ss 133C–133G; Qld, s 128; WA, ss 83A–83E. 147. For a comment, see D Davine, ‘Market Rent Reviews in Commercial Leases’ (2006) 13 APLJ 299. 148. See NSW, s 70A; Qld, s 53(2); Tas, s 71A; Vic, s 79; WA, s 48. 149. The decisions in Warnford Investments v Duckworth [1979] 1 Ch 127; [1978] 2 All ER 517 and Centrovincial Estates PLC v Bulk Storage Ltd (1983) P & CR 394 highlight the extent of this liability. See Green and Whippman, ‘Original Tenant Liability — The Recent Cases’ (1984) 134 New LJ 982. See also Selous Street Properties v Oronel Fabrics (1984) 270 EG 643. 150. Picton-Warlow v Allendale Holdings Pty Ltd [1988] WAR 107. For a general review of the vulnerability of the lessee’s position following an assignment, see Butt, ‘Liability of Tenant for Assignee’s Breaches’ (1996) 70 ALJ 600. In England and Wales, legislation provides that the tenant’s liability on the covenants ceases after a lawful assignment: Landlord and Tenant (Covenants) Act 1995. 151. Breams Property Investment Co Ltd v Strougler [1948] 2 KB 1 at 7; [1948] 1 All ER 758 at 758. 152. Griffith v Pelton [1958] Ch 205; [1957] 3 All ER 75; Price v Murray [1970] VR 782; Esther Investments Pty Ltd v Cherrywood Park Pty Ltd [1986] WAR 279. Note Rossiter, ‘Options to Acquire Interests in Land — Freehold and Leasehold’ (1982) 56 ALJ 576 at 582–3. 153. The issues are explored by Smith, ‘The Running of Covenants in Equitable Leases and Equitable Assignments of Legal Leases’ (1978) 37 CLJ 98. 154. See also Chan v Cresdon (1989) 168 CLR 242; 89 ALR 522; 4.70. 155. Compare NSW, ss 117, 118; Qld, ss 117, 118; Tas, ss 10, 11; WA, ss 77, 78; presumably the 1540 Act remains in force in South Australia. 156. Davis v Town Properties Investment Corp Ltd [1903] 1 Ch 797; [1900–3] All ER Rep 558. 157. This argument is convincingly advanced by Butt, 4th ed, at 380–71. See NSW, s 51 (discussed above at 8.127); ACT, s 77; NT, s 62; Qld, s 62; Tas, s 60; Vic, s 54(2); WA, s 95. 158. This approach was also adopted in P & A Swift Investments v Combined English Stores Group plc [1988] 2 All ER 885 and followed in Lang v Asemo Pty Ltd [1989] VR 747. 159. Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234

CLR 237 at [101]; Accordent Pty Ltd v Bresimark Nominees Pty Ltd (2008) 101 SASR 286 at [28]; Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] VSCA 106 (at [54]). 160. NSW, s 119; Qld, s 116; Landlord and Tenant Act 1936 (SA) s 50; Tas, s 12; Vic, s 140; WA, s 76; Jelley v Buckman [1974] QB 488; [1973] 3 All ER 853. 161. This provision was amended in 2005 to deal with repudiation of leases. See 8.183Cff below. For provisions in other jurisdictions, see ACT, s 426(1); NSW, s 129(1); NT, ss 137–138; Qld, s 124(1); Landlord and Tenant Act 1936 (SA) s 10; Tas, s 15(1); WA, s 81(1). 162. See also ACT, s 426(5); NSW, s 129(6)(e); Qld, s 124(6)(c); Tas, s 15(6); WA, s 81(8)(b). 163. ACT, s 425(1); NSW, s 129(10); NT, s 138(6)(b); Qld, s 124(9); Landlord and Tenant Act 1936 (SA) s 12(6); Tas, s 15(8); WA, s 81(10). 164. For comparable legislation in the other jurisdictions, see NSW, s 129(8); NT, s 137; Qld, s 124(7); Landlord and Tenant Act 1936 (SA) s 12(5); Tas, s 15(7); WA, s 81(9). 165. NSW, 129(6)(a); Qld, s 124(6)(a). 166. See generally Fox v Jolly [1916] 1 AC 1. 167. The decision in Savva is discussed by Harcup, ‘Is a Breach of Covenant Capable of Remedy?’ (1996) 140 Sol J 898. See also Christensen and Duncan, ‘Breaches of a Lease “Capable of Remedy”: A Technical or Practical Approach?’ (2006) 13 APLJ 204. 168. ACT, s 426(1); NSW, s 129(1); NT, ss 137–138; Qld, s 124(1); Landlord and Tenant Act 1936 (SA) s 10; Tas, s 15(1); WA, s 81(1). 169. The general principles are discussed in Serjeant v Nash, Field & Co [1903] 2 KB 304; [1900–3] All ER Rep 252; Majala Pty Ltd v Ellas [1949] VLR 104; Hinton v Fawcett [1957] SASR 213. 170. See further, Wilkinson, ‘Waiver of a Breach of Covenant’ (1996) 146 NLJ 1545. 171. See also Tattersall’s Hotel Penrith Pty Ltd v Permanent Trustee Co of New South Wales (1942) 42 SR (NSW) 104; McKinnon v Portelli (1960) 60 SR (NSW) 343. 172. Jones v Carter (1846) 15 M & W 718 at 726; 153 ER 1040 at 1043 per Parke B; GS Fashions Ltd v B & Q plc [1995] 4 All ER 899 at 903–4 per Lightman J. For an application of Moore v Ullcoats Mining Co Ltd see Calabar Properties Ltd v Seagull Autos Ltd [1969] 1 Ch 451; [1968] 1 All ER 1. 173. Landlord and Tenant Act 1899 (NSW) ss 8–10 (amended sections inserted by the Supreme Court Act 1970); Qld, ss 123–128; Landlord and Tenant Act 1936 (SA) ss 4, 5, 7, 9; Supreme Court Civil Procedure Act 1932 (Tas) s 11(14), (14A); Supreme Court Act 1986 (Vic) s 85; WA, s 81(2).

174. See Qld, s 124; Vic, s 146; WA, s 81; cf Tas, s 15. See also Beca Developments Pty Ltd v Idameneo (1989) 4 BPR 9575. 175. See also Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Ltd [2007] NSWSC 92; Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203. 176. Compare NSW, s 129(2); Qld, s 142(2); Landlord and Tenant Act 1936 (SA) s 11; Tas, s 15(2); WA, s 81(2). 177. See Gummow, ‘Forfeiture and Certainty: The High Court and the House of Lords’ in Finn (ed), Essays in Equity, 1985, 30; Lang, ‘Forfeiture of Interests in Land’ (1984) 100 LQR 427; Rossiter, Vendor and Purchaser: Commentary and Materials, 1985, 398–406. 178. See also Rossiter, Penalties and Forfeiture, 1992, 164–5; Bland v Ingram Estates Ltd [2002] 2 WLR 361; [2002] 1 All ER 244. 179. Imray v Oakshette [1897] 2 QB 218; NSW, s 130; Qld, s 125; Vic, s 146(4); WA, s 81(4); cf Landlord and Tenant Act 1936 (SA) s 12; Tas, s 15(3). 180. Law Reform (Abolitions and Repeals) Act 1996 (ACT) s 5; Landlord and Tenant Amendment (Distress Abolition) Act 1930 (NSW); Residential Tenancies Act 1994 (Qld) s 55; Residential Tenancies Act 1995 (SA) s 60 (residential tenancies); Landlord and Tenant Act 1958 (Vic) s 12; Distress for Rent Abolition Act 1936 (WA) s 2. 181. See also Duncan, ‘Of Straws and Camel’s Backs — Fundamental Breach of Lease’ (1986) 2 QITLJ 31. 182. See also Redfern, ‘Mitigation of Loss by a Landlord Where a Tenant Repudiates the Lease’ (1994) 2 APLJ 175; but cf Vickers v Stichtenoth (1989) 52 SASR 90. 183. Redfern, ‘What is the Value of an Anti-Shevill Clause?’ (1995) 3 APLJ 158; Leda Commercial Properties v DHK Retailers Pty Ltd (1992) 111 FLR 81; on appeal [1993] ANZ ConvR 635. 184. See generally, Redfern, ‘Termination of Leases for Failure to Pay Rent’ (1996) 4 APLJ 76. Shevill v The Builders’ Licensing Board (1982) 149 CLR 620; 42 ALR 305 was followed in AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564. Note Rossiter, Penalties and Forfeiture, 1992, 131–4, 136–8; Carter and Harland, Contract Law in Australia, 2nd ed, 1991, 742–4; Rossiter, ‘The Doctrine of Election and Contracts for the Sale of Land’ (1986) 60 ALJ 563 at 572–3. 185. See generally, D McGill, ‘Statutory Protections from Forfeiture of a Leasehold Estate Following Apriaden Pty Ltd v Seacrest Pty Ltd’ (2007) 14 APLJ 12.

186. See also Esther Investments v Cherrywood Park Pty Ltd [1986] WAR 279; World Best Holdings Ltd v Sarker [2010] NSWCA 24; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268. 187. Legione v Hateley (1983) 152 CLR 406 at 449 per Mason and Deane JJ. 188. For a detailed discussion of the issues raised in Apriaden v Seacrest, Batiste v Lenin and Marshall v Snowy River and the relevance of notice to repudiation of leases, see McGill, ‘Statutory Protections from Forfeiture of a Leasehold Estate Following Apriaden Pty Ltd v Seacrest Pty Ltd’ (2007) 14 APLJ 126–46. 189. For a note on English legislation permitting public sector tenants to repair the demised premises and set off the amount of the repair against rent, see Maughan-Pewsey, ‘Landlord’s Disrepair: A New Statutory Remedy’ [1986] NLJ 828. See Weir, ‘A Tenant’s Right of Set-Off’ (1994) 68 ALJ 857; Waite, ‘Repairs and Deductions from Rent’ (1900) 45 Conv & PL 199; Rank, ‘Repairs in Lieu of Rent’ (1976) 40 Conv & PL 196; and Smith, ‘Remedies of Tenant’ (1980) 130 NLJ 330; Butt, ‘Repairs, Recoupment, Repudiation, Relief’ (2003) 77(4) ALJ 211. 190. See for example, Steinwall, Trade Practices Act 1974, LexisNexis Butterworths, Sydney, 2007; Skapinker, ‘The Impact of the Trade Practices Act on Land Transactions’ (1996) 4 APLJ 107; Webb, ‘Has Caveat Emptor Become Vendor, Lessor, and Agent Emptor — Silence, Section 52 Trade Practices Act, 1974 and Real Property Transactions’ (1995) 3 APLJ 122; Webb, ‘Evidence of Tendency and Coincidence in Matters Arising under Section 52 Trade Practices Act 1974 — Potential Uses in Real Property Transactions’ (1997) 5 APLJ 145. 191. Second Main Report of the Australian Government Commission of Inquiry into Poverty, (Professor R Sackville), Law and Poverty in Australia, (AGPS, 1975). 192. See also, A J Bradbrook, ‘Residential Tenancies Law in Australia: The Second Stage of Reforms’ (1998) 20 Syd Univ L Rev 402. 193. For legislation in other states, see Residential Tenancies Act 1997 (ACT); Residential Tenancies Act 1999 (NT); Residential Tenancies Act 1994 (Qld); Residential Tenancies Act 1995 (SA); Residential Tenancies Act 1997 (Tas); Residential Tenancies Act 1997 (Vic); Residential Tenancies Act 1987 (WA). In this section on residential tenancies, the legislation is referred to by the abbreviation of the state enacting it. 194. See also ACT, s 6A; NT, ss 137–38; Qld, s 12(2); SA, s 3(1); Tas, s 15(1); Vic, s 3; WA, s 81(1); Commissioner of Fair Trading v Voulon [2005] WASC 229. 195. See Radaich v Smith at 8.22C above.

196. For other jurisdictions, see ACT, ss 6C–6F; NT, s 4; Qld, ss 31–36; SA, s 5; Tas, s 6; Vic, ss 6– 14; WA, ss 5–6. 197. See also, ACT, s 9; NT, s 4; Qld, s 124(1); Landlord and Tenant Act 1936 (SA) s 10; Tas, s 15(1); Vic, s 27; WA, s 81(1). 198. ACT, s 8, Sch 1, cl 52, s 71(2); NT, s 66; Qld, s 183; SA, s 65; Tas, s 55; WA, s 44. 199. See also ACT, s 8, Sch 1, cll 63–64; NSW, s 51(2)(a); NT, s 51; Qld, ss 184, 188; Vic, ss 61, 63; WA, s 42. 200. ACT, s 8, Sch 1, cll 59–62; NSW, s 64; NT, ss 60, 63; Qld, s 216–221; SA, s 68(3); Tas, ss 33– 34; Vic, ss 72–73; WA, s 43. 201. See 8.200. 202. ACT, s 8, Sch 1, cl 54(1)(d); NT, s 49; Qld, ss 210–11; SA, s 66; Tas, s 57; Vic, s 70; WA, s 45. 203. SA, s 56(1). 204. ACT, s 65, Sch 1, cl 34; NSW, s 41(1); Qld, s 91; SA, s 55; Tas, s 20; Vic, s 44; WA, s 30. Compare NT, s 41 (30-day notice). 205. ACT, s 71; NSW, ss 44(1), (5), 43(1); NT, s 42; Qld, s 92; SA, s 56(2); Tas, s 23; Vic, s 47; WA, s 32(3). 206. Second Main Report of the Australian Government Commission of Inquiry into Poverty (Professor R Sackville), Law and Poverty in Australia, AGPS, Canberra, 1975, 68–73. 207. Edgeworth, ‘Access to Justice in Courts and Tribunals: Residential Tenancies in New South Wales (1971–2001)’ (2006) 31 Alt LJ 75–8. 208. ACT, s 20; Landlord and Tenant (Rental Bonds) Act 1977 (NSW) s 67; NT, s 29; SA, s 61; Tas, s 25; Vic, s 406; WA, s 29. 209. ACT, ss 43–55; NSW, s 81; NT, s 82; Qld, Ch 5 (Pt 1); SA, s 79; Tas, s 37; Vic, ss 216–228; WA, s 60. 210. ACT, s 8, Sch 1, cll 94, 88 (landlord — 26 weeks, tenant three weeks); NSW, ss 58, 59 (landlord — 60 days, tenant 21 days); NT, ss 89, 95 (landlord — 42 days, tenant 14 days); Qld, s 326 (landlord and tenant — equivalent to a period); SA, ss 83, 86(2) (landlord — 90 days, tenant 21 days or a period, whichever is greater); Tas, ss 39, 43 (landlord — 14 days, tenant 14 days); Vic, ss 235, 263 (landlord — 120 days, tenant 28 days); WA, ss 64, 68 (landlord — 60 days, tenant 21 days). 211. See generally, ACT, s 49; NSW, ss 87(1) (breach by tenant); 98(1) (breach by landlord); NT, s 87;

Qld, s 53; SA, s 80; Tas, s 42; Vic, s 246; WA, s 62. 212. ACT, s 37; NT, s 104; NSW s 83; Qld, ss 293–300; SA, s 93; Vic, s 322; WA, s 71. 213. ACT, Pts 6–7; Qld, ss 397–433A; SA, Pt 8; Vic, Pt 11. 214. See also ACT, s 125; SA, s 41.

[page 853]

Planning Land Use by Private Agreement: Freehold Covenants

CHAPTER

9

INTRODUCTION 9.1

The basic doctrines of property law were formulated during a period

when governments played little or no part in planning the use and development of the community’s land resources. Consequently, it is not surprising that the law provided opportunities for private landowners to regulate the use of their land by private agreement. To some extent this was achieved by the traditional principles of contract law, but it became apparent that orthodox contract law did not deal adequately with a number of problems. In particular, the doctrine of privity of contract limited the effectiveness of contracts as a means of land use control. For example,

neighbouring landowners might enter into an agreement regulating the use of their respective lots. If one party sold the land and the other was unable to enforce the agreement against the purchaser, the agreement had limited value as a means of controlling land use. Once the courts made the decision to enforce the agreement against a successor in title to the person who made the agreement (the covenantor), the law had moved from the realm of contract into that of property. This chapter and the next examine the two subdivisions of the law of property primarily concerned with the planning of land use by private agreement. The first is the law of covenants affecting land, which governs the enforcement of such covenants by and against persons who were not parties to the original agreement. (The enforceability of covenants contained in leases after assignment of the lease or reversion is not discussed in this chapter but is dealt with in 8.123ff.) The second is the law of easements, under which a landowner may acquire a limited interest in nearby land owned by another person. The overlap between the two subdivisions is considerable; as always, the borders within the law of property are not as immutable as they appear at first glance. Not all the materials in these two chapters relate to the acquisition of proprietary interests in the land of another by express agreement. For example, easements may be acquired by prescription — that is, user as of right, without permission, over a long period of time: see 10.81ff. It is nonetheless convenient to consider the doctrine of prescription in the context of easements generally. Both chapters are primarily concerned with the legal techniques available for the private planning of land use.

[page 854]

9.2

It is a common practice for landowners to enter into agreements

regulating the use and development of their land. Most, but by no means all, such agreements are executed by purchasers of land at the time they take their conveyance or transfer. A typical case is that of a subdivision of land, where the owner of a large block proposes to sell a portion of the land and retain the rest. The subdivider is anxious to preserve the value of the land retained and also to obtain the highest price for the land that is being sold. Thus, the subdivider may seek to restrict the use of the land to be acquired by the purchaser in order to remove, as far as possible, the danger that the purchaser or successors in title will carry on some harmful or unpleasant activity on that land. The most obvious means of achieving the subdivider’s objective is to persuade the purchaser to agree to restrict or regulate use of the land in the desired manner. If the purchaser has a strong desire to buy the particular piece of land, there is little choice but to accept the covenants imposed. As an inducement to the purchaser to enter the agreement (and to pay a higher purchase price), the subdivider may be willing to execute a reciprocal agreement regulating the use of the retained land. In this way both vendor and purchaser have made their contribution towards establishing the ‘character’ of the neighbourhood by their private agreement. In the case of large areas of land purchased by developers for subdivision and resale, the existence of a comprehensive scheme of restrictive covenants binding all purchasers may make the land more valuable. Purchasers are assured that the desirable characteristics of the surrounding landscape and possibly the ‘high-

class’ character of the neighbourhood will be preserved by the restrictive covenants. 9.3

In modern times, the state has taken over some of the functions once

performed by agreements between private landowners. Land use is now subject to statutory and administrative controls which restrict activities in specified areas, regulate subdivision of lands, the alteration and erection of buildings, the opening of roads and the provision of recreational space, and are designed to protect the environment and preserve buildings and landscapes of historical value or unique beauty. The distinction between public and private forms of land use control is not clear-cut. In some jurisdictions, legislation provides that planning schemes and law may override private covenants, whereas in other jurisdictions the grant of a planning permit is dependent upon either compliance with or variation or removal of a covenant. See below at 9.81. 9.4

It is sometimes suggested that private planning mechanisms are no

longer desirable in view of the large number of government agencies which control land use. By contrast, some commentators have suggested that private covenants lead to more efficient allocation of resources at lower cost.1 Whatever view is taken on this issue, the rules governing the enforcement of covenants affecting land remain an important part of the law of property. The law of property, in addition to the law of contract, is involved because it has long been settled that the enforcement of such covenants is not restricted to the parties to the original agreement. In certain cases at least, the covenants may be enforced by and against persons who were not the contracting parties,

but who have acquired interests in the land affected by the covenant. The rules governing enforcement are complex and often in urgent need of reform. But any potential law reformer needs first to master the technical doctrines that are to be overturned.

[page 855]

Privity of contract 9.5

A covenant is simply a promise made in a deed or document under

seal. The covenant is enforceable by the covenantee (the party to the deed entitled to the benefit of the covenant) against the covenantor (the party covenanting to do or refrain from doing a particular act which is subject to the burden) on the usual contractual principles. These principles dictate that if the covenantee has sold the land to which the covenant relates, the covenantee will be entitled only to nominal damages on breach by the covenantor, since no actual damage has been sustained. Again, if there were no property law doctrines applicable to covenants affecting land, orthodox contractual rules would allow the covenant to be enforced only as between the contracting parties. In four Australian jurisdictions, the only significant exception to the doctrine of privity of contract is created by a section drawn from English legislation. In Victoria, the provision is found in the Property Law Act 1958 s 56(1): A person may take an immediate or other interest in land or other property, or the benefit of any

condition, right of entry, covenant or agreement over or respecting land or other property, although he is not named as a party to the conveyance or other instrument.

Equivalent provision is made in other states: NSW, s 36C; SA, s 34; Tas, s 61.2 However, as will be seen, Western Australia, Queensland and the Northern Territory3 have enacted sections cast in much wider terms than those in force in the other states: see 9.14. 9.6

The meaning of s 56(1) was under debate for many years. On several

occasions Lord Denning MR considered the effect of the equivalent English provision, which is contained in the Law of Property Act 1925 (UK) s 56(1).4 In Lord Denning’s view, the effect of the provision was to overturn the doctrine of privity of contract. If, for example, A and B agreed contractually that A was to make certain payments to C, Lord Denning’s interpretation of s 56(1) allowed C to enforce the contract against A, despite the fact that A was not a party to the agreement. In Beswick v Beswick [1966] Ch 538 at 556–7; [1966] 3 All ER 1 at 8–9, the facts of which resembled those in the example, Lord Denning applied his interpretation. However, the House of Lords, while affirming the actual decision of the Court of Appeal, rejected this broad view of s 56(1): [1968] AC 58; [1967] 2 All ER 1197. Their Lordships agreed that s 56(1) was a mere consolidating provision which could not have been intended to have the drastic effect of abrogating an entrenched doctrine such as privity of contract. They considered that the section had to be understood by relating it to s 5 of the Real Property Act 1845 (UK), which it replaced. Section 5 was designed simply to abrogate the procedural rule that a person could not enforce the term of a deed made between parties unless that person was actually named as a party thereto in the body of the

document. This rule, for example, prevented a person whose agent executed the deed from enforcing the deed unless actually named as a party, although the rule never applied to deeds poll. Having agreed that s 56(1) did not abolish the doctrine of privity of contract, their Lordships provided no clear statement of the positive effect of the section.

[page 856]

9.7C

Dalton v Ellis; Estate of Bristow (2005) 65 NSWLR 134; [2005] NSWSC 1252 Supreme Court of New South Wales (Equity Division)

[The deceased, one Bristow, entered into a deed with the first plaintiff whereby he acknowledged that he was the father of a female child due to be born to the first plaintiff at a time after the date of the deed. The deceased covenanted that he would make a will conferring a named benefit upon the child. The only substantial asset in the estate of the deceased was a parcel of land at Newport in Sydney. The second plaintiff was the child referred to in the deed and one issue before the court was whether the second plaintiff was entitled to sue upon the deed.] Young CJ in Eq: On 21 December 1973 the deceased executed a deed. The deed was expressed to be between the deceased of the one part and Dr Dalton of the other part. The key clauses of the deed are as follows: 1. 5.

6.

Mr Bristow acknowledges and agrees that he is the father of the female child due to be born to Dr Dalton on 25 February 1974 … Mr Bristow covenants and agrees that forthwith after the execution of this Deed he will make and will thereafter at all times keep in force a valid and effective Will under and pursuant to the terms of which the said child is entitled to receive upon Mr Bristow’s death an interest in Mr Bristow’s estate which shall be not less than that fraction of the value of the assets owned by Mr Bristow at the date of his death the numerator of which is one (1) and the denominator of which is the number of children of which Mr Bristow is the father including the said child. It being the intention, wish and desire of the parties that the said child should be entitled to the benefits conferred on her under the terms of this Deed as

though she were a party hereto even though she is not such a party IT IS HEREBY AGREED AND DECLARED that Dr Dalton should and she hereby does hold the benefits conferred upon the said child under this Deed as Trustee for the said child to the intent that the child should be able to and can enforce the sum as covenants entered into with her in a Deed which she is party. Isis Dalton, the second plaintiff, was born two months prematurely on 29 December 1973 … May the second plaintiff sue on the deed? Clearly, the second plaintiff is not an actual party to the deed. The deed itself says so. Can she, however, sue on it? The general rule in contract law is that unless a person is a party to a contract, she cannot sue on it. This is known as the doctrine of privity of contract; see Tweddle v Atkinson (1861) 1 B & S 393; 121 ER 762. In Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, the High Court reviewed the law with respect to third party contracts. The court adjusted the law with respect to insurance contracts. However, the remainder of the law of privity was left virtually intact despite comments that it was unsatisfactory in some respects particularly that the exception of trust of a promise did not adequately cover the field (see Mason CJ and Wilson J at 121 and Deane J at 147). [page 857] Section 36C of the Conveyancing Act 1919 is as follows: (1) A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant, or agreement over or respecting land or other property, although the person may not be named as a party to the assurance or other instrument. (2) Such person may sue, and be entitled to all rights and remedies in respect thereof as if he or she had been named as a party to the assurance or other instrument. In Bohn v Miller Brothers Pty Ltd [1953] VLR 355, approved and applied in Bird v Trustees Executors and Agency Co Ltd [1957] VR 619, single judges of the Victorian Supreme Court held that s 36C or its interstate equivalents do not assist persons who are not in existence and identifiable at the time the instrument conferring benefits on them is executed. Is a person en ventre sa mere to be considered a person in existence for the purpose of fulfilling this test? The rule of the common law is plain. As long ago as in Doe d Clarke v Clarke (1794) 2 H Black 399 at 401; 126 ER 617 at 618, the Court of Common Pleas held, following the then recent work, ‘Watkins’s Law of Descents’, ‘It is now laid down as a fixed principle, that wherever such consideration would be for his benefit, a child en ventre sa mere shall be considered as absolutely born.’ (See per Buller J).

This principle had been taken over from the Roman Law see Justinian, Institutes, Book 2 Title 13 and Book 3 Title 1 though the early Roman Jurist Gaius had classified postumi as incerta. As was said in Gibson v Gibson (1698) 2 Freeman 223; 22 ER 1173, ‘by the civil law, posthumus pro nato habetur’, colloquially translated as ‘it is to be the posthumous child’s on birth’. The principle has been applied in many cases; see eg Doe d Lancashire v Lancashire (1792) TR 49; 101 ER 28 where examples from the authorities to that point are digested and Long v Blackall (1797) 7 TR 100; 101 ER 875. Thus, I consider that a posthumous child (at least one who has quickened and is later born alive, as the second plaintiff in this case) is to be considered as a person identifiable and in existence for the purpose of the application of s 36C. Simonds J in White v Bijou Mansions Ltd [1937] Ch 610 at 623 et seq, traced the background of the English equivalent of s 36C (s 56 of the Law of Property Act 1925 (Eng)). His Lordship commenced with reference to s 5 of the Real Property Amendment Act 1845 (Eng) which provided that a person to whom a deed purported to grant an interest in land could take that interest even though he or she were not a party to the deed. His Lordship then said of s 56 of the Law of Property Act at p 625: Just as under s 5 of the Act of 1845 only that person could call it in aid who, although not a party, yet was a grantee or covenantee, so under s. 56 of this Act only that person can call it in aid who, although not named as a party to the conveyance or other instrument, is yet a person to whom that conveyance or other instrument purports to grant some thing or with which some agreement or covenant is purported to be made. The position in England has now been affected by the Contracts (Rights of Third Parties) Act 1999 which has not been adopted in NSW. However, Chitty on Contracts, 29th ed (Sweet [page 858] Maxwell, London, 2004) paras [18–114]ff, indicates that, after Beswick v Beswick [1968] AC 58 the following limitations apply to s 36C (my summary): (1) it applies only to real property; (2) to covenants running with the land; (3) to cases where the instrument is not merely for the benefit of the third party but purports to contain a grant to or covenant with him; (4) to deeds inter partes; (5) where the third party is in existence and identifiable at the time when it was made. See also Carter on Contract Law in Australia (Butterworths, 2002 [914]). Beswick v Beswick would appear to be good law in Australia; see eg Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 at 12. See also Re

Caroline Chisholm Village Pty Ltd (1980) 1 BPR 9507 at 9512 and my decision in Doyle v Phillips (No 1) (1997) 8 BPR 15,523 at 15,525. See, however, Stuckey, The Conveyancing Act (Law Book Co, Sydney, 1970) 2nd ed [238] and Carter op cit [914]. Section 36C has received more recent attention in Australian Mortgage & Properties Pty Ltd v Baclon Pty Ltd (2001) 10 BPR 19,227. In that case a licence to occupy a property was conferred on a company and permitted that company’s sole director to reside there. It also permitted two of the director’s family members to reside there as well, although they were not named in the licence. When executing the document, the plaintiff’s principals did not identify who those family members were, after being requested to do so. Subsequently, the director’s mother sought to rely on s 36C to enforce the provisions of the licence (amongst other things). Austin J held that s 36C did not apply because she was not a person with whom an agreement or covenant was purportedly made, even though she indirectly benefited from it. It thus appears to me that the second plaintiff is unable to rely on s 36C to enforce cl 5 in the deed. I should add, for completeness, that there appear to be some cases of executed contracts where A has paid money to B to be paid to C that C may sue B for money had and received; see my article ‘Third Party Contract Rights’ (1992) 9 Aust Bar Rev 39 at 41. None of those exceptional cases could be relevant in the instant case. The Third Party Beneficiary Rule As Chitty says (29th ed 18-074), Equity developed an exception to the doctrine of privity which has long since been universally recognized that: … where A made a promise to B for the benefit of C, the promise could be enforced by C against A if B had constituted himself trustee of A’s promise for C. The rule has, at least in the days before Trident, been sparingly applied. It is clear that a promisee will not be taken to be a trustee of the promise merely because there is a benefit to a third party. The promisee must have an intention to create a trust: Swain v Law Society [1983] 1 AC 598 at 620. The intention to create the trust may be found in conduct, but it must be made abundantly clear and not be necessary to resort to inferences to find the requisite intent: Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 at 79–80 and Re Schebsman [1944] Ch 83 at 104. The intention must be to create a trust, and not just an intention to benefit a third party (Re Schebsman at 89 and Ryder v Taylor (1935) 36 SR (NSW) 31 at 48), but provided that [page 859] that intention appears from the language of the contract construed in its context, such a trust will, at least prima facie, arise. Clause 6 of the deed is clearly expressed so as to show an intent that the first plaintiff was to hold the benefits conferred on the second plaintiff under the deed, that is, the

right to be named in the deceased’s will, as trustee for the benefit of the second plaintiff. The clause goes even further by expressly purporting to entitle the second plaintiff to the benefit of the deed as though she were a party to it and with the intent that she be able to enforce it. This further supports the existence of the necessary intent: per Deane J in Trident at 147. Mr Gorrick said that the surrounding circumstances of the deed indicated that it and any trust created under it had been revoked in the time between its execution and the deceased’s death. He pointed to the fact that there had been no attempt by the plaintiffs to find out whether the deceased had made a will, the absence of any evidence of a will and the failure of either plaintiff to enforce clause 5 of the deed prior to the deceased’s death, as factors indicating a revocation. However, as there was no express power of revocation in the deed, once settled, the trust that it established could not be revoked (Paul v Paul (1882) 20 Ch D 742 and Standing v Bowring (1885) 31 Ch D 282), even if some of the above circumstances point to revocation or variation (which is in any case doubtful). Accordingly, the second plaintiff is the beneficiary of a chose in action, specifically a right to sue on a contract requiring the deceased to have named her in his will. [Young CJ decided that, although the second plaintiff had a claim under the deed, the defendant was entitled to the whole of the deceased’s estate under the Family Provision Act 1982.]

9.8

In White v Bijou Mansions Ltd [1937] Ch 610; [1938] 1 All ER 546

(aff’d on appeal [1938] Ch 351), the vendors of the fee simple estate in a sizable parcel of land, conveyed part of it to F. F covenanted that he would build a house for a certain sum and that he would use this house only as a private dwelling, or as a place for carrying on a medical practice. The vendors covenanted that in every building lease or future sale of parts of Blackacre there would be included covenants that the land should only be used for the purposes of a private dwelling. White, the plaintiff, was the successor in title to F. Four years after the sale to F a nearby block was conveyed by the vendors to N who covenanted for himself, his heirs, executors, administrators and assigns with the intent to bind himself and his successors in title and the owner for the time being of the property conveyed, with the vendors, their

heirs and assigns, that the land should only be used for the purposes of a private dwelling house. Later this land was leased to the defendant D, who breached the covenant. Simonds J held that the covenant made between V and N was not expressed in such a way as to confer a benefit upon F, as it did not purport to be made with F. Though the defendant was bound by the covenant, the plaintiff could not claim against D for breach of covenant by relying on s 56(1). 9.9

The circumstances in which s 56(1) will apply are well illustrated by Re

Ecclesiastical Commrs for England’s Conveyance [1936] Ch 430; [1934] All ER Rep 118. In 1887, Gotto purchased land from the Commissioners. At the same time he covenanted for himself and his successors in title with the Commissioners and their successors ‘and also as a separate covenant with their assigns owners for the time being of land adjoining or adjacent to the said land hereby conveyed’. The covenants related to the use of Gotto’s land. The applicants, successors in title to Gotto, issued

[page 860]

an originating summons to determine whether their land was bound by any of the covenants. The respondents were successors in title to owners of land which either adjoined or was close to the applicant’s land. This land had been purchased from the Ecclesiastical Commissioners prior to the conveyance to Gotto. The court held that the burden of the covenants ran with the land, and then proceeded to consider whether the respondents had any right to

enforce the covenants. It was held that, although the original owners of the respondents’ land were not parties to the conveyance of 1887, the conveyance was expressed to be made with them. Thus s 56(1) applied and the respondents, as successors in title of the original owners, were able to take advantage of Gotto’s covenants under the rules relating to passing of the benefit of covenants. 9.10

Section 56(1) does not operate to confer rights of enforcement upon

persons not in existence and identifiable when the covenant was made: Bird v Trustees, Executors and Agency Co Ltd [1957] VR 619. Other questions concerning the operation of s 56(1) are discussed by Treitel in a Note, (1967) 30 Mod LR 687 at 689–90, dealing with Beswick v Beswick: The question now is whether the words ‘or other property’ in s 56(1) have (quite apart from any statutory definition of ‘property’) given the sub-section a wider scope than that of the old s 5. According to Lord Guest, they have not; there was no half-way house between giving s 56(1) the extreme construction favoured by a majority of the Court of Appeal and limiting it ‘to the law as previously existing’. But this view is not shared by the other members of the House, who are all prepared to accept the possibility that s 56(1) had made some change, falling short of the virtual abolition of the doctrine of privity. (See, for example, Lord Reid who says that s 56(1) has not ‘substantially’ altered the law and Lord Hodson who refers to s 56(1) as an ‘enlargement’ of its predecessor making no ‘substantial’ innovation.) The first possible change is the application of the sub-section to covenants which do not run with the land: this … is accepted by Lord Hodson. The second possible change is the application of the sub-section to at least some kinds of property other than real property: this view finds some support from Lords Upjohn and Pearce, though it is denied by Lord Guest and perhaps by Lord Reid. Lord Hodson says that ‘property’ must be given ‘a limited meaning’ but he does not say what that meaning is. One of the two earlier cases in which s 56(1) was actually applied supports the view that ‘property’ at the very least includes leasehold land: Stromdale & Ball Ltd v Burden. But two further limitations on the scope of s 5 may well have survived. First, it is suggested by

Lord Upjohn that s 56(1) is limited to deeds inter partes. (Lord Pearce agreed. Lord Reid mentions the point without comment.) There is strong support for this view on historical grounds, and it is also consistent with all the cases, though it does not form the ground of decision in any of them. The second limitation is that s 56(1) only applies where an instrument purports to contain a grant to or covenant with the third party, as opposed to being merely for his benefit. (This view is regarded as possible though unsatisfactory by Lord Pearce; accepted by Lord Upjohn; rejected by Lord Guest; and mentioned without comment by Lords Reid and Hodson.) This limitation was regarded as decisive in a number of earlier cases in which s 56(1) was considered; and as it was at any rate not clearly rejected in Beswick v Beswick it probably still represents the law.

In Doyle v Phillips (No 1) (1997) 8 BPR 15,523 at 15,525, Young J summarised the effect of the section: It is commonly accepted that the section cannot operate in favour of a person not in existence at the date of the instrument and that it does not permit a mere third party to

[page 861]

enforce a contract made for his or her benefit. The intention of the section was to assist in the operation of technical conveyancing law and requires a covenant to be made with the people even though they are not party to the deed [emphasis added].

See also Re Caroline Chisholm Village Pty Ltd (1980) 1 BPR 9507. 9.11

In Stromdale and Ball Ltd v Burden [1952] Ch 223; [1952] 1 All ER

59, by terms of a deed inter partes to which the defendant and the plaintiff directors were parties but not the plaintiff company, the defendant granted an option to purchase her underlease to the plaintiff company. Danckwerts J concluded that the provisions of s 56 of the Law of Property Act 1925 (UK) enabled the plaintiff to enforce the option. The deed granted an option to

purchase, which created an interest in land and was an agreement respecting land. 9.12

In 1937, the English Law Revision Committee recommended the

modification of the doctrine of privity of contract in these terms: We therefore recommend that where a contract by its express terms purports to confer a benefit directly upon a third party, the third party shall be entitled to enforce the provision in his own name, provided that the promisor shall be entitled to raise as against the third party any defence that would have been valid against the promisee. The rights of the third party shall be subject to cancellation of the contract by the mutual consent of the contracting parties at any time before the third party has adopted it either expressly or by conduct [Law Revision Committee, Sixth Interim Report, Cmnd 5449, 1937, para 48].

The Contracts (Rights of Third Parties) Act (UK) was enacted in 1999. It is provided by terms of s 1 that: 9.13E

Contracts (Rights of Third Parties) Act 1999 (UK)

(1) … a person who is not a party to a contract (a ‘third party’) may in his own right enforce a term of the contract if — (a) the contract expressly provides that he may, or (b) subject to subsection (2), the term purports to confer a benefit on him. (2) Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party. (3) The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.

9.14

In Western Australia, Queensland and the Northern Territory

statutory provisions have modified the rigid common law rules that a stranger to a contract cannot enforce it even though the sole purpose of that contract

may be to confer benefits upon that person. The Western Australian provision, s 11(1), is in similar terms to s 56(1), but s 11(2) specifically confers power upon a person who receives a benefit under the express terms of a covenant to enforce the covenant even though he or she is not a party. The provision follows the form suggested by the English Law Revision Committee. The Queensland and Northern Territory

[page 862]

provisions are cast in rather wider terms: Qld, ss 13, 55; NT, ss 12, 56. Section 13 rewords the provision equivalent to s 56(1) to remove the requirement imposed in Bird v Trustees, Executors and Agency Co Pty [1957] VR 619 that the person be in existence and identifiable when the covenant was made. Section 55 completely reforms the law of privity of contract enabling the enforcement of contractual promises by and against third party beneficiaries. The Queensland Law Reform Commission did not discuss their effect on the law relating to covenants affecting land, but it could be farreaching. In Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313; 146 ALR 572 two members of the High Court (Gaudron J at CLR 363; ALR 606; and Kirby J at CLR 412–13; ALR 645) held that a tenant’s child could rely on the provision to benefit from the tenant’s contract with the landlord. However, Brennan CJ and Gummow J held that the provision did not apply to obligations imposed by statute. As the other judges (Dawson, McHugh and Toohey JJ) did not discuss the section, its effect remains

uncertain. Under Gaudron and Kirby JJ’s interpretation, successors in title to the covenantee could sue on the covenant. 9.15

In Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988)

165 CLR 107, a majority of the High Court, Mason CJ, Wilson, Toohey and Gaudron JJ, held that the appellant was liable to indemnify the respondent under a contract of liability insurance despite the lack of privity of contract between the parties to the appeal. However, there was also a clear majority view that the decision of the court did not affect the general doctrine of privity of contract and that its effect was limited to contracts of insurance. The influence of the decision in Trident on the law of restrictive covenants was argued in Cousin v Grant (1991) 103 FLR 236. On this point, Miles CJ of the Supreme Court of the Australian Capital Territory concluded (at 244): Whatever, as a result of the Trident case be the legal categorisation of the rights of a beneficiary under a contract of liability insurance, the right of the beneficiary to enforce the policy against the insurer is either an exception to the general requirement of privity of contract or a right conferred by the law independently of contract. In the present case the plaintiffs were not party to the Schedule of provisions, covenants and conditions. They cannot sue upon a breach of any promise contained within it.

THE RUNNING OF COVENANTS AT COMMON LAW The burden 9.16C

Austerberry v Corporation of Oldham (1885) 29 Ch D 750

Court of Appeal [In 1837 a group of landowners formed a company for the purpose of making a road. Pursuant to this arrangement John Elliot conveyed a portion of his land to trustees representing the company. The trustees covenanted with John Elliot, his heirs and assigns, to make and maintain the road at their expense and to keep it under repair. Similar arrangements were entered into between the trustees and other owners of land adjoining the road.

[page 863]

The trustees made the road and maintained it until it was taken over by the respondent, the Oldham Corporation. The plaintiff, Austerberry, was Elliot’s successor in title. Both the Oldham Corporation and Austerberry had notice of the covenant to repair. In 1881, the corporation attempted to recover the cost of repairing the road from the plaintiff and other adjoining landowners, obtaining orders from the justices for repayment of the moneys due. The plaintiff brought an action to ascertain his rights, and the rights of other landowners claiming, inter alia, a declaration that the corporation was not entitled to recover the cost of repairs to the road. He also claimed an injunction to restrain the corporation from proceeding further to enforce the orders made by the justices. The Vice-Chancellor of the County Palatine of Lancaster decided in favour of the defendant. The plaintiff appealed to the Court of Appeal.] Lindley LJ: [Lindley LJ first discussed the application of the Public Health Act to the facts of the case. He proceeded to discuss the covenant between Elliot and the trustees:] … First it seems to have been thought that that covenant was so worded as to cover everything which the corporation had done — I mean by ‘everything’ the metalling, and paving, and sewering; but when the covenant is looked at it is seen that it is not extensive enough to cover that; and, therefore, whatever may be the merits of the case, the corporation must be right as to a great portion of the charges made against the plaintiff. But then there is the covenant which extends (to use a short word) to repairing and the plaintiff says that at all events to the extent to which you, the corporation, have incurred expense in repairing the road, to that extent you are bound to exonerate me by virtue of that covenant. That gives rise to one or two questions of law. The first question which I will consider is whether that covenant runs with the land, as it is called — whether the benefit of it runs with the land held by the plaintiff, and whether the burden of it runs with the land held by the defendants; because, if the covenant does run at law, then the plaintiff, so far as I can see, would be right as to this portion of his claim. Now, as regards the benefit running with the plaintiff’s land, the

covenant is, so far as the road goes, a covenant to repair the road; what I mean by that is, there is nothing in the deed which points particularly to that portion of the road which abuts upon or fronts the plaintiff’s land — it is a covenant to repair the whole of the road, no distinction being made between the portion of that road which joins or abuts upon his land and the rest of the road; in other words, it is a covenant simply to make and maintain this road as a public highway; there is no covenant to do anything whatever on the plaintiff’s land, and there is nothing pointing to the plaintiff’s land in particular. Now it appears to me to be going a long way to say that the benefit of that covenant runs with the plaintiff’s land. I do not overlook the fact that the plaintiff, as a frontager, has certain rights of getting on to the road; and if this covenant had been so worded as to shew that there had been an intention to grant him some particular benefit in respect of that particular part of his land, possibly we might have said that the benefit of the covenant did run with this land, but when you look at the covenant it is a mere covenant with him, as with all adjoining owners, to make this road, a small portion of which only abuts on his land, and there is nothing specially relating to his land at all. I cannot see myself how any benefit of this covenant runs with his land. But it strikes me, I confess, that there is still more formidable objection as regards the burden. Does the burden of this covenant run with the land so as to bind the defendants? The defendants have acquired the road under the trustees, and they are bound by such covenant as runs with the land. Now we come to face the difficulty; does a covenant to repair all this road run with the land — that is, does the burden of it descend upon those to [page 864] whom the road may be assigned in future? We are not dealing here with a case of landlord and tenant. The authorities which refer to that class of cases have little, if any, bearing upon the case which we have to consider, and I am not prepared to say that any covenant which imposes a burden upon land does run with the land, unless the covenant does, upon the true construction of the deed containing the covenant, amount to either a grant of an easement, or a rentcharge, or some estate or interest in the land. A mere covenant to repair, or to do something of that kind, does not seem to me, I confess, to run with the land in such a way as to bind those who may acquire it. It is remarkable that the authorities upon this point, when they are examined, are very few, and it is also remarkable that in no case that I know of, except one which I shall refer to presently, is there anything like authority to say that a burden of this kind will run with the land. That point has often been discussed, and I rather think the conclusion at which the editors of the last edition of Smith’s Leading Cases have come to is right, that no case has been decided which does establish that such a burden can run with the land in the sense in which I am now using that expression … There is no other authority that I am aware of that such a covenant as this runs with the land, unless it is Western v MacDermott (1866) LR 1 Eq 499; 2 Ch App 72; [1861– 73] All ER Rep 671, where the Court of Appeal did not sanction the notion that the covenant in that case ran with the land, although the covenant was a purely restrictive covenant. I am not aware of any other case which either shews, or appears to shew, that a burden such as this can be annexed to land by a mere covenant, such as we have got

here; and in the absence of authority it appears to me that we shall be perfectly warranted in saying that the burden of this covenant does not run with the land. After all it is a mere personal covenant. If the parties had intended to charge this land forever, into whosesoever hands it came, with the burden of repairing the road, there are ways and means known to conveyancers by which it could be done with comparative ease; all that would have been necessary would have been to create a rentcharge and charge it on the tolls, and the thing would have been done. They have not done anything of the sort, and, therefore, it seems to me to shew that they did not intend to have a covenant which should run with the land. That disposes of the part of the case which is perhaps the most difficult. The last point was this — that even if it did run with the land at law, still, upon the authority of Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143; [1843 60] All ER Rep 9, the defendants, having bought the land with notice of this covenant, take the land subject to it. Mr Collins very properly did not press that upon us, because after the two recent decisions in the Court of Appeal in Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403, and London and South Western Railway Co v Gomm (1882) 20 Ch D 562, that argument is untenable. Tulk v Moxhay cannot be extended to covenants of this description. It appears to me, therefore, that upon all points the plaintiff has failed, and that the appeal ought to be dismissed with costs. [Cotton LJ agreed with Lindley LJ that the benefit of this covenant did not run with the plaintiff’s land, but expressed no decided view on whether the burden of a covenant could run at law. Fry LJ took the view that whilst the benefit of the covenant might have passed to Austerberry, the burden of this covenant did not run at law. He expressed doubts whether the burden of covenants of this kind could ever run at law, except where a landlord and tenant relationship existed.]

[page 865]

9.17

Gray and Gray have commented (3rd ed, 451) that ‘positive

covenants affecting freehold land … bizarrely remain, for the most part, unenforceable against third parties’. In Clifford v Dove [2003] NSWSC 938 it was held that a positive covenant to repair a right of way and cattle yards did not bind subsequent owners of the burdened land. Note Gray, Edgeworth,

Foster and Dorsett, 569–70, [12.9]. As to reform of the law with respect to positive covenants, see 9.41ff. 9.18

Although the burden of covenants cannot run with the land at law, a

similar effect may be achieved indirectly, and imperfectly, by a ‘chain of covenants’. If a landowner, P, covenants with V that P’s land will be used in a particular way, P will remain contractually liable even after conveyance of the land. Thus, if P conveys land to A and A breaches the covenant, P will be liable to V on the usual contractual principles. For protection, P may require A to indemnify him against any breach occurring after the date of the conveyance to A. The effect of the indemnity is much the same as a covenant the burden of which runs with the land. However, V must commence proceedings against P and P must in turn claim an indemnity from A. The chain will be extended if A, when disposing of the land, extracts an indemnity from the purchaser. Is a chain of covenants a satisfactory means of enforcing the burden of a covenant? What are the limits on the effectiveness of such a chain? 9.19

The application of the principle in Halsall v Brizell [1957] Ch 169;

[1957] 1 All ER 371 may have the effect of allowing the burden of a covenant to run with the land at law. In this case, the purchaser of a lot on a building estate sought to repudiate the burden of a covenant executed by his predecessor in title. The covenant imposed an obligation to contribute to the upkeep of roads, sewers and other amenities enjoyed by landowners on the estate. It was held that because the purchaser wished to take advantage of the provisions in the deed conferring these benefits on him in common with

other landowners, he was required to meet the contributions required by the deed. It was said that a person could not accept a benefit under a deed, without also accepting the obligations imposed by its terms.5 9.20

In Rhone v Stephens [1994] 2 WLR 429, Lord Templeman stated

that while he approved the decision in Halsell v Brizell he was not prepared to recognise the ‘pure principle’ in Tito v Waddell (No 2) that any party deriving any benefit from a conveyance must accept any burden in the same conveyance. In Gallagher v Rainbow (1994) 68 ALJR 512 at 523–4 McHugh J assumed that this was the correct position.6 These views are consistent with the strong judgment of Brooking J of the Supreme Court of Victoria in Government Insurance Office (NSW) v KA Reed Services Pty Ltd [1988] VR 829. His Honour reasoned (at 840, 841): I am, with the greatest respect, unable to accept that there exists a principle of benefit and burden, whether as formulated by Megarry V-C [in Tito v Waddell (No 2)] or Lord Denning MR or by Danckwerts LJ [in ER Ives Investment Ltd v High]. Lord Denning

[page 866]

did, it is true, go on to advance the less general proposition that when adjoining owners of land make an agreement to secure continuing rights and benefits for each of them in or over the land of the other, neither of them can take the benefit of the agreement and throw over the burden of it, and that their successors are in the same position. But even this is too wide. It confounds the law relating to covenants affecting land. For Lord Denning’s reference to Halsall v Brizell shows that his proposition embraces positive covenants … Halsall v Brizell does not seem to me to support a proposition couched in terms of an agreement between owners of adjoining land to secure continuing rights and benefits for each of them in or over the land of the other, quite apart from the special circumstance that there the agreement was by deed and that Upjohn J invoked a rule

relating to deeds. As for the ‘pure principle’ propounded in Tito’s case, it is founded upon authority that will not sustain it and at odds with settled and fundamental rules. It is in truth mere maxim masquerading as a rule of law, false and misleading … when read literally.7

9.21

In Thamesmead Town Ltd v Allotey (2000) 79 P & CR 557, the

English Court of Appeal construed the rule of reciprocity narrowly by insisting on two preconditions to the operation of the rule. First, there must be a ‘correlation between the burden and the benefit which the successor has chosen to take’. Merely taking an incidental benefit will not suffice to impose a burden. Second, the covenantor’s successors in title must have the opportunity to elect whether to take, or renounce if taken, the benefit (per Peter Gibson LJ at 563–6). In consequence, owners in this case were not obliged to contribute to the maintenance of communal areas because they had no strict entitlement to use them. It appears that where on orthodox principles the burden of a covenant does not run, the covenant nevertheless may in effect be indirectly enforceable by the exercise of a right of re-entry: see Shiloh Spinners Ltd v Harding [1973] AC 691; [1973] 1 All ER 90. Thamesmead Town Ltd was applied by the English Court of Appeal in Wilkinson v Kerdene Ltd [2013] EWCA Civ 44 where the covenantors sought to rely upon Halsall v Brizell to recover maintenance and repair payments for works upon a village estate from successors in title to the original covenantees. The successors in title were held to have no answer to the demand for payment unless they were able to show the payment covenant had no relation whatever to the rights which they continued to exercise. 9.22

In the last paragraph of his judgment in Austerberry v Corporation of

Oldham, Lindley LJ rejected an argument that the burden of the covenant

had run in equity, if not at law because it was settled by 1885 that the equitable doctrine was confined to restrictive covenants, as opposed to positive covenants requiring the expenditure of money. So, Lindley LJ stated that the doctrine of Tulk v Moxhay (which permits a court of equity to enforce a restrictive covenant over land against a purchaser of the land taking with notice of the covenant) did not apply to covenants ‘of this description’ — that is, positive covenants: see 9.30Cff.

[page 867]

The benefit 9.23C

Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500; [1949] 2 All ER 179 Court of Appeal

[In 1938, Ellen Smith and others whose land was flood-prone executed an agreement under seal with the defendant Board. The deed provided that in consideration of the Board undertaking to widen, deepen and make good the banks of the river and also undertaking to maintain the work forever after, the landowners agreed to contribute to the cost of the work. The deed set out the location of the land of the parties to the deed and recited the fact that the land had been subject to flooding in the past. In 1940, Ellen Smith conveyed the fee simple estate in her land to John Smith, the first plaintiff. The conveyance purported to assign expressly the benefit of the covenant made by the Board. As will be seen, the statutory method for the assignment of a chose in action (here the benefit of a covenant), requires notification of the assignment to the debtor: see 9.30ff. The trial judge, Morris J, held that the purported assignment was ineffective because the requisite notice had not been given to the Board. In 1944, Snipes Hall Farm Ltd, the second plaintiff, entered

possession of John Smith’s land as yearly tenant under an oral agreement. In 1946, the river flooded, causing extensive damage to the land. The plaintiffs instituted proceedings claiming damages against the Board. They contended that the Board was liable in tort and for breach of the 1938 agreement. The plaintiffs contended that the benefit of the covenant contained in the 1938 agreement ran with the land and could be enforced by both plaintiffs. Morris J gave judgment for the defendant. The plaintiffs appealed.] Tucker LJ: I think on the undisputed evidence and the judge’s findings the board were in breach under the contract, and that such breach caused the damage complained of. It remains to consider whether, in these circumstances, the plaintiffs, or either of them, can sue in respect of this breach. It is said for the defendants that the benefit of the covenant does not run with the land so as to bind a stranger [ie the Board] who has not and never had an interest in the land to be benefited and there being no servient tenement to bear the burden. Further, it is contended that such a covenant must by the terms of the deed in which it is contained relate to some specific parcel of land, the precise extent and situation of which can be identified by reference to the deed alone. It is first necessary to ascertain from the deed that the covenant is one which ‘touches or concerns’ the land, that is, it must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land, and it must then be shown that it was the intention of the parties that the benefit thereof should run with the land. In this case the deed shows that its object was to improve the drainage of land liable to flooding and prevent future flooding. The location of the land is described as situate between the Leeds and Liverpool Canal and the River Douglas and adjoining the Eller Brook. In return for lump sum payments the Board covenants to do certain work to the banks of the Eller Brook, one of such banks being in fact situated upon and forming part of the plaintiffs’ lands, and to maintain for all time the work when completed. In my view the language of the deed satisfies both tests. It affects the value of the land per se and converts it from flooded meadows to land suitable for agriculture, and shows an intention that the benefit of the obligation to maintain shall attach thereto into whosoever hands the lands shall come. [page 868] With regard to the covenantor being a stranger the case of The Prior [decided in 1368] is referred to in Spencer’s case (1583) 5 Co Rep 16a; 77 ER 72, in these words: In the case of a grandfather, father and two sons, the grandfather being seised of the manor of D, whereof a chapel was parcel: a prior, with the assent of his convent, by deed covenanted for him and his successors, with the grandfather and his heirs, that he and his convent would sing all the week in his chapel, parcel of the said manor, for the lords of the said manor and his servants, etc; the grandfather did enfeoff one of the manor in fee, who gave it to the younger son and his wife in tail; and it was adjudged that the tenants in tail, as terre-tenants (for the elder brother was heir), should have an action of covenant against the prior, for the covenant is to do a thing

which is annexed to the chapel, which is within the manor, and so annexed to the manor, as it is there said. The notes to Spencer’s case state: When such a covenant (namely, covenants running with the land made with the owner of the land to which they relate) is made it seems to be of no consequence whether the covenantor be the person who conveyed the land to the covenantee or be a mere stranger. In vol 4 of Bythewood & Jarman’s Conveyancing (4th ed) p 268, the following passage from the third report of the Real Property Commissioners is quoted with approval: Expressions found in some books would lead to the opinion that, in considering this class of covenant with reference to the benefit of them, there is a distinction between those cases where the covenantor is a party by whom the estate is, or has been, conveyed, and those in which he is a stranger to the estate. We think the authority of Lord Coke on this point (which is express (Co Litt 384b)) sufficient to warrant us in disregarding this distinction. In Rogers v Hosegood [1900] 2 Ch 388 at 395, Farwell J, in a passage where he refers, amongst others to The Prior’s case — and I quote from Farwell J’s judgment because, although this case went to the Court of Appeal, his judgment was approved, and the Court of Appeal had to deal with a rather different point — after stating what are the requirements in order that the covenant may run with the land, proceeds: It is not contended that the covenants in question in the case have not the first characteristic, but it is said that they fail in the second. I am of opinion that they possess both. Adopting the definition of Bayley J in Congleton Corp v Pattison (1808) 10 East 130 at 135; 103 ER 725 at 726, the covenant must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land. It is to my mind obvious that the value of Sir John Millais’s land is directly increased by the covenants in question … I see no difficulty in holding that the benefit of a covenant runs with the land of the covenantee, while the burden of the same covenant does not run with the land of the covenantor. In this state of the authorities it seems clear, despite some dicta tending to the contrary view, that such a covenant if it runs with the land is binding on the covenantor though a mere [page 869] stranger, and that this point will not avail the defendant board. As to the requirement that the deed contained in the covenant must expressly identify the particular land to be benefited, no authority was cited to us and in the absence of such authority I can see no valid reason why the maxim Id certum est quod certum reddi potest [that which is

capable of being rendered certain is to be treated as certain] should not apply, so as to make admissible extrinsic evidence to prove the extent and situation of the lands of the respective landowners adjoining the Eller Brook situate between the Leeds and Liverpool Canal and the River Douglas. On this part of the case the learned judge said: In my judgment the contractual obligations of the board are not to be regarded as covenants running with the land. They do not differ from obligations which by agreement a firm of contractors might agree to discharge in reference to some particular land. The Catchment Board do not own any land and there is no question of any obligation in relation to or connection with any land of theirs … Section 78 of the Law of Property Act does not affect the question as to what are covenants relating to the land of a covenantee. Furthermore, much of the reasoning of Lindley LJ in Austerberry v Corp of Oldham is applicable. Although work might have to be done on the land which formerly belonged to Mrs Ellen Smith, and now belongs to the first plaintiff, equally it might be that for the effectual preventing of flooding of low meadows, work on the banks of Eller Brook at some place considerably higher up on the brook might have to be undertaken. I do not find anything in the judgments in Austerberry v Corp of Oldham which conflicts with the law as I have endeavoured to set it out above, and I have accordingly arrived at the conclusion that the covenant by the Board in the agreement of 25 April 1938 is one which runs with the land referred to therein, which land is capable of identification, and that it is binding on the defendant board; and further, that by virtue of s 78 of the Law of Property Act 1925 it can be enforced at the suit of the covenantee and her successors in title and the persons deriving title under her or them, so that both the plaintiff Smith and the plaintiff company can sue in respect of the damage resulting to their respective interests therein by reason of the defendants’ breach of covenant. For these reasons, I would allow this appeal, and remit the assessment of damages to an official referee … [Somervell and Denning LJJ agreed with Tucker LJ. Denning LJ also relied upon s 56(1) of the Law of Property Act 1925 in his reasons for judgment.]

9.24 Questions 1.

What requirements must be fulfilled before the benefit of a covenant runs with the land at law? What purpose (if any) is served by each requirement? Is it material whether the covenant is negative or positive in operation? Is it material whether the covenantor has any estate in land? See Gray, Edgeworth, Foster

and Dorsett, 605–6, [13.3]; and Note, (1949) 12 Mod LR 498. 2.

Where the benefit of a covenant runs at law, can a successor in title to the covenantee obtain an equitable remedy, such as an injunction, against the covenantor to restrain a breach of the covenant?

[page 870]

9.25

A further requirement which must be fulfilled before the benefit of a

covenant may run with the land at law is that the covenantee, at the time the deed is executed, must have a legal estate in the land benefited by the covenant. The common law rule was that the assignee had to acquire the same estate as the original covenantee since the benefit of a covenant was ‘annexed’ to that particular estate. Is this still the case? How does s 78 of the Law of Property Act 1925 (UK) affect the common law rule? The equivalent Australian provision reads thus: 9.26E

Property Law Act 1958 (Vic)

78(1) A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed. For the purposes of this subsection in connexion with covenants restrictive of the user of land ‘successors in title’ shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited.8

9.27

The usual rule is that the benefit of covenants which do not touch

and concern the land of the covenantee and thus do not run at law, may be expressly assigned. Indeed, the usual rule is that the benefit of contracts generally may be expressly assigned. Vic, s 134 provides as follows: 9.28E

Property Law Act 1958 (Vic)

134 Legal assignments of things in action Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be and shall be deemed to have been effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice — (a) the legal right to such debt or thing in action; (b) all legal and other remedies for the same; and (c) the power to give a good discharge for the same without the concurrence of the assignor …

9.29

Compare NSW, s 12; Qld, s 199; SA, s 15; Tas, s 86; WA, s 20. In

Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500; [1949] 2 All ER 179 (9.23C), Smith was unable to rely on an express assignment of the benefit of the covenant to him because of the failure to notify the Catchment Board of the assignment.

[page 871]

THE RUNNING OF COVENANTS IN EQUITY

The burden 9.30C

Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 Court of Chancery

[In 1808, the plaintiff, Tulk, held the fee simple estate in vacant land and a garden area in Leicester Square and also in certain houses adjoining the square. In that year he conveyed the fee simple estate in the vacant land and garden area to E. E covenanted for himself, his heirs and assigns, with Tulk his heirs, executors and administrators that E, his heirs and assigns: … should, and would from time to time, and at all times thereafter at his and their own costs and charges, keep and maintain the said piece of ground and square garden and the iron railing around the same in its then form, and in sufficient and proper repair as a square garden and pleasure-ground, in an open state, uncovered with any buildings, in a neat and ornamental order. After several intermediate conveyances, the vacant land and garden area was acquired by the defendant, Moxhay, in 1848. The conveyance to Moxhay contained no covenant similar to that entered by E, but Moxhay took with notice of the original covenant. Moxhay having declared an intention to build on his land, Tulk, who had retained ownership of houses in the square, filed a bill for an injunction to restrain Moxhay from using the land for any purpose other than a garden. The Master of the Rolls granted the injunction and an appeal was taken to the Lord Chancellor by way of a motion to discharge the injunction.] Lord Cottenham LC: That this court has jurisdiction to enforce a contract between the owner of land and his neighbour purchasing a part of it, that the latter shall either use or abstain from using the land purchased in a particular way, is what I never knew disputed. Here there is no question about the contract: the owner of certain houses in the square sells the land adjoining, with a covenant from the purchaser not to use it for any other purpose than as a square garden. And it is now contended, not that the vendee could violate that contract, but that he might sell the piece of land, and that the purchaser from him may violate it without this court having any power to interfere. If that were so, it would be impossible for an owner of land to sell part of it without incurring the risk of rendering what he retains worthless. It is said that, the covenant being one which does not run with the land, this court cannot enforce it; but the question is, not whether the covenant runs with the land, but whether a party shall be permitted to use the land in a manner inconsistent with the contract entered into by his vendor, and with notice of

which he purchased. Of course, the price would be affected by the covenant, and nothing could be more inequitable than that the original purchaser should be able to sell the property the next day for a greater price, in consideration of the assignee being allowed to escape from the liability which he had himself undertaken. That the question does not depend upon whether the covenant runs with the land is evident from this, that if there was a mere agreement and no covenant, this court would enforce it against a party purchasing with notice of it; for if an equity is attached to the [page 872] property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased … With respect to the observations of Lord Brougham in Keppell v Bailey (1834) 2 My & K 517; 39 ER 1042, he never could have meant to lay down that this court would not enforce an equity attached to land by the owner, unless under such circumstances as would maintain an action of law. If that be the result of his observations, I can only say that I cannot coincide with it. I think the cases cited before the Vice-Chancellor and this decision of the Master of the Rolls perfectly right, and, therefore, that this motion must be refused, with costs.

9.31

As the Lord Chancellor suggests in Tulk v Moxhay, the question

whether the burden of a covenant could run in equity had previously been considered in Keppell v Bailey (1834) 2 My & K 517; 39 ER 1042. Lord Brougham concluded that the burden of covenants affecting land did not run at law, and that equity should follow the law on this issue. Apart from deciding the case on technical grounds, Lord Brougham argued that it would be undesirable in principle to permit the burden of covenants to run with the land. Under Torrens system legislation a caveat can be lodged by a person claiming an estate or interest in land. The nature of the interest created by a restrictive covenant becomes important in deciding whether a caveat can be lodged to prevent the destruction of the covenant by registration of a transfer of the burdened land: see 5.168ff.9

9.32 Questions 1.

What reasons did Lord Cottenham express for holding that equity would restrain a breach of covenant by a successor in title of the covenantor taking with notice of the covenant? With whose interests was he mainly concerned? Was the Lord Chancellor confining his attention to any particular variety of covenants affecting land? Could his arguments be applied to any contract affecting land of which a purchaser has notice? See Simpson, 241– 3.

2.

What is the effect of Tulk v Moxhay in terms of the categories of proprietary interests that are recognised in land?

3.

Does the Lord Chancellor acknowledge the effect of his decision upon the law of property?

4.

Did Lord Cottenham in Tulk v Moxhay consider the social consequences of his decision?

5.

Is it desirable that the use of land should be restricted by private agreement?

6.

Should the planning of land use be solely a government function, rather than a power which can be exercised by private individuals? What could be the results of private planning from a community point of view? The relationship between public planning laws and private covenants is discussed at 9.81ff.

[page 873]

9.33

Because restrictive covenants prohibit, rather than permit, activities

on burdened land, there is usually no direct conflict between covenants and restrictions imposed by planning law. However, the cumulative effect of a covenant and zoning provision may be to prevent use of land for any purpose. In all states except South Australia, the Supreme Court has power to modify covenants in specified circumstances: see 9.97ff.

Covenant must benefit the land 9.34C

Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227 Supreme Court of South Australia (In Banco)

[M Ltd owned land at Mallala on which a motor racing circuit had been constructed. In 1971, another company, A Ltd, acquired control of M Ltd and built a new site for race meetings at Virginia, about 35 kilometres from Mallala. Thereafter A Ltd ran race meetings at Virginia. In 1972, M Ltd transferred the Mallala land to the defendants, the Fs. As part of the consideration for the sale, the Fs executed an encumbrance, expressed to be for the benefit of A Ltd, over the land. This encumbered the land with payment of the annual sum of $1 if demanded, and with the observance of a covenant that the encumbrancer would not thereafter use the land, or suffer it to be used for any form of motor sport. In 1976, the Fs transferred the land to S Ltd, subject to the encumbrance. S Ltd, the plaintiff, applied for a declaration that the covenants contained in the encumbrance were void or, alternatively, were unenforceable against it.] Bray CJ: [Bray CJ held that the encumbrance itself was a valid security for the payment of a rent charge of $1 per year. The encumbrance was in statutory form, and the Real Property Act 1886 (SA) s 128 provided for the registration of such an encumbrance. He continued:] The restrictive covenants, however, are in no way linked with the rent charge. The liability

to pay it is in no way dependent in whole or in part on the performance or nonperformance of any of the covenants. Apart from the question of restraint of trade, I see … no reason to doubt that they were binding on the Ferrules as personal contracts. It by no means follows, however, that their burden passes with the land to the plaintiff, even if we assume, which is by no means clear, that the parties to the encumbrance intended to bind the assigns of the Farrellys if they could … I am prepared to infer … that it was intended to bind subsequent owners of the land. That intention will not necessarily achieve its object. There is clearly no privity of contract between the plaintiff and either of the Virginia companies. At common law it was only as between landlord and tenant that the burden of covenants ran with the land: for example, Regent Oil Co Ltd v J A Gregory (Hatch End) Ltd [1966] Ch 402 at 433, per Harman LJ citing Buckley LJ in London County Council v Allen [1914] 3 KB 642 at 653. Equity, however, went further by what has become known as the rule in Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 … [The limits of the rule] long remained in doubt. There was at one time a tendency to expand it into a general principle [that] the liability of the subsequent transferee depends simply on notice of the original covenant. [Bray CJ cited the words of Knight Bruce LJ in De Mattos v Gibson (1858) 4 De G & J 276 at 286; 45 ER 108 at 110, and went on to discuss a number of other cases in which the enforcement of covenants against third parties was based upon the doctrine of notice. He continued:]

[page 874]

There had long been a school of thought that regarded the rule in Tulk v Moxhay as dependent, not only on notice, but on some sort of negative quasi-easement imposed on the land with which the burden of the covenant was alleged to run. But if that were so, and that land was a quasi-servient tenement, then there had to be a quasi-dominant tenement to which the benefit of the covenant was attached. To use technical language, it was thought that there could not be a restrictive covenant in gross running with the land. Jessel MR expressed himself to that effect in the celebrated case of London & South Western Railway Co v Gomm (1881) 20 Ch D 562 at 583. That view was to prevail. In Formby v Barker [1903] 2 Ch 539, the Court of Appeal held that a covenant in a conveyance, by which the purchaser undertook not to carry on certain trades on the land conveyed, was purely personal and that it did not bind subsequent holders of the land taking with notice of the covenant … In London County Council v Allen the Court of Appeal held that a subsequent holder of the land, deriving title from a person who had entered into a restrictive covenant concerning that land, was not bound by it, even if he took with notice of it, if the original covenantee was not in possession of or interested in the land for the benefit of which the covenant was entered into … Scrutton J summed up the history of the rule (at 672) as follows: I think the result of this long train of authorities is that, whereas in my view, at the

time of Tulk v Moxhay and for at least 20 years afterwards, the plaintiffs in this case would have succeeded against an assign on the ground that the assign had notice of the covenant, since Formby v Barker; Re Nisbet and Potts’ Contract [1906] 1 Ch 386; and Milbourn v Lyons [1914] 1 Ch 34, three decisions of the Court of Appeal, the plaintiffs must fail on the ground that they have never had any land for the benefit of which this ‘equitable interest analogous to a negative easement’ could be created, and therefore cannot sue a person who bought the land with knowledge that there was a restrictive covenant as to its use, where he proceeds to disregard, because he is not privy to the contract. … In my view the law is now clear in Australia that the burden of restrictive covenants will only run with the land in equity against a subsequent holder of the land with notice of the covenant when the covenant is entered into for the benefit of some parcel of land, or possibly some interest in land. The burden of a covenant in gross will not so run; such a covenant only binds the original covenantor. The Torrens system certainly, in my view, imposes no more extensive burdens on subsequent registered proprietors of land under the system. Indeed in some respects, as will be seen, the burden might be less. The legislation in some States makes provision for the noting of restrictive covenants on the register. The South Australia Act does not, but Napier CJ was able to hold in Blacks Ltd v Rix [1962] SASR 161, that s 249 of the Act enables the court to give effect to an equitable interest under the rule in Tulk v Moxhay against a registered proprietor who took the land with notice of the restriction. That case was the familiar case of a building scheme attracting the rule in Elliston v Reacher [1908] 2 Ch 665. Restrictive covenants with regard to the type of building to be erected on the land sold were contained in a registered encumbrance given by the original purchaser. These covenants were clearly for the benefit of the neighbouring owners, purchasers under the same scheme. Their lots were regarded as quasi-dominant tenements. There are difficulties about that case, which was not argued on behalf of the defendant, arising from the form of the encumbrance and the provisions of s 97 of the Real Property Act. I refer to these later. These difficulties are [page 875] not mentioned by the learned judge. I accept the decision as an authority that an equitable interest under the rule in Tulk v Moxhay will be recognised as an interest capable of protection like other equitable interests under the South Australian Real Property Act, subject to any specific provision of that statute. I hold, however, that no such equitable interest can exist in the absence of a quasi-dominant tenement to which the benefit of the covenant is attached. Can one be found here? Mr Williams QC, for the Virginia companies, argued that it could. His main argument was that it could be found in the interest of one of his clients as encumbrancee. A subsidiary argument was that it could be found in the Virginia land. I deal with the subsidiary argument first. In my view the Virginia land cannot be such a quasi-dominant tenement. To begin with it is 35 kilometres away from the subject land. It may be that the quasi-dominant tenement and the quasi-servient tenement do not have to be strictly contiguous. In Newton Abbot Co-operative Society Ltd v Williamson & Treadgold Ltd

[1952] Ch 286, parcels of land on opposite sides of the road were held to carry the benefit and the burden respectively of the covenant. But it is hard to see how a burden on one parcel of land could benefit or ‘touch or concern’ another parcel 35 kilometres away. In truth, the benefit, if any, in my view was meant to attach, not to the Virginia land, but to the business conducted on it … Next, not only is there absolutely nothing in the encumbrance from which any land entitled to the benefit of the covenant can be identified or defined, there is absolutely nothing to suggest that the covenants were imposed for the benefit of any land at all. I do not think they were intended to be so imposed. I think what was intended was a covenant in gross. There has been a controversy in England as to whether the land entitled to the benefit of the restrictive covenant under the rule in Tulk v Moxhay must be identified in the conveyance or other document containing the restriction or whether it can be identified by extrinsic evidence. There are two comparatively recent decisions by single judges of great eminence that extrinsic evidence is admissible for this purpose: see the Newton Abbot case; Marten v Flight Refuelling Ltd [1962] Ch 115.There is some earlier authority to the contrary … Whatever may ultimately be held to be the law of England, however, I am of opinion that under the Torrens system it is essential before the burden of a restrictive covenant can be held to run with the land that the land entitled to the benefit of the covenant shall be capable of identification in some way from the registered document containing the covenant or, at least, from other related documents which can be discovered by a search in the Lands Titles Office: see Bursill Enterprises Pty Ltd v Berger Bros Trading Pty Ltd (1971) 124 CLR 73. A prospective purchaser of land subject to a burden should be able to find out by a search whether the covenant is a covenant in gross, which will not be binding on him if he purchases, or a covenant the benefit of which is attached to some parcel or parcels of land, which may be binding on him. It was so held by Hudson J in the Supreme Court of Victoria in Re Dennerstein [1963] VR 688. With respect I agree. I hold, therefore, that the Virginia land cannot be a quasi-dominant tenement sufficient to attract the rule in Tulk v Moxhay, qualified as it is by London County Council v Allen. Mr Williams, however, threw the weight of his argument on the proposition that his client as encumbrancee has a sufficient interest in the subject land to create a quasidominant tenement for the purpose. He relied strongly on certain English cases, particularly Regent Oil Co Ltd v Gregory (Hatch End) Ltd. In my view this reliance is misconceived. In that case, it is true that a restrictive covenant in a mortgage was held binding on an assignee taking with notice of the mortgage, but the reason is plain to see. It is because of the peculiar form of the mortgage under the present English law. In England at the present time a legal mortgage of land in fee simple is created by a demise and subdemise or by way of legal [page 876] charge, which by reason of the provisions of s 87 of the English Law of Property Act 1925, confers on the mortgagee the same rights as if it were mortgaged by demise: see

Halsbury, Laws of England (3rd ed) vol 27, para 239. In other words, the English mortgagor and the English mortgagee are for certain purposes at least, of which this is one, in the position of landlord and tenant and at common law the burden of the tenant’s covenants runs with the land. The relationship of mortgagor and mortgagee is for the present purpose, as it were, parasitic on the relationship of landlord and tenant and thus the burden of the covenant will run with the land as it does in the case of landlord and tenant. [Bray CJ went on to analyse the judgments in the Regent Oil case and to conclude that the reasoning in the case depended upon the artificial relationship of landlord and tenant which exists between mortgagor and mortgagee in English law. This relationship did not exist in the case of a mortgage or encumbrance of land under the Torrens system, except, perhaps, where there was an attornment clause in the mortgage or encumbrance.] I am of opinion, therefore, that there is here no quasi-dominant tenement sufficient to create any equitable interest under the rule in Tulk v Moxhay. I doubt indeed, as I have said, whether there was ever any intention to attach the restrictive covenants to any land or any interest in land. I think they were intended to stand as covenants in gross for the protection of the business of the Virginia companies wherever they may happen to carry it on. Indeed, Mr Williams conceded that on his argument based on his client’s interest as encumbrancee it could sell the encumbrance and the restrictive covenants for their nuisance value to someone who had no relevant land and no relevant business. [Bray CJ also referred to the Real Property Act 1886 s 97, and expressed the view that this section might have the effect of preventing the burden of a covenant contained in a mortgage or encumbrance from running with the land even in the case where the principle in Tulk v Moxhay would otherwise apply. Hogarth and Zelling JJ delivered judgments agreeing that this was a covenant in gross, the burden of which could not bind a covenantor’s successor in title.]

9.35 Questions 1.

Why was it held that the covenant could not be enforced by the covenantee against a successor in title to the covenantor?

2.

To what extent does the requirement that the covenant be given for the protection of the land of the covenantee follow inevitably

from the doctrine of Tulk v Moxhay? 3.

To what extent does it represent a change in the court’s approach to the enforcement of covenants in equity?

9.36

Bray CJ refers to the principle that a restrictive covenant, to be

enforceable against the successor in title to the covenantor, must benefit, or ‘touch and concern’, the land of the covenantee. As his Honour notes, expert evidence is admissible on the question of whether the covenant in question does protect the plaintiff’s land: Marten v Flight Refuelling Ltd [1962] Ch 115 at 138–9. The English authorities have tended to take a lenient view of this requirement. It has been held, for example, that a covenant prohibiting the conduct of specified businesses on

[page 877]

the burdened land, which is designed to protect the covenantee’s business (carried on nearby), is capable of benefiting the land of the covenantee: Newton Abbot Co-operative Society Ltd v Williamson and Treadgold [1952] 2 Ch 286; cf Marten v Flight Refuelling Ltd [1962] Ch 115; [1961] 2 All ER 696. In McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd [1970] 1 NSWR 686, Hope J held that a covenant in terms that the burdened land would not be used for the purpose of sale and production of wine under the name ‘Dalwood’ did not ‘touch and concern’ a vineyard some 35 kilometres distant. The distance between the two vineyards was an important factor but

Hope J also distinguished the Newton Abbott case on the business competition point: see also the telling criticisms of Jacobs J (dissenting) in Quadramain Pty Ltd v Sevastopol Investments Pty Ltd (1976) 8 ALR 555 at 570–3; 50 ALJR 475 at 483–4. The Quadramain case raised the question of whether restrictive covenants are subject to the common law doctrine under which contracts unreasonable in restraint of trade are contrary to public policy and void. A majority of the High Court held that the doctrine did not apply to restraints imposed by way of restrictive covenants. The equitable requirement that covenants ‘touch and concern’ the land of the covenantee may limit the use of restrictive covenants as a means of affecting competition. In Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd (2002) V ConvR 54654; [2001] FCA 1672 Finkelstein J held that an 11 kilometre distance was no obstacle to a benefit being realised. He concluded that in some instances distance may prove fatal to a benefit, but in other instances may be irrelevant. In this case, evidence showed that the defendant’s land would be benefited if no flour mill operated on the plaintiff’s land. 9.37

In 1907, the London County Council executed an indenture with MJ

Allen under which Allen covenanted on behalf of himself and his successors not to erect a building on specified land without the consent of the council. Subsequently, buildings were erected on the specified land by Allen’s successors in title who had notice of the covenant. The council issued a writ claiming a mandatory injunction to pull down the buildings. The council did not own land in the vicinity of the land with respect to which the covenant was given, so could not enforce the covenant: London County Council v Allen [1914] 3 KB 642; [1914–15] All ER Rep 1008. Is there any reason, as a

matter of policy, for limiting the enforcement of a covenant in equity to a party with an interest in land that is benefited by the covenant? If there is such a reason does it apply to the case where the enforcing body is a public authority such as the London County Council? For cases concerning public authorities in Australia, see Lane Cove Municipal Council v Hurdis Pty Ltd (1955) 55 SR (NSW) 434; Commr for Main Roads v BP Australia Ltd (1964) 82 WN (NSW) (Pt 2) 27. See now NSW, s 88D, inserted in 1972, and s 88E, inserted in 1976. These sections provide a procedure by which public and local authorities and prescribed corporations may impose restrictions on land, notwithstanding that they do not retain land for the benefit of which the restriction is imposed. Originally the provisions permitted only imposition of restrictions but in 1986, amendments to the Act extended the imposition to positive obligations: see 9.42. Other states have enacted legislation which enables specified statutory authorities to enter into covenants which are enforceable against successors in title despite the fact that the authority does not own benefited land. The technique has generally been used to protect historic buildings and parkland. See Bradbrook, MacCallum, Moore and Grattan, 896–7 [18.45] for examples of some such provisions. 9.38

A landlord’s reversion upon a tenancy amounts to a sufficient interest

within the rule in London County Council v Allen. Thus, the landlord may restrain a sublessee from breaching a restrictive covenant in the original lease, even though the landlord owns no other land that

[page 878]

might benefit by the covenant: Regent Oil Co Ltd v JA Gregory (Hatch End) Ltd [1966] Ch 402 at 432–3; [1965] 3 All ER 673 at 680. 9.39

In Clem Smith Nominees Pty Ltd v Farrelly (9.34C), the land

burdened by the covenant was Torrens system land. It will be seen that difficult questions arise concerning the applicability of the equitable principles governing restrictive covenants to land under the Torrens system. The Torrens legislation in New South Wales, Queensland, Tasmania, Victoria and Western Australia now makes special provision for the notification of restrictive covenants upon the register: see 9.110. In Queensland the instrument of covenant may be registered only if the covenantee is the state or a local government: Land Title Act 1974 (Qld) s 97A(2). No such provision has been made in South Australia. In Clem Smith, the vendor of the Mallala land required the covenantors to execute an encumbrance containing the desired covenant. The purpose of this device was to ensure that the existence of the covenant could be discovered from the register. The legitimacy of this device had previously been upheld in Blacks Co Ltd v Rix [1962] SASR 161. Some doubt was expressed about the correctness of that decision in the Clem Smith case: see also Burke v Yurilla SA Pty Ltd (1991) 56 SASR 382 at 386–9.

Covenant must be negative in substance 9.40

After initial uncertainty, it was established that only the burden of

negative (or restrictive) covenants run in equity. The leading case is Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403, in which a purchaser of land entered into a covenant to erect and keep in repair certain improvements on the land. The Court of Appeal held that the covenant could not be enforced against a successor in title of the original purchaser, even if he took with notice of the covenant. Brett LJ argued (at 408) that: [A] covenant to repair is not restrictive and could not be enforced against the land, therefore such a covenant is [not within the rule in Tulk v Moxhay]. It is admitted that there has been no case in which any court has gone farther than this, and yet if the court would have been prepared to go farther, such a case would have arisen. The strongest argument to the contrary is, that the reason for no court having gone farther is that a mandatory injunction was not in former times grantable, whereas it is now; but I cannot help thinking, in spite of this, that if we enlarged the rule as it is now contended, we should be making a new equity, which we cannot do [emphasis added].

Cotton LJ observed that ‘[t]he covenant to repair can only be enforced by making the owner put his hand into his pocket, and there is nothing which would justify us in going that length’. In applying the principle of Haywood’s case, equity is concerned with the substantial effect of the covenant, rather than the form in which it is couched. An illustration is provided by the covenant in Tulk v Moxhay itself, which was treated as a covenant not to build on the square, although it was drafted as a promise to maintain the land as a garden.10 9.41

In Victoria, the Victorian Law Reform Commission, Easements and

Covenant, Final Report 22 recommended, after careful consideration, retention of the Austerberry rule and that, as a general rule, positive covenants should only operate in contract and not bind the

[page 879]

covenantor’s successors: at [6.118]. The commission was of the view that the imposition of positive obligations on land should remain under the control of parliament. 9.42

On the other hand, the principle that the burden of a positive

covenant cannot run with land has been modified in New South Wales: ss 88BA, 88D and 88E. Sections 88D and 88E enable the Crown, a statutory authority or a local council to impose restrictive or positive covenants on its own land (see s 88D(2)) or to impose such covenants on land owned by others: see s 88E(2). These covenants are enforceable even though their benefit is not annexed to other land: s 88E(2). This will enable governmental bodies to dispose of land on condition that it is developed in a certain way within a specified period. The burden of a positive covenant imposed under ss 88D or 88E runs with the land in the same way as if it were restrictive. Provision is also made to assist governmental bodies to enforce positive covenants. The authority may enter and inspect the burdened land to check whether the covenant is being observed: s 88F(2)(a). If there is a default it may carry out development required by the covenant, bring court action for recovery of expenses against the person bound by the covenant and register a charge over the land for the amount payable under the judgment: see s 88F. The authority may apply to the court for an injunction enforcing a positive or negative covenant: s 88H. In the last resort, where breach of the covenant has been persistent and unreasonable, the authority may apply to the court for an

order that the burdened land be transferred to the authority: s 88I. For consequential amendments see also Local Government (Covenants) Amendment Act 1986 (NSW); Real Property (Covenants) Amendment Act 1986 (NSW). Where land subject to a positive covenant is under the Torrens system, provision is made for recording of the covenant on the certificate of title. Section 88BA gives private persons the right to impose positive covenants requiring maintenance or repair of land that is the site of an easement. 9.43

In recent years, private landowners have entered into conservation

covenants with government and statutory authorities for the protection of biodiversity. A conservation covenant may impose positive covenants of a continuing nature in addition to restrictive covenants. Enabling legislation provides for the positive obligations to bind successors in title to the land. Thus, in New South Wales, the National Parks and Wildlife Act 1974 by terms of s 69E states that a ‘conservation agreement which has been registered by the Registrar-General and which is in force is binding on, and enforceable by and against, the successors in title to the owner who entered into the agreement and those successors in title shall be deemed to have notice of the agreement’. Section 69C(2) provides that a conservation agreement may impose terms: ‘(c) requiring the owner to carry out specified activities or do specified things, (d) requiring the owner to permit access to the area by specified persons, (e) requiring the owner to contribute towards costs incurred which relate to the area or the agreement, (f) specifying the manner in which any money provided to the owner under the agreement shall

be applied by the owner, (g) requiring the owner to repay money paid to the owner under the agreement if a specified breach of the agreement occurs …’11 9.44

A different approach has been taken by the English Law

Commission. The principle that the burden of positive covenants cannot run with the land was criticised in Report of

[page 880]

the Committee on Positive Covenants Affecting Land, Cmnd 2719, 1965; again in Report on Transfer of Land: The Law of Positive and Restrictive Covenants, 1984, Law Com No 127; and most recently in Making Land Work: Easements, Covenants and Profits à Prendre, Law Com No 327, 2011. In this lastmentioned report, the commission recommended that land owners be permitted to create both negative and positive obligations capable of running with the land. It was further recommended that these obligations should take effect as new registrable legal interests and that the legal system should henceforth not permit or recognise new Tulk v Moxhay interests. However, to accommodate the submissions of those concerned about a proliferation of novel legal interests in land unqualified by the numerus clausus principle, the commission recommended that the validity of the new legal obligation should continue to be conditional upon the need to touch and concern the benefited land. The commission concluded at [5.70] that the new covenants should take effect not as contractual promises but as legal interests in the burdened land appurtenant to the benefited land.

Covenant must be intended to run with the land 9.45

A further requirement that must be satisfied before the burden of a

covenant runs in equity is that the burden must be intended to run. Normally this intention will be expressed adequately by the covenantor covenanting on behalf of himself or herself and successors in title. However, in most states, it is now provided by statute that covenants affecting land are deemed to be made on behalf of the covenantor and any successors in title (including owners and occupiers for the time being) unless a contrary intention appears: NSW, s 70A; Qld, s 53(2); Tas, s 71A; Vic, s 79; WA, s 48. In Morrells of Oxford Ltd v Oxford United Football Club Ltd [2001] Ch 459; 2 WLR 128, the court found a contrary intention in the instrument because the covenant (not to permit the operation of a brewery or licensed club on the retained land) was expressed to be for the benefit of purchasers, their successors and assigns, while only the vendors were expressed to be subject to the burden. Ginnane J in Prowse v Johnstone [2015] VSC 621 expressed the matter in these terms at [157]: ‘In order for a covenant to bind subsequent transferees, it is necessary to show from its wording that the burden of the covenant was intended to run with the covenantor’s land.’ His Honour found that the covenant in question was intended so to run with the land as it contained the words ‘as transferees’ and contained an express request that the covenant should run with the land: at [159].

Covenant as an equitable interest 9.46

A restrictive covenant is an equitable interest in land.12 Under the

general law, this raises the question of its sphere of enforceability: against whom is the covenant enforceable? The restrictive covenant will not be enforceable against a purchaser of the legal estate without notice of the interest. On the question of notice, see the unique Tasmanian provision: Tas, s 35A. In Re Nisbet and Potts’ Contract [1906] 1 Ch 386; [1904–7] All ER Rep 865, it was held that the burden of a restrictive covenant is enforceable against an adverse possessor of land burdened by the covenant, whether that person took with notice or not. 9.47

The equitable character of the restrictive covenant has consequences

for the kinds of remedies available to a person who seeks to enforce the covenant against a successor in title to the covenantor. As to whether the court has the discretion to refuse an injunction against

[page 881]

a person who breaches the terms of a restrictive covenant, see Marten v Flight Refuelling Ltd [1962] Ch 115; Shaw v Appleyard [1977] 1 WLR 970; [1978] 1 All ER 123. Under Lord Cairns’ Act and its modern statutory equivalents, the court has a discretion to substitute an award of equitable damages in addition to or in lieu of an injunction: see Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798; [1974] 2 All ER 321. For circumstances in which legal damages are available for breach of a restrictive covenant, see Bradbrook and Neave, 499–501; and Smith and Snipes Hall

Farm Ltd v River Douglas Catchment Board [1947] 2 KB 500; [1949] 2 All ER 179; 9.23C.

The benefit 9.48

If a restrictive covenant is to be enforced there must not only be a

person subject to the burden of the covenant but also a person entitled to its benefit. If the original covenantee retains land that benefits from the restrictive covenant, the covenantee can of course proceed against the original covenantor and any of the covenantor’s successors in title to whom the burden of the covenant passes. If the original covenantee disposes of the land benefiting from the covenant, equity will not permit the enforcement of the covenant, the ground for the refusal being that the purpose of the covenant is to protect the benefited land and only a person with an interest in that land should be permitted to enforce the covenant: Formby v Barker [1903] 2 Ch 539; [1900–3] All ER Rep 445. Once equity decided that the burden of a restrictive covenant could run, it also began to formulate rules as to when the benefit of the covenant could pass. A person seeking to enforce a restrictive covenant is obliged to comply with the equitable rules relating to the passing of the benefit of covenants in several situations. If the plaintiff needs to rely upon equitable rules to show that the burden of a covenant has passed, he must also satisfy the equitable rules for the passing of the benefit. Also, the equitable rules for the running of the benefit will be relevant where (1) the covenantee did not have a legal estate in the benefited land; (2) the plaintiff does not have a legal estate in the benefited land; (3) the statutory

requirements for the express assignment of the benefit have not been complied with; and (4) the plaintiff seeks to rely on the benefited land being part of a scheme of development (Bradbrook and Neave, 314 [13.27]). The orthodox view is that there were three ways in which the benefit of a covenant could pass in equity. These were (1) by express annexation of the covenant to the land of the covenantee; (2) by express assignment of the benefit of the covenant; and (3) by virtue of the doctrines relating to building schemes or schemes of development.

Annexation of the benefit of the covenant to the land Express annexation 9.49C

Rogers v Hosegood [1900] 2 Ch 388; [1900–3] All ER Rep 915 Court of Appeal

[The plaintiff, Rogers, and his partners held the fee simple estate in certain land subject to a mortgage. In 1869, part of the land was conveyed by Rogers, his partners and the mortgagees to the Duke of Bedford. The Duke covenanted with the plaintiff and his partners (but not

[page 882]

with the mortgagees) that no more than one house, to be used only as a private dwelling house, would be built on the land conveyed. The covenant was expressed to be made with the intent, so far as possible, to bind the land thereby conveyed and every part thereof, into whomsoever hands the same might come, and to enure to the benefit of Rogers and his partners, their heirs and assigns and others claiming under them to all or any of the lands adjoining or near the land

conveyed. Later in 1869, another plot was conveyed to the Duke, who entered a similar covenant with Rogers and his partners in respect of that plot. In 1873, Sir John Millais purchased a nearby plot from Rogers and his partners. Sir John had no knowledge of the covenants entered into by the Duke of Bedford. The conveyance to Sir John contained no express assignment of the benefit of those covenants. In due course, Rogers became the sole owner of that portion of the original land remaining unsold. The other plaintiffs were the devisees of the real estate of Sir John Millais, including the plot conveyed to him in 1873. The defendants were successors in title to the Duke of Bedford. They took with notice of the covenants entered into by the Duke. The plaintiffs brought an action to restrain the defendants from erecting buildings in breach of the covenants. Farwell J decided in favour of the plaintiffs. The defendants appealed.] Collins LJ read the judgment of the court (Lord Alverstone MR, Rigby and Collins LJJ): … The real and only difficulty arises on the question — whether the benefit of the covenants has passed to the assigns of Sir John Millais as owners of the plot purchased by him on 25 March 1873, there being no evidence that he knew of these covenants when he bought. Here, again, the difficulty is narrowed, because by express declaration on the face of the conveyances of 1869 the benefit of the two covenants in question was intended for all or any of the vendor’s lands near to or adjoining the plot sold, and therefore for (among others) the plot of land acquired by Sir John Millais, and that they ‘touched and concerned’ that land within the meaning of those words so as to run with the land at law we do not doubt. Therefore, but for a technical difficulty which was not raised before Farwell J, we should agree with him that the benefit of the covenants in question was annexed to and passed to Sir John Millais by the conveyance of the land which he bought in 1873. A difficulty, however, in giving effect to this view arises from the fact that the covenants in question in the deeds of May and July 1869 were made with the mortgagors only, and therefore in contemplation of law were made with strangers to the land: Webb v Russell (1789) 3 TR 393; 100 ER 639, to which, therefore, the benefit did not become annexed. That a court of equity, however, would not regard such an objection as defeating the intention of the parties to the covenant is clear; and, therefore, when the covenant was clearly made for the benefit of certain land with a person who in the contemplation of such a court was the true owner of it, it would be regarded as annexed to and running with that land, just as it would have been at law but for the technical difficulty. We think this is the result of the observations of Hall V-C in the well- known passage in Renals v Cowlishaw (1878) 9 Ch 125; [1874–80] All ER Rep 359, of Jessel MR in London and South Western Railway Co v Gomm (1882) 20 Ch D 562, and of Wood V-C in Child v Douglas (1854) Kay 560; 69 ER 237, which, we agree with Farwell J are untouched on this point by anything decided in the subsequent proceedings in that case … [I]n equity just as at law the first point to be determined is whether the covenant or contract in its inception binds the land. If it does, it is then capable of passing with the land to subsequent assignees: if it does not, it is incapable of passing by mere assignment of the land. The benefit may be annexed to one plot and the burden to another, and when this

has been once clearly done the benefit and the burden pass to the respective assignees, subject, in the case of the burden, to proof that the legal estate, if acquired, has been acquired with notice of the covenant. The passage enclosed in a parenthesis in the report of the judgment of Hall V-C in Renals v Cowlishaw [page 883] supports the same view, nor are the general observations or the decision of the case itself inconsistent with it. There, in the original conveyance which imposed the restrictive covenant, there was no expression, as there is in the present case, that the restriction was intended for the benefit of any part of the estate retained, and it is in reference to such a case that the Vice-Chancellor said: The plaintiffs … rest their case upon their being ‘assigns’ of the Mill Hill Estate, and they say that, as the vendors to Shaw were the owners of that estate when they sold to Shaw a parcel of land adjoining it, the restrictive covenants entered into by the purchaser of that parcel of land must be taken to have been entered into with them for the purpose of protecting the Mill Hill Estate, which they retained; and, therefore, that the benefit of that restrictive covenant goes to the assign of that estate, irrespective of whether or not any representation that such a covenant had been entered into by a purchaser from the vendors was made to such assigns, and without any contract by the vendors that that purchaser should have the benefit of that covenant. The argument must, it would seem, go to this length — namely, that in such a case a purchaser becomes entitled to [the benefit of] the covenant even although he did not know of the existence of the covenant, and that although the purchaser is not (as the purchasers in the present case were not) purchaser of all the property retained by the vendor upon the occasion of the conveyance containing the covenants. It appears to me that the three cases to which I have referred shew that this is not the law of this court; and that in order to enable a purchaser as an assign (such purchaser not being an assign of all that the vendor retained when he executed the conveyance containing the covenants, and that conveyance not shewing that the benefit of the covenant was intended to enure for the time being of each portion of the estate so retained or of the portion of the estate of which the plaintiff is assign) to claim the benefit of a restrictive covenant, this, at least, must appear, that the assign acquired his property with the benefit of the covenant, that is, it must appear that the benefit of the covenant was part of the subject matter of the purchase. … These authorities establish the proposition that, when the benefit has been once clearly annexed to one piece of land, it passes by assignment of that land, and may be said to run with it, in contemplation as well of equity as of law, without proof of special bargain or representation on the assignment. In such a case it runs, not because the conscience of either party is affected, but because the purchaser has bought something which inhered in or was annexed to the land bought. This is the reason why, in dealing with the burden, the purchaser’s conscience is not affected by notice of covenants which were part of the original bargain on the first sale, but were merely personal and collateral, while it is affected by notice of those which touch and concern the land. The covenant

must be one that is capable of running with the land before the question of the purchaser’s conscience and the equity affecting it can come into discussion. When, as in Renals v Cowlishaw, there is no indication in the original conveyance, or in the circumstances attending it, that the burden of the restrictive covenant is imposed for the benefit of the land reserved, or any particular part of it, then it becomes necessary to examine the circumstances under which any part of the land reserved is sold, in order to see whether a benefit, not originally annexed to it, has become annexed to it on the sale, so that the purchaser is deemed to have bought it with the land, and this can hardly be the case when the purchaser did not know of the existence of the restrictive covenant. But when, as here, it has been once annexed to the land reserved, then it is not necessary to spell an intention out of surrounding facts, such as the existence of a building scheme, statements at auctions, and such like circumstances, and the presumption [page 884] must be that it passes on a sale of that land, unless there is something to rebut it, and the purchaser’s ignorance of the existence of the covenant does not defeat the presumption. We can find nothing in the conveyance to Sir John Millais in any degree inconsistent with the intention to pass to him the benefit already annexed to the land sold to him. We are of opinion, therefore, that Sir John Millais’s assigns are entitled to enforce the restrictive covenant against the defendant, and that his appeal must be dismissed …

9.50 Questions 1.

Which of the words used were apt to annex the benefit of the covenant to the land?

2.

What was the importance of the fact that the covenant was expressed to be for the benefit of successors in title to ‘all or any of the lands adjoining or near’ the land conveyed?

3.

X conveys part of his land to Q who covenants ‘for himself, his heirs, executors, and administrators’, with X ‘his heirs, executors, administrators and assigns’ that he will not use the land in certain

ways. Q’s land subsequently passes into the hands of the defendant, who takes with notice of the covenant. Later, the land retained by X passes into the hands of the plaintiff. The conveyance to the plaintiff contains no reference to the covenant entered into by Q. The plaintiff sues the defendant for an injunction to prevent breach of the covenant. Does the plaintiff succeed? See Renals v Cowlishaw (1878) 9 Ch D 125; (1879) 11 Ch D 866.

9.51

In Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998)

152 ALR 149 the High Court considered a covenant which expressly excluded tenants of the land benefited from sharing that benefit. It was argued that, because the tenants were excluded, the covenant could not touch and concern the benefited land and was therefore unenforceable against a successor in title to the burdened land. The High Court (Gaudron, McHugh, Gummow, Kirby and Hayne JJ) held that the exclusion of tenants from the benefit of the covenant was not repugnant to the principle governing the enforceability of restrictive covenants and that as the primary judge had found that the value of the benefited land was enhanced by the covenant, it was enforceable under the doctrine of Tulk v Moxhay. The court observed (at 158–9) that ‘[l] imitations upon the power of enforcement will be but a factor to be taken into account in the process of valuation’.

Statutory annexation

9.52C

Midland Brick Company Pty Ltd v Welsh (2006) 32 WAR 287; [2006] WASC 122 Supreme Court of Western Australia

[The plaintiff entered into a contract to sell certain land to the defendant. In reliance upon special conditions contained in the contract and by terms in a deed executed between the parties after the contract, the plaintiff claimed that the defendant and her successors in title

[page 885]

were bound by restrictive covenants for the benefit of neighbouring land retained by the plaintiff. The plaintiff lodged a caveat to protect its interests. The defendant contended that the contractual arrangements between the parties were not intended to and did not operate for the benefit of the neighbouring land owned by the plaintiff.] Hasluck J: Nature of a restrictive covenant The common law rules concerning privity of contract establish that as between a covenantor (in this case the defendant) and a covenantee (in this case Midland Brick) a covenant is enforceable as a matter of contract law, but it cannot be enforced by or between successors to the original contracting parties unless it runs with the land; that is, unless it possesses a proprietary as distinct from a mere contractual nature. It emerges from earlier discussion that the central question in the present case is whether the covenants relied upon by Midland Brick should be characterised simply as personal covenants or whether they can be characterised as restrictive covenants running with the land. Section 129C of the Transfer of Land Act 1893 allows for restrictive covenants to be made binding in law against land by registration of an instrument entered into by the parties in a[n] approved form. There is no such instrument in the present case. However, both parties appeared to recognise that if the covenants in question were intended to run with the land and to bind the defendant’s successors in title then, being enforceable in equity, the covenants would create an estate or interest in the subject land which was vested in Midland Brick. There is authority to the effect that an unregistered restrictive covenant is an equitable interest in the land which may be protected by caveat: Blacks Ltd v Rix [1962] SASR 161. This brings me to the nature of a restrictive covenant and the way in which it can be enforced … [His Honour referred to Tulk v Moxhay and the requirements for the running of restrictive covenants with the land and annexation of the benefit of the covenant.] I note in passing that there are questions to be addressed also as to what use can be made of certain statutory provisions bearing upon these issues. Section 47(1) of the

Property Law Act 1969 (WA) (which corresponds to s 78 of the Law of Property Act 1925 (UK) and s 70(1) of the Conveyancing Act 1919 (NSW)) deals with benefits of covenants relating to land. It provides that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and, has effect as if those successors and other persons were expressed. Section 48(1) of the Property Law Act (which corresponds with s 70A(1) of the Conveyancing Act (NSW)) deals with the burden of covenants relating to land. It provides that unless a contrary intention is expressed, a covenant relating to any land of a covenantor or capable of being bound by him, shall be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him or them, and, has effect as if those successors and other persons were expressed. The conventional view of s 47 is that it has no relevance to the issue of express annexation of a benefit to the retained land but simply precludes the need to mention the covenantee’s successors in title, if a covenant is annexed: see Bradbrook and Neave 2nd ed, par 13.19. As to s 48, it has been suggested that this section does not overcome the common law rules concerning privity in that if a covenant cannot be made to bind successors in title by express agreement it cannot do so any the more where by force of this statutory provision it is merely deemed to be made on behalf of the covenantor and his successors in title. In other words, [page 886] it is no more than a statutory shorthand provision intended to make it clear that a covenantor remains contractually liable for the acts or defaults of his successors. … Particular cases There are a number of decided cases which suggest that it is necessary for the instrument creating the covenant to contain a clear verbal formula annexing the benefit of the covenant to the land. In Pirie v Registrar General (1962) 109 CLR 619 a majority of the High Court consisting of Kitto, Windeyer and Owen JJ were of the view that the covenants under consideration could not be enforced as a proprietary interest in that they were not shown to be restrictions the benefit of which was by express language annexed to the protected land, or the benefit of which was annexed to the protected land by virtue of a building scheme or the benefit of which was assignable with the protected land. Kitto J observed at 627 that the fact that a covenant had been entered into which curtailed the covenantor’s rights with respect to the user of land was not enough by itself to be enforceable in equity under the doctrine of Tulk v Moxhay (supra). The restriction must be a burden upon the land; that is to say, it must be enforceable not merely as a contractual obligation, but as an interest in the land. He was of the view that in the case before him there was nothing either in the instrument containing the covenant or in the evidence which had been adduced, to identify any land as being land which the covenant was designed to benefit. Kitto J made these observations at 629: But the fact that the instrument containing the restrictive covenant did not by its

language annex the benefit of the restrictions to land retained by the covenantee is, in my opinion, by itself a reason for reaching the same conclusion, because s 88(3), as I would construe it, relates only to a restriction of the same description as that to which sub-section (1) of the same section is directed, that is to say a restriction (as to the user of land) the benefit of which is intended to be annexed to other land. However, Pirie’s case (supra) has to be approached with care because the legislation in New South Wales makes the situation more complex than in the other States. Section 88(1) of the Conveyancing Act 1919 (NSW), which refers to a restriction arising under covenant (the benefit of which is intended to be annexed to other land), arguably requires that these words apply only in cases of express annexation: see Bradbrook and Neave, supra at par 17.49 to par 17.71. There are other cases, and certain observations in Renals v Cowlishaw (1878) 9 Ch D 125 at 129 (affirmed in the Court of Appeal (1879) 11 Ch D 866), which suggest that a covenant conferring a benefit need not be express, for this may be gathered from the language of the instrument or inferred from the nature of the transaction. In Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500 a covenant by a water authority to keep river banks in repair was held to run with the land. It is not apparent whether words or express annexation were used, and none of the Lord Justices mentioned this as a requirement. It was thought to be sufficient that the language or the agreement was such that it affected the value of the land and showed an intention that the obligation should attach thereto. It was said also that the covenant must touch and concern the land to be benefited. Further, the land which is benefited by the covenant must be ascertainable by reference to the terms of the deed or relevant document read in the light of surrounding circumstances. In that case, Tucker LJ indicated at 508 that extrinsic evidence will be admissible to prove the extent and situation of the lands of the respective landowners. In Newton Abbott Co-Operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286 a vendor, who carried on the business of an ironmonger on premises known as Devonia, of [page 887] which she was the owner, conveyed property opposite to those premises to a purchaser in 1923. The conveyance contained a covenant by the purchaser (who was then carrying on the business of a grocer on part of the premises) not to carry on the business of an ironmonger on those premises. Twenty-five years later the vendor’s successor in title assigned the business of an ironmonger carried on by him at Devonia to a co-operative society, together with the benefit of the restrictive covenant. Soon afterwards, the owners and occupiers of the land opposite began selling items of ironmongery and hardware. Steps were then taken to enforce the restrictive covenants. It was held by Upjohn J that the plaintiffs were entitled to succeed in the action and to an injunction enabling them to enforce the restrictive covenant upon the basis that the benefit had passed by assignment. The plaintiffs had submitted that the benefit of the restrictive covenant was annexed to Devonia so as to pass with the assignment of Devonia in equity without any express

mention in that subsequent assignment; in other words, that the covenant runs with the land. Alternatively, the plaintiffs contended that as they were the express assigns of the benefit of the covenant, they were, as such, entitled to enforce it. Upjohn J observed that in this difficult branch of the law one thing was clear, namely, that in order to annex the benefit of a restrictive covenant to land, so that it runs with the land without express assignment on a subsequent assignment of the land, the land for the benefit of which it is taken must be clearly identified in the conveyance creating the covenant. In the case before him, as he could find nothing in the 1923 conveyance which identified the land, the benefit of which the covenant was alleged to be taken, that was insufficient to annex the benefit of the covenant to those premises, and the plaintiffs therefore failed as to the first of their contentions. However, in dealing with the second submission, namely, that the plaintiffs were express assigns of the benefit of the restrictive covenant, he was of the view, having regard to observations made in Renals v Cowlishaw (supra), that it was permissible to look at the attendant circumstances. Upjohn J made these observations at 297: Apart from the fact that Mrs Mardon is described as of Devonia, there is nothing in the conveyance of 1923 to define the land for the benefit of which the restrictive covenant was taken, and I do not think that carries one very far; but, for the reasons I have given, I am, in my judgment, entitled to look at the attendant circumstances to see if the land to be benefited is shown ‘otherwise’ with reasonable certainty. That is a question of fact and, on the admitted facts, bearing in mind the close juxtaposition position of Devonia and the defendant’s premises, in my view the only reasonable inference to draw from the circumstances at the time of the conveyance of 1923 was that Mrs Mardon took the covenant restrictive of the user of the defendant’s premises for the benefit of her own business of ironmonger and of her property Devonia where at all material times she was carrying on that business, which last mentioned fact must have been apparent to the purchasers in 1923. In that case, a further ground relied upon for opposing the relief sought, was that there was no dominant tenement. It was argued that the covenant was taken not for the benefit of any land, but for the benefit of the vendor’s business. It emerges from the passage I have just quoted that Upjohn J rejected the challenge to the validity of the covenant on this ground. He was of the view that the vendor might well have had in mind that she might want ultimately to sell her land and that she would get an enhanced price by selling to someone intending to carry on the business of an ironmonger who, if he obtained the benefit of the covenant, could prevent competition from the premises opposite. [page 888] In Marten v Flight Refuelling Ltd [1962] Ch 115 the farm in question was a portion of a large agricultural estate. The purchaser of the farm entered into certain restrictive covenants with the vendors and their successors in title. The terms of the conveyance did not expressly annex the covenants to the benefited land. Nor did the conveyance identify the land benefited. The purchaser’s successor in title brought an action for certain

declarations concerning the covenant which forbade the user of the land allegedly burdened for any but agricultural purposes without the previous written consent of the plaintiffs. It was said that the user of the land as an aerodrome was in breach of the covenant, although the plaintiffs conceded that the use and maintenance of the aerodrome by statutory authority could not be interfered with. Wilberforce J held that since it could be shown with reasonable certainty, having regard to the circumstances surrounding the conveyance in 1943, that the covenant was taken for the benefit of the land of the vendors, being the estate as a single agricultural unit, it was immaterial that the conveyance did not ‘annex’ or identify the land to be benefited by the covenant; that the agricultural estate as a whole was capable of being benefited by the covenant; that the plaintiffs together represented the whole legal and equitable interest in the covenant; and that, therefore the plaintiffs were entitled to a declaration that they were entitled to the benefit of the covenant. The learned Judge referred to the defendants contentions that there must appear from the terms of the deed itself an intention to benefit some land and that the precise land to be benefited must also be stated in the deed, or at least must be capable of ascertainment from the terms of the deed by evidence which is admissible in accordance with the normal rules of interpretation of documents. He noted that the defendants submitted that the decision of Upjohn J in Newton Abbott (supra) which appeared to admit parol evidence for the purpose of identifying the land to be benefited, went too far. He noted also (at 130) that it is well established by the authorities that the benefit of restrictive covenants can pass to persons other than the original covenantee, even in the absence of annexation, provided that certain conditions are fulfilled. He went on to say (at 133) that he saw nothing in Newton Abbott (supra) which was contrary to the principles which appear to be securely laid down. He then made these observations about that case at 133: Here were two shops in common ownership facing each other in the same street, one of them, Devonia, an ironmonger’s shop. The shops opposite are sold with a covenant against carrying on an ironmonger’s business. What could be more obvious than that the covenant was intended for the protection or benefit of the vendor’s property Devonia? To have rejected such a conclusion would, I venture to think, have involved not only an injustice but a departure from commonsense. So far from declining the authority of that case, I welcome it as a useful guide. The learned Judge then concluded (at 134) in respect of the case before him that the covenant was taken for the benefit of land of the vendors, that land being the Crichel Estate. In reaching that conclusion he was not going outside such surrounding or attendant circumstances as, in accordance with the authorities, it was legitimate for the Court to take into account. He said that a decision based on the mere wording of cl 2 of the conveyance would, in his judgment, be unduly narrow and indeed technical, and would go far to undermine the usefulness of the rule which equity courts have evolved that the benefit of restrictive covenants may be capable of passing to assigns of the ‘dominant’ land or of the covenant in cases other than those of annexation. In answer to the question of whether the land was capable of being benefited by the covenant, the learned Judge observed (at 136) that if an owner of land, on selling part of it,

[page 889] thinks fit to impose a restriction on user, and the restriction was imposed for the purpose of benefiting the land retained, a court would normally assume that it is capable of doing so. There might, of course, be exceptional cases where the covenant was on the face of it taken capriciously or not bona fide, but a covenant taken by the owner of an agricultural estate not to use a sold off portion for other than agricultural purposes could hardly fall within either of those categories. In Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; [1980] 1 All ER 371, the plaintiffs, who were successors in title to the covenantees, sought to enforce a restrictive covenant against the covenantor. The covenant was not expressly annexed to the land for the benefit of which it was given, and with respect to part of the land held by the plaintiffs there was no complete chain of assignment of the benefit of the covenant. Nevertheless, the Court of Appeal held that the plaintiffs could enforce the covenant. Brightman J took the view that the benefit of the covenant had passed by virtue of s 78(1) of the Law of Property Act 1925 (UK) (which, as I have noted, is the equivalent of s 47(1) of the Property Law Act in this State) and placed some reliance also upon the Smith and Snipes Hall farm case (supra). He held also that, if on the proper construction of a document a restrictive covenant was annexed to land, prima facie, it was annexed to every part of the land. The learned Judge said that in his judgment the benefit of the covenant was annexed to the retained land as a consequence of s 78 of the Law of Property Act which provides that a covenant relating to any land of the covenantee should be deemed to have been made with the covenantee and his successors in title. He made these observations about defence counsel’s submissions concerning s 78 at 378: One view, which he described as ‘the orthodox view’ hitherto held, is that it is merely a statutory shorthand for reducing the length of legal documents. A second view, which was the one that counsel for the defendants was inclined to place in the forefront of his argument, is that the section only applies, or at any rate only achieves annexation, when the land intended to be benefited is signified in the document by express words or necessary implication as the intended beneficiary of the covenant. A third view is that the section applies if the covenant in fact touches and concerns the land of the covenantee, whether that be gleaned from the document itself or from evidence outside the document. For myself, I reject the narrowest interpretation of s 78, the supposed orthodox view, which seems to me to fly in the face of the wording of the section. Before I express my reasons I will say that I do not find it necessary to choose between the second and third views because, in my opinion, this covenant relates to land of the covenantee on either interpretation of s 78. Clause 5(iv) shows quite clearly that the covenant is for the protection of the retained land and that land is described in clause 2 as ‘any adjoining or adjacent property retained by the vendor’. This formulation is sufficient for annexation purposes. See Rogers v Hosegood [1900] 2 Ch 388. There is in my judgment no doubt that this covenant ‘related to the land of the covenantee’, or, to use the old fashioned expression, that it touched and concerned

the land, even if counsel for the defendants is correct in his submission that the document must show an intention to benefit identified land. The learned Judge then went on to make these further observations at 379: If, as the language of s 78 implies, a covenant relating to land which is restrictive of the user thereof is enforceable at the suit of (1) a successor in title of the covenantee, [page 890] (2) a person deriving title under the covenantee or under his successors in title and (3) the owner or occupier of the land intended to be benefited by the covenant, it must, in my view, follow that the covenant runs with the land, because ex hypothesi every successor in title to the land, every derivative proprietor of the land and every other owner and occupier has a right by statute to the covenant. In other words, if the condition precedent of s 78 is satisfied, that is to say, there exists a covenant which touches and concerns the land of the covenantee, that covenant runs with the land for the benefit of his successors in title, persons deriving title under him or them and other owners and occupiers. It is noted in Bradbrook & Neave (supra) at par 13.37 that it remains to be seen whether Australian courts will take a similar view of the effect of s 78 as that of the Court of Appeal in Federated Homes (supra). In Forestview Nominees Pty Ltd & Silkchime Pty Ltd v Perpetual Trustees (WA) Ltd (1998) 193 CLR 154 a restrictive covenant over land was expressed to enure only for the benefit of the transferee and its successors in title as the registered proprietor or proprietors, and not to enure for the benefit of any tenant for the time being, of the benefited land. The High Court held that the clear intention of the parties as evinced by the terms of the restrictive covenant was to deny the benefit of the covenant to parties lacking privity of estate with the covenantee with the result that tenants were not able to avail themselves of the benefit of the covenant as they had been expressly excluded by the language of the instrument. It is immediately obvious that this decision does not bear directly upon the circumstances of the present case. However, the case contains some useful observations as to the rationale underlying the Tulk v Moxhay (supra) doctrine. It was the unanimous view of the High Court (at par 23) that the preferable explanation as to the passing of the burden of restrictive covenants is that the burden is imposed upon successors to the covenantor upon the same principle that the grantee of a guilty trustee is bound to convey the res to the cestui que trust. There would be the like injustice, if the purchaser with notice, or the volunteer, were allowed to profit at the expense of the cestui que trust or the covenantee by ignoring the Trust or the restrictive agreement. Accordingly, equity imposes upon the successor to the covenantor ‘a constructive duty’ which is ‘coextensive’ with the express duty of the covenantor to the covenantee. The position of successors to the covenantor with respect to the burden of the covenant thus rests not upon any legal principle of privity of estate but upon the equitable principle of privity of conscience.

Further, the High Court was of the view (at 169) that the requirement in equity that the benefit of the restrictive covenant was intended to run with the land concerned expresses, in particular, the conclusion that equity did not, by analogy, import the common law requirement of privity of estate. The requirement is an expression, rather than a denial, of the preference of equity for intention over form and to giving effect to the intention evinced in the terms of the restrictive covenant in question. It has rightly been said that the question of the intention of the parties is at the heart of the matter. It was said finally that the resolution of the dispute before the Court made it unnecessary to consider the alternative submission that, in any event, the deficiency which the appellant sought to expose would be made good by s 47 of the Property Law Act 1969 (WA). It was said that no occasion arose to consider whether the reasoning of the English Court of Appeal in the Federated Homes case (supra) was applicable to the construction of s 47 and, if so, whether it should be followed. It appears, then, that this issue as to the manner in which s 47 operates has been left open by the High Court. Nonetheless, it will be useful to look at some other Australian cases which appear to bear upon the circumstances of the present case. [page 891] In Clem Smith Nominees Pty Ltd v Farrelly & Farrelly (1978) 20 SASR 227 [9.34C] … [t]he Full Court in South Australia held that the burden of a restrictive covenant will only run with the land in equity against a subsequent holder of the land with notice of the covenant when the covenant is entered into for the benefit of some parcel of other land. This meant that the covenant was unenforceable because there was nothing in the relevant documents which suggested that the benefit of the restrictive covenant was meant to attach to any land or which would enable any land entitled to the benefit of the covenant to be identified or defined. It was a covenant in gross relating not to the Virginia land but to the business conducted on it. Moreover, although it might not be necessary that the quasi-dominant tenement and the quasi-servient tenement should be strictly contiguous, the land at Virginia was too far away for it to be regarded as a quasi-dominant tenement. Bray CJ acknowledged, having regard to Newton Abbott (supra) (where parcels of land on opposite sides of the road were held to carry the benefit and the burden respectively of the covenant) that the dominant and servient tenements did not have to be strictly contiguous. However, in his view, it was hard to see how a burden on one parcel of land could benefit or ‘touch or concern’ another parcel 35 kilometres away. Thus, even if the Adelaide company as the owner of the Virginia land could be regarded as the owner of a quasi-dominant tenement, in the opinion of the learned Chief Justice, the benefit, if any, was meant to attach, not to the Virginia land, but to the business conducted on it. Bray CJ then proceeded to make these observations at 236: Next, not only is there absolutely nothing in the encumbrance from which any land entitled to the benefit of a covenant can be identified or defined, there is absolutely nothing to suggest that the covenants were imposed for the benefit of any land at all. I do not think they were intended to be so imposed. I think what was intended was a covenant in gross.

There has been a controversy in England as to whether the land entitled to the benefit of the restrictive covenant under the rule in Tulk v Moxhay (supra) must be identified in the conveyance or other document containing the restriction or whether it can be identified by extrinsic evidence. There are two comparatively recent decisions by single Judges of great eminence that extrinsic evidence is admissible for this purpose: see the Newton Abbott case (supra); Marten v Flight Refuelling Ltd (supra) … Whatever may ultimately be held to be the law of England, however, I am of opinion that under the Torrens system it is essential before the burden of a restrictive covenant can be held to run with the land that the land entitled to the benefit of the covenant shall be capable of identification in some way from the registered document containing the covenant or, at least, from other related documents which can be discovered by a search in the Lands Titles Office (see Bursill Enterprises Pty Ltd v Berger Bros Trading Pty Ltd (1971) 124 CLR 73) … I hold, therefore, that the Virginia land cannot be a quasi-dominant tenement sufficient to attract the rule in Tulk v Moxhay (supra), qualified as it is by London County Council v Allen [1914] 3 KB 642. In summary, then, the learned Chief Justice doubted whether there was ever any intention to attach the restrictive covenants to any land or any interest in land. In his view, they were simply intended to stand as covenants in gross for the protection of the business of the Virginia companies wherever they may happen to carry it on. Before dealing with a restraint of trade argument, he observed that the covenants in question were mere personal contracts binding on F, but not on F’s successor in title, and that they were therefore not enforceable [page 892] against the latter. I note in passing that his reasoning was influenced to some extent by the provisions of the Torrens system in South Australia concerning indefeasibility and the registration of interests in land. In the same case Hogarth J arrived at essentially the same conclusion as the Chief Justice. He observed (at 249) that the rule in Tulk v Moxhay (supra) originated where the land of the covenantor was part of land originally owned by the covenantee, and adjoining what remained in the ownership of the covenantee. However, in his view, it was no longer necessary, as in the Newton Abbott case (supra), that the two parcels of land should be actually contiguous. However, at least the dominant land had to be sought ‘in the neighbourhood’ of the servient land. The land at Mallala was too far removed from the land of the Adelaide company at Virginia to come within that classification. Zelling J observed (at 254) that what was being contended for were unregistered equitable interests in land which, however enforceable they may have been against F, were not enforceable against a purchaser for value from F such as the plaintiff. The indefeasibility provisions of the Torrens system established that no unregistered estate or interest or agreement prevails against the title of any bona fide subsequent transferee for valuable consideration duly registered under the statute.

I digress here briefly to observe that both parties in the present case proceeded from the premise that Zelling J’s observation concerning an unregistered equitable interest in the subject land (arising from a restrictive covenant of the kind contended for) represented the law in this State. According to counsel for Midland Brick, this underlined the importance of the vendor being able to lodge an absolute caveat in order to protect its unregistered equitable interest in the subject land. Without such a caveat, it was said, the indefeasibility provisions of the Transfer of Land Act 1893 (WA) and the common law rules concerning privity of contract meant that Midland Brick would not be able to insist upon a performance of the special conditions if the subject land were sold by the defendant to a third party. As I have indicated, the operative document in the Clem Smith case (supra) did not contain any words expressly annexing the benefit of the covenant to any particular piece of land. The memorandum of encumbrance simply purported to reflect F’s desire to render the said land available for the purpose of securing to and for the benefit of the Adelaide company the payment of a sum of money and performance of the covenant in question. Zelling J observed (at 255) that it was clear from a perusal of the document that there was no land to which the benefit of the covenant was annexed. He said that if he was entitled to look at outside evidence on both points, that is both as to the annexation and as to the identity of the land, then it was clear that the Virginia land was intended to be benefited. As to the use of outside evidence he noted that reliance was placed upon Newton Abbott (supra) and the Marten case (supra) but noted also that these had been the subject of academic criticism. His Honour then made these observations at 255: In my opinion, the judgment of Richards J in RJ Finlayson Limited v Elder Smith & Company Limited [1936] SASR 209 at 240 states the position correctly. He said: ‘The position appears to be that surrounding circumstances cannot annex the benefit of a covenant to land; the instrument containing the covenant must itself show an intention to annex it, and then circumstances may be used in order to identify the land to which the parties intended to annex it.’ … In my opinion, the covenants here were not annexed to any land and there is no intention deducible from the encumbrance to show the intention to annex them. The circumstances to which I have referred would have been sufficient in my opinion [page 893] to identify the land to which the parties intended to annex the covenants, but that does not get Mr Williams’ clients over the first hurdle that the instrument containing the covenants does not itself show an intention to annex the benefit of the restrictive covenants to any land. On this point also therefore Mallala and International Raceway must fail. … In Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd [2001] FCA 1672 Finklestein J was concerned with an action to determine the validity of two restrictive covenants. According to his Honour, it was once thought that the benefited land must be clearly defined in the covenant, or in the deed in which the covenant is found, or must be

capable of ascertainment from the terms of the deed, which may be explained where necessary by extrinsic evidence. However, he went on to say that there are cases where it has been held that extrinsic evidence is admissible to establish both that there is an intention to benefit land kept by the covenantee, and also to identify that land. The cases include Newton Abbott (supra), Marten v Flight Refuelling Ltd [1962] Ch 115 and, in Australia, Clem Smith (supra). Justice Finklestein then made these observations at par 12: There is evidence to show that the parties intended the covenant to benefit the Kensington land. The Kensington land was referred to as the land to be benefited in correspondence between the solicitors, written after the Registrar had delivered her requisition to Baramon. The benefited land is expressly identified in the substitute covenant, a covenant which was drafted by Baramon’s solicitors. In these circumstances I infer that the parties intended to annex the covenant to the Kensington land at the time of their contract. … It appears from the reasoning of Finklestein J in Baramon (supra) that if an owner imposes a restriction on use and the restriction is imposed for the purposes of benefiting retained land, the Court will usually assume that it is capable of doing so; that is, the covenant is capable of conferring a benefit … [In an application of these principles to the facts of the present case, Hasluck J continued:] The cl 2.1.1 covenant by the ‘purchaser’ (that is, the defendant) not to subdivide the subject land without consent and the cl 2.1.2 covenant not to complain of emissions are negative in form. In my view, these covenants conform to the first requirement of the Tulk v Moxhay doctrine (supra), and this was accepted by the defendant at the trial. In the absence of any controversy as to this aspect of the matter I have little difficulty in finding that this requirement of the doctrine has been satisfied. Midland Brick is then required to establish that the covenants comprising the special conditions touch and concern identifiable land owned by Midland Brick as covenantee and reflect an intention to benefit the land in question by providing for the benefit to run with the land allegedly benefited. As I have indicated, this gives rise to certain difficulties in the circumstances of the present case. The parties reduced their agreement concerning the special conditions to writing, then finalised the exact form of those special conditions in the deed (in the light of my earlier finding). The principles of interpretation establish that the primary duty of the Court is to discover the intention of the parties from the words of the relevant instrument save that evidence of surrounding circumstances is admissible if the language used is ambiguous or susceptible of more than one meaning … I pause here to say that, having regard to cases such as Newton Abbott (supra) I am of the view that the Tulk v Moxhay doctrine (supra), does not require that the land allegedly benefited [page 894]

should share common boundaries with the land allegedly burdened. As appears from Marten’s case (supra) and the dicta in Baramon (supra), the crucial issue is whether the benefited land is sufficiently near to be capable of being benefited as to amenity or enhancement of value. If an owner imposes a restriction on use for the purpose of benefiting retained land, the Court will usually assume that the covenants in question are capable of conferring a benefit, and do so. In the present case, there is no reason or evidence before me to suggest that Midland Brick was acting capriciously in seeking to obtain the benefit of protective conditions. Moreover, as in Newton Abbott (supra), one can readily assume that steps taken to ensure that an industrial complex will be able to continue its operation within a partly rural and residential area is likely to enhance the value of the land if it be on-sold to another brick-maker or industrial concern that requires an immunity of sorts in order to carry on its operation. Thus, I am able to assume, and I so find, that the Midland Brick site was capable of and would be benefited by the special conditions if it be held that upon the proper interpretation of the deed the special conditions contained in cl 2 were intended to benefit the land retained by Midland Brick as vendor by providing for the benefit to run with that land. To my mind, it is clear from the deed that the special conditions were intended to confer a benefit, but the crucial question is whether, having regard to the language of the deed, and bringing to account the ambiguity I have mentioned, the intention was to confer a benefit simply upon Midland Brick as the operator and manager of a business upon the Midland Brick site or whether the intention was to confer a benefit that would run with Midland Brick’s land. I noticed in earlier discussion that although no particular form of words is required to effect an annexation of benefit to land, two formulae were often used. Either the covenant was expressed to be made for the benefit of specified land or the covenant was expressed to be made with the covenantee in his capacity as the owner of neighbouring land and with his successors in title. It follows from my earlier observations and ruling that when parol evidence is received as an aid to interpretation, it becomes apparent that what was being spoken of was facilities on brick- making land owned by Midland Brick adjacent to the subject land. Midland Brick as ‘vendor’ is being spoken of as an owner of land. Further, the definition of ‘Midland Brick’ in the deed establishes that ‘Midland’ shall mean ‘Midland Brick Company Pty Ltd and its transferees, successors and assigns’. This is a clear pointer to a conclusion that the covenant made by the defendant was intended to benefit not only Midland Brick but any party deriving title from Midland Brick. This of itself is a persuasive indication that the special conditions were intended to benefit the land retained by Midland Brick, and not simply to benefit Midland Brick as the operator of a business. For all these reasons, I consider that the special conditions contained in the deed were intended to benefit land owned and retained by Midland Brick at the time of the sale and to run with the land. Decided cases such as Marten (supra) and Federated Homes (supra) permit me to find that a covenant made with the intention of benefiting retained land will benefit all of the land retained by the vendor, being, in this case, the Midland Brick site and the additional properties. I will make that finding. The finding is supported by s 49

of the Property Law Act which declares that when the benefit of a restriction as to the user of land has been annexed to other land the benefit shall be deemed, unless it is expressly provided to the contrary, to be annexed to the whole of the land capable of benefiting from the restriction. Moreover, even if my application of the principles of interpretation had led me to a contrary view, I am of the opinion, having regard to the reasoning in Marten (supra) and Federated [page 895] Homes (supra) that there are two further reasons why I should find that the benefit is annexed to Midland Brick’s land. First, an intention to benefit the Midland Brick site and additional properties can be inferred from the circumstances of the transaction. Second, and in any event, the benefit is annexed as a consequence of s 47(1) of the Property Law Act. Let me deal with each of these matters in turn. As to the first matter, the defendant contends that in the present case, in the absence of any express words of annexation, one can reasonably suppose that the special conditions were not intended to benefit land retained by the vendor but simply to benefit the vendor as the operator of a business for the time being on land nearby. Thus, on this view of the matter, it might be said that the present case resembles the Clem Smith case (supra) where, in the Court’s view, the intention was not to benefit the land in question but, rather, to benefit the plaintiff as the proprietor of a racetrack some distance away by ensuring that the land allegedly burdened by the covenant could not be used for racing by a competitor. A similar conclusion was arrived at in the McGuigan case (supra). See also Woodberry v Gilbert (1907) 3 Tas LR 7 in which it was held that a personal covenant not to carry on the business of a livery stable keeper did not create an interest in the subject land. However, to my mind, the outcome in those cases is eclipsed by the reasoning of Wilberforce J in Marten’s case (supra). The learned Judge said that in circumstances where the covenant was clearly intended for the benefit of the vendor’s property a decision based simply on the absence of express words of annexation in the conveyance would be unduly narrow and undermine the usefulness of the rule which courts had evolved concerning the benefit of restrictive covenants. In the present case, it is apparent from the exchanges between the parties, as I have found, that from the outset Midland Brick insisted upon the special conditions. These were clearly intended to prevent complaints by nearby landowners that the use being made of the land retained by the vendor was interfering with the enjoyment of neighbouring land; that is, an endeavour was being made by Midland Brick to avert complaints in the nature of an action for nuisance. Midland Brick was clearly contracting as an owner of land and with an intent to create an immunity for itself in its role as the owner of retained land. Midland Brick’s insistence upon its entitlement to lodge a caveat adds weight to the inference that it was seeking to protect a proprietary interest. For all these reasons, I am persuaded to follow Marten’s case (supra) and hold that, in addition to what I have said previously about the proper interpretation of the provisions of the deed, this is a case, as pleaded by Midland Brick at par 5 of the claim, in which the

intention to benefit the land retained by Midland Brick in the manner contended for in par 3 of Midland Brick’s particulars of claim can be inferred from the circumstances surrounding the transaction. I note in passing that this view of the matter is consistent with the reasoning of Finklestein J in Baramon (supra). It is consistent also with the rationale for the Tulk v Moxhay doctrine (supra) given by the High Court in Forestview (supra) where mention was made of the preference of equity for intention over form. This brings me to the second matter, namely, the application of s 47(1) of the Property Law Act to the circumstances of the present case. That provision states that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and has effect as if those successors and other persons were expressed. It is a well-known fact that the enactment of the Property Law Act 1969 (WA) brought this State into line with the other States of Australia (with the exception of Queensland) and the Law of Property Act 1925 (UK). It is apparent from the ruling of the House of Lords in Beswick [page 896] v Beswick [1968] AC 58 concerning the privity of contract provision corresponding to s 11(1) of the Property Law Act that the United Kingdom legislation was viewed as a consolidation of the law, although the history of the legislation shows that it consolidated statutes which themselves were amending Acts. On the other hand, the Property Law Act in this State was described as ‘An Act to amend [emphasis added] and consolidate the law relating to property and for incidental purposes’. To my mind, it should not be thought surprising if the provisions of the Property Law Act effected significant changes to the law. At a first glance it might certainly be thought that s 47 and s 48 of the Property Law Act (which correspond to s 78 and s 79 of the Law of Property Act (UK)) have altered substantially the rules of common law concerning the passing of the benefit and the burden of covenants. Indeed, in Adamson v Hayes (1973) 130 CLR 276, where it was accepted by the High Court that the Property Law Act created rules additional to those contained in the Statute of Frauds 1677 (Imp) concerning the creation of interests in land, Gibbs J observed at 301 that the word ‘deemed’ is sometimes used to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail. That prompted him to give effect to a provision which was clearly intended ‘to alter what would otherwise have been the position’. Such an approach might be thought to assist an interpretation of s 47 (where the word ‘deemed’ is used) to the effect that the benefit of a covenant is intended to run with the land although the instrument in question does not specifically mention the covenantee’s successors in title. However, as I indicated in earlier discussion, these provisions can arguably be regarded as merely word-saving devices and do no more than render it unnecessary in the description of the parties to a conveyance to add after the covenantee’s name ‘his executors, administrators and assigns’ and after the covenantor’s name ‘and his successors in title’: Sefton v Tophams Ltd [1967] 1 AC 60 at 73.

Nonetheless, Brightman J arrived at a view to the contrary, in Federated Homes (supra) and this was the view adopted at first instance by Carr J in the Forestview case (supra) where, after a lengthy review of the decided cases, Carr J made these observations at (1995) 133 ALR 465 at 487: In my view, the covenant contains language sufficient to disclose the intention that the benefit of the restrictive covenant should pass to the respondent and his successors in title as owners to the amalgamated shopping centre land and thus be annexed to that land. I have reached the foregoing conclusion without having to refer to s 47 of the Property Law Act 1969 (WA). In my opinion that section operates as additional reinforcement for that conclusion. When the case was taken on appeal to the High Court the question of whether s 47(1) of the Property Law Act could be used to support a conclusion that the benefit of a covenant was annexed to the land adjoining land the subject of a conveyance was left open. Nonetheless, having regard to the language of the provision, and its presence in a statute which was enacted not only to consolidate but also to amend I consider that the provision lends support to Midland Brick’s contention in the present case. For the reasons I have just given, I consider that the special conditions ‘relate’ to the retained land of Midland Brick as the covenantee. In the absence of any decisive ruling to the contrary, I consider that I should follow the reasoning of Brightman J in Federated Homes (supra) in holding that the benefit of the covenant is intended to run with the land because [page 897] Midland Brick, as owner of the retained land and its successors in title, have been given a statutory right to enforce the covenant. For this further reason, I am able to conclude that there was an intention to benefit land retained by the vendor being the Midland Brick site and the additional properties. [Hasluck J held that the plaintiff was entitled to a declaration that it had an interest in land capable of supporting the caveat registered.]

9.53

The orthodox view was that in the absence of words expressly

annexing the benefit of the covenant to the land, annexation could not be deduced from the surrounding circumstances. It was also accepted that the wording of legislation, similar in terms to Law of Property Act 1925 (UK) s

78, providing that a covenant relating to any land of the covenantee shall be deemed to have been made with the covenantee and his or her successors in title, had no effect on the question of whether a restrictive covenant had been annexed to land. This had been interpreted as a word-saving provision designed to save reference to the covenantee’s successors in title in the body of the document.13 In Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371, the Court of Appeal rejected the orthodox view for the view that, provided the covenant touched and concerned the land of the covenantee, s 78 had the effect of annexing it. 9.54

The interpretation of s 78 adopted in Federated Homes Ltd v Mill

Lodge Properties Ltd [1980] 1 WLR 594; [1980] 1 All ER 371 (CA) was accepted in Roake v Chadha [1984] 1 WLR 40; [1983] 3 All ER 503, where Judge Paul Baker QC regarded it as improper to depart from the Court of Appeal’s view. However, in that case, the covenant expressly provided that it was not to enure for the benefit of successive purchasers unless its benefit were expressly assigned. It was held that the section did not operate to annex a covenant irrespective of its clear contrary words. The result was reached despite the absence of words in s 78 indicating that it can be excluded by contrary intention.14 In J Sainsbury plc v Enfield London B C [1989] All ER 817, Morritt J noted significant differences in the wording of s 78 compared with its predecessor, s 58 of the Conveyancing and Law of Property Act 1881. In the case of the 1881 legislation, his Honour was of the view that there were no words in s 58 which were ‘capable by themselves of effecting annexation of the benefit of the covenant’: at 826. The reasoning in Federated Homes Ltd v Mill Lodge Properties Ltd has also been approved and followed in

Crest Nicholson Residential (South) Limited v McAllister [2004] EWCA Civ 410 and Mohammadzadeh v Joseph [2006] EWHC 1040. 9.55

By s 62 of the Property Law Act 1958 (Vic): ‘A conveyance of land

shall be deemed to include … all … rights and advantages whatsoever … enjoyed with … the land …’ Similar provision is made in the other states. Can s 62 be interpreted as passing the benefit of a covenant that is not expressly annexed?15

[page 898]

Identification of the land 9.56

It is frequently said that where the parties to the covenant intend that

the benefit of the covenant shall be annexed to the land, the exact land which is to benefit by the covenant must be ascertainable by reference to the document creating the covenant. Usually the draftsman will describe the land precisely, as by a reference to a certificate of title in the case of Torrens system land or to a plan endorsed in the conveyance in the case of general law land. However, even if the description is less precise, for example, where a reference is made to ‘adjoining land’, extrinsic evidence is admissible to identify the land intended to be benefited: Bradbrook and Neave, 316ff [13.30]ff. The reasoning in Marten v Flight Refuelling Ltd [1962] Ch 115; [1961] 2 All ER 696 saw a further relaxation of this approach, so that even if no land was mentioned in the instrument containing the covenant the court inferred from all the surrounding circumstances that the intention was to

benefit neighbouring land retained by the vendors. In Marten v Flight Refuelling Ltd, the persons seeking to enforce the covenant were the persons for whose benefit in equity the covenant was originally taken. Nevertheless, the statements made by Wilberforce J in that case related to the passing of the benefit of the covenant from the covenantee to his or her assigns, as well as to enforcement of the covenant by the covenantee.16 However, in Crest Nicholson Residential (South) Ltd v McAllister [2004] EWCA Civ 410, the Court of Appeal noted that the decision of the same court in Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; [1980] 1 All ER 371 left open the question whether statutory annexation is only effected when the land intended to be benefited is described in the instrument creating the covenant by express words or by necessary implication, with or without having regard to extrinsic evidence to identify the land. Chadwick LJ, speaking for the court, expressed the clear view that there was nothing in Federated Homes Ltd v Mill Lodge Properties Ltd to suggest that it was no longer necessary that the land intended to be benefited should not be so defined as to be easily identifiable. See also Mohammadzadeh v Joseph [2006] EWHC 1040. 9.57

In J Sainsbury plc v Enfield London B C [1989] 2 All ER 817 at 822,

Morritt J was of the view that the intention to annex must be shown in the conveyance itself construed in the light of the surrounding circumstances, ‘including any necessary implication in the conveyance from those surrounding circumstances’: see Bradbrook, MacCallum Moore and Grattan, 898, [18.70]. The land benefited was not described precisely in Rogers v Hosegood, but in general terms. In Baramon Sales Pty Ltd v Goodman Fielder

Mills Ltd (2002) V ConvR 54-654; [2001] FCA 1672, Finkelstein J held that even though there was no mention of the land in the covenant, correspondence between the parties’ solicitors clearly identified the land to be benefited, and so the requirement was met. More recently, Etherton J made the point very clearly in Mohammadzadeh v Joseph [2006] EWHC 1040 that it was not necessary, as a matter of law, that the covenantee must show an intention to benefit the covenantee as an additional requirement to demonstrating that the covenants touched and concerned land and were easily identifiable from the instrument and available extrinsic evidence. In his Honour’s view, this was precisely the point decided by Federated Homes Ltd v Mill Lodge Properties Ltd.

[page 899]

9.58

Where a covenant did not identify the benefited land even in general

terms, although registered on title at the time of registration of a subdivision, it was held that the covenant did not burden the lot held by successors to the original covenantor: Pollard v Registrar of Titles [2013] VSC 286. 9.59

The requirements as to identification of the benefited land may be

stricter in New South Wales because of the provisions of NSW, s 88(1). In Doyle v Phillips (No 1) (1997) 8 BPR 15,523, it was held that a covenant which was expressed to be for the benefit of all lots in a subdivision, even though some of the lots could not be benefited as they were too far away, did not clearly indicate the land to be benefited.17 The requirements as to

identification of the benefited land also may be stricter where the land is under the Torrens system, even in the absence of a provision such as NSW, s 88. It seems in New South Wales, compliance with s 88(1) will ensure effective annexation given that the legislation requires the draftsman to indicate clearly the benefited and burdened land. The section provides: 9.60E

Conveyancing Act 1919 (NSW)

88 Requirements for easements and restrictions on use of land (1) Except to the extent that this Division otherwise provides, an easement expressed to be created by an instrument coming into operation after the commencement of the Conveyancing (Amendment) Act, 1930, and a restriction arising under covenant or otherwise as to the user of any land the benefit of which is intended to be annexed to other land, contained in an instrument coming into operation after such commencement, shall not be enforceable against a person interested in the land claimed to be subject to the easement or restriction, and not being a party to its creation unless the instrument clearly indicates — (a) the land to which the benefit of the easement or restriction is appurtenant; (b) the land which is subject to the burden of the easement or restriction …; (c) the persons (if any) having the right to release, vary, or modify the easement or restriction, other than the persons having, in the absence of agreement to the contrary, the right by law to release, vary, or modify the easement or restriction; and (d) the persons (if any) whose consent to a release, variation or modification of the easement or restriction is stipulated for … (3) This section applies to land under the provisions of the Real Property Act, 1900, and in respect thereof — (a) the Registrar-General shall have, and shall be deemed always to have had, power to record a restriction referred to in [s 88(1)], in such manner as he considers appropriate, in the folio of the Register kept under that Act that relates to the land subject to the burden of the restriction, to record in like manner any dealing purporting to affect the operation of a restriction so recorded and to record in like manner any release, variation or modification of the restriction; a [page 900] recording in the Register kept under that Act of any such restriction shall not give the restriction any greater operation than it has under the dealing creating

it; and a restriction so recorded is an interest within the meaning of section 42 of that Act.

Section 88 took effect in substantially its present form as from 31 January 1931, but a similar provision was originally enacted as Conveyancing Act 1919 (NSW) s 89, although no specific provision was made for Torrens system land. The present s 88(1) is frequently stated to be little more than a codification of the pre-existing law, in so far as it imposes formal requirements for the enforceability of restrictive covenants: see, for example, Re Louis and the Conveyancing Act [1971] 1 NSWLR 164 at 178 per Jacobs JA. Is the section relevant to the case where a covenant is sought to be enforced against the original covenantor?18

The covenant must ‘touch and concern’ the land 9.61

For the benefit of a covenant to pass with land by express annexation,

the covenant must ‘touch and concern’ the land. In Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 152 ALR 149, the High Court held that a covenant preventing the use of land for retail purposes touched and concerned the land, even though lessees on the benefited land were excluded by the covenant from enforcing it. The increased value to the land was held to be one factor in determining whether the covenant touched and concerned the land. In Re Ballard’s Conveyance [1937] Ch 473; [1937] 2 All ER 691 it was held that the benefit of a covenant which was expressly annexed did not pass on sale of the land. Clauson J said that it was necessary to establish that, at the time the covenant was given, it touched and concerned the whole of the

land which was retained (the Childwickbury estate). Since it was obvious that the larger part of the land would not be affected by any breach of covenant, the covenant could not be said to ‘touch and concern’ the relevant land. He held that, in the absence of language in the covenant showing that it ran with that part of the land which it did protect, the covenant could not be severed. Hence the words of express annexation were ineffective and a successor in title to the covenantee could not enforce the covenant. In Zetland v Driver [1939] Ch 1; [1938] 29 All ER 158, Re Ballard’s Conveyance was distinguished because the parties had expressed the benefit of the covenant to be for the whole and any part or parts of the land. See also Council for the Municipality of Lane Cove v Hand and Hurdis Pty Ltd (1955) 72 WN (NSW) 284; and Coles Myer NSW Ltd v Dymocks Book Arcade Ltd (1996) 9 BPR 16,939. In the latter case, Simos J held that the benefit of a covenant was annexed to such parts of the dominant tenement as were capable of benefiting from the covenant. His Honour did not deal with the question of whether the land was correctly identified. 9.62

The principle of Re Ballard’s Conveyance has been applied in

Australia: Langdale Pty Ltd v Sollas [1959] VR 634; Re Arcade Hotel [1962] VR 274; Ellison v O’Neill (1968) 88 WN (NSW) (Pt 1) 213; [1968] 2 NSWR 246. In these cases, the problem presented itself in a slightly different manner to the way in which it appeared in Re Ballard’s Conveyance. Although in each instance the covenant, when entered into, touched and

[page 901]

concerned the whole of the land of the covenantee, subdivision of the covenantee’s land rendered the covenant unenforceable by a purchaser of part of that land, since it could not be shown that the covenant necessarily benefited that part of it, as distinct from the whole. Whether there is any rule favouring construction of a covenant as being annexed to the whole and not each and every part of the benefited land is discussed in Gyarfas v Bray (1989) 4 BPR 9736, below. 9.63C

Gyarfas v Bray (1989) 4 BPR 9736 Supreme Court of New South Wales (Equity Division)

[On subdivision of the subject land, restrictive covenants entered into between the transferor and transferee provided that ‘the land to which the benefit of the covenants is to be appurtenant is the balance of the land’ in the relevant certificate of title and ‘the land which is to be subject to the burden of the covenants is the land the subject of this transfer’. One issue before the court was whether any rule of construction precluded the court from finding that the covenant was effectively annexed to each and every part as well as the whole of the benefited land.] Bryson J: The true meaning and intention about the land to which the benefit of a restrictive covenant is to be available is in principle and irreducibly a question of construction of the instrument creating each particular restrictive covenant. As such it might not seem capable of being much affected by precedent or earlier judicial opinion, but it is in fact the subject of many. The case law is referred to and the subject is discussed in Bradbrook and Neave, Easements and Restrictive Covenants in Australia at paras (1341) to (1354) and numerous decisions including Victorian and English decisions at first instance are there referred to. My consideration should begin with Drake v Gray [1936] 1 Ch 451 (CA). The Court of Appeal held that the words ‘the owners or owner for the time being of the remaining hereditaments so agreed to be partitioned as aforesaid’ showed a clear intention to annex the covenant to each and every portion of the partitioned land, and that the benefit of the covenant ran with the whole and with every part. The way in which the Court of Appeal arranged and ordered the argument and addressed the questions before it appears to me to have had an unfortunate later influence. At 457 and 458 Slesser LJ referred to decisions which established that: where only part of the land of the covenantee has been acquired by a purchaser and it is shown that the benefit was intended to enure to each portion of the covenantee’s land, the benefit of the restrictive covenant will pass to the purchaser without being mentioned,

and runs with the land; those authorities were Renals v Cowlishaw (1878) 9 Ch D 215 and in Re Union of London and Smith’s Bank’s Conveyance [1933] Ch 611. Slesser LJ then said (at 458) ‘I agree with Mr Cleveland-Stephens’ (who was the appellant’s counsel) ‘that, following that decision, it is incumbent upon the present plaintiff to show that, on a proper construction of this conveyance, the benefit was intended to enure to each portion of the land’. At 461 Romer LJ said ‘In this case the parties are agreed that in order to succeed in his action the respondent must show that the benefit of the restrictive covenants entered into by the trustees was intended to enure to each portion of the land of the covenantees. The question for us therefore is purely one of the construction of the particular covenant.’ At 465 Greene LJ said: ‘The question involved is a pure question of the construction of a particular document considered in relation to very special surrounding circumstances. It is [page 902] whether on the true construction of the conveyance the benefit of the restrictive covenant is annexed to land as a whole or to the whole of this land.’ Unfortunately these or some other observations in these judgments appear to have given rise to a view that prima facie words which annex the benefit of a covenant to the land of the covenantee do not annex that benefit to subdivided parts, whereas it seems to me that the Court of Appeal did no more than choose which party was to have the burden of argument before it. The adoption of a prima facie approach to what the words mean would be difficult to reconcile with some other observations in Drake v Gray, in particular the following passage in the judgment of Greene LJ at 468: ‘I am quite unable to accept the view that where the intention is to annex the benefit of a covenant to the land in such a way that it can be enforced by the owner of any part of it, it is necessary to have some form of words such as ‘the land and every part of it’ or something of that kind.’ In Re Arcade Hotel Pty Ltd (1962) VR 274 a majority (Lowe and Gavan Duffy JJ) of the Full Court of the Supreme Court of Victoria held, in relation to a particular restrictive covenant, that it applied only in respect of the whole of the land and did not extend to parts subsequently transferred out of a parent title, and its benefit did not pass to the transferees of part only. Sholl J dissented. The judgment of Lowe J (with whom Gavan Duffy J concurred) identified the question of importance at 277 in these words: ‘The question that remains is — does the covenant on its proper construction refer to the dominant land only as a whole or does it refer to the whole and every part of the dominant land?’ His Honour referred to case law, commencing with Drake v Gray and the passage at 465 in the judgment of Greene LJ which I have mentioned, and to later case law at first instance in Victoria in which various conclusions had been reached, upon the construction of various covenants which had been given in varying circumstances. According to my understanding the reasoning at 277 and 278 shows that Lowe J also proceeded to a conclusion by a process of construction of the words of the document before him; Lowe J found some useful approaches and expressions in earlier cases but the essential exercise was the construction of the covenant then under consideration. Sholl J who dissented dealt with the construction of the covenant with characteristic

rigour and completeness at pages 287 to 296. I would respectfully say that I find Sholl J’s treatment of the general considerations and case law impressive and his reasoning relating to construction of the covenant convincing, and included in this is his consideration at 290 and following of the lack of significance of the absence of the words ‘or any part thereof’ or some similar expression and of the distributive availability of the burden and also of the benefit of covenants which touch and concern land … At 278–279 Lowe J referred to the judgment of Sholl J. Lowe J appears to acknowledge the weight of Sholl J’s reasoning but said ‘… it seems to me that where the decision rests on the meaning of language commonly used in the same context not only here but in England, it is undesirable that it should be construed differently here from the construction given to it in England. Moreover, the undesirability is even greater when the English decisions are those of the Court of Appeal.’ He referred to Piro v Foster (1943) 68 CLR 313. I observe, with respect, that I do not find this easy to follow because it is not accompanied by a citation of any English decision, of the Court of Appeal or otherwise, other than Drake v Gray, which might bear on the question whether the covenant on its proper construction referred to the benefited land only as a whole or to the whole and every part of the benefited land. Drake v Gray, while itself professedly an insurance of the construction by each member of the Court of Appeal of a particular covenant, without even in purport establishing a general rule for the construction of covenants, contains observations, for example that of Greene LJ at 468, which would deny the necessity of words such as ‘the land and every part of it’, and the [page 903] conclusion in Drake v Gray was favourable to distribution of benefit to subdivided parts. A further difficulty with Lowe J’s observations, as it appears to me, is that the adoption of forms of language commonly used in the same context both in Victoria and in England had not been shown by any earlier passage in the judgment. To me it is an unfortunate characteristic of restrictive covenants that they do not closely follow common forms. I do not find it possible to see why it was important that the same approach to the construction of this class of documents should be taken in Victoria as in England; the subject is not one for which uniform development of common law principles could be important … When a problem in this area came before the Court of Appeal of England in Federated Homes Ltd v Mill Lodge Properties Ltd (1980) 1 WLR 594, Drake v Gray was not treated as having established any approach which should be taken to such questions of construction; it was not treated as of more than incidental significance. This decision had been preceded by a comment by Megarry QC (later Megarry V-C) at 78 LQR 334; see too at 482. This puts an end to any consideration that respect for or comity with English Courts requires that approach to be followed in Australia. The principal matter under consideration in Federated Homes was the interpretation of s 78 of the Law of Property Act 1925; s 78 corresponds with s 70 of the Conveyancing Act 1919 in the substituted form which came into effect on 1 January 1931, too late to affect this case. At 606 Brightman LJ dealt with the following submission: ‘It was

suggested by Mr Price that, if this covenant ought to be read as enuring for the benefit of the retained land, it should be read as enuring only for the benefit of the retained land as a whole and not for the benefit of every part of it; with the apparent result that there is no annexation of the benefit it to a part of the retained land when any severance takes place.’ Brightman LJ referred to discussion in Megarry and Wade The Law of Real Property (4th ed) at 763, and said ‘I find the idea of the annexation of a covenant to the whole of the land but not to a part of it a difficult conception fully to grasp’ and also said ‘… would have thought, if the benefit of the covenant is, on a proper construction of a document, annexed to the land, prima facie it is annexed to every part thereof, unless the contrary clearly appears’. Drake v Gray was referred to by Brightman LJ only for an illustration of the process of construction of a particular document and not for any principle; and that reference was not concurred by Megaw LJ who otherwise, with Brown LJ, agreed with Brightman LJ. Megaw LJ said at 608: ‘For myself I would regard the observations made in the passage which Brightman LJ read from Megarry and Wade, The Law of Real Property, 4th ed, 763, as being powerful reasons, and I find a great difficulty in understanding how, either as a matter of principle, or as a matter of practical good sense in relation to a legal relationship of this sort, it can be said that a covenant, which ex hypothesi has been annexed to the land as a whole, is somehow or other not annexed to the individual parts of that land.’ The passage cited from Megarry and Wade included the following: … The rule that presumes annexation to the whole only is arbitrary and inconvenient. In principle it conflicts with the rule for assignments, which allows a benefit annexed to the whole to be assigned with part, and it also conflicts with the corresponding rule for easements. In my opinion, the adoption of a rule that unless displaced the benefit of a restrictive covenant should be taken to be annexed only to the whole of the covenantee’s land is not supported by any advantage relating to maintaining uniformity in legal principles, or to according respect to decisions of the Court of Appeal of England. If legal principles are truly involved in choosing a disposition towards or against distributability of benefit at the outset of one’s approach to the [page 904] construction of a restrictive covenant, I regard the considerations marshalled by Sholl J and much more briefly by Brightman LJ as convincing … To some degree decisions in this field may have been affected by policy and the adoption of approaches supportive of or hostile to restrictive covenants. There is no doubt and much practical experience shows that many restrictive covenants have been a source of inconvenience, trouble and difficulty out of all proportion to any good that they may have done; or without doing any good at all. Often they have been imposed in language which shows that they were very poorly considered; or with poor drafting or inadequate reflection. Often they deal with matters which at later times have come to be regulated in the public interest by town-planning laws, and often they have become obsolete, or inconvenient. Their incorporation into the Torrens system has tended if anything to

extend their effective lives and to increase their visibility and the notice taken of them. Often they are perpetual, at least according to their terms. Their inconveniences explain the existence of s 89 of the Conveyancing Act 1919. Their inconveniences may also have been a source of a view that restrictive covenants should not be looked on with favour by courts and that they should not receive favourable constructions. A converse view could be imagined, hostile to constructions which would minimise or evade restrictive covenants, although I have not actually encountered that view. I would not ally myself with preconceptions about the construction of restrictive covenants generally, and I would not approach them either in the spirit that their restrictions ought to be fostered or in the converse spirit that the Court should view such restrictions with disfavour. In this matter, as is usually right, the Court should remain dispassionate and uncommitted. I address the construction of the reference in the restrictive covenants to the benefited land without regard to any prima facie rule of construction.

9.64

In Victoria an attempt has been made to overcome Re Ballard’s

Conveyance by Vic, s 79A, inserted in 1964 as a result of the decision in Re Arcade Hotel Pty Ltd [1962] VR 274. Section 79A now provides: 9.65E

Property Law Act 1958 (Vic)

79A Construction of covenants affecting land It is hereby declared that when the benefit of a restriction as to the user of or the building on any land is or has been annexed or purports to be annexed by any instrument to other land the benefit shall unless it is expressly provided to the contrary be deemed to be and always to have been annexed to the whole and to each and every part of such other land capable of benefiting from such restriction [cf WA, s 49].

9.66

In Re Miscamble’s Application [1966] VR 596, it was held that s 79A

had retrospective effect. For an exposition of the effect of the section, see [1966] VR 596 at 598–601. For an example of a covenant which would not have been effectively annexed to the land sought to be benefited were it not for the provisions of s 79A, see Vrakas v Mills [2006] VSC 463. If you were legislating to overcome the decision in Re Ballard’s Conveyance would you have adopted the approach taken by s 79A? Are there any difficulties created

by such an approach? See the observations of Young CJ in Doyle v Phillips (No 1) (1997) 8 BPR 15,523 at 15,524.

[page 905]

A covenant expressed to benefit ‘so much of the land described in Certificate of Title Volume 4480 Folio 895831 as is represented by the Lots on the said plan of subdivision other than the land hereby transferred and every part thereof’ was effective to secure the benefit for each lot in the subdivision: Fitt v Luxury Developments Pty Ltd [2000] VSC 258. 9.67

A covenant does not touch and concern the land of the covenantee if

it is expressed to be made for the benefit of land already sold by the covenantee: see Kerridge v Foley (1964) 82 WN (NSW) (Pt 1) 293; [1964– 65] NSWR 1958.

Express assignment of the benefit of the covenant 9.68C

Re Union of London and Smith’s Bank Ltd’s Conveyance; Miles v Easter [1933] Ch 611; [1933] All ER Rep 355 Court of Appeal

Romer LJ (delivering the judgment of the Court of Appeal): … Now it may be conceded that the benefit of a covenant entered into with the covenantee or his assigns is assignable. The use of the word ‘assigns’ indicates this: see Williams on Personal Property (18th ed) p 33. But it by no means follows that the assignee of a restrictive covenant affecting land of the covenantor is entitled to enforce it against an assign of that land. For the burden of the covenant did not run with the land at law, and is only enforceable against a purchaser with notice by reason of the equitable doctrine that is usually referred to as the rule in Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143; [1843–60] All ER Rep 9. It was open,

therefore, to the courts of equity to prescribe the particular class of assignees of the covenant to whom they should concede the benefit of the rule. This they have done, and in doing so have included within the class persons to whom the benefit of the covenant could not have been assigned at law. For at law the benefit could not be assigned in pieces. It would have to be assigned as a whole or not at all. And yet in equity the right to enforce the covenant can in certain circumstances be assigned by the covenantee from time to time to one person after another. Who then are the assignees of the covenant that are entitled to enforce it? The answer to this question is to be found in several authorities which it now becomes necessary to consider. In Formby v Barker [1903] 2 Ch 539; [1900–3] All ER Rep 445, a vendor, on the occasion of the sale of the whole of his land, extracted from the purchaser a restrictive covenant as to its user. The vendor having died, his executor sought to enforce the covenant against an assignee of the purchaser. In as much as there was no land retained by the vendor on the occasion of the sale the covenant was merely personal to the vendor, and was accordingly held to be unenforceable by the vendor’s executor as his assignee against the assignee of the purchaser … It is plain, however, from these and other cases, and notably that of Renals v Cowlishaw (1878) 9 Ch D 125; [1874–80] All ER Rep 359, that if the restrictive covenant be taken not merely for some personal purpose or object of the vendor, but for the benefit of some other land of his in the sense that it would enable him to dispose of that land to greater advantage, the covenant, though not annexed to his land so as to run with any part of it, may be enforced against an assignee of the covenantor taking with notice, both by the covenantee and by persons to whom the benefit of such covenant has been assigned, subject however to certain conditions. In the first place, the ‘other land’ must be land that is capable of being benefited by the covenant — otherwise it would be impossible to infer that the object of the [page 906] covenant was to enable the vendor to dispose of his land to greater advantage. In the next place, this land must be ‘ascertainable’ or ‘certain’, to use the words of Romer and Scrutton LJJ respectively. For, although the court will readily infer the intention to benefit the other land of the vendor where the existence and situation of such land are indicated in the conveyance or have been otherwise shown with reasonable certainty, it is impossible to do so from vague references in the conveyance or in other documents laid before the court as to the existence of other lands of the vendor, the extent and situation of which are undefined. In the third place, the covenant cannot be enforced by the covenantee against an assign of the purchaser after the covenantee has parted with the whole of his land. This last point was decided, and in our opinion rightly decided, by Sargant J in Chambers v Randall [1923] 1 Ch 149; [1922] All ER Rep 565. As pointed out by that learned judge, the covenant having been entered into to enable the covenantee to dispose of his property to advantage, that result will in fact have been obtained when all that property has been disposed of. There is therefore no longer any reason why the court should extend to him the benefit

of the equitable doctrine of Tulk v Moxhay. That is only done when it is sought to enforce the covenant in connection with the enjoyment of land that the covenant was intended to protect. But it was also held by Sargant J in the same case, and in our opinion rightly held, that although on a sale of the whole or part of the property intended to be protected by the covenant the right to enforce the covenant may be expressly assigned to the purchaser, such an assignment will be ineffective if made at a later date when the covenantee has parted with the whole of his land. The covenantee must, indeed, be at liberty to include in any sale of the retained property the right to enforce the covenants. He might not otherwise be able to dispose of such property to the best advantage, and the intention with which he obtained the covenant would be defeated. But if he has been able to sell any particular part of his property without assigning to the purchaser the benefit of the covenant, there seems no reason why he should at a later date and as an independent transaction be at liberty to confer upon the purchaser such benefit. To hold that he could do so would be to treat the covenant as having been obtained, not only for the purpose of enabling the covenantee to dispose of his land to the best advantage, but also for the purpose of enabling him to dispose of the benefit of the covenant to the best advantage. Where, at the date of the assignment of the benefit of the covenant, the covenantee has disposed of the whole of his land, there is an additional reason why the assignee should be unable to enforce it. For at the date of the assignment the covenant had ceased to be enforceable at the instance of the covenantee himself, and he cannot confer any greater rights upon the assignee than he possessed himself …

9.69

Romer LJ in Miles v Easter suggests that, before the benefit of a

restrictive covenant can be expressly assigned in equity, the land for the benefit of which the covenant is taken must be ‘ascertainable’ or ‘certain’. In his view the court will infer an intention to benefit land where the existence and location of the land are specified in the conveyance, or otherwise shown with reasonable certainty, but no such intention will be inferred from vague references in the conveyance. The stringency of this approach has been modified in later cases, notably Newton Abbott Co-operative Society Ltd v Williamson and Treadgold Ltd [1952] Ch 286; [1952] 1 All ER 279. In that case, Mrs Mardon, the owner of premises known as ‘Devonia’ on which she conducted the business of an ironmonger, sold land she owned on the opposite side of the street to certain purchasers. The purchasers of this land

covenanted not to carry on the business of an ironmonger on the land. The conveyance did not identify the dominant land that was to benefit

[page 907]

by the covenant, except in so far as the vendor was described as being ‘of Devonia’. In 1947, the defendants acquired the premises burdened by the covenant, having actual notice of the covenant. In 1944, the original owner of Devonia died, devising Devonia to L, who, in 1948 sold the ironmongery business to a society and granted the society a lease for 21 years. At the same time he assigned the benefit of the restrictive covenant to the society. The society later amalgamated with the plaintiff. In 1949, the defendants used the premises for the purposes of an ironmongery business. The plaintiff sought an injunction to restrain the defendants from breaching the covenant. It was conceded that the defendants were subject to the burden of the covenant, the sole question being whether the plaintiff was entitled to the benefit. Upjohn J held that the benefit of the covenant had not been annexed to the land so as to pass without express mention to the plaintiff. Before a covenant could be regarded as annexed to land, the conveyance creating the covenant had to identify clearly the land for the benefit of which the covenant was taken. The fact that the conveyance described Mrs Mardon as being ‘of Devonia’ was not a sufficient identification for the purposes of express annexation. However, Upjohn J held that the benefit of the covenant had passed by express assignment. On completion of the administration of Mrs

Mardon’s estate, L became entitled in equity to the benefit of the restrictive covenant as residuary legatee under Mrs Mardon’s will. Counsel for the defendant argued that the express assignment by L was ineffective in equity on two grounds. First, the covenant was taken solely for the purpose of protecting Mrs Mardon’s personal interest in the goodwill of the business and not in order to protect her land. Upjohn J rejected this contention, concluding that the purpose of the covenant, inter alia, was to enhance the value of the land on which the business was conducted by making it more attractive to a potential purchaser wishing to carry on the same business. Second, counsel argued that the benefit of the covenant was not expressly assignable because the original conveyance did not identify the land for the benefit of which the covenant was taken. However, Upjohn J took the view that it was not necessary to define the dominant land in the conveyance, it being sufficient if the land receiving the benefit of the covenant could be identified with reasonable certainty from all the circumstances surrounding the transaction. On the facts, the only reasonable inference was that Mrs Mardon took the covenant for the benefit of her business and the land on which it was being conducted. Thus the plaintiff was entitled to an injunction.

9.70 Questions 1.

To what extent did the decision in the Newton Abbott case represent a relaxation of the rules laid down in Miles v Easter [1933] Ch 611; [1933] All ER Rep 355 (9.63C)?

2. 3.

What is the purpose of the requirement that the land benefited be ascertainable at the date of the covenant? What difficulties arise if identification of the land by parol evidence is permitted? Compare Allen v Lawson [1926] VLR 1. Although the decision in the Newton Abbott case has attracted academic criticism (see, for example, Elphinstone, ‘Assignment of the Benefit of Covenants Affecting Land’ (1952) 68 LQR 353) it was subsequently followed by Wilberforce J in Marten v Flight Refuelling Ltd [1962] Ch 115; [1961] 2 All ER 696. In that case, extrinsic evidence was taken into account to ascertain the identity of the land benefiting from the covenant. Indeed,

[page 908]

Wilberforce J appeared to be prepared to extend the principle of the Newton Abbott case not only to cases of express assignment, but also to cases of express annexation of the benefit of the covenant to land: see also Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227 at 255 where Zelling J appears to have regarded the Newton Abbott case as incorrect on this point, while Bray CJ (at 236–7) left the issue open: see 9.34C.

9.71

As to whether the techniques for passing the benefit of a restrictive

covenant are mutually exclusive, in Stilwell v Blackman [1968] Ch 508;

[1967] 3 All ER 514, Ungoed Thomas J held that they were not. Thus, the benefit of a covenant expressly annexed to the whole (but not each and every part) of the covenantee’s land was capable of being assigned with a conveyance of portion of the covenantee’s land. Is this decision of practical significance in Australian jurisdictions?19

Creation of a building scheme 9.72

A common example of development of land, particularly in the

expanding urban areas of Australia, is the case of a vendor subdividing a large area of land into plots with a view to sale. In order to preserve the value of the land and to encourage buyers, the vendor may wish to impose restrictive covenants on each plot preventing, for example, the use of land for other than residential purposes or the erection of dwellings less than a certain value. The vendor is seeking, as it is sometimes put, to create a ‘local law’ for the area, thus maintaining the character of the neighbourhood. To achieve this result, each purchaser of a plot will covenant with the vendor to observe the restrictions. The intention of the vendor is that each purchaser and his or her assigns should be able to sue and be sued by every other purchaser and his or her assigns for breach of the restrictive covenants, regardless of the order in which the purchasers acquired their interest from the common vendor. This aim can be achieved by the execution of conveyances or transfers in the appropriate form. If the benefit of the covenant is annexed to each and every part of the land retained by the common vendor at the time of the conveyance, later purchasers from the common vendor will be able to enforce the covenants entered into by earlier purchasers. In Victoria and Western Australia it is not necessary to use this formula: Vic, s 79A; WA, s 49. If later purchasers covenant both with the common vendor and with earlier purchasers who are either expressly named or clearly referred to, earlier purchasers will be able to rely upon legislation equivalent to Vic, s 56 (see 9.5) in order to enforce the restrictive covenants against later purchasers.

However, in many cases, the documentation is ineffective to achieve these results. Purchasers of lots who acquire their land before other purchasers are not able to enforce restrictive covenants entered into by later purchasers who merely covenant with the vendor and the vendor’s successors in title. They and their successors in title cannot claim the benefit of covenants not entered into at the time the land was purchased from the developer. Furthermore, except in Victoria and Western Australia, later purchasers are not able to enforce the covenants entered into by earlier purchasers if the covenants are not expressed to be for the benefit of the whole and each and every part of the benefited land.

[page 909]

9.73

If, however, the restrictive covenants are held to be imposed as a

result of a ‘building scheme’ (sometimes called a scheme or scheme of development), all purchasers of lots are bound by and can take the benefit of the covenants, regardless of the order in which the original purchasers acquired their land from the vendor and even if the benefit of the covenant has not been expressly annexed to the land or assigned to the person seeking to enforce it: see Re Louis and the Conveyancing Act [1971] NSWLR 164 at 197; 9.98C. Moreover, a purchaser who has bought land under a building scheme may enforce the restrictions against the vendor in respect of the land retained, and may insist on the inclusion in the conveyance of a covenant by the vendor to reserve the restrictions over the retained lots: Re Birmingham and District Land Co and Allday [1893] 1 Ch 342. Even where the

documentation is inadequate, the necessary ingredients of a building scheme may be inferred from the circumstances of the case: see Bradbrook and Neave, 343ff. 9.74

The test of whether there is a building scheme in force is essentially

whether the covenants were intended to benefit all the purchasers of lots, or were merely imposed for the sole benefit of the vendor. Clearly enough, if all the lots owned by the vendor are disposed of within a short space of time, the inference is that the covenants were imposed for the benefit of the purchasers. The classic statement of the conditions necessary for the creation of a building scheme was made by Parker J in Elliston v Reacher [1908] 2 Ch 374 at 384–5: I pass, therefore, to the consideration of the question whether the plaintiffs can enforce these restrictive covenants. In my judgment, in order to bring the principles of Renals v Cowlishaw (1878) 9 Ch D 125; (1879) 11 Ch D 866; [1874–80] All ER Rep 359, and Spicer v Martin (1888) 14 App Cas 12, [1886–90] All ER Rep 461, into operation it must be proved (1) that both the plaintiffs and defendants derived title under a common vendor (2) that previously to selling the lands in which the plaintiffs and defendants are respectively entitled the vendor laid out his estate, or a defined portion thereof (including the lands purchased by the plaintiffs and defendants respectively), for sale in lots subject to restrictions intended to be imposed on all the lots, and which, though varying in details as to particular lots, are consistent and consistent only with some general scheme of development; (3) that these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold, whether or not they were also intended to be and were for the benefit, of other land retained by the vendor; and (4) that both the plaintiffs and the defendants, or their predecessors in title, purchased their lots from the common vendor upon the footing that the restrictions subject to which the purchases were made to enure for the benefit of the other lots included in the general scheme whether or not they were also to enure for the benefit of other lands retained by the vendors. If these four points be established, I think that the plaintiffs would in equity be entitled to enforce the restrictive covenants entered into

by the defendants or their predecessors with the common vendor irrespective of the dates of the respective purchases. I may observe, with reference to the third point, that the vendor’s object in imposing the restrictions must in general be gathered from all the circumstances of the case, including in particular the nature of the restrictions. If a general observance of the restrictions is in fact calculated to enhance the values of the several lots offered for sale, it is an easy inference that the vendor intended the restrictions to be for the benefit of all the lots, even though he might retain other land the value of which might be similarly enhanced, for a vendor may naturally be expected to aim at obtaining the highest possible price for his land. Further, if the first three points be established, the fourth point may readily be inferred, provided the purchasers have notice of the facts involved in the three first points; but if the purchaser purchases in ignorance of any material part of those

[page 910]

facts, it would be difficult, if not impossible, to establish the fourth point. It is also observable that the equity arising out of the establishment of the four points I have mentioned has been sometimes explained by the implication of mutual contracts between the various purchasers, and sometimes by the implication of a contract between each purchaser and the common vendor, that each purchaser is to have the benefit of all the covenants by the other purchasers, so that each purchaser is in equity an assign of the benefit of these covenants. In my opinion the implication of mutual contract is not always a perfectly satisfactory explanation. It may be satisfactory where all lots are sold by auction at the same time, but when as in cases such as Spicer v Martin, there is no sale by auction, but all the various sales are by private treaty and at various intervals of time, the circumstances may, at the date of one or more of the sales, be such as to preclude the possibility of any actual contract. For example, a prior purchaser may be dead or incapable of contracting at the time of a subsequent purchase, and in any event it is unlikely that the prior and subsequent purchasers are ever brought into personal relationship, and yet the equity may exist between them. It is, I think, enough to say, using Lord Macnaghten’s words in Spicer v Martin, that where the four points I have mentioned are established, the community of interest imports in equity the reciprocity of obligation which is in fact contemplated by each at the time of his own purchase.

A further requirement which has been added by later cases is that the area to which the scheme extends must be clearly defined or at least identifiable: Reid v Bickerstaff [1909] 2 Ch 305; [1908–10] All ER Rep 298; Re Barry and the Conveyancing Act (1962) 79 WN (NSW) 759. On the other hand, it was decided in Baxter v Four Oaks Properties Ltd [1965] Ch 816; [1965] 1 All ER 906 that the second condition laid down by Parker J need not be strictly observed if all the purchasers were aware that they were to be subject to binding and mutually enforceable covenants as, for example, where the common vendor requires each purchaser to execute a single deed containing mutual covenants. Thus, it would seem that the issue of whether a series of transactions constitutes a building scheme can be regarded as one of ‘fact’, a characterisation which necessarily gives the court a considerable discretion in the matter. For a general overview of building schemes, see Gray, Edgeworth, Foster and Dorsett, 621–4, [13.30]–[13.35].

Common vendor 9.75

The traditional view was that a building scheme did not arise where

two or more landowners co-operated to create the scheme: Re Pinewood Estate, Farnborough [1958] 1 Ch 280; [1957] 2 All ER 517; Re Lakhani and Weinstein (1980) 118 DLR (3d) 61. However, in Re Dolphin’s Conveyance [1970] Ch 654; [1970] 2 All ER 664, Stamp J modified still further the rules relating to building schemes. The plaintiffs in that case sought a declaration that they were not bound by certain restrictive covenants entered into by their predecessors in title, because there was no person in a position to enforce these covenants. The defendants were owners of adjoining land, and claimed

to be entitled to the benefit of the covenants. The plaintiffs’ land had previously been part of an identifiable area known as the ‘Selly Hill Estate’. The main portion of this estate had been conveyed to the plaintiffs’ and defendants’ predecessors in title in nine parcels from two successive vendors between 1871 and 1877. Each of the nine conveyances contained restrictive covenants binding on the purchasers. In addition, the vendors covenanted that they, their heirs and assigns would procure similar covenants from each purchaser or lessee of the land comprised in the estate. The last parcel of land was sold in 1893. The conveyance contained similar purchaser’s covenants, but no vendor’s covenant, since there was no longer any part of the land remaining unsold. There had been no express annexation of the benefit of the

[page 911]

covenants, and no express assignment. The facts did not satisfy the requirements laid down in Elliston v Reacher since the parties did not derive title from a common vendor and the vendor had not laid out the estate in lots subject to common restrictions. Nevertheless, Stamp J held that the defendants, being successors in title could enforce the restrictions. Instead of requiring strict adherence to the four requirements of building schemes laid down in Elliston v Reacher, Stamp J preferred to rely on a wider principle. He quoted from the judgment of Cross J in Baxter v Four Oaks Properties Ltd in which it was said (at Ch 825; All ER 913): … where the owner of land deals with it on the footing of imposing restrictive obligations on the

use of various parts of it as and when he sells them off for the common benefit of himself (in so far as he retains any land) and of the various purchasers inter se a court of equity has been prepared to give effect to this common intention notwithstanding any technical difficulties involved.

It would not be sufficient to show that each conveyance from the vendor contained similar covenants, for this might mean only that the covenants were imposed for the vendor’s own benefit, and that of the unsold estate. However, in this case the vendor not only inserted similar covenants in all the conveyances but also covenanted with each purchaser that future purchasers would be required to enter into these covenants. Thus, an intention to impose covenants for the common benefit of the vendor and all the purchasers was clearly indicated, and accordingly the defendants could enforce the covenants. Stamp J said that the submissions relating to the requirements of Elliston v Reacher were not well founded (at Ch 663; All ER 670–1): To hold that only where you find the necessary concomitants of a building scheme or a deed of mutual covenant can you give effect to the common intention found in the conveyances themselves would, in my judgment, be to ignore the wider principle on which the building scheme cases are founded and to fly in the face of other authority … The building scheme cases stem … from the wider rule that if there be found the common intention and the common interest referred to by Cross J … the court will give effect to it, and are but an extension and example of that rule.

9.76

This principle was applied in Re Mack and the Conveyancing Act

[1975] 2 NSWLR 623. Wootten J said (at 630): It is now accepted that this is the nature of the equity which makes the covenants in a building scheme reciprocally enforceable as between the owners for the time being of the lots in the scheme — ‘an equity which is created by circumstances and is independent of contractual obligation’ … This being the basis of the equity, there is no ground of reason or justice for requiring that there be a common vendor, unless indeed that term be understood in an artificial sense to include several vendors sharing a common intention. The ‘community of interest’ between the purchasers is as real

in the one case as the other. No doubt in cases where there is only one vendor it may be easier to infer the intention to take the covenants for the benefit of all the land in a scheme, but that is no reason for refusing to give effect to the common intention of several vendors to establish reciprocal benefits and obligations throughout an estate where such an intention is established.

Wootten J held that the existence of a building scheme had been established despite the absence of a common vendor.

[page 912]

9.77 Questions 1.

Is it desirable for the court to depart from the strict rules laid down in Elliston v Reacher [1908] 2 Ch 374?

2.

What purpose was served by the requirement that the vendor lay out the area in lots? For some other cases where it was held that the requirements of the building scheme doctrine had been satisfied, see Eagling v Gardner [1970] 2 All ER 838; Brunner v Greenslade [1971] Ch 993; [1970] 3 All ER 833. Compare Mitcham City Council v Clothier (1994) 62 SASR 394; 83 LGERA 431 in which the inability to prove a common intention was fatal to attempts to establish a common building scheme. Planning consent had been obtained for a seven-lot residential subdivision subject to the condition that the future division of an allotment was prohibited. It was held that the encumbrance that attached to each lot pursuant to the conditions attached to the development

consent were not valid as against strangers to the original covenant. One reason for the non-enforceability was that it was not part of a building scheme; there was no evidence of intention to create reciprocal rights, enforceable between all allotment purchasers and their successors in title.

Benefit to all purchasers 9.78

The third requirement of a building scheme is that the restriction

must be imposed for the common advantage of all purchasers and not simply for the benefit of the vendor. In Texaco Antilles Ltd v Kernochan [1973] AC 609; [1973] 2 All ER 118, it was argued that the very fact that the vendor of a large number of lots had taken pains to annex the benefit of the restrictions to every lot and to subject each lot to the burden of the restrictions, so that the ‘local law’ created by the restrictions should be mutually enforceable by and against all the owners for the time being of the lots, precluded the scheme from being a building scheme. The Privy Council rejected this argument (at AC 624 per Lord Cross of Chelsea): Extraneous circumstances may indeed show the existence of a building scheme even though there is nothing on the face of the conveyance containing the covenants to indicate they were to be mutually enforceable by the owners for the time being of a number of different lots but it certainly does not follow from that that there can be no ‘building scheme’ if the conveyances do so indicate. In this connection it is interesting to observe that the precedent for a scheme of development contained in the standard textbook [Preston and Newsom] is drafted on the same lines as the common form conveyance used by [the company] in this case.

It is not necessary for the covenants in a common building scheme to be

identical so long as they remain consistent with an overall reciprocity of obligation: Re Naish and the Conveyancing Act [1960] 77 WN (NSW) 892; Reid v Bickerstaff [1909] 2 Ch 305; White v Bijou Mansions Ltd [1938] Ch 351; Collins v Castle (1887) 36 Ch D 243; Cousin v Grant (1991) 103 FLR 236; Re Application of Poltava Pty Ltd [1982] 2 NSWLR 161 at 167–9. However, the whole scheme will fail if the covenants do not retain this reciprocity of obligation: Re NSW Aged Pensioner Hostel and the Conveyancing Act [1967] 1 NSWR 332; Re Louis and the Conveyancing Act [1971]

[page 913]

1 NSWLR 164; Application of Amory Pty Ltd (1984) NSW Conv R & ¶55180; Emile Elias & Co Ltd v Pine Groves Ltd [1993] 1 WLR 305 (PC).

Purchase on footing that restrictions would enure to benefit all lots 9.79

For some Australian cases applying the fourth requirement, see Re

Naish and the Conveyancing Act (1960) 77 WN (NSW) 892; Re Dennerstein [1963] VR 688. 9.80

It is a matter of public policy as to whether private persons should

have the power to create this ‘local law’ of planning or whether all planning should be left to public authorities. If private persons should have this power, it may be desirable that public bodies possess veto rights over the proposed scheme. In this connection it should be noted that in the nineteenth century,

when restrictive covenants were first freely enforced in equity, there was little planning of the use of land at a public level; the restrictive covenant was the device which enabled little pockets of order to be introduced into the general chaos. Now planning by public authorities is pervasive and no private agreement can authorise a departure from the planning schemes in force in a particular area, although such agreements may impose additional restrictions on the use of land. The person entitled to the benefit of a restrictive covenant may find it simpler to enforce the covenant, rather than rely upon the authorities to enforce the planning scheme. In New South Wales, the application of the building scheme doctrine may be affected by s 88. It may be that s 88(1) applies to any covenant the benefit of which was intended to extend beyond the original covenantee and to run with the land. On the other hand, the section may only apply to a covenant the benefit of which passes by express annexation. The wording ‘the benefit of which is intended to be annexed to other land’ is not clear.’ Helmore’s approach to the problem is as follows (Helmore, 215–16): That section relates to a restriction ‘arising under a covenant or otherwise … which is contained in an instrument coming into operation after the commencement of the Conveyancing Act 1930’. Any such restriction is not enforceable against a party interested in the land claimed to be subject to the restriction who is not a party to its creation unless the instrument clearly indicates the matters enumerated in the section, and more particularly, what are the ‘dominant’ and ‘servient’ lands … [I]t may be convenient to take as an example an instance where the ‘building scheme’ requirements exist, but there is no express covenant between B, a transferee from the common vendor, and A, an earlier transferee. As between these there is no ‘instrument’ at all, and all the obligations are implied, though there are instruments containing covenants between each of these parties and the common vendor which must comply with s 88. It is submitted that the instrument referred to in s 88(1) as being the instrument which contains the restriction is the same instrument as that which

is required to indicate the specified matters. The author has expressed the view that s 88 would not operate to render unenforceable implied obligations arising under the building scheme doctrine, there being no relevant instrument between the parties to the implication, but it must be admitted that the position is by no means free from doubt.

See also Helmore, ‘The Common Building Scheme and Statutory Provisions’ (1963) 37 ALJ 81 and Bradbrook and Neave, 361–2. Helmore’s view gained some support from Jacobs JA in Re Louis and the Conveyancing Act [1971] 1 NSWLR 164 at 180, in relation to building schemes affecting general law land. Re Louis (9.116C) deals with the position of building schemes affecting Torrens system land.

[page 914]

Planning instruments 9.81

Generally, planning instruments do not make restrictive covenants

invalid and planning permission or development approval to use land for certain purposes is not a defence in an action for breach of covenant: see Re Chamberlain and the Conveyancing Act (1969) 90 WN (NSW) (Pt 1) 585. Occasionally, environmental planning legislation provides for the case of inconsistency between planning instruments and covenants affecting land subject to the scheme. For example, s 28 of the Environment Planning and Assessment Act 1979 (NSW) states than an ‘environmental planning instrument’ may provide that a ‘regulatory instrument specified in that environmental planning instrument’ shall not apply to a development which is in accordance with the instrument. In the context of the section, ‘regulatory

instrument’ includes an agreement or covenant. Section 28(6) was inserted in 2009, stating that this rule applies despite the indefeasibility provision in s 42 of the Real Property Act 1900. 9.82C

Lennard v Jessica Estates Pty Ltd (2008) 71 NSWLR 306; [2008] NSWCA 121 New South Wales Court of Appeal

Tobias JA: The respondent, Jessica Estates Pty Ltd (Jessica), is the developer of 121 residential lots at Singleton known as the ‘Hunter View Estate’ (the Estate), which comprised the whole of the land in DP 1061723. On 24 July 2006 the appellants, Mr and Mrs Lennard, purchased Lot 122 in the Estate (Lot 122) which was then vacant. The appellants were not its first purchasers. Camilla Romano originally purchased the Lot 122 from the respondent in 2003. All lots in the Estate were subject to an instrument lodged with the Deposited Plan under s 88B of the Conveyancing Act 1919 (NSW) (the Instrument). Item 5 of Part 1 of the Instrument identified a restriction on the use of each lot in the Estate, the benefit of which was ascribed to each other lot (the restriction). The terms of that restriction on use were set out in Part 2 of the Instrument of which para (k) is presently relevant: (k) Unless the Registered Proprietor obtains the prior written consent of Jessica the Registered Proprietor shall not: (i) construct more than one dwelling on the Lot Burdened; (ii) construct any building of the nature known as semi-detached duplex on the Lot Burdened; (iii) use or permit to be used the Lot Burdened for any purpose other than as a private dwelling; (iv) alter a building on the Lot Burdened in such a way as to create a further dwelling on the Lot Burdened; (v) subdivide the Lot Burdened, and (vi) operate or permit to be operated upon or about the Lot Burdened a childcare centre, kindergarten or other similar activity. On 15 March 2007, Singleton Council (the Council) granted development consent to the erection of two three-bedroom residential units upon Lot 122. The proposed development was in the form of two attached dwellings identified in the Singleton Local Environmental Plan 1996 (NSW) (the LEP) as ‘dual occupancy — attached’. It was common ground that this type [page 915]

of development constituted a semi-detached duplex within the meaning of para (k)(ii) of the Instrument. Subsequently, on 20 June 2007 the Council granted development consent to a two-lot strata subdivision of Lot 122. Again, it was common ground that such a subdivision fell within the terms of para (k)(v) of the Instrument. Construction of the duplex without Jessica’s consent commenced on 5 July 2007. Prior to and at the time of that commencement, Jessica had written to the appellants’ solicitors objecting to the proposed work on the ground that the construction of the duplex would be in breach of paras (k)(i) and (ii) of the Instrument and threatening legal action to prevent the commencement and/or the continuation of construction … … Jessica claimed a declaration that the appellants were in breach of para (k) by commencing the construction of the duplex without first obtaining its written consent. It also sought orders that the appellants be restrained from carrying out any further construction work on Lot 122 without first obtaining that consent and that they forthwith take all necessary steps to remove the duplex constructed upon that land. The appellants maintained that para (k)(i), (ii) and (v) of the Instrument did not apply to Lot 122 because of the operation of cl 6(1) of the LEP. That provision was in the following terms: (1) If any agreement, covenant or similar instrument prohibits a land use allowed by this plan, then it shall not apply to that land use (to the extent necessary to allow that land use). Clause 6 of the LEP was inserted pursuant to s 28 of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act) which relevantly provided as follows: (1) In this section, regulatory instrument means any Act (other than this Act), rule, regulation, by-law, ordinance, proclamation, agreement, covenant or instrument by or under whatever authority made. (2) For the purpose of enabling development to be carried out in accordance with an environmental planning instrument or in accordance with a consent granted under this Act, an environmental planning instrument may provide that, to the extent necessary to serve that purpose, a regulatory instrument specified in that environmental planning instrument shall not apply to any such development or shall apply subject to the modifications specified in that environmental planning instrument … [The primary judge held that the construction of the duplex and its subdivision was in breach of the instrument of restriction as to user and that none of the provisions of para (k) (i), (ii) and (v) prohibited the land use allowed by the LEP. His Honour held para (k) was a relevant prohibition but that none of the matters listed in (i), (ii) and (v) was a land use within the terms of cl 6(1) LEP.] The thrust of the primary judge’s reasoning with respect to the construction of cl 6(1) of the LEP was that the draftsperson, being aware of the definition in the EPA Act of

‘development’ and that the definition distinguishes between the erection of a building, a carrying out of work, the subdivision of land and the use of land, must have intended by the adoption of the expression ‘a land use’ in cl 6(1) to confine the operation of that provision to a use of land with the consequence that it had no application to a regulatory instrument that prohibited the [page 916] erection of a building, the carrying out of work or the subdivision of land. Although his Honour acknowledged that the expression ‘a land use’ was neither defined in the LEP nor in the EPA Act, nonetheless he considered that it should be construed as a reference to ‘the use of land’, thus bringing it within the equivalent subset in the definition of ‘development’ in s 4(1) of that Act (whether in its original or amended form) … In my opinion, therefore, as a matter of logic the expression ‘a land use’ in cl 6(1) of the LEP extends not only to the use of land for a particular purpose but also to the erection of buildings to enable that use to be carried out. Such a construction is perfectly consistent with its planning context and, as will appear, with the implementation of the aims and objectives of the LEP with respect to the land uses identified therein as permissible with the Council’s consent. I would regard any other construction of the provision as being irrational in the relevant sense … The intention of the draughtsperson in inserting cl 6(1) into the LEP is to be found in cl 3(g) which provides that the aims and objectives in cl 2 of the LEP are to be implemented by, inter alia: (g) suspending certain regulatory instruments where the operation of such instruments would prevent the carrying out of development in accordance with this plan. Although Jessica as well as the primary judge fastened upon the fact that the draughtsperson of cl 6(1) had used the expression ‘a land use’ rather than ‘development’ which otherwise would have accorded literally with terms cl 3(g), nonetheless in my opinion that fact does not require the expression ‘a land use’ cl 6(1) to be read down in the manner advocated. As cl 3(g) is the source of cl 6(1), the latter should take its meaning from the former if otherwise an ambiguity exists and the words used in cl 6(1) permit of a range of possible meanings including the erection of buildings for the purpose of a land use allowed by the LEP. Accordingly, in my opinion cl 6(1) extends to the prohibition contained in para (k)(ii) of the Instrument which purports to prohibit the construction of a semi-detached duplex. Although the primary judge considered that that sub-paragraph dealt with building design rather than land use, I cannot with respect agree. The provision is concerned with the erection of a building of a particular type rather than a particular design but that type is related to the building’s use, as a semi-detached duplex, that is, as two attached dwellings. A similar observation may be made with respect to his Honour’s adoption of Jessica’s submission that para (k)(i) was concerned only with density rather than land use. It contended that this subparagraph was not in truth a restriction on the use to which Lot

122 could be put and, therefore, it was not a restriction or prohibition on ‘a land use’. Rather it was a restriction on the number of dwellings that could be constructed on that lot and not on its use. It is true that para (k)(i) prohibits the construction of more than one dwelling rather than more than one building. However, in my view it does not follow that that is not a restriction on the use of the land. The land may be used for the purpose of one dwelling or more than one dwelling. Its use for, say, two dwellings is in my opinion different to its use for one dwelling. If its use is restricted to the latter then the land cannot be used for the purpose of the former. That in my view is a restriction on its use. It follows from the foregoing that in my opinion Austin J erred in holding that neither sub-paras (i) or (ii) of para (k) of the Instrument prohibited ‘a land use allowed by’ the LEP. The prohibition on subdivision contained in para (k)(v) is more problematic. The issue is whether ‘a land use allowed by’ the LEP includes the subdivision of land for a particular purpose of use. It is true that in some contexts the cases have drawn a distinction between the subdivision of land on the one hand and the use of land as subdivided on the other. [page 917] That distinction has been covered in the definition of ‘subdivision of land’ in s 4B(1) of the EPA Act which contemplates the division of land into two or more parts anterior to the actual use or occupation of those parts. However, in my opinion the expression ‘a land use’ in cl 6(1) of the LEP is capable of including the subdivision of land for the purpose of a use permitted by the LEP. Generally speaking, in the context of planning, land is not subdivided except for a particular purpose. Thus the Estate was subdivided for the purpose of creating residential lots i.e. lots intended to be used for residential purposes. In the present case, the Council granted its consent to a strata plan of subdivision of the duplex to enable it to be separately used and occupied as two dwellings. In these circumstances I see no reason why the subdivision or strata subdivision of Lot 122 in the present case was not a subdivision for the purpose of enabling its use for two dwellings and so constituted ‘a land use’ within the meaning of cl 6(1). Such a construction accords with common sense and the language of cl 6(1) is not so intractable as to deny its adoption. It would in my opinion border on the irrational to exclude the strata subdivision of the duplex where otherwise the duplex may be constructed and used for the purpose of separate dwellings. Again, if cl 6(1) is to take its meaning from the intention of the draughtsperson as expressed in cl 3(g) of the LEP, it follows that in accordance with the principles of construction to which I have referred, the expression ‘a land use’ in cl 6(1) is capable of including the subdivision of the land for a purpose allowed by the LEP. Thus his Honour ought to have included para (k)(v) as a restriction on the use of land noted in the Instrument which prohibited a land use allowed by the LEP. [Appeal upheld. McColl and Bell JJA agreed with the judgment of Tobias JA.]

9.83

Section 28 of the Environmental Planning and Assessment Act

(NSW) was considered by the New South Wales Court of Appeal in Coshott v Ludwig (1997) NSW Conv R & ¶55-810 where Meagher JA (with whom Giles and Simos AJJA agreed) stated that the ‘self-evident purpose of s 28 of the Act and [the provision of the relevant local environmental plan] is to remove all obstacles to the planning principles decided on by the Council or the Minister’. Nonetheless, the decision in Lennard v Jessica Estates Pty Ltd illustrates how difficult it may be in a particular case to determine whether there is an inconsistency between a local environmental plan or instrument and a private covenant. 9.84

In Doyle v Phillips (No 1) (1997) 8 BPR 15,523, Young J made some

general observations about the interpretation of planning schemes which render covenants unenforceable: An interest held by a person whose land is entitled to the benefit of a restrictive covenant is an equitable interest in land. The effect of planning schemes which abolish or suspend a citizen’s interest in land must be construed fairly strictly because the legislature is presumed not to take people’s property away from them at least without just compensation. This is of course in accordance with ordinary principles of statutory construction.

In this context, his Honour quoted from what Barwick CJ said in Wade v New South Wales Rutile Mining Co Pty Ltd (1969) 121 CLR 177 at 181: If Parliament intends to derogate from the common law right of the citizen it should make its law in that respect plain … The courts are not entitled, and ought not, to eke out a

[page 918]

derogation of such private rights by implications not rendered necessary by the words used by Parliament but merely considered to be consistent with the policy which the courts conclude or suppose the Parliament to have intended to implement.

Young J further observed that the extinguishment of an interest by government action may not be the same as an acquisition but, as the covenant was not enforceable for other reasons, explicitly decided not to decide this question. Doyle v Phillips is discussed in Butt, ‘Restrictive Covenants — Again’ (1997) 71 ALJ 910. 9.85

In Victoria, the Planning and Environment Act 1987 (Vic) and the

Subdivision Act 1988 (Vic) endeavoured to provide for the variation or extinguishment of restrictive covenants by town planning schemes but the attempt was not entirely successful thus provoking further legislative action in 1991 and 1993 (Subdivision (Miscellaneous Amendments) Act 1991 (Vic)). Section 23(1) of the Subdivision Act 1988 now provides: 9.86E

Subdivision Act 1988 (Vic)

23(1) If a planning scheme or permit regulates or authorises the creation, removal or variation of an easement or restriction, the Council or the person benefiting from the creation, variation or removal must, in accordance with the planning scheme or permit and with the Planning and Environment Act 1987, lodge a certified plan at the Office of Titles for registration.

9.87

The history of this legislation and the extent of its application

following the 1991 amendments are discussed by Tooher, ‘Restrictive Covenants and Public Planning Legislation — Should the Landowner Feel “Touched and Concerned”?’ (1992) 9 EPLJ 63.

The Planning and Environment Act 1987 and Subdivision Act 1988 originally permitted town planning permits to override restrictive covenants in certain circumstances. Later amendments have substantially modified this policy. Section 60(2) of the Planning and Environment Act (as amended in 1991) prohibited the responsible authority from granting a permit allowing removal or variation of a restrictive covenant unless it was satisfied that the owner of the benefited land would be unlikely to suffer financial loss, loss of amenity, loss arising from change to the character of the neighbourhood or any other material detriment. Because the provision was interpreted restrictively, s 60(2) allowed removal of some restrictions through the public planning process. However, the 1993 amendment, inserting a new s 60(5), now prevents removal of a covenant by permit unless the objection to the grant of the permit is vexatious or frivolous, the owner of the land benefited has consented in writing to its removal not more than three months before the application for a permit, or the owner ‘will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of removal or variation of the restriction’. (Section 60(2) continues to apply to covenants created since 25 June 1991.) See Tooher, ‘“Double Trouble” in Discharging Restrictive Covenants: Dual Occupancy and the Duality of Forums’ (1993) 10 EPLJ 365; Tooher, ‘Victorian Parliament Strikes Back’ (1994) 11 EPLJ 349. In the latter article, Tooher concludes (351–2) that: … s 60 of the Planning and Environment Act 1987 now embodies an ideological mishmash … the amending provisions are based on a philosophy that protects the individual landowner

[page 919]

at all costs. They are guided by an assumption that the landowner should share the spoils of any proposed development which might require his consent, irrespective of whether there is any probability or any possibility of any consequent loss. Depending on viewpoint, s 60(5) will undoubtedly achieve where s 60(2) failed, thereby sealing an unnecessary victory for the landowner.

The Victorian Law Reform Commission, in Easements and Covenants, Final Report 22, recommended (Recommendation 38): 38. We propose the following set of reforms to planning legislation and recommend further public consultation regarding their implementation: a.

It should no longer be possible to remove a restrictive covenant by registration of a plan under section 23 of the Subdivision Act 1988 (Vic). Consequential amendments should be made to the Planning and Environment Act 1987 (Vic) and the Subdivision Act 1988 (Vic) to omit provisions that enable restrictive covenants to be removed or varied by or under a planning scheme.

b.

In determining an application for a planning permit, a responsible authority should not be expressly required to have regard to any restrictive covenant.

c.

The Planning and Environment Act 1987 (Vic) should provide that: i)

The Victorian Planning Provisions may specify forms of use or development of land that cannot be prevented or restricted by a restrictive covenant.

ii)

A planning scheme may, in respect of a zone or a planning scheme area, specify forms of permitted use or development of land that cannot be prevented or restricted by a restrictive covenant.

iii) A restrictive covenant is unenforceable to the extent it is inconsistent with such a specification.

The commission did not recommend that the specification should have the effect of suspending the covenant (cf s 28 of the EPA Act (NSW)) for the

reason that the concept of suspension created uncertainty by inferring that the effect on the covenant was temporary.

Construction of covenants 9.88

The material in this chapter has been concerned primarily with the

complex rules governing the running of the burden and benefit of covenants at law and in equity. However, in practice, one of the most important problems is the construction of particular covenants. In many cases the court will be concerned to ascertain whether the defendant’s actions are actually prohibited by the words of the covenant in question. For example, in Texaco Antilles Ltd v Kernochan [1973] AC 609; [1973] 2 All ER 118, the defendants contended that even if their land was burdened by the covenant, their activities were not in breach of it. The relevant covenant was drafted in 1925 and prohibited the erection of a ‘public garage’ on the land. The defendants argued that a service station did not come within this description, but the argument was unsuccessful. 9.89

In relation to land under the Torrens system, the High Court has

ruled in Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 that the ambit of permitted extrinsic material to aid in the construction of easements and covenants is not as wide as that under the general law. Enquiries are to be confined to matters shown on the register. Nonetheless, it was held in Re Hammond [2015] VSC 608, applying the decision in Prowse

[page 920]

v Johnstone [2012] VSC 4, that it was permissible for a court to look at registered instruments and plans of subdivision to aid in construction. Thus, for example, the wording of other covenants in the subdivision in question were pari materia as an aid to construction that ‘a private dwelling house’ was not intended to mean one dwelling house only. To similar effect was the decision of the Victorian Supreme Court in Suhr v Michelmore [2013] VSC 284. 9.90

There are numerous cases interpreting particular covenants: see

Bradbrook and Neave, Ch 5 405ff. For illustrative cases concerning construction of covenants, see Hilderbrandt v Stephen [1964] NSWR 740; Christie v Dalco Holdings [1964] Tas SR 34; Sefton v Tophams Ltd [1967] 1 AC 60; [1966] 1 All ER 1039; Lawton v SHEV Pty Ltd (1969) 89 WN (NSW) (Pt 1) 635; Earl of Leicester v Wells-Next-The-Sea Urban District Council [1973] Ch 110; [1972] 3 All ER 77; Prowse v Johnstone [2012] VSC 4; Re Hammond [2015] VSC 608; and Suhr v Michelmore [2013] VSC 284. In New South Wales, one particular problem of construction has been overcome by a specific legislative provision: NSW, s 88C. This section provides, in effect, that erection of a building of brick veneer construction, where the outer wall consists of brick having a thickness of at least 76 millimetres, is not a breach of a covenant stipulating that no building shall be erected unless it is made of brick. The section applies retrospectively to restrictions created and buildings erected before the coming into operation of the Act and to

buildings erected before or after the coming into operation of the Act. The effect of the section may be excluded by express agreement. For the position in the absence of legislation such as NSW, s 88C, see Jacobs v Greig [1956] VLR 597.

Discharge of restrictive covenants 9.91

Apart from legislation, a restrictive covenant is effectively discharged

when a court of equity, in its discretion, declines to enforce the covenant at the suit of the covenantee or successors in title to the covenantee. This may come about, for example, because the owner of the dominant tenement has taken no steps to restrain open breaches of covenant over a period of time, or because the owner induces the covenantor or successor to believe that breaches will be disregarded: Shaw v Appleyard [1977] 1 WLR 970; [1978] 1 All ER 123. An additional ground for refusing to enforce a restrictive covenant is that the character of the neighbourhood has so changed that there would be no real purpose in enforcing the covenant: Chatsworth Estates Company v Fewell [1931] Ch 224.20 Other cases of discharge are by operation of law, by agreement or by statute.

By operation of law 9.92

As in the case of easements, restrictive covenants may be extinguished

by operation of law if both the benefited and burdened land come into the same hands: Kerridge v Foley (1964) 82 WN (NSW) (Pt 1) 293; [1964–65] NSWR 1958; Re Tiltwood, Sussex [1978] 1 Ch 269; [1978] 2 All ER 1091.

In Tasmania, legislation prevents the extinguishment of a covenant in these circumstances: Tas, s 9A; Land Titles Act 1980 s 103(1); see also NSW, s 88B(3)(c)(iii) discussed in Glover, ‘Extinguishment of Restrictive Covenants’ (1978) 129 New LJ 236.

[page 921]

Extinguishment does not occur where both the benefited and burdened land are subject to a building scheme covering a larger area. The principles are discussed in Post Investments Pty Ltd v Wilson (1990) 26 NSWLR 598 below, in relation to both land under common law title and land under the provisions of the Torrens system. 9.93C

Post Investments Pty Ltd v Wilson (1990) 26 NSWLR 598 Supreme Court of New South Wales (Equity Division)

[The plaintiffs were the registered proprietors of properties known as numbers 36, 38 and 40 Parriwi Road which were subject to a registered restrictive covenant which limited building on the land to a ‘cottage building’ and imposed further limitations on location of the building and material and design of the building. The defendants’ land benefited from the covenant. In relation to number 36 Parriwi Road, at one time the plaintiffs and the defendants shared a common predecessor in title in one Bennett who owned for a period both the dominant and servient land. The plaintiffs sought orders for extinguishment of the covenant.] Powell J: The restrictions affecting No 36 Parriwi Road It being clear enough that between January 1936 when the memorandum of transfer to him of the defendants’ land was registered, and June 1954, when the memorandum of transfer from him of No 36 Parriwi Road was registered, Mr Bennett was registered as the

proprietor of both the dominant and servient tenements, the question which arises is whether the benefit of the restrictions was extinguished upon the merger, or but merely suspended during the period when Mr Bennett was registered as proprietor of both properties. The determination of that question, so it seems to me, requires, first, an examination of the position at common law, and, secondly, a determination of whether the provisions of the Real Property Act 1900 — and to an extent, of the Conveyancing Act 1919 — change what would otherwise be the position at common law. As a broad general rule, the position at common law is that where land has been subject to an easement, or has been subjected to covenants restrictive of its user, for the benefit of other land, and thereafter the dominant and servient tenements come into the ownership and possession of the same person, any easement over, or restriction affecting the user of, the servient tenement is extinguished by operation of law. For the principle of merger to operate both ‘unities’ — ownership and possession — must exist; it following that unity of possession without unity of ownership is not enough — and, for this purpose, unity of ownership involves the acquisition of both tenements for a fee simple absolute. So far as easements are concerned, the authorities would seem to indicate that, if there is only unity of possession, the right is merely suspended until the unity of possession ceases, while if there is only unity of ownership, the right continues until there is also unity of possession: see, eg, Richardson v Graham [1908] 1 KB 39; see also Megarry and Wade, The Law of Real Property, 5th ed (1984) at 899; Gale on Easements, (15th ed, 1986) at 345 et seq; Bradbrook and Neave, Easements and Restrictive Covenants in Australia (1981) p 374, para 922. If an easement has been extinguished by merger, it does not revive automatically on severance, but must be the subject of a fresh grant, whether express or implied, by the common owner upon severance: see James v Plant (1826) 4 Ad & E 749; Cuvet v Davis (1883) 9 VLR (L) 390. Although the position as to restrictive covenants is less clear, the fact that the law, in this regard — except where what is involved is a restriction arising under a common building scheme — has been developed by analogy with the law relating to easements, would suggest, [page 922] first, that, at common law, the benefit of a restrictive covenant is destroyed upon the ownership and possession of both dominant and servient tenements coming into the same hands (see, eg, Kerridge v Foley (1964) 82 WN (Pt1)(NSW) 293; Re Tiltwood, Sussex; Barrett v Bond [1978] 1 Ch 269; Megarry and Wade (op cit p 794); Preston and Newsom, Restrictive Covenants Affecting Freehold Land (6th ed, 1976); Bradbrook and Neave (ibid), and, secondly, that if that benefit has been destroyed in that way, it is not revived automatically on severance, but, if it is thereafter to exist, must be reimposed by the common owner at the time of severance: see Texaco Antilles Ltd v Kernochan [1973] AC 609 at 626 per Lord Cross of Chelsea; Megarry and Wade (op cit p 794); Preston and Newsom (ibid). Whatever be the jurisprudential basis for the distinction, it seems now to be established that where what is involved is a restriction arising under a common building scheme, unity of ownership and possession does not, without more, put an end to the

restriction as between the properties jointly owned, and that, in such case, in the absence of something more, the restriction, as between the jointly owned properties, is merely suspended during co-ownership and revives upon severance: see Brunner v Greenslade [1971] Ch 993; Texaco Antilles Ltd v Kernochan; Megarry and Wade (op cit p 794); Preston and Newsom (ibid). In the present case, it is clear that, although the relevant restrictions were imposed upon No 36 Parriwi Road at or about the time when the not entirely dissimilar restrictions were imposed upon Nos 38 and 40 Parriwi Road, the restrictions were imposed, in each case, solely for the benefit of the defendants’ land, it following that they cannot be regarded as part of a common building scheme. This being so it must follow that if, notwithstanding that both the defendants’ land and No 36 Parriwi Road are registered pursuant to the provisions of the Real Property Act 1900, the common law principles applied, then the benefit of the restrictions was extinguished in 1936 … No 36 Parriwi Road now stands free of them … The question, thus, is: whether the fact that No 36 Parriwi Road is registered pursuant to the provisions of the Real Property Act 1900 and that the restrictions remain noted upon the relevant certificate of title takes the case out of the operation of these common law principles — as I have indicated, Mr Trew — relying upon the decisions of McLelland CJ in Equity in Re Standard and the Conveyancing Act 1919 and Margil Pty Ltd v Stegul Pastoral Pty Ltd — both cases of easements — submitted that it did, while Mr Foster, who submitted that those decisions, if correct, ought to be limited to cases of easements, would have it that it did not, a view of which, as I have previously indicated, the judgment of Bryson J in Gyarfas v Bray (1989) 4 BPR 9736 would provide support. As I have earlier recorded, Mr Foster has submitted, first, that even if the decisions in Re Standard and the Conveyancing Act 1919 and Margil Pty Ltd v Stegul Pastoral Co Pty Ltd correctly state the law in so far as easements are concerned, they do not state the law in relation to restrictive covenants, first, because easements are noted on the certificates of title to both the dominant and servient tenements, whereas restrictive covenants are noted only on the certificate of title to the servient tenement; and, secondly, since, despite the — as he would have it — limited effect now given by s 88(3) of the Conveyancing Act 1919 to the notation of a restrictive covenant on the certificate of title to the servient tenement, the registered proprietor of the dominant tenement does not become the proprietor of any ‘estate or interest’ in the servient tenement. It is, of course, clear that an easement is conceptually different from a restrictive covenant, the former — put simplistically — being a right in the dominant owner to make some limited use of the property of the servient owner, while the latter — again put simplistically — is a right in the dominant owner to restrict the use made by the servient owner of his (the servient owner’s) property. But even if that be so, it does not [page 923] dispose of the matter, for s 88(3)(c) of the Conveyancing Act 1919 provides that a restrictive covenant which complies with the provisions of s 88(1) (see Re Louis and the Conveyancing Act [1971] 1 NSWLR 164; cf Re Martyn and the Conveyancing Act (1965) 65 SR (NSW) 387), and is noted on the certificate of title to the servient tenement, is an

‘interest’ for the purpose of s 42 of the Real Property Act 1900, the consequence of which, in such case, must be that the servient owner holds his land subject to that ‘interest’. Next, Mr Foster submitted that the decisions in both Re Standard and the Conveyancing Act 1919 and Margil Pty Ltd v Stegul Pastoral Co Pty Ltd ought to be regarded as wrongly decided, or, in the case of the latter, capable of being upheld only because of the provisions of s 47(7) of the Real Property Act 1900.21 I am unable to accept that either decision was wrongly decided. So far as the former is concerned, it seems to me that, even if it can be supported upon no other ground, the facts appear to demonstrate that there was a re-grant of the way (in the sense described in James v Plant) upon the severance of the previously jointly owned interests, while, in the case of the latter, it can clearly be upheld in the light of the provisions of s 47(7) of the Real Property Act 1900. The real question thus is: are the decisions of McLelland CJ in Equity and Needham J, to the extent to which they appear to hold that the provisions of s 42 of the Real Property Act 1900 preclude the operation of the common law doctrine of extinguishment by merger in the case of land under the provisions of the Real Property Act 1900 to be regarded as correctly decided. With regard to this question, Mr Foster has pointed to the provisions of s 47(7) of the Real Property Act 1900 which were not introduced into the Act until 1970 — he could also have pointed to the provisions of s 88B(3)(c) [see 9.101] of the Conveyancing Act 1919, which were not introduced into that Act until 1964 to support a similar argument — as demonstrating — as he would have it, clearly — the legislature’s recognition, and acceptance, of the fact that, prior to 1970, the common law doctrine of extinguishment of easements by merger — and, since s 88 of the Conveyancing Act 1919 links easements and restrictive covenants, the like doctrine in relation to restrictive covenants — operated even in respect of land under the provisions of the Real Property Act 1900. Acceptance of this submission would seem to lead inevitably to the conclusion that, since the restrictions were, as Mr Foster would have it, extinguished in 1936, they were not later revived when the amendments were passed — because of the language of s 47(7) of the Real Property Act 1900, a different result would seem to follow in the case of easements which were still notified on the Register when the amendment was passed in 1970. Regrettably, over the years since the Torrens title legislation was first introduced, the legislature has tinkered with the legislation in a way which suggests, first, that it does not fully understand the principle of indefeasibility which underpins the legislative scheme, and, secondly, that it does not fully appreciate that, while, in its original form, the legislation made no provision for the registration of equitable interests in land, it did not forbid their creation or transfer, those matters being left to the general law: see, eg, Tietyens v Cox (1916) 17 SR (NSW) 48 at 50–51; 34 WN (NSW) 10 at 9. So far as the first of these matters is concerned, the received doctrine is Breskvar v Wall (1971) 126 CLR 376 at 385–6: The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration. That which the certificate of [page 924]

title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor. Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what was the cause or reason for which the instrument is void. A logical consequence of this view is that if certificates of title to a dominant and servient tenement bear a notification that the former is entitled to the benefit of, and the latter is subject to the burden of, an easement, there should be no room for dispute as to the continued existence of the easement, a view which commended itself to the Full Court of the Supreme Court of Victoria (Irvine CJ, Mann J and Macfarlan J) in Webster v Strong [1926] VLR 509 and to Gillard J in Riley v Penttila [1974] VR 547. Despite this: 1.

2.

when the legislature came to amend the Conveyancing Act 1919 in 1930, it introduced the present s 89, which extends to both easements and restrictive covenants — whereas s 88 which it replaced was limited to restrictive covenants — and provided, inter alia, that the court might order that an easement be varied or extinguished if, inter alia, the person or persons entitled to the benefit of it had agreed to the easement being varied or modified, or if, by the acts or omissions of that person or of those persons, the easement ought to be considered to have been abandoned in whole or in part — the effect of this amendment — which was applied not only to Old System land but also to land under the Real Property Act — upon the indefeasibility principle had been remarked upon by Hutley JA in Pieper v Edwards [1982] 1 NSWLR 336 at 339; although, prior to that time, McLelland CJ in Equity had held (Re Standard and the Conveyancing Act 1919) that the doctrine of extinguishment by merger did not apply to easements registered under the Real Property Act 1900, when, in 1970, the legislature came to pass the Real Property (Amendment) Act 1970 it substituted the present s 47 for the former s 47, and, by including subs (7) provided the basis for an argument that, had it not done so, the doctrine of extinguishment by merger would have applied to easements registered under the Real Property Act 1900.

So far as the second matter is concerned, despite the fact that, in its original form, the Real Property Act was not intended to provide for the registration of any equitable interest in, or over, land registered under the Act; despite the fact that the doctrine which now, in an appropriate case, permits the enforcement of a covenant restrictive of the use of land against a purchaser of the servient tenement is one developed by the courts of equity; and despite the fact that, in its original form, the Real Property Act 1900 made no provision for the registration of such a covenant, or for the entry upon the Register of a notification of such a covenant: 1.

when it came to pass the Conveyancing Act 1919: (a) the legislature applied the original s 89 (the origin of the present s 88(1)) to land under the Real Property Act 1900; and (b) the legislature applied the former s 88 (the original of the present s 89, but

then limited to restrictive covenants) to land registered under the Real Property Act, grounds for an order extinguishing the benefit of a covenant — which order, [page 925] in order to be effective, in relation to land registered under the Real Property Act seemingly had to be lodged with the Registrar-General — including an agreement to discharge, or acts and omissions amounting to waiver; 2.

when it came to pass the Conveyancing (Amendment) Act 1930: (a) the legislature validated the practice of the Registrar-General — which had been questioned — of recording in the Register of restrictions as to the user of land registered under the Real Property Act 1900 (s 88(3)(a)); (b) the legislature provided (s 88(3)(b)) that notification should not give the restriction any greater operation than it would have under the instrument creating it, a clear indication, one would think, first, that restrictions not falling within the Tulk v Moxhay [(1848) 2 Ph 774; 41 ER 1143] principle would not run with the land; secondly, that, unless it could be demonstrated that there was a common building scheme (see Elliston v Reacher [1908] 2 Ch 374; see also Re Naish and the Conveyancing Act (1960) 77 WN (NSW) 892) earlier purchasers (or their successors in title) from a common vendor will not be permitted to enforce a restriction against later purchasers (or their successors in title) from the common vendor; and, thirdly, that, depending upon the proper construction of the covenant in question, in cases in which the original dominant tenement has later been subdivided, purchasers of lots in that further subdivision may not be permitted to enforce the restrictions against the original servient tenement: cf Drake v Gray [1936] Ch 451; Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; [1980] 1 All ER 371; (c) the legislature constituted such restrictions, when notified on the Register, as interests for the purposes of s 42 of the Real Property Act 1900, that is, as something to which the title of the registered proprietor was subject;

3.

when it came to pass the Local Government and Conveyancing (Amendment) Act 1964, which (inter alia) introduced the provisions of s 88B (which applies to both Old System land and to land registered under the Real Property Act 1900) into the Conveyancing Act 1919, and permitted the creation and, notification, of (inter alia) easements and restrictive covenants on the registration of a plan of subdivision and prior to sale, transfer or conveyance, the legislature, by including in s 88B the provisions of subs (3)(c)(ii), (iii), provided the basis for an argument that, had it not done so, the fact of common ownership would have prevented the creation of the easements or restrictions in the first place, and would have resulted in their immediate extinguishment even if validly created in the first place.

It seems to me that a guide to the resolution of the difficulties to which I have referred is provided by the views expressed by Mason J, as he then was, in Treweeke v 36 Wolseley Road Pty Ltd (1972–73) 128 CLR 274 at 301–2; see also Driscoll v Church Commissioners for England [1957] 1 QB 330; Re Ghey and Galton’s Application [1957] 2 QB 650 at 659–60 per Lord Evershed MR; Re Cook [1964] VR 808; Pieper v Edwards; cf Re Rose Bay Bowling and Recreation Club Ltd (1935) 52 WN (NSW) 77 that, even in cases in which the relevant jurisdictional facts have been shown to have been established, the Court retains a discretion to make, or to refuse to make, an order under s 89(1), or a declaration under s 89(3) of the Conveyancing Act 1919. If this be so, then, as it appears to me, while, in a case in which facts justifying a finding, at common law, that an easement has been abandoned or [page 926] extinguished, or that a restriction has been waived or extinguished, are shown to exist the relevant notification is susceptible to an order or declaration which would lead to its being removed from the Register, until it is removed from the Register the servient tenement remains subject to, and the dominant tenement retains the benefit of, the easement or restriction — to put it in another way, it is not the facts, as found, which remove the burden of the easement or restriction, but the administrative act — based on the appropriate order or declaration — of removing the notification from the Register. If, as I believe it to be, this is a correct assessment of the position, then one cannot but conclude that the doctrine of extinguishment by merger has no place in the law in so far as land registered under the provisions of the Real Property Act is concerned.

9.94 Questions Is the conclusion in Post Investments, that registration of the covenant gives the covenant no greater operation than under the instrument creating it, consistent with s 88(3)(b) of the Conveyancing Act 1919 (NSW)? The decision in Post Investments Pty Ltd is discussed in a note, (1993) 67 ALJ 296; Gray, Edgeworth, Foster and Dorsett, 628, [13.45]. Section 47(7) Real Property Act 1900 (NSW) now provides, following amendment in 2005: An affecting interest [‘affecting interest’ includes a restrictive covenant] (being an affecting

interest that benefits land) recorded in the Register shall not be extinguished solely by reason of the same person becoming proprietor of separate parcels of land respectively burdened and benefited by the affecting interest, notwithstanding any rule of law or equity in that behalf.

9.95

In Texaco Antilles Ltd v Kernochan [1973] AC 609; [1973] 2 All ER

118, the respondents sought to restrain the appellant from building a service station on its land, in breach of certain restrictions contained in the original conveyance to the appellant’s predecessors in title. Both the appellant and the respondents were successors in title to the C Co Ltd, which had held the fee simple in the burdened and the benefited land at an earlier date. It was argued that this unity of seisin had extinguished the restrictive covenants as between the owners of the land now held by the appellant and the respondents, although if a building scheme existed it would not cause the remainder of the scheme to collapse. The Privy Council held that the two pieces of land formed part of an area covered by a building scheme. Because of the existence of the scheme, the fact that at an earlier date both pieces of land had come into the same hands did not extinguish the restrictive covenants. Obviously at the date when the C Co Ltd owned both the burdened and benefited land, the company could not have brought an action against itself. However, that fact did not bring an end to the restrictions governing the relationship between the owners of the pieces of land. Since the burdened and benefited lands were now in separate hands the restrictions could be enforced by the respondents against the appellant. The parties to the transaction which brought an end to the unity of seisin could expressly or

impliedly agree that the restrictions would no longer apply between themselves, although such an agreement would

[page 927]

not relieve them from liability to other adjoining areas of land contained in the building scheme. No such agreement could be implied in this case.22

By agreement 9.96

On general principles, restrictive covenants may be extinguished by

agreement between the relevant parties. Where the instrument creating the covenant so provides, it appears that the power to release or modify a covenant may be conferred upon a third party having no interest in the land burdened or benefited and not being a party to the original creation of the covenants: Jones v Sherwood Hills Pty Ltd (SC(NSW), Waddell J, 8 July 1975, unreported) discussed in a Note, (1978) 52 ALJ 223.

By statute 9.97

All states except South Australia have made statutory provision for

the discharge or modification of restrictive covenants: NSW, s 89; Qld, s 181; Tas, s 84A; Vic, s 84; Transfer of Land Act 1893 (WA) s 129C (Torrens system land only); see also Land Titles Act 1980 (Tas) s 106(2). Generally, the power to discharge or modify is conferred on the court, although in Tasmania it is the function of the Recorder of Titles subject to a right of

appeal to the Supreme Court: Tas, ss 84F, 84G. The legislation in three states — New South Wales, Victoria and Western Australia — is in substantially similar form except in relation to the compensation provisions and the fact that in New South Wales and Western Australia the legislation extends to easements. In addition, in New South Wales the power of the court to modify or extinguish applies to positive covenants for maintenance or repair of the site of an easement imposed under s 88BA or imposed by the Crown, a statutory authority or a local council under Conveyancing Act 1919 (NSW) ss 88D(2) and 88E(2) or see s 89(1)(b). Additionally, NSW, s 89(5) clarifies that such a court order will bind anyone ‘entitled’ or ‘interested in’ enforcing the restriction, or who has an estate or interest in the previously burdened land. Broadly, state legislation follows the approach of the Law of Property Act 1925 (UK) s 84 before its amendment in 1969. For example, Vic, s 84 provides as follows: 9.98E

Property Law Act 1958 (Vic)

84 Power for Court to modify etc restrictive covenants affecting land (1) The Court shall have power from time to time on the application of any person interested in any land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon by order wholly or partially to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied — (a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or that the continued existence thereof would impede [page 928]

the reasonable user of the land without securing practical benefits to other persons or (as the case may be) would unless modified so impede such user; or (b) that the persons of full age and capacity for the time being or from time to time entitled to the benefit of the restriction whether in respect of estates in fee simple or any lesser estates or interests in the property to which the benefit of the restriction is annexed have agreed either expressly or by implication by their acts or omissions to the same being discharged or modified, or (c) that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction: Provided that no compensation shall be payable in respect of the discharge or modification of a restriction by reason of any advantage thereby accruing to the owner of the land affected by the restriction unless the person entitled to the benefit of the restriction also suffers loss in consequence of the discharge or modification nor shall any compensation be payable in excess of such loss; but this provision shall not affect any right to compensation where the person claiming the compensation proves that by reason of the imposition of the restriction the amount of consideration paid for the acquisition of the land was reduced. (2) The Court shall have power on the application of any person interested — … (d) to declare whether or not in any particular case any land is affected by a restriction imposed by any instrument; or (e) to declare what upon the true construction of any instrument purporting to impose a restriction is the nature and extent of the restriction thereby imposed and whether the same is enforceable and if so by whom.

9.99

The legislation in force in New South Wales and Western Australia

makes no provision for the payment of compensation by the applicant to any person suffering loss in consequence of the order. NSW, s 89(1A) also adds that easements may be treated as abandoned if unused for at least 20 years before the application to the court is made. 9.100

Perhaps the most interesting legislative initiative for the discharge

of covenants has been recommended by the Victorian Law Reform Commission in Easements and Covenants, Final Report 22, 2011. Recommendation 36 provides: ‘A restrictive covenant that is recorded by the Registrar after a specified date must be for a defined period of time not

exceeding 20 years’. The Commission did not recommend that the proposed legislative reform should be retrospective. What are the advantages in a sunset provision of 20 years or less for the legal enforcement of private covenants? Should valuable property rights be lost by default after 20 years duration? Should provision be made for the owners of the benefited land to apply for an extension of the duration of a covenant? 9.101

In England, the grounds for the modification and discharge of

restrictions are set out in s 84(1)(1A)–(1C) of the Law of Property Act 1925. The legislative provision followed the publication by the English Law Commission of Report on Restrictive Covenants, 1967, Law Com No 11, which suggested changes in the drafting of s 84 in its then form. In Making

[page 929]

Land Work: Easements, Covenants and Profits à Prendre, Law Com No 327, 2011, the commission recommended no change to the law regarding restrictions. However, in view of its support for the legal creation of positive obligations (see 9.44) the commission recommended that the appropriate tribunal should have power to modify or discharge a positive land obligation or reciprocal payment obligation if, ‘as a result of changes in circumstances, performance of the obligation has ceased to be reasonably practicable or has become reasonably expensive’: paras 7.69–7.70. In 2016, the Government announced it would bring forward a draft law of property bill to give effect to the Law Commission’s recommendations.

9.102

Queensland and Tasmania followed the form of the 1969 English

legislation. Thus, Qld, s 181(1)(b) permits modification or discharge if the court is satisfied: 9.103E

Property Law Act 1974 (Qld)

181 Power to modify or extinguish easements and restrictive covenants (1) … (b) that the continued existence of the easement or restriction would impede some reasonable user of the land subject to the easement or restriction, or that the easement or restriction, in impeding that user, either — (i) does not secure to persons entitled to the benefit of it any practical benefits of substantial value, utility, or advantage to them; or (ii) is contrary to the public interest, and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the extinguishment or modification.

9.104

In Ex parte Melvin [1980] Qd R 391 it was held that the words ‘or

that easement or restriction’ should be read as ‘and that easement or restriction’, so that it must be demonstrated that the restriction both impedes the reasonable user of land and satisfies the grounds in either (i) or (ii). The Tasmanian provision makes this clear: see Tas, s 84C(1)(c), (6); cf also Vic, s 84(1)(a). The Queensland and Tasmanian legislation permits the award of compensation where an order is made for extinguishment or modification of an easement or covenant: Qld, s 181(4); Tas, s 84C(7). Perhaps the most important change effected by the Queensland and Tasmanian legislation is that planning matters may now be a basis for granting an application for extinguishment or modification. Section 84C(1)(c) of the Tasmanian legislation permits modification or extinguishment where: ‘[T]he continued

existence of the interest would impede a user of the land in accordance with an interim order or planning scheme, or, as the case may be, would, unless modified, so impede such a user.’ Section 181(4) of the Queensland legislation takes the slightly different approach of requiring the court to take planning matters into account in determining whether the covenant is absolute or the alternative grounds in s 181(1)(b) are satisfied. 9.105

In most states, town planning considerations have little importance

in determining whether a covenant should be modified or extinguished. In Kort Pty Ltd v Shaw [1983] WAR 113 the Supreme Court of Western Australia held that it had no power to extinguish a restrictive covenant which restricted development on land to a single residence, because none of the statutory grounds had been satisfied. The covenant had been imposed prior to any planning

[page 930]

controls over the land. The plaintiff wished to consolidate two blocks of land (one of which was not subject to the covenant) and erect five residential units. The development was permitted by the planning scheme and had been approved by the local council. Burt CJ commented (at 115) that ‘in the result, a decision made by a private developer many years ago may frustrate the objects now sought to be obtained by town planning schemes made under the Act’.

9.106

The principles to be applied in the exercise of the statutory

jurisdiction to modify or discharge covenants are conveniently summarised in Vrakas v Registrar of Titles, extracted below. 9.107C

Vrakas v Registrar of Titles [2008] VSC 281 Supreme Court of Victoria

Kyrou J: The principles that govern an application to discharge or modify a restrictive covenant under s 84 of the PL Act may be summarised as follows. Section 84(1)(a) has two limbs. In essence, the first limb is that, due to changes in the character of the property or neighbourhood or other circumstances, the covenant is obsolete, and the second limb is that the covenant’s continued existence would impede the reasonable user of the land without practical benefits to other persons. An applicant need only establish one of these limbs in order to have a right to a remedy under s 84(1) (a), subject to the court’s residual discretion. In relation to the first limb of s 84(1)(a), what is the ‘neighbourhood’ must be determined as at the date of the hearing, rather than the date of the covenant. What is the ‘neighbourhood’ is a question of fact. A covenant is ‘obsolete’ if it can no longer achieve or fulfil any of its original objects or purposes or has become ‘futile or useless’. A covenant is not obsolete if it is still capable of fulfilling any of its original purposes, even if only to a diminished extent. The test is whether, as a result of changes in the character of the property or the neighbourhood, or other material circumstances, the restriction is no longer enforceable or has become of no value. If a covenant continues to have any value for the persons entitled to the benefit of it, then it will rarely, if ever, be obsolete. A covenant could be held to be not obsolete even if the purpose for which it was designed had become wholly obsolete, provided that it conferred a continuing benefit on persons by maintaining a restriction on the user of land. Strictly speaking, the inquiry is as to whether the restriction of user created by the covenant is obsolete, rather than as to whether the covenant itself is obsolete. In relation to the second limb of s 84(1)(a), to establish that a covenant would impede the reasonable user of the land, it must be shown that ‘the continuance of the unmodified covenants hinders, to a real, sensible degree, the land being reasonably used, having due regard to the situation it occupies, to the surrounding property, and to the purpose of the covenants’. Whether this is so is essentially a question of fact. It is not sufficient merely to show that the continued existence of the covenant would impede a particular reasonable use which is proposed by the applicant. The applicant must show that the restriction will impede all reasonable uses. ‘Practical benefits’ within the meaning of the second limb of s 84(1)(a) are any real benefits to a person entitled to the benefit of a restrictive covenant and are not limited to the sale value of the land benefited by the covenant.

[page 931] It must be established that the covenant is not necessary for any reasonable purpose of the person who is enjoying the benefit of it. If a relaxation of the restriction imposed by a covenant would be likely to lead to further applications of a similar nature, resulting in a detrimental change to a whole area, this ‘precedential’ effect may be relevant in determining whether the restriction secures any practical benefits. Whether there are any practical benefits to other persons is a question of fact. In relation to s 84(1)(c), the test for whether a discharge or modification of a covenant would ‘substantially injure’ a person entitled to the benefit of the covenant is similar to that in relation to ‘practical benefits’ in the second limb of s 84(1)(a). Section 84(1)(c) requires a comparison between the benefits initially intended to be conferred and actually conferred by the covenant, and the benefits, if any, which would remain after the covenant has been discharged or modified — if the evidence establishes that the difference between the two (that is, the injury, if any) will not be substantial, the ground in s 84(1)(c) is made out. The injury must not be unsubstantial, and must be real and not a fanciful detriment. It is not enough for the applicant merely to prove that there will be no appreciable injury or depreciation in value of the property to which the covenant is annexed. A lack of specific plans makes it more difficult for an applicant to show that there will be no substantial injury to persons entitled to the benefit of a covenant. The prospect that, if the application for the discharge or modification of a covenant were granted, that might be used to support further applications in a similar vein, may be relevant. Such ‘precedent value’ may, in an appropriate case, of itself be a factor demonstrating that an applicant fails to establish the requirements in s 84(1)(c). Whether a person entitled to the benefit of the covenant would be substantially injured within the meaning of s 84(1)(c) is a question of fact. Town planning principles and considerations are not relevant to the Court’s consideration of whether an applicant has established a ground under s 84(1). The applicant has the onus of establishing the matters set out in a limb of s 84(1)(a), or in s 84(1)(c), upon which he or she relies. In relation to s 84(1)(c), this means that the applicant must effectively prove a negative. The absence of objectors to the discharge or modification of a covenant will not, in itself, necessarily satisfy the onus of proof. Each case must be decided on its own facts. Even if the matters set out in a limb of s 84(1)(a), or in s 84(1)(c), are proved by the applicant, the Court has a discretion to refuse the application. Town planning principles and considerations may be relevant to the exercise of the Court’s residual discretion. ‘Precedential’ issues similar to those discussed above may also be relevant in the exercise of that discretion. In Stanhill Pty Ltd v Jackson, Morris J, after considering the ordinary grammatical meaning of s 84(1), the history of the provision and the provision’s policy basis, departed from what he described as the narrow traditional approach to s 84(1) in favour of a more

‘robust’ interpretation of the provision and indicated that, in his view, ‘some of the restrictions adopted in earlier cases are without justification’. In essence, his Honour held: in relation to the first limb of s 84(1)(a), that ‘obsolete’ should be given its ordinary meaning of ‘outmoded’ or ‘out of date’ (rather than meaning something that is futile or wholly unable to achieve its original purpose); in relation to the second limb of s 84(1) (a), that ‘the reasonable user of the land’ means a user of the land acting reasonably, with what is reasonable to be gleaned [page 932] from current attitudes and circumstances (including town planning issues), ‘impede’ means to retard, obstruct or hinder (and does not mean ‘prevent’), and ‘practical benefits’ are actual benefits having substance rather than purely theoretical or trifling benefits; and, in relation to s 84(1)(c), that it must only be shown that any harm caused to a person entitled to the benefit of a covenant would not be of real significance or importance. In the recent decision of Fraser v Di Paolo, Coghlan J referred to, but found it unnecessary to express a settled view about Morris J’s comments. In this case, I apply the longstanding principles to the interpretation of s 84(1). I note, however, that had I applied Morris J’s interpretation of s 84(1) (which has much to commend it), the result would have been the same.

9.108

Kyrou J referred to the approach to s 84 taken by Morris J in

Stanhill Pty Ltd v Jackson which arguably adopted a more liberal and robust approach. In Prowse v Johnstone [2012] VSC 4, Cavanough J stated at 99: I say nothing about whether, as a matter of planning policy or other public policy, there is anything to commend Morris J’s interpretation of s 84(1) in Stanhill Pty Ltd v Jackson, insofar as Morris J departed from the long standing principles relating to the interpretation of that provision. In my view, the long standing principles should be followed by single judges of this Court unless and until the Court of Appeal or the High Court rules otherwise. To the extent that Morris J relied upon the decision of the Full Court of the Federal Court in Morpath Pty Ltd v ACT Youth Accommodation Group Inc, I do not consider that his Honour was justified. The subject matter and the language of the statute in question in Morpath was quite different from that of s 84 of the Act. The statute related to leases in the ACT …

9.109

For the approach of other Australian courts to the legislation, see Re

Naish and the Conveyancing Act (1960) 77 WN (NSW) 892; Re Gross and the Conveyancing Act [1965] NSWR 887; Re Callanan [1970] 2 NSWR 127; Re Markin [1966] VR 494; Wall v Australian Real Estate Investment Co Ltd [1978] WAR 187; Bradbrook and Neave, 568ff [19.50ff]. See also Webster v Bradac (1993) 5 BPR 12,032. In that case the plaintiffs sought an order under s 89(1)(c) of the Conveyancing Act 1919 (NSW) for the modification of a restrictive covenant in order to enable them to establish a church on the servient land. The order for modification was refused. The court held that the kind of injury contemplated by the phrase ‘substantially injure’ in s 89(1)(c) is injury to the relevant person in relation to their interest in the land benefited. The injury may be of an economic kind (for example, reduction in the value of the land), a physical kind (for example, increased traffic and noise) or an intangible kind (for example, impairment of views and reduced privacy; subjective tastes and preferences of individuals may, within reasonable limits, give rise to injury). A person may be injured within the meaning of s 89(1)(c) notwithstanding that his or her land may increase in value as a result of the modification of the covenant. The establishment of a church on the land would result in regular activities being held on the land which would be likely to impinge on the peace and quiet of the immediate area.

Restrictive covenants and the Torrens system 9.110

The Torrens legislation in all states expressly prohibits the entry of

trusts upon the register. Since restrictive covenants are equitable interests it

would appear that, in the absence of specific legislation, the appropriate means of protecting them would be to lodge a caveat,

[page 933]

although doubts have been expressed as to whether this procedure is open: cf Barber, ‘Restrictive Covenants and the Real Property Acts of Queensland’ (1970) 2 ACLR 85. Early in the history of the Torrens system the registrars in some states adopted the practice of noting restrictive covenants on the certificate of title of the burdened land. This was done without specific legislative authorisation. The validity of such notifications was later questioned in Victoria (Re Dennerstein [1963] VR 688) and New South Wales: Re Martyn (1965) 65 SR (NSW) 387; [1965] NSWR 80; see also Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227; 9.34C. The registrars’ practice was given belated recognition in New South Wales and Victoria: Conveyancing (Amendment) Act 1930 (NSW) s 19; Transfer of Land Act 1954 (Vic) s 72. All states except South Australia now permit the notification of restrictive covenants upon the Torrens register: NSW, s 88(3); Land Title Act 1994 (Qld) s 97A (only if the covenantee is the state or a local government); Land Titles Act 1980 (Tas) s 102; Transfer of Land Act 1958 (Vic) s 88(1); Transfer of Land Act 1893 (WA) s 129A. 9.111

The legislation gives rise to a number of difficult policy questions.

The provision authorising notification of restrictive covenants on the register does not elevate them to legal interests to which indefeasibility of title

attaches in the usual way. The result is that restrictive covenants appearing on the register are in a rather peculiar position. If the covenant is not noted upon the register it appears that the principle of indefeasibility of title will apply to protect a purchaser of the burdened land against the enforcement of the covenant. In the absence of fraud, formal notice of the existence of the covenant will not make it enforceable: Christie v Dalco Holdings Pty Ltd [1964] Tas SR 34; Norton v Kilduff [1974] Qd R 47. If the covenant is noted upon the register it will bind a purchaser of the burdened land provided that some person is in a position to enforce the covenant. However, in considering whether an action can be brought to enforce the covenant, some difficulty arises in determining the extent to which the equitable rules governing the passing of the benefit should apply to land under the Torrens system. The purpose of the Torrens register is to provide a means by which a prospective purchaser of land can discover the full nature and extent of the interests affecting that land without having to undertake inquiries outside the register. But to discover whether the benefit of a restrictive covenant has passed by express assignment or by operation of the building scheme doctrine may require the purchaser of the burdened land to undertake such inquiries. In Re Dennerstein [1963] VR 688 this problem led the Supreme Court of Victoria to modify the application of the building scheme doctrine to land under the Torrens system. 9.112

The recent English tendency to liberalise the technical requirements

for the transmission of the benefit of restrictive covenants also gives rise to some problems. For example, the decisions allowing extrinsic evidence to identify the land benefiting from a covenant, assuming they would be

followed in Australia in relation to general law land, pose special problems for the Torrens system. A requirement that a purchaser make inquiries outside the register to ascertain the identity of the benefited land undermines the policy of the system: see the comments of Bray CJ in the Clem Smith case; 9.34C. In Siemenski v Brooks Nominees [1990] Tas R 236 at 244, Zeeman J held that a covenant noted on the register was not a valid notation within the meaning of s 102(2)(a) of the Land Titles Act 1980 (Tas) for the purpose of providing notice of the covenant so that the burden of the covenant ran with the land. This was for the reason that there was no reference in the relevant folio of the register comprising the subject land which either directly or indirectly led to the instrument creating the covenant.

[page 934]

9.113

In South Australia, no provision is made for the notification of

restrictive covenants upon the register. If such a notification was made, its validity would depend upon whether the court took the view that it was impliedly authorised by the legislation. These issues are discussed in Re Dennerstein [1963] VR 688 and Re Martyn (1965) 65 SR (NSW) 387; [1965] NSWR 80, which were concerned with the position in Victoria and New South Wales before the enactment of legislation authorising notification. In the absence of notification, or if notification is regarded as unauthorised, it would seem that the principle of indefeasibility prevents the enforcement of restrictive covenants against purchasers from the covenantor. As appears from the Clem Smith case (1978) 20 SASR 227, in South Australia the device of

registering memorandum of encumbrance securing a nominal rent charge and containing restrictive covenants has been used to ensure that the existence of a covenant can be discovered from the register. In Blacks Co Ltd v Rix [1962] SASR 161, Napier J held that a covenant contained in a registered encumbrance was enforceable against a person who had purchased the land from the covenantee. The correctness of this decision was left open in the Clem Smith case, although the view was expressed that the fact that the restrictive covenant was contained in a registered encumbrance did not mean that the interest derived from the covenant was itself registered or noted on the certificate of title: (1978) 20 SASR 227 at 254 per Zelling J. Before provision was made for the notification of restrictive covenants on the register in Queensland there developed a common practice of registering a bill of encumbrance charging the land with an annual sum, which is reduced to a nominal figure if the covenants contained in the encumbrance are observed. Although Pt 6 Div 4A of the Land Title Act 1994 (Qld) now allows registration of an instrument of covenant, this only applies where the covenantee is the state or a local government and therefore this practice will presumably continue in relation to covenants which cannot be noted on the title. Further, such covenants are unenforceable if in conflict with planning schemes made under the Sustainable Planning Act 2009 (Qld), according to s 87 of that Act. As in South Australia, the effect of this device is uncertain. For a more detailed discussion, see Bradbrook and Neave, 450ff [17.60ff]. In the absence of such protection the registered proprietor who obtains that position without fraud will not be bound by a restrictive covenant which would otherwise affect the relevant land: Ryan v Brain [1994] 1 Qd R 681.

9.114C

Vrakas v Mills (2007) V ConvR 54-733; [2006] VSC 463 Supreme Court of Victoria

[The plaintiffs applied under s 84(1) Property Law Act 1958 (Vic) for a whole or partial discharge of a restrictive covenant burdening their land. Hargrave J decided that a scheme of development did not apply to the land but even if it had done so, the plaintiffs had purchased the land without notice of any such scheme and were not affected by it.] Hargrave J: Notice The plaintiffs’ land is under the operation of the Transfer of Land Act 1958 (Vic). In these circumstances, it was submitted on behalf of the plaintiffs that, notwithstanding the existence of a scheme of development, the only persons entitled to enforce the restrictive covenant against them remain Mr and Mrs Smart, and also the current owners of the lands previously comprised in Lots 311, 340 and 342 of the Robinson subdivision. It was submitted that [page 935] this result follows because the plaintiffs purchased their land subject only to the restrictive covenant notified on the certificate of title. That notification contains no reference to a building scheme. Nor does it give any notice that the restrictive covenant is for the benefit of all of the lands previously comprised in the Robinson subdivision. In Re Dennerstein [1963] VR 688 Hudson J considered an application under s 84 of the Act for a declaration as to whether or not the applicant’s land was affected by a restrictive covenant imposed in the original transfer of land from the head title of a subdivision. In an earlier decision, another judge had found that the restrictive covenant in question was invalid because the benefit of it was not annexed to any land; it was simply a covenant in favour of named persons and their executors, administrators and transferees. The objectors sought to contend that there was a scheme of development affecting the land. Hudson J found that there was a scheme of development. However, as there was no notice in the Register that the restrictive covenant arose under a scheme, or as to the identity of the land to which the benefit of the scheme was to be annexed, Hudson J decided that the plaintiff was not bound by the restrictive covenant. In Re Dennerstein, it was submitted on behalf of the objectors that from the transfer it would appear that the land was transferred out of a certificate of title which comprised an area of land known as the ‘Como’ estate, that from an inspection of the lodged plan of subdivision of this estate the lots therein could be identified and by searches of the transfers of those lots, it could be ascertained as a matter of reasonable inference that the transfers were made pursuant to a common building scheme and what were the lands

affected thereby and subjected to the burden and entitled to the benefit of the restrictions imposed by the scheme. This argument was firmly rejected by Hudson J in the following terms: In my view, a purchaser of land under the Transfer of Land Act is not bound to prosecute inquiries and searches and make deductions such as would be involved if Mr Searby’s contentions were accepted. Even when all the materials and evidence in relation to the circumstances under which an estate has been subdivided and sold are available it is not by any means easy to determine whether the sale of allotments in the estate has been made under or pursuant to a common building scheme. To require a person interested in purchasing one of those allotments to make this determination after obtaining the necessary evidence perhaps years after the original sale if it is available would render conveyancing a hazardous and cumbersome operation, and, in the case of dealings in land under the operation of the Transfer of Land Act, would defeat the object of the Act and destroy in large measure the efficacy of the system sought to be established thereby. I have reached the conclusion that, even assuming there is power under the Act to notify as encumbrances on a certificate of title restrictions arising under a building scheme, such a notification will not be effective to bind transferees of the land unless not only the existence of the scheme and the nature of the restrictions imposed thereunder, but the lands affected by the scheme (both as to the benefit and the burden of the restriction) are indicated in the notification, either directly or by reference to some instrument or other document to which a person searching the register has access. In the present case these requirements are not satisfied. The covenants contained in the instrument of transfer notified as an encumbrance, though they certainly set out the restrictions, give no indication that they arose under a building scheme, nor of the land to which the benefit thereof was intended to be annexed, under such a scheme. The applicant, therefore, had no notice of the existence of the scheme or of the restrictions imposed thereby. She did have notice that the covenants contained in the instrument of transfer had been entered into by [page 936] her predecessor in title but those covenants as she had no doubt been advised are no longer enforceable by any person and, therefore, she took her transfer free of the restrictions contained therein and is entitled to a declaration accordingly [at 696–7]. It is apparent from the above passage from Re Dennerstein that, in order to bind a transferee of land registered under the Transfer of Land Act with a restrictive covenant arising under a scheme of development, it is necessary for the notification in the Register to give notice of: the existence of the scheme; the nature of the restrictive covenant; and the identity of the lands affected by the scheme, both as to the benefit and the burden of the restriction. Further, it is necessary that this notice is given in the certificate of title, either directly or by reference to some instrument or other document to which a person searching the Register has access.

In this case, there is no issue that the plaintiffs were on notice of the nature of the restrictive covenant. The restrictive covenant is contained in the two instruments of transfer which are recorded as encumbrances on the certificate of title to the plaintiffs’ land. However, the form of the restrictive covenant does not make any reference to the existence of a scheme of development or as to the lands affected by it. Notwithstanding this, it was submitted on behalf of the defendants that the plaintiffs had sufficient notice of a scheme and of the lands affected by it. It was submitted that there are numerous documents indicating the existence of a scheme available from a search of the Register, including: (1) the Robinson plan of subdivision; (2) the Robinson head title; (3) each title created out of the Robinson head title; and (4) the 56 transfers of land out of the Robinson head title, each containing an identical restrictive covenant. Further, reliance was placed upon other extrinsic evidence such as the joint advertisement for the sales of lots in the Robinson subdivision and Freer-Smith subdivision and the form of the contract of sale used by the common solicitor representing the owners of each subdivision. I do not accept these submissions. They are to the same effect as the submissions made in Re Dennerstein on behalf of the objectors, which were rejected. For the reasons stated in Re Dennerstein, they should be rejected here also. In the alternative, it was submitted on behalf of the defendants that the decision in Re Dennerstein is wrong and I should decline to follow it. In this regard, reliance was placed upon some criticisms of Re Dennerstein by Gillard J in Fitt v Luxury Developments [2000] VSC 258. In that case, the restrictive covenant was expressed to be in favour of the vendor and his assigns ‘of so much of the land described in [the head title] as is represented by the Lots on the said Plan of Subdivision other than the land hereby transferred and every part thereof.’ Furthermore, in that case, the plan of subdivision contained a notation on each page in the following form: ‘All Lots on P/S8402 are Affected by a Building Scheme.’ In these circumstances, it was clear that the Register contained full notice of both the fact that a building scheme was asserted and of the lands affected thereby, being all of the lands comprised in the plan of subdivision. In these circumstances, it was unnecessary for Gillard J to decide whether he was bound to follow Re Dennerstein, because the notice required by it had been given. However, by way of obiter dicta, Gillard J expressed some disapproval of Re Dennerstein. In my opinion, when analysed for their full effect, Gillard J’s criticisms of Re Dennerstein do not assist the defendants in this case. This is because those criticisms are limited to the necessity for giving notice of the existence of a building scheme. On my reading, Gillard J’s comments do not contain any criticism of the requirement stated in Re Dennerstein that notice must be given of the identity of the lands affected by the building scheme. Indeed, Gillard J reaffirmed the need to give notice of the lands affected. First, Gillard J expressed the view that ‘there is a strong argument that the decision [in Re Dennerstein] is wrong in respect to a requirement that information in the Register must establish the building scheme’s [page 937] existence’ [at [305]]. Second, in respect of the requirement to identify the lands affected

by a building scheme, Gillard J said: ‘I do not wish to make any observation in respect to that requirement.’ Third, Gillard J expressed his conclusion in the following way: In my view there is a very strong argument that the recording must make it clear that there is a restrictive covenant, identify the land to be benefited and set out the restrictions and other questions concerning the basis upon which it is said to be valid and enforceable are matters for the Court and not required to be part of the information in the Register of Land. As I have said, the restrictive covenant affecting the plaintiffs’ land does not contain any notice that the covenant is for the benefit of all of the owners of the land previously comprised in the Robinson subdivision. As a result, there is no notice of the lands affected by the building scheme contended for by the defendants. Accordingly, whether or not Gillard J’s criticisms of the requirement to give notice of the existence of a scheme are correct, the plaintiffs are unaffected by the scheme relied upon by the defendants.

9.115 Questions 1.

Does Vrakas v Mills hold that there are no circumstances under which the common law doctrine of the building scheme applies to land under the Torrens system? If not, where a common building scheme is envisaged, how should the covenants be framed?

2.

What is the point of difference between the reasoning expressed by Hargrave J and that of Gillard J in Fitt v Luxury Developments?

3.

The Transfer of Land Act 1958 (Vic) s 88 provides, following amendment in 2009, as follows (emphasis added): (1) The Registrar has the power, and is taken to have always had the power, to record on a folio of the Register — (a) a restrictive covenant affecting the parcel or parcels of land to which the folio of the Register relates, if all of the registered proprietors of the land to be affected by

the covenant agree to the creation of the restrictive covenant; and (b) subject to subsections (1AA), (1AB) and (1AC), any instrument purporting to vary or release the operation of a restrictive covenant. … (3) Apart from the operation of Part III a recording in the Register of any such restrictive covenant charge, easement or right shall not give it any greater operation than it has under the instrument or Act creating it. Does Vic, s 88 elevate registered restrictive covenants into legal interests? Did s 88 alter the previously existing law in relation to building schemes as expressed in Re Dennerstein?23

[page 938]

9.116C

Re Louis and the Conveyancing Act [1971] 1 NSWLR 164 Supreme Court of New South Wales

[The applicant, Louis, was the registered proprietor of certain land at Vaucluse, near Sydney, being lot 68 on Deposited Plan No 9328. This land was part of a larger area subdivided shortly before 1 July 1920. All lots in the subdivision were subject to restrictions imposed by the transferors. The applicant sought a declaration as to whether the restrictive covenant notified on the certificate of title to lot 68 was enforceable and, if so, by whom. He also sought orders extinguishing or modifying the covenant (assuming it to be enforceable) so as to permit the

further subdivision of lot 68 into two separate lots. The application was referred to a court of three judges pursuant to the Equity Act 1901 (NSW) s 6. The court was asked to assume that the subdivision complied with the requirements of a building scheme for the purpose of considering the application. Deposited Plan No 9328 contained a large number of lots, of which 10 were transferred to purchasers prior to the coming into operation of the Conveyancing Act 1919 on 1 July 1920 and 37 were transferred after that date. The 10 early transfers included covenants which did not indicate the land to which the benefit of the restrictions was appurtenant. The 37 later transfers did specify the land to which the benefit of the restrictions was appurtenant. The original transfer of lot 68, which was executed on 15 September 1922, described the land benefiting from the covenant over the lot as being each and every part of the land in the deposited plan. At the date of execution of the transfer, the 10 early transfers had been registered together with 20 of the later set of transfers.] Jacobs JA: … [O]f the objectors to the present application at least six … take title from a transferee whose transfer was executed on the same day as or subsequently to the transfer of the applicant’s land. Since all these transfers are subsequent to and comply with the requirements of what was then s 89 of the Conveyancing Act 1919 then certainly they come within s 88(3) of the present Act and, subject to any special matter which may be raised because of any lack of reciprocity, may be enforced by the proprietors of those lands against Mr Louis, whether or not a building scheme either existed or was effective. These objectors do not need the assistance of the equitable doctrine of the building scheme; they have the benefit of restrictions arising from covenants which run with the land at law. All they need is the application in equity of the rule in Tulk v Moxhay (1848) 1 H & Tw 105; 47 ER 1345, so that Mr Louis’ land will be burdened even though Mr Louis was not the original covenantor. To this extent it may be said that the present preliminary question cannot in any event resolve all the matters arising under the summons, which also seeks orders for extinguishment or modification of the restrictions. However, it is desirable that it be known by whom the restrictions are enforceable (s 89(3)) and therefore it is desirable that the particular questions asked on this application be dealt with as far as is necessary and convenient so to do … The questions, generally speaking, are concerned with the meaning and application, particularly to land under the provisions of the Real Property Act, of s 88 of the Conveyancing Act 1919. The original 1919 section which dealt with restrictive covenants affecting land was s 89. This section was as follows: (1) No purchaser of any land shall be affected by any covenant restrictive of the use of the land contained in any instrument coming into operation after the [page 939]

commencement of this Act unless the instrument containing such covenant clearly defines — (a) the land to which the benefit of the covenant is intended to be appurtenant; and (b) the land which is to be subject to the burden of such covenant; and (c) the persons (if any) by whom or with whose consent the covenant may be released, varied, or modified. (2) This section applies to land under the provisions of the Real Property Act, 1900. In 1930 this section was repealed and a new s 88 was introduced … The objectors, other than those to whom I have already specifically referred, depend upon the existence of a building scheme to give them the benefit of the covenant, and the question is whether the doctrine of the common building scheme can apply to land under the provisions of the Real Property Act. The subject is a difficult one but I state my conclusion at the outset — Yes, provided the restriction purports to be created by an instrument and that instrument, upon which the notification of the restriction in the register is based, indicates the land to which the benefit of the restriction is intended to be appurtenant and all the other terms of the restriction, including the persons (if any) intended to have the right to release, vary or modify the restriction and the persons (if any) whose consent to a release, variation or modification of the restriction is intended to be stipulated for. I have previously expressed the view that sub-s (3) of s 88 can only apply in order to subject land under the Real Property Act to the burden of a restriction when the instrument purporting to create the restriction describes the land to which the benefit of the restriction is appurtenant. I adhere to that view. I do not regard sub-s (3) as intended to permit the notification upon the register of restrictions which were wholly ineffectual at common law except between the immediate parties thereto, and which do not satisfy the terms of s 88(1). If at common law the land intended to be benefited was not described, it could not be said that the essential conditions of annexure at common law were complied with. The instrument must show an intention that the benefit of the covenant was intended to pass to the holders of certain land and if the land was not described this condition could not be fulfilled. Thus Elphinstone, Covenants Affecting Land (1946) p 49, could state as the fourth essential condition for the benefit of a restrictive covenant to be capable of passing by conveyance that the land intended to be protected should be described by the instrument creating the covenant so as to be ascertainable with reasonable certainty. Therefore, in the present case the covenants which were entered into without describing the land intended to be benefited could not be construed at law as intended to be for the benefit of any land and this was as true in the years preceding July 1920 as it was true after 1920 when the original section was enacted. There was, however, always the equitable doctrine of the common building scheme. That doctrine was concerned with notice of a vendor’s intention and not with the existence of a covenant in actual fact. It is possible to envisage a case where there was never one covenant contained in a conveyance and yet there might be a common building scheme, because purchasers purchased on the basis that there would be such covenants. If they did so then the obligations of the proposed covenants would be enforceable between all the parties concerned, including the common vendor. No such case, so far as I know, has ever existed. The usual and the significant case of the common building

scheme is where equity permits an owner of land to have the benefit of a covenant of which he was intended to have the benefit, but of which [page 940] under the principles of the common law he could not have the benefit. Under the common law the benefit could only enure for subsequent purchasers and an earlier purchaser would be bound by the burden of a covenant which he had entered into with the vendor and the various purchasers from the vendor but could not obtain a reciprocal benefit. Therefore, by the doctrine of the common building scheme, by way of extension of the rule in Tulk v Moxhay, equity intervened in order to declare that, provided that the intention existed at the time of the original sales from the common vendor, the earlier purchasers should not only be bound by the covenants of the common scheme vis-à-vis the later purchasers but should have the benefit of the covenants which the later purchasers would in the ordinary case or should in the rare case have entered into with the common vendor. The doctrine of the common building scheme could also be applied where the form of the covenants was ineffectual to annex the benefit at common law. It is to this part of the doctrine that recourse would be had in respect of a covenant such as is found in the earlier transfers in the present application. These covenants would be ineffectual to create restrictions appurtenant to the land because the land to be benefited was not described. However, covenants to the like effect could create restrictions under a common building scheme provided that they were supplemented extrinsically by the additional matters necessary in order to constitute a good scheme. The land is then burdened with the restriction in favour of all the other land in the scheme, provided the original purchaser took with the requisite knowledge of the scheme and provided all subsequent purchasers took with notice of the scheme. The validity of any particular restriction would cease when the lot was acquired by the purchaser of a legal estate for value without notice of the scheme. It therefore appears that there are two different ways in which it may be necessary to invoke the doctrine of the common building scheme. One of these is when there were the requisite intention and the necessary steps taken and the necessary notice in the relevant parties but the documentation was either non-existent or inadequate. The second is where there were the necessary intention and the necessary steps taken and the necessary knowledge and where the documentation was quite adequate to give those entitled at law to the benefit of a restriction the right to enforce it, but where the benefit at law could not be enjoyed by the earlier purchasers in respect of land subsequently sold by the vendor. It was to meet the latter type of case that the doctrine of the building scheme in equity was primarily developed. Therefore, the ordinary case of a building scheme would involve covenants the benefit of which enured in favour of subsequent purchasers by operation of the doctrine in equity of the common building scheme. Therefore, in any particular case it could not be said that a particular restriction was a restriction which took its validity only from a common building scheme or only by operation of law. Generally any particular restriction would be annexed to some of the land at law because the latter land was subsequently transferred by the vendor who had

taken the original covenant and by operation of the common building scheme doctrine in equity in respect of the earlier transferees or conveyees from the vendor. It is against this background that I approach the question whether s 88 is appropriate in all or any circumstances to enable a registered proprietor who has not and cannot have the benefit of the covenant at law to enforce that covenant in equity by reliance on the doctrine of the common building scheme. It is necessary in order to amplify this conclusion to consider the scope and intent of s 88(1) generally and then to consider its application by s 88(3) to land under the Real Property Act. Section 88 deals only with the benefit and burden of restrictions under equitable doctrine in that it deals, so far as burden is concerned, only with the burden or enforceability of the restriction against a person who is not a party to the creation of the restriction. There could be no such burden at law. [page 941] In respect of restrictions expressed in instruments, s 88 imposes conditions of validity, but it does not otherwise deal with validity. It takes the instrument as it is drawn with the intention revealed by the instrument, but without regard to the effectiveness in law or equity of that intention. It is concerned with form, not with substance. The words ‘intended to be annexed’ in my opinion refer to the expression of the intention, not to the effectiveness of that intention. The substantial effectiveness remains a matter of the general principles of law and equity. That is why the words ‘intended to be annexed’ are so important and I regret that in my judgment in Re Pirie and the Real Property Act (1961) 79 WN (NSW) 701 at 704, I did not italicise these words and the words ‘intention to annex’ there appearing or otherwise indicate the importance which I attached to them. If I had, a number of misunderstandings of my words would have been avoided. Since s 88(1) deals with intention disclosed by indications in the instruments, the words ‘is appurtenant’ in s 88(1)(a) do not in my opinion refer to intrinsic validity of the annexation or appurtenance but to the intention disclosed by the instrument. Of course in many situations if the intention to annex fails to any extent, so that the benefit of the restriction is not appurtenant to the whole of the land described, then the restriction will have no effect. In such cases the language of s 88(1)(a) is precisely appropriate. But there are other cases where the land is described by reference to its several parts. Even if the intention fails as to some parts the intention may be effectual as to other parts, depending upon extrinsic matters — for example, that in respect of those parts the restriction touches and concerns those parts. This is a question of construction of the instrument in the light of the surrounding circumstances. Where the situation is that of a building scheme, of necessity the restrictions are intended to bind the whole of the land and its several parts. The intention will be disclosed to give the benefit of the covenant to the whole of the land and to each and every part. If this intention were not disclosed then any extrinsic intention to create a building scheme would be of no avail so far as the application of s 88 is concerned, because the requirements of s 88(1) would not be complied with. In the case of old system land this defect might not be fatal because a building scheme might have validity quite apart from s 88(1). But in the case of land under the Real Property Act the

deficiency in form would be fatal because the restriction can only be effective by virtue of s 88(3). I adhere to the view that ‘restriction’ in s 88(3) is limited to its meaning in s 88(1): Re Pirie and the Real Property Act. In this whole context a resort to general principles of registered title under the Real Property Act is of little value. This is so for two main reasons. First, the whole subject matter of restrictions dealt with in s 88 is an equitable subject matter in which validity never comes from mere form but from the substantive equitable principle. Secondly, in case it should otherwise have been asserted that as in other situations registration conferred validity, s 88(3)(b) provided expressly to the contrary. In effectuating an intention to apply s 88 to land under the Real Property Act (and it is most important to note that these are the opening words of sub-s (3)) the legislature was providing that an equitable interest and an equitable obligation should be enforceable in respect of land under the Act. There was something of a dilemma. Unless the restriction was made an interest within the meaning of the Act, a purchaser would not take subject to it, because of the terms of s 42. However, if it was made an interest, there was a likelihood that mere registration would give validity and that was not intended to gain validity from registration. These intentions are reflected in s 88(3)(b) and (c). The latter paragraph provides that the restriction will on registration be an interest. The former paragraph provided that registration shall not give the restriction any greater operation than it has under the instrument creating it. [page 942] It is necessary, in the light of these factors, to consider what was meant by the words ‘under the instrument creating it’. The actual restriction in the instrument creating it has strictly no operation in respect of any situation with which s 88 deals, that is, enforceability against a person not being a party to its creation. The actual operation of the instrument is limited to binding the party thereto by the covenant. A purchaser from that party is only bound by the rule in Tulk v Moxhay. Section 88(3)(b) of necessity therefore must be referring to something more than legal operation by virtue of the words of the instrument which creates the legal rights and obligations. I think that the paragraph looks only to neutralising the effect of registration, and that it does not codify the extent of the operation of a restriction. It may be that it assumes wrongly that the instrument creates the restriction which is referred to in s 88(1). It may be that in the particular circumstances no more is meant by ‘creating’ than ‘containing the expression of’. In any case s 88(3)(b) does not say positively that the operative effect of the restriction must be found in the instrument and the instrument alone. If it did in the context of s 88 it would be nonsense. It says negatively that registration will continue to depend upon the relevant legal and equitable principles. Thus the rule in Tulk v Moxhay is applicable, a rule of equity which extends beyond the effect at law of the instrument creating the restriction. I see no reason why the language of s 88(3) should not also extend to the equitable rights and duties which arise from the extension of the rule in Tulk v Moxhay to give the benefit to prior purchasers. I reach the position, therefore, that in most circumstances a restriction, the intrinsic

validity of which depends upon the existence of a building scheme, will in its actual form of expression come within the terms of s 88(1). I also conclude that such a restriction may also come within the terms of s 88(3) where the circumstances are that the restriction has its origin in an instrument and the instrument complies in its form with the terms of s 88(1). I conclude, therefore, that in the limited class of case where not only can a building scheme be proved in order to give intrinsic validity to the restriction, but also the formal requirements of s 88(1) are observed, a restriction the validity of which depends on a building scheme may come within the terms of s 88(1), and consequently may, in respect of land under the Real Property Act, come within s 88(3). If, therefore, all the covenants in the present case were in the later form I would be of the opinion that those covenants could be enforced, not only by subsequent purchasers from the common vendor, but also by prior purchasers who were bound to depend upon the proof of the common building scheme. I would be of the same opinion if the earlier covenants had sufficiently described the land intended to be benefited, so that they were effective at common law to annex the benefit of the covenant to the land in the hands of subsequent purchasers. However, the form of the earlier covenants makes it necessary to consider first whether the land purported to be burdened with those covenants can in fact be so burdened in the hands of a transferee under the Real Property Act; and secondly, if the answer to this question be ‘no’, whether the result is to vitiate the whole building scheme which was intended because that scheme fails in respect of these lots. Upon the first of these questions I think that my answer follows from what I have said earlier. Section 88(3), in respect of land under the Real Property Act deals only with notifications of restrictions where the notification can be seen to express the land which is intended to have the benefit of the restriction. This is not only because in my opinion the word ‘restriction’ in s 88(3) refers to a restriction created by an instrument which complies on its face with s 88, but because the restrictions dealt with by the whole of s 88, including sub-s (3), are restrictions the benefit of which were capable of being annexed to land at law. Both before and [page 943] after the enactment of s 88 and its predecessor section in 1919 it was necessary that the land intended to be benefited be described. Section 88(3) is not a sub-section independent of the rest of s 88, although it deals with a different form of land title, land under the provisions of the Real Property Act 1900, and in respect thereof. It does not provide a separate code upon the subject matter in respect of land under the provisions of the Real Property Act. It takes the provisions of the section, that is to say sub-s (1), (2) and (4), and applies these provisions to land under the Real Property Act, and then, incidentally to that application, makes the special provisions necessary for such land. With those and the reasons therefore I have already dealt, I recognise a difficulty in the provision that the RegistrarGeneral shall have and be deemed always to have had power to enter in the register book a notification of the restriction. It is true that the use of the word ‘always’ means that the Registrar-General had that power prior to the enactment of s 88 and the predecessor s 89. That, however, does not in my opinion lead to the result that the Registrar-General’s power prior to the enactment of those sections extended beyond the power to enter a

notification where the substance of the now-existent statutory requirements had been complied with. It must be borne in mind that these statutory requirements do little, if anything, more than express the previously existing law. Equity, it is true, extended that law to comprehend building schemes where legal requirements as to the form of instrument had not been complied with. I see nothing in s 88(3) which enables the notification upon the register of anything other than an instrument which complies with the law, even though the intrinsic validity of the instrument depends upon an equitable doctrine. To say more would be to repeat views which I have expressed earlier in this judgment. I conclude that neither before nor after 1919 was a covenant in the earlier form valid to annex the benefit thereof to land so that it ran with the land either at common law, or by the retrospective effect of s 88(3), in respect of land under the provisions of the Real Property Act. The deficiency might have been supplied in respect of old system land by the operation of the equitable doctrine of the common building scheme, but the formal deficiency precludes the application of this doctrine in respect of the land being land under the Real Property Act. There remains then the question whether, the scheme failing in respect of these ten blocks first transferred, the lack of reciprocity with these lots makes it inequitable to apply the rule in Tulk v Moxhay in respect of any lots within the scheme. That a deficiency in the reciprocity or mutuality of obligation may lead to the court of equity declining to interfere is well recognised in Re New South Wales Aged Pensioners’ Hostel and the Conveyancing Act [1967] 1 NSWR 332. However, that was a very different case. As was submitted to us, it is a question of fact and degree whether or not the breaches of the scheme are so great as to prevent on equitable grounds the scheme continuing to operate between those bound by it. In the case referred to very few of a great number of lots were effectively bound by the scheme. In the present case a comparatively few lots escape from the operation of the scheme. There is in my opinion no good reason why the rule in Tulk v Moxhay should not apply so that land is burdened with a covenant in favour of subsequent purchasers who take the benefit of the covenant at law and in favour of prior purchasers who take the benefit of the covenant in equity by virtue of the application of the doctrine of the common building scheme, provided always that in the case of the prior purchaser from the common vendor his own land is effectively bound. In other words, I do not think that the covenants of subsequent purchasers from the common vendor can be enforced by those prior purchasers whose land is not effectively bound with the reciprocal burden … [page 944] I would make an order declaring that the restriction arising under the covenant notified on the certificate of title registered vol 3402 folio 16 is enforceable by some, but not all of the registered proprietors of lots in the subdivision. The objectors who thus have the benefit of the restriction should have their costs of the summons paid by the applicant. [Helsham J agreed with the views of Jacobs JA. McLelland CJ in Eq considered that Re Martyn should be followed and that in so far as other owners of lots in the subdivision were forced to rely

on the doctrine of the common building scheme to enforce the covenant against Louis, they could not succeed.]

9.117 Questions 1.

Which owners of lots in the subdivision were entitled to the benefit of the covenant over lot 68? To what extent was the principle of reciprocity relevant in reaching a decision on this question?

2.

In what circumstances can the building scheme doctrine apply to land under the Torrens system in New South Wales?

9.118

The Full Court of the Supreme Court of New South Wales had

held in 1965 in Re Martyn (1965) 65 SR (NSW) 387; [1965] NSWR 80 that in the case of restrictive covenants created prior to 1920 when there was no legislative requirement to clearly state and identify the benefited land, such covenants could not be enforced or recognised under the Torrens system. The court was also of the view that these covenants could not be enforced through the equitable doctrine of the common building scheme even if such a scheme existed. Whilst not departing from that finding, the Court in Re Louis has accepted a qualified sphere of operation for the common building scheme under the Torrens system. Later authorities to Re Louis in New South Wales have accepted that building schemes may exist over Torrens title land: Re Mack and the Conveyancing Act [1975] 2 NSWLR 623; Application of Amory

Pty Ltd (1984) NSW ConvR & ¶55-180; Hosking v Haas (No 2) [2009] NSWSC 1328.24 9.119

In New South Wales, restrictive covenants are nowadays almost

always created by means of registration of a plan pursuant to the provisions of s 88B of the Conveyancing Act. Disputes concerning the existence and enforceability of common building schemes tend to arise in the context of older subdivisions created before s 88B was enacted. However, an exception to this occurred in Hosking v Haas (No 2) [2009] NSWSC 1328 which concerned a 1995 subdivision. The court found that a scheme of development existed and the requirements of Elliston v Reacher were satisfied. The court followed Re Louis and accepted that a building scheme could exist under Torrens title land.

[page 945]

9.120C

Burke v Yurilla SA Pty Ltd (1991) 56 SASR 382 Supreme Court of South Australia (In Banco)

[In 1955, the defendant transferred a number of allotments of land to the Mitcham City Council. The transferee then entered into an encumbrance for the benefit of the defendant which contained covenants as to building upon the land intended to take effect as a building scheme. (As to the use of an encumbrance as a device for securing the registration of restrictive covenants in South Australia, see 9.39.) The encumbrance was registered. In 1960, the transferee resold the allotments to purchasers who in turn transferred one of the allotments to the plaintiff in 1968. The other defendants were successors in title to the transferee. The plaintiff sought a

determination as to whether the restrictive covenants which were contained in the registered encumbrance were enforceable against him.] Debelle J: Where a building scheme is found to exist in the case of land under the general law and the successor in title has notice of the covenants, the courts of equity will enforce the common interest in maintaining the restrictions. To use Lord Macnaghten’s words in Spicer v Martin (1888) 14 App Cas 12 at 25, the community of interests necessarily requires and imports reciprocity of obligation. In the case of land under the Real Property Act, the enforcement of the equitable right will depend on whether a person dealing bona fide with the registered proprietor will be deemed to have notice of the restrictive covenants contained in a registered encumbrance. If he is, the courts will be able to enforce the equitable interest. A subsequent registered proprietor of an interest in land under the Real Property Act is deemed to have notice of covenants contained in a registered instrument, the existence of which is notified on the title, where the covenants affect the estate or interest in the land with which the instrument deals, that is to say, where the covenants run with the land. However, he will not be deemed to have notice of covenants contained in a registered instrument which do not affect the estate or interest in the land with which the instrument deals. This is the effect of the decision of the High Court in Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326. The burden of restrictive covenant will run with the land in equity against a subsequent holder of the land who has notice of the covenant when the covenant is entered into for the benefit of some parcel of land, or possibly some interest in land: see Clem Smith Nominees Pty Ltd v Farrelly, per Bray CJ (at 235); Re Louis and The Conveyancing Act [1971] 1 NSWLR 164 at 175, 177–8. Before it can be held that the burden of a restrictive covenant will run with the land under the Torrens system, it is necessary to establish that the land entitled to the benefit of the covenant is capable of identification from the registered document or from the Register. In Clem Smith Nominees Pty Ltd v Farrelly, Bray CJ said (at 237): I am of opinion that under the Torrens system it is essential, before the burden of a restrictive covenant can be held to run with the land, that the land entitled to the benefit of the covenant shall be capable of identification in some way from the registered document containing the covenant or, at least, from other related documents which can be discovered by a search in the Lands Titles Office: see Bursill Enterprises Pty Ltd v Berger Bros Trading Pty Ltd (1971) 124 CLR 73. A prospective purchaser of land subject to a burden should be able to find out by a search whether the covenant is a covenant in gross, which will not be binding on him if he purchases, or a covenant [page 946] the benefit of which is attached to some parcel or parcels of land, which may be binding on him. It was so held by Hudson J in the Supreme Court of Victoria in Re Dennerstein [1963] VR 688. With respect I agree.

It can be stated, therefore, that a person who deals with a registered proprietor is deemed to have notice of and will be bound by a restrictive covenant which runs with the land which is contained in a registered encumbrance noted on the original Certificate of Title. Covenants which are intended to establish a building scheme will ex hypothesi be for the benefit of other parcels of land. Provided the land entitled to the benefit of the covenant can be identified from the Register, those entitled to the benefit of the covenant will be able to enforce the covenant by equitable remedies. Those criteria are satisfied here and the covenants are enforceable against the plaintiff … As both Barwick CJ and Stephen J noted in Mercantile Credits Ltd v Shell Co of Australia Ltd (supra), to confer indefeasibility on rights which run with the land should not lead to difficulty or do violence to the general scheme of the Real Property Act … The necessity for a person intending to deal with the registered proprietor to make proper searches of the Register had earlier been emphasised by the High Court. In Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73, the High Court had held that where a purchaser failed to make such searches as he ought reasonably to have made, he is bound by that which is contained on the Register notwithstanding that the endorsement on the title might not have accurately described the nature of the interest to which the land is subject. In that case, it was held that a purchaser who had seen a reference to the registered number of a transfer described as creating a right of way ought to have searched the transfer to ascertain exactly the nature of the rights granted by it, which inspection would have disclosed that the transfer also included a transfer of air space … In practice, the decision in Bursill’s case (supra) should not lead to difficulty in the case of encumbrances which include restrictive covenants which run with the land. The practice of the Registrar General is to endorse on the Certificate of Title an entry to the effect that the land is subject to an encumbrance. As can be seen from the terms of the endorsement in this case, the endorsement conveys little more information than the fact that the encumbrance exists. Apart from any obligation which the decision in Bursill’s case might impose on a person intending to deal with the registered proprietor, the paucity of information disclosed by the endorsement will make it necessary in any event to search the Register to ascertain the precise terms and effect of the encumbrance. If the encumbrance is discharged, an endorsement to that effect is noted on the title. It would not be difficult, therefore, for any person searching the Register to ascertain whether the encumbrance is current. Provided that the person intending to deal with the registered proprietor is able to identify the land which is entitled to the benefit of the covenant either from the encumbrance or from other related documents which can be discovered on a search of the Lands Titles Office, the purchaser would have notice from the Register itself of the restrictive covenant and its terms: see per Bray CJ in Clem Smith Nominees Pty Ltd v Farrelly and Re Dennerstein [1963] VR 688… I would answer the question in the special case as follows. There is nothing in the operation of the Real Property Act which renders the covenants contained in the encumbrance, the subject of this action, unenforceable against the plaintiff. [King CJ and Cox J agreed with the reasons and conclusion of Debelle J.]

[page 947]

9.121 Questions 1.

The decision in Burke v Yurilla SA Pty Ltd is consistent with the analysis of Jacobs JA in Re Louis [1971] 1 NSWLR 164. Do you agree with the reasoning of Debelle J that the enforcement of restrictive covenants under the equitable doctrine of the common building scheme does not frustrate the aims of the Torrens system?

2.

Is the decision in Burke on all fours with the reasoning of the High Court in Mercantile Credits v Shell (1976) 136 CLR 326 and Bursill v Berger Bros (1971) 124 CLR 73?

3.

Is there not a difference between the determination of the extent of the indefeasibility of a covenant in a registered instrument (Mercantile) and the extent of an interest misdescribed but noted on the folio of the register (Bursill) on the one hand and the resolution of the ambit of a restrictive covenant which is necessarily dependent on matters of fact extraneous to the register on the other hand?

9.122

In Cousin v Grant (1991) 103 FLR 236, Miles CJ of the Supreme

Court of the Australian Capital Territory found a scheme of development to exist over property held under the Land Titles (Unit Titles) Act 1970 (ACT). His Honour concluded that the purchasers of the units in question acquired

the properties as lessees on the basis that the covenants in the schedule to the unit plan were to enure for the benefit of other lessees of the units included in the plan. The plaintiffs, as registered proprietors of one of the units, were held entitled to equitable relief for breach by the defendants of the covenants in the schedule and the defendants’ submission that the plaintiffs ought not to have brought the action until after formal complaint to the body corporate was rejected. 9.123

In Kerridge v Foley (1965) 82 WN (NSW) (Pt 1) 293 the A Co

subdivided an area of land. In 1934 the company conveyed one of the lots to M, who entered into certain restrictive covenants. Pursuant to NSW, s 88, the conveyance declared that the land to which the benefit of the restrictive covenants was appurtenant was the whole of the land shown in a plan. At the time of the conveyance the A Co had already disposed of some of the land in that plan. The defendants were successors in title to M. The plaintiffs were successors in title to W who had purchased land from the A Co in 1935. At the time of that purchase, W had entered into identical covenants to those entered into by M, though the benefit of the restrictive covenants was described as being appurtenant to certain other lots, one of which was the defendants’ lot. The defendants proposed to carry out certain work on their lot and the plaintiffs commenced an action contending that the work would breach the restrictive covenants. Jacobs J held, inter alia, that the benefit of a restrictive covenant could only be appurtenant to land owned by the covenantee, or possibly, in the case of a building scheme, land previously owned by the covenantee. On the facts of this case no building scheme was involved as there was no mutuality of rights and obligations since different

lots were delineated on each plan. Thus, the conveyances did not clearly indicate the land to which the benefit of the restriction was appurtenant, and accordingly, the terms of s 88 were not satisfied. For this reason the covenant was not enforceable against the defendants, who were not parties to its creation. In Re Louis [1971] 1 NSWLR 164 (9.116C) the covenants contained in the transfers of the 37 lots sold after 11 July 1920 were stated to be made for the benefit of the whole and each part of the land comprised in the deposited plan, although at the time these lots were transferred

[page 948]

part of the land subject to the building scheme had already been transferred to other purchasers. No difficulties were raised in relation to this point. It may be that the interpretation of NSW, s 88(1), laid down in Kerridge v Foley, is not applicable where a building scheme is concerned. Compare Re Mack and the Conveyancing Act [1975] 2 NSWLR 623. 9.124

In New South Wales, s 88B sets out a procedure which can be

followed to create covenants in the course of what is, in effect, a building scheme. When a developer lodges a plan of subdivision in the office of the Registrar-General, s 88B(2) requires that the plan shall indicate what easements are intended to be created over the relevant land, and what restrictions as to use are intended to be created. On registration of the plan of subdivision in the office of the Registrar-General, restrictive covenants

indicated on the plan are thereby automatically created, and without further assurance are annexed to the land benefited by the restriction. This occurs even if, at the time the plan is registered, the burdened and benefited land are in the same ownership. Moreover, such restrictive covenants are not extinguished if the owner of the land benefited thereafter acquired a greater interest in the land burdened: s 88B(3). The developer of the land is still required to comply with NSW, s 88(1) and thus, the details required by s 88(1) must be lodged with the plan. The Registrar-General is required by s 88B(3), when issuing a certificate of title for land burdened by a restriction as to use in the manner described, to record the restriction thereon. What would be the effect of the failure of the Registrar-General to do so? See Pratten v Warringah Shire Council (1969) 90 WN (NSW) (Pt 1) 134. 9.125

In Tasmania the Recorder may, with the consent of all persons with

registered estates in the land shown in a plan of subdivision, make an order setting out the benefit or burden of the covenants which are to run with the lot or other piece of land: Land Titles Act 1980 (Tas) s 110(2)(b). In Western Australia, the Transfer of Land Act 1893 (WA) Pt IVA has a similar provision. A proprietor of land that is the subject of a plan may note, in an approved form, on the plan a restrictive covenant to which the land is to be subject: s 136D(1). The land to be burdened by the restrictive covenant must be a subject of the plan: s 136D(2). The plan must specify the land to be burdened and the land to be benefited by the restrictive covenant, the term of the restrictive covenant (if any) and any prescribed matter: s 136D(5). Land becomes subject to an easement or restrictive covenant noted on a plan at the time the new certificates for the land the subject of the plan have been

registered: s 136F(1)(b). A restrictive covenant has effect even though the land burdened by the restrictive covenant has the same proprietor as any land benefited by the restrictive covenant: s 136H. The Registrar is given the power to make such recordings and entries in the Register as to the restrictive covenant created under this part as the Registrar thinks fit: s 136I. Section 136J deals with the discharge and modification of easements and restrictive covenants under this Part.

1.

See Ellickson, ‘Alternatives to Zoning: Covenants, Nuisance Rules and Fines as Land Use Controls’ in Ackerman (ed), Economic Foundations of Property Law, 1975, 265.

2.

Conveyancing Act 1919 (NSW); Law of Property Act 1936 (SA); Conveyancing and Law of Property Act 1884 (Tas); Property Law Act 1958 (Vic).

3.

Property Law Act 1974 (Qld); Property Law Act 1969 (WA).

4.

See, for example, Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500 at 514–17; [1949] 2 All ER 179 at 188–90; Drive Yourself Hire Co (London) Ltd v Strutt [1954] 1 QB 250 at 271–5; [1953] 2 All ER 1475 at 1481–4.

5.

The same principle was applied in ER Ives Investment Ltd v High [1967] 2 QB 379; [1967] 1 All ER 504, and Tito v Waddell (No 2) [1977] Ch 106; [1977] 3 All ER 129. These cases were discussed in Aughterson, ‘Enforcement of Positive Burdens — A New Viability’ [1985] Conv R 12.

6.

See also, ‘Enforcement of Positive Covenants Affecting Freehold Land’ (1994) 110 LQR 346.

7.

Brooking J’s sentiments are echoed by Meagher, Gummow and Lehane, 1221. For a discussion of a technique which may be available for the purpose based on NSW, s 134 see Note (1962) 35 ALJ 408 and Woodman, 323. For similar provisions, see Tas, s 83 and Vic, s 153.

8.

NSW, s 70 and see Land Titles Act 1925 (ACT) s 109; Qld, s 53(1); Tas, s 71; Vic, s 78; WA, s 47. Is Tucker LJ’s reasoning convincing? See Bradbrook, MacCallum, Moore and Grattan, 901–2, [18.120]; Megarry and Wade, 748; Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371.

9.

For a discussion of the historical background to the case and a criticism of later cases which

narrowed down the effect of Tulk v Moxhay, see Bell, ‘Tulk v Moxhay Revisited’ [1981] Conv R 55. For a general discussion of the nature of restrictive covenants, see Hayton, ‘Restrictive Covenants as Property Interests’ (1971) 87 LQR 539. 10. See also Shepherd Homes v Sandham (No 2) [1971] 1 WLR 1062; [1971] 2 All ER 1267. The requirement that covenants be negative rather than positive is discussed in Rhone v Stevens [1994] 2 WLR 429 and West Lakes v Makris (1993) ANZ ConvR 193-150. 11. Conservation covenants are discussed by Fitzsimons and Carr, ‘Conservation Covenants on Private land: Issues with Measuring and Achieving Biodiversity Outcomes in Australia’ (2014) 54(3) Environmental Management 606–16. 12. See generally Hayton, ‘Restrictive Covenants as Property Interests’ (1971) 87 LQR 539. 13. This view was challenged by some academic writers: Radcliffe, ‘Some Problems Relating to the Law of Restrictive Covenants’ (1941) 57 LQR 203 at 205; Wade, ‘Covenants — “A Broad and Reasonable View”’ (1972) 31 Camb LJ 157 at 171–4. 14. The case was discussed in Newson, ‘Restrictive Covenants’ (1984) JPL 847. 15. See Wade, ‘Covenants — “A Broad and Reasonable View”’ (1972) 31 Camb LJ 157. 16. But see Baker, ‘The Benefit of Restrictive Covenants’ (1968) 84 LQR 22 at 30, suggesting that precise identification of the dominant tenement is required for express annexation of the benefit of a covenant. Some Australian courts seem to have taken this approach. See Re Pirie and the Real Property Act [1962] NSWR 1004 at 1008 per Jacobs J; Clem Smith Nominees Pty Ltd v Farrelly (1978) 20 SASR 227. For the opposing view, see Wade, ‘Covenants — “A Broad and Reasonable View”’ (1972) 31 Camb LJ 157 at 166–7. 17. See Butt, ‘Restrictive Covenants — Again’ (1997) 71 ALJ 910. Compare the approach taken in Papadopoulos v Goodwin [1982] 1 NSWLR 413 and Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 1 NSWLR 1 (10.112) in relation to the application of the subsection to easements. 18. For a full discussion of the effect of s 88(1), see Woodman, 338ff. As to the effect of s 88(1)(c), see Jones v Sherwood Hills Pty Ltd (SC (NSW), Waddell J, 8 July 1975, unreported) discussed in a Note (1978) 52 ALJ 223. 19. See Note (1970) 44 ALJ 40. For a helpful article on the impact of Stilwell v Blackman on the law of restrictive covenants, see Baker, ‘The Benefit of Restrictive Covenants’ (1968) 84 LQR 22. 20. M Da Costa, ‘Change in the Character of a Neighbourhood as a Defence to the Enforcement of Restrictive Covenants by Injunction — A Comparative Study’ (1966) 5 MULR 205.

21. Section 47(7): ‘An easement or profit à prendre … recorded in the register shall not be extinguished solely by reason of the same person becoming proprietor both of the land burdened and of the land benefited …’. 22. See also Brunner v Greenslade [1971] Ch 933; [1970] 3 All ER 833; Bates, ‘Extinguishment and Removal of Restrictive Covenants in Land’ (1980) 54 ALJ 156; Preece, ‘The Effect of Unity of Ownership of Benefited and Burdened Land on Easements and Restrictive Covenants’ (1982) 56 ALJ 587. 23. Compare NSW, s 88(3); Land Titles Act 1980 (Tas) s 102; Transfer of Land Act 1893–1978 (WA) s 129A. 24. For a discussion of Re Louis, see Woodman, 351–4; Bradbrook and Neave, 482–6. See also Note (1972) 46 ALJ 91; Butt, 468–70; Gray, Edgeworth, Foster and Dorsett, 624–5, [13.37].

[page 949]

Easements and Profits à Prendre

10.1

CHAPTER

10

Easements and profits à prendre are property interests that confer

limited rights over land in the possession of another. Known historically as ‘incorporeal hereditaments’, they are not rights to the land itself, but represent rights over the land. They are to be distinguished on the one hand from estates — ‘corporeal hereditaments’ — and the various security interests, such as mortgages. As rights in rem, they run with the land. It follows that if land, burdened by an easement (the ‘servient land’) or profit à prendre is transferred, the obligation imposed by the easement or profit continues to be enforceable and binds each new owner for as long as their ownership of the land endures. This chapter is subdivided first, into an examination of easements, and second, profits. Easements come in many forms. Common examples are: easements of way, which allow access to the dominant land by foot or by

vehicle depending upon the terms or basis upon which the easement is created; and service easements generally which include drainage and sewerage easements and also easements for services such as telephone and electricity. An easement may be defined as follows: An easement is a right attached to one particular piece of land that allows the owner of that land (the dominant owner) either to use the land of another person (the servient owner) in a particular manner, such as by walking over it or depositing rubbish on it, or to restrict its use by that other person to a particular extent, but that does not allow him to take any part of its natural produce of the land or its soil.1

It follows that an easement only gives the owner of the dominant tenement limited rights in relation to the servient tenement, in accordance with the terms of the easement. It should also be noted that easements may be positive or negative in nature. A positive easement gives the owner of the dominant tenement the right to do something on his or her neighbour’s land (that is, the servient tenement), such as walking over it or running a drainage pipe across it. An example of a negative easement is an easement of light. The distinction between positive and negative easements is important because new categories of positive easements can be

[page 950]

recognised, but it is unclear whether novel easements of a negative character can be created in Australia. But even positive easements are subject to strict

substantive requirements if they are to qualify as interests in land. This feature of the law of easements is due to the numerus clausus principle examined at 1.30E above, that is, that the number and range of rights that can be created over land is strictly limited. Because this chapter raises questions about the reform of some aspects of the law of easements, an important reference is the report of the Victorian Law Reform Commission, Easements and Covenants: Final Report 22, 2010.

THE CHARACTERISTICS OF EASEMENTS 10.2

In the leading case, Re Ellenborough Park [1956] Ch 131; [1955] 3

WLR 892; [1955] 3 All ER 667 (see 10.13C), the court identified four substantive requirements for the creation of an easement. First, there must be a dominant and servient tenement. Secondly, the easement must ‘accommodate’ the dominant tenement. Thirdly, the dominant and servient tenement must not be held and occupied by the same person. Fourthly, the right must be capable of forming the subject matter of a grant. These requirements will be examined separately.

Dominant and servient tenements 10.3C

Gas & Fuel Corporation of Victoria v Barba [1976] VR 755 Supreme Court of Victoria

[The plaintiff corporation, which was constructing a natural gas pipeline, negotiated with V, the registered proprietor of land, for the grant of an easement for the pipeline. On 21 July 1975, V

signed an agreement under which, in consideration for the payment of $10, he agreed to grant the corporation an option to acquire a pipeline easement. The agreement acknowledged payment of $10 to the plaintiff, although the amount had not been paid. In the option agreement, reference was made to ‘the dominant tenement’, but no land of the corporation was identified. On 15 August, the defendants purchased the land from V under a terms contract of sale. The contract of sale contained a condition under which the vendor warranted that it had received a notice from the corporation calling for the creation of a pipeline easement. It went on to provide that: ‘The Vendor has concurred in the granting of the said easement and the Purchaser acknowledges having read a full copy of the proposed creation of easement document prior to the signing of this Contract.’ The condition acknowledged that compensation moneys were to be paid to V. On 20 August, the corporation wrote to V indicating its intention to exercise the option and enclosing the sum of $10. On 29 September, the plaintiff corporation again wrote to V, enclosing a document described as a ‘Creation of Easement’, for execution by V. After the defendants entered into possession under the terms contract of sale on 3 November, they refused entry to the corporation’s employees and contractors. On 17 December, V sealed the creation of easement. On 18 December, the corporation commenced proceedings seeking a declaration that it was entitled to have the instrument creating the easement registered. The corporation also claimed injunctive relief and damages. By the time the action was heard, the easement had been registered.]

[page 951]

Crockett J: [Crockett J first assumed that the grant of the option for an easement created no equitable interest, so that the corporation’s equitable interest arose after the defendants’ interest under the terms contract of sale. Even on this view, the effect of the special condition in the contract was to preserve the corporation’s priority when it acquired its interest, whether this occurred at the time of the agreement to grant an easement or upon execution of the creation of the easement. In these circumstances, the Transfer of Land Act 1958 (Vic) s 42(2)(e) did not give the interest of the defendants (as tenants in possession of the land under the terms contract of sale) priority over the corporation’s interest. In any event, he concluded that a binding option came into existence when the option agreement was signed by the authorised officer of V. This occurred despite the failure of the corporation to pay $10 until later. He continued:] … The next question, then, is, did the option create an interest in land? There appear

to be no reported cases of options to have an easement granted to the optionee. But it is difficult to see why such an option cannot be given and, if given, does not thereupon create an equitable interest equivalent to that when options to grant other interests in land are given, eg, an option to take a lease: Moore v Clench (1875) 1 Ch D 447 at 452; or an option to purchase land: Griffith v Pelton [1958] Ch 205 at 225; [1957] 3 All ER 75. But the defendants contend that in the present case an effective equitable interest was not created since there was not defined in the option instrument a dominant tenement to which the so called easement was to be made appurtenant. One cannot have an easement in gross. A fortiori, one cannot have an option to create what would be an easement in gross. The option agreement referred to an annexed specimen form of easement. This form had provision for the definition of a dominant tenement by completion of the title particulars of the land intended to be that of which the easement would be appurtenant. That land, however, was not identified in the specimen. Nor was there any evidence that the easement said to be the subject of an option was what had been described as a ‘statutory easement’ whereby the need for the existence of a dominant tenement might be excused by Act of Parliament: see per Windeyer J — Commr for Main Roads v North Shore Gas Co Ltd (1967) 120 CLR 118 at 133; [1968] ALR 111 at 119. The plaintiff seeks to answer this submission with an argument that proceeds by a number of steps. First, it is said that the dominant tenement can consist of incorporeal property. At all events it certainly can consist of both corporeal and incorporeal hereditaments: Re Salvin’s Indenture [1938] 2 All ER 498. In that case the grantee was a water authority. The grant was of an easement to make, lay, alter and clean pipes necessary for the transit of water for the authority’s purpose. Farwell J rejected an argument that the grant was of an easement in gross stating (at 506): The undertaking in this case, which is now vested in the defendants, consists of corporeal hereditaments and incorporeal hereditaments, the corporeal hereditaments being the lands which the company acquired for the purpose of its object — that is to say, lands for the erection of reservoirs and other similar purposes — and the incorporeal hereditaments being the rights which it acquired in land of others, to lay pipes and for other purposes. The undertaking, in my judgment, being composed of corporeal and incorporeal hereditaments, is capable of being the dominant tenement in respect of such a grant as this. It is plain that the dominant tenement need not be contiguous to the servient tenement. Next, it was argued that failure to specify the dominant tenement in the instrument is not necessarily fatal as extrinsic evidence is admissible to identify the tenement so as to establish appurtenancy. Reliance is placed upon two comparatively recent decisions of the Court of [page 952]

Appeal: Johnstone v Holdway [1963] 1 QB 601; [1963] 1 All ER 432; and The Shannon Ltd v Venner Ltd [1965] Ch 682; [1965] 1 All ER 590. In Johnstone’s case the conveyance contained a reservation of a right of way in favour of the plaintiff’s

predecessor in title. But the reservation did not specify the dominant tenement for the benefit of which the right of way was given. Upjohn LJ in giving the court’s judgment said (at 612): In our judgment it is a question of the construction of the deed creating a right of way as to what is the dominant tenement for the benefit of which the right of way is granted and to which the right of way is appurtenant. In construing the deed the court is entitled to have evidence of all material facts at the time of the execution of the deed, so as to place the court in the situation of the parties. That evidence allowed the court to say that it was intended that there was land for the benefit of which the easement was reserved and what that land was. In The Shannon Ltd v Venner Ltd the court not only agreed that extrinsic evidence was admissible to prove both the intention that there should be, and the identity of, a dominant tenement but also held that the easement may, when the dominant tenement is not specified in the grant, be appurtenant to other land besides that conveyed by the deed. In both of the cases the court reached the conclusions it did by purporting to apply Thorpe v Brumfitt (1873) LR 8 Ch 650. In this same connection, counsel for the plaintiff also relies upon Re Salvin’s Indenture, in which the evidence relied upon to establish the ‘corporeal and incorporeal hereditaments’ was entirely extrinsic to the grant. Finally, counsel points to evidence establishing that the plaintiff at the material time owned a particular parcel of land upon which it conducted the operations of collection and despatch into a reticulation system of natural gas as part of its undertaking whereby gas was distributed and sold to consumers for commercial and domestic use. Further, that it has rights acquired in the land of others to lay pipes. Pipes laid pursuant to those rights and intended to be laid across the defendants’ land are, or would eventually be, connected to the central distribution system established upon the land in the ownership of the plaintiff. Moreover at the time of the grant of the option the grantor knew that if the option was exercised the land subject to it would be used by the plaintiff for laying [pipes] as part of the plaintiff’s undertaking as a distributor and seller of gas: Consequently, it is contended that an intention to create a dominant tenement has been sufficiently established and its identity proved so as to prevent the option from being one that was for no more than an easement in gross. The plaintiff submits that the decision in Gapes v Fish [1927] VLR 88; [1927] ALR 111, upon which the defendants rely, does not stand in its way. Being a decision of the Full Court it is, of course, if indistinguishable, binding upon me. In that case the court’s judgment was delivered by Dixon AJ (as he then was). The court was of the view that a reservation of a right of way that made no reference to a dominant tenement for the advantage of which the way might be reserved imposed no servitude on the defendant’s land. The judgment, however, went on to deal with the extent that evidence to prove identity of appurtenant land may be admitted. In doing so it is clear that the court was unprepared to treat Thorpe v Brumfitt, as an authority for all that the Court of Appeal was to attribute to it almost 40 years later … The present case appears to me to be clearly distinguishable from Gapes v Fish. There

was a reference in the option agreement (by reference in turn to the specimen form of easement [page 953]

attached to it) to unidentified land to which it was intended that the enjoyment of the easement should be annexed. Indeed, the indication that such was the intention could not have been clearer. The plaintiff’s land was described as being ‘the dominant tenement’. However, the title particulars were incomplete. As a result, the land was not identified. It is in just such circumstances that the Full Court said that ‘probably evidence to identify it may be admitted’. The evidence admitted for this purpose has identified the land to which the easement, upon exercise of the option, is to be annexed. Upon its exercise, the plaintiff had an interest in the land, the attempted enjoyment of which the defendants deliberately and effectively obstructed after an initial entry upon the land … [Crockett J also found that the corporation was entitled to an injunction restraining the defendants from further obstruction, and for an award of equitable damages to compensate for the additional costs caused by the defendants’ obstruction.]

10.4

The defendants appealed successfully to the High Court of Australia

against the award of damages: Barba v Gas & Fuel Corp of Victoria (1976) 136 CLR 120. The High Court did not express any disagreement with the reasoning of Crockett J contained in the extract above. However, the court held that the option agreement conferred upon the corporation only a contingent equitable interest in the subject land, so that the corporation’s servants and contractors had no right to enter prior to the execution of the creation of easement. The High Court set aside the award of damages against the defendants because they were entitled to refuse entry to the corporation’s contractors at the time they did so. The court left standing both the declaration that the corporation was entitled to have the easement registered and the injunction. This conclusion was based on the finding that the interest

of the corporation under the creation of easement prevailed over the prior equitable interest of the purchasers under the contract of sale, because of the condition contained in the contract of sale. 10.5

In Gapes v Fish [1927] VLR 88; (1926) 33 ALR 111 (referred to in

the Barba case), the conveyance contained a reservation of a right of way to the vendor in the following terms: ‘Saving and reserving a right of way 24 feet wide running along the southern boundary of the land above described for him the said vendor his heirs and assigns … at all times to pass … over and along the same …’. The conveyance made no reference to the dominant tenement for the enjoyment of which the easement was reserved. It was held that the reservation was an attempt to create an easement in gross, and thus conferred only a personal licence on the vendor of the land. Gapes v Fish was followed in Harada v Registrar of Titles [1981] VR 743. In that case, the Supreme Court of Victoria considered the nature of a right which the State Electricity Commission had sought to acquire compulsorily over the plaintiff’s land. The right, if acquired, would have entitled the commission to clear the relevant portion of the plaintiff’s land, transmit electricity over high voltage power lines above the land, and prevent the plaintiff from building under the power lines. The court held that the right was not capable of being an easement at common law, since it was not given for the benefit of a dominant tenement. The argument that the alleged easement benefited land on which terminal stations were built was rejected. It was also held that the right could not amount to an easement because its effect would prevent the owner from building under the pipeline, so that it amounted to permitting

the State Electricity Commission to occupy the land jointly with the plaintiff.2 Gapes v Fish

[page 954]

was distinguished in Re Maiorana and the Conveyancing Act (1970) 92 WN (NSW) 365, where Hope J took the view that the court could have regard to surrounding circumstances, as well as the terms of the document, to identify the dominant tenement and to determine whether an easement was validly created.3 An incorporeal hereditament can qualify as a dominant tenement in its own right: Hanbury v Jenkins [1901] 2 Ch 401; for example, it may be another easement: Conveyancing Act 1919 (NSW) s 88AC(1). Furthermore, a dominant tenement may comprise both a corporeal and an incorporeal property, for example where a water authority’s easement to lay pipes is appurtenant to the authority’s land and existing easements: Re Salvin’s Indenture [1938] 2 All ER 498.

Formal requirements for creation of easements 10.6

In general, easements are created in the same way as other interests in

land by means of the execution of formal documents. Easements over land under the Torrens legislation may be expressly granted by registration of an instrument in the appropriate form, and expressly reserved in an instrument of transfer by which the land is transferred. The legislation in all Australian

states provides for registration of easements on the certificate of title of either the dominant or servient tenement, and, in most cases, of both tenements.4 Provisions of this kind contemplate the registration of easements created by instruments in registrable form. On registration, the easement will be indefeasible. The Torrens statutes create many exceptions to indefeasibility for certain easements which will be examined below. Easements over Old System title are created at law by means of a deed, and in equity by means of the various doctrines examined in Chapter 4, for example by proprietary estoppel: Fenwick v Wambo Coal Pty Ltd (No 3) (2011) 15 BPR 29,559. 10.7

In addition, the creation of easements in New South Wales is

affected by NSW, s 88(1), which provides that an easement is not enforceable against a person interested in the servient tenement, not being a party to its creation unless, inter alia, the instrument clearly indicates: (a) the land to which the benefit of the easement … is appurtenant, (b) the land which is subject to the burden of the easement or restriction … (d) the persons (if any) whose consent to a release, variation or modification of the easement … is required.

Section 88(1A) provides that land (including the site of the easement) is clearly indicated if it is shown: (a) in the manner prescribed by regulations made under [the Conveyancing Act 1919] or the Real Property Act 1900, or (b) in any other manner satisfactory to the Registrar-General in the particular case or class of cases concerned.

[page 955]

This subsection does not limit other ways in which land may be clearly indicated. The section does not apply to easements in favour of the Crown, any public or local authority, or a corporation prescribed by regulations: ss 88(4), 88A(1). See also s 88B (registration of plans of subdivision). These provisions were discussed in Papadopoulos v Goodwin [1982] 1 NSWLR 413 in which the court held that it was permissible to look at registered plans to determine the location of rights of way where the dominant and servient tenements were in different subdivisions.5 In Queensland, similar requirements apply in relation to easements created by registration of a plan of subdivision: see Land Title Act 1994 ss 93, 95 and cf Transfer of Land Act 1893 (WA) s 136C.

Easements in gross 10.8

In all Australian states, some easements in gross may be created,

usually in favour of the Crown or local and public authorities. For example, NSW, s 88A provides for land under the general law and the Torrens system as follows. 10.9E

Conveyancing Act 1919 (NSW)

88A Easements in gross (1A) An easement without a dominant tenement may be created in favour of a prescribed authority, and any such easement may be assured to a prescribed authority [for the definition of prescribed authority, see s 88A(1)]. (1B) However, an easement without a dominant tenement may only be created in favour of, or

assured to a corporation prescribed by the regulations … if the easement is for the purpose of, or incidental to, the supply of a utility service to the public, including (but not limited to): — (a) the supply of gas, water or electricity, or (b) the supply of drainage or sewage services. …

10.10

Conveyancing Act 1919 (NSW) s 88A(2) and (2A) allow for the

use of short forms of words to create various types of easements in gross in favour of the Crown or a local or public authority. These include easements of way, easements to enter on land in order to repair a structure on other land, easements for drainage of water and sewerage, easements for the passage of electricity and for the provision of various other domestic services, easements for water supply and easements of access.6 Under s 88B(3)(a) and (b), an easement in gross permitted by s 88A may be created by registering a plan of subdivision with the Registrar-General: see 10.55. In Tasmania, s 90A has a similar effect to s 88A. A similar provision exists in South Australia (SA, s 41A) and Western Australia (Land Administration Act 1997 (WA) s 195).

[page 956]

See also Local Government Act 1989 (Vic) s 187A, which enables an easement in gross to be created in favour of a council. Compare Land Title Act 1994 (Qld) s 89, which allows easements in gross to be created in favour of various public utility providers, and Land Titles Act 1925 (ACT) s 103C,

which allows the registration of easements in gross in favour of the territory, the Commonwealth or a person providing a public utility service. Although an easement in gross is created by statute and is therefore inherently incapable of incorporating implied terms, the holder of the benefit of the easement has the same ancillary rights as would be implied if the easement had been granted by an instrument operating between the parties.7 10.11

In the Northern Territory, the Law of Property Act makes it

generally possible to create easements in gross. Section 155 provides that ‘a person may create an easement without dominant land in favour of another person’. The easement in gross is created by the registration of (a) a deed of grant or an instrument of easement in gross under the Land Title Act; or (b) a plan of subdivision, within the meaning of s 4 of that Act, and an instrument of easement of gross under that Division; or (c) an instrument lodged with the Registrar-General under s 19(2) of the Crown Lands Act: s 156. By s 158(2) an easement in gross may be enforced by any person who has the use or benefit of the easement in gross. The easement in gross binds each person who has an interest in the servient land: s 159. Section 147 of the Land Administration Act 1997 (WA) is expressed in similarly broad terms. The Real Property Act 1886 (SA) s 81 appears to allow the creation of easements in gross under the Torrens system, providing that a certificate of title may contain an entry that ‘the person named therein is entitled to any easement in gross’.

10.12 Questions

1.

What is the policy behind these sections?

2.

Should the Northern Territory and Western Australian provisions be adopted in other states? The Victorian Law Reform Commission recommended8 against allowing easements in gross to be created in Victoria on the basis that: a) it could elevate what are essentially personal rights which do not enhance other land into property rights; and b) it might lead to the overburdening of land. Do you agree?

3.

What is the objection to easements in gross?

4.

What is the difference between an easement in gross, a contractual licence and a lease of portion of the land (as in Claude Neon Ltd v Melbourne & Metropolitan Board of Works (1969) 43 ALJR 69)?

5.

What is meant by the principle that an easement requires a dominant and servient tenement?

6.

Must the dominant tenement be an estate in land?

[page 957]

7.

If two people agree that one should be able to use the other’s land in a particular way, why should the law refuse to regard that right as anything more than a contractual right, simply because there is no dominant tenement?9

8.

Vic, s 197 provides as follows: Whenever in any conveyance of land or in any deed of grant a right to use any road

or way has been granted to the purchaser or to the grantee his heirs and assigns, such right, although it be not granted into out of and from the land conveyed to the purchaser or described in the deed as owned by the grantee, shall nevertheless be deemed to be a right appurtenant to the land conveyed or owned as the case may be and every part thereof and not a right in gross.

Would this provision have led to a different result in Gapes v Fish?

Accommodation of dominant tenement 10.13C

Re Ellenborough Park [1956] Ch 131; [1955] 3 All ER 667 Court of Appeal

[In 1855 D and W owned a large area of land which they began to subdivide into lots. As part of this subdivision, an inner portion of the land, known as Ellenborough Park, was to be maintained as a pleasure ground for the enjoyment of the purchasers of the surrounding plots. Each purchaser was to have an easement giving the right to use the area as a pleasure ground, subject to the payment of a proportion of the cost of maintenance. The court regarded a conveyance, made in 1864 to John Porter, as typical of the conveyances made to the purchasers of the lots. In 1954 the park was vested in the trustees of the estate of D. The rest of the land contained in the subdivision had been sold, and was vested in the successors in title of the original purchasers. During the war years, the park had been requisitioned by the War Office, and could not be used by the surrounding landowners. The War Office paid the trustees a yearly compensation rent, and also an amount for dilapidation. The trustees were concerned to distinguish these sums in the accounts which they kept in respect of receipts and payments for the upkeep of the park. They took out a summons to clarify the position. One question put by the summons was whether the owners of the property adjoining the park had any enforceable right to use the park on payment of a contribution towards its upkeep. The other questions related to the distribution of compensation rent and dilapidation payments. The defendants were Mrs Maddison (a beneficiary under the will of D) and a neighbouring occupier, Allen, appointed by the court to represent the rights of all persons claiming the right to use the park.

Danckwerts J held that the adjoining landowners had legal easements over the park. He also held in effect that these landowners were substantially entitled to the benefit

[page 958]

of the sums paid by the War Office for compensation rent and dilapidation payments. Mrs Maddison appealed.] Evershed MR: The substantial question raised in this appeal is whether the respondent, or those whom he has been appointed to represent, being the owners of certain houses fronting upon, or, in some few cases, adjacent to, the garden or park known as Ellenborough Park in Weston-super-Mare, have any right known to the law, and now enforceable by them against the owners of the park, to the use and enjoyment of the park to the extent and in the manner later more precisely defined. Both the premises now belonging to the respondent, or to the owners for whom he acts as champion, and also the park itself, were originally part of an estate known as the White Cross Estate. The houses in question were built and the park laid out in the middle of the last century. None of the owners of the houses is an original grantee from the proprietors of the White Cross Estate. Similarly, the present owners of the park are the successors in title of the original grantors of the premises of the house owners. The substantial question in the case, which we have briefly indicated, is one of considerable interest and importance. It is clear from our brief recital of the facts that, if the house owners are now entitled to an enforceable right in respect of the use and enjoyment of Ellenborough Park, that right must have the character and quality of an easement as understood by, and known to, our law. It has, therefore, been necessary for us to consider carefully the qualities and characteristics of easements, and, for such purpose, to look back into the history of that category of incorporeal rights in the development of English real property law … For the purposes of the argument before us Mr Cross and Mr Goff were content to adopt, as correct, the four characteristics formulated in Dr Cheshire’s Modern Real Property (7th ed) p 456 et seq. They are (1) there must be a dominant and a servient tenement; (2) an easement must ‘accommodate’ the dominant tenement; (3) dominant and servient owners must be different persons; and (4) a right over land cannot amount to an easement, unless it is capable of forming the subject matter of a grant. The argument in the case is found, accordingly, to turn upon the meaning and application to the circumstances of the present case of the second and fourth conditions; that is, first, whether the alleged easement can be said in truth to ‘accommodate’ the dominant tenement — in other words, whether there exists the required ‘connection’ between the one and the other; and, secondly, whether the right alleged is ‘capable of forming the subject matter of a grant’. The exact significance of this fourth and last condition is at first sight perhaps, not entirely clear. As between the original parties to the ‘grant’, it is not in doubt that rights of this kind would be capable of taking effect by way of contract or licence. But for the purposes of the present case, as the arguments made

clear, the cognate questions involved under this condition are: whether the rights purported to be given are expressed in terms of too wide and vague a character: whether, if and so far as effective, such rights would amount to rights of joint occupation or would substantially deprive the park owners of proprietorship or legal possession; whether, if and so far as effective, such rights constitute mere rights of recreation, possessing no quality of utility or benefit; and on such grounds cannot qualify as easements … [I]t is clear from the deed from which we have quoted, and from the other deeds in like form made (as must be assumed), in respect of the remaining premises in Ellenborough Crescent, that the original common vendors were engaged upon a scheme of development of this part of the White Cross Estate designed to produce a result of common experience: namely a row of uniform houses facing inwards upon a park or garden which was intended to form, and formed in fact, an essential characteristic belonging, and properly speaking ‘appurtenant’ to all and each of them. In substance, instead of each house being confined to [page 959]

its own small and moderate garden, each was to enjoy in common, but in common exclusively with the other houses in the Crescent, a single large ‘private’ garden … [T]he language of the deed of 1864 is clearly to the effect that the right of enjoyment of the garden was intended to be annexed to the premises sold, rather than given as a privilege personal to the purchaser … We pass, accordingly, to a consideration of the first of Dr Cheshire’s conditions — that of the accommodation of the alleged dominant tenements by the rights as we have interpreted them. For it was one of the main submissions by Mr Cross on behalf of the appellant that the right of full enjoyment of the park, granted to the purchaser by the conveyance of 23 December 1864 was insufficiently connected with the enjoyment of the property conveyed, in that it did not subserve some use which was to be made of that property; and that such a right accordingly could not exist in law as an easement … It is clear that the right did, in some degree, enhance the value of the property, and this consideration cannot be dismissed as wholly irrelevant. It is, of course, a point to be noted; but we agree with Mr Cross’s submission that it is in no way decisive of the problem; it is not sufficient to show that the right increased the value of the property conveyed, unless it is also shown that it was connected with the normal enjoyment of that property. It appears to us that the question whether or not this connection exists is primarily one of fact, and depends largely on the nature of the alleged dominant tenement and the nature of the right granted. As to the former, it was in the contemplation of the parties to the conveyance of 1864 that the property conveyed should be used for residential and not commercial purposes. As appears from the map, the houses, which were built upon the plots around and near to Ellenborough Park, varied in size, some being large detached houses and others smaller and either semi-detached or in a row. We have already stated that the purchasers of all the plots, which actually abutted on the park, were granted the right to enjoy the use of it, as were also the purchasers of some of the plots which, although not fronting upon the park, were only a short distance away from it. As to the nature of the right granted, the conveyance of

1864 shows that the park was to be kept and maintained as a pleasure ground or ornamental garden, and that it was contemplated that it should at all times be kept in good order and condition and well stocked with plants and shrubs; and the vendors covenanted that they would not at any time thereafter erect or permit to be erected any dwelling house or other building (except a grotto, bower, summer house, flower stand, fountain, music stand or other ornamental erection) within or on any part of the pleasure ground. On these facts Mr Cross submitted that the requisite connection between the right to use the park and the normal enjoyment of the houses which were built around it or near it had not been established. He likened the position to a right granted to the purchaser of a house to use the Zoological Gardens free of charge or to attend Lord’s Cricket Ground without payment. Such a right would undoubtedly he said, increase the value of the property conveyed but could not run with it at law as an easement, because there was no sufficient nexus between the enjoyment of the right and the use of the house. It is probably true, we think, that in neither of Mr Cross’s illustrations would the supposed right constitute an easement, for it would be wholly extraneous to, and independent of the use of a house as a house namely, as a place in which the householder and his family live and make their home; and it is for this reason that the analogy which Mr Cross sought to establish between his illustrations and the present case cannot, in our opinion, be supported. A much closer analogy, as it seems to us, is the case of a man selling the freehold of part of his house and granting to the purchaser, his heirs and assigns, the right, appurtenant to such part, to use the garden in common with the vendor and his assigns. In such a case, the test of connection, or accommodation, would be amply satisfied; for just as the use of a garden [page 960]

undoubtedly enhances, and is connected with, the normal enjoyment of the house to which it belongs, so also would the right granted, in the case supported, be closely connected with the use and enjoyment of the part of the premises sold. Such, we think, is in substance the position in the present case. The park became a communal garden for the benefit and enjoyment of those whose houses adjoined it or were in its close proximity … The result is not affected by the circumstance that the right to the park is in this case enjoyed by some few houses which are not immediately fronting on the park. The test for present purposes, no doubt, is that the park should constitute in a real and intelligible sense the garden (albeit the communal garden) of the houses to which its enjoyment is annexed. But we think that the test is satisfied as regards these few neighbouring, though not adjacent, houses. We think that the extension of the right of enjoyment to these few houses does not negative the presence of the necessary ‘nexus’ between the subject matter enjoyed and the premises to which the enjoyment is expressed to belong …

10.14C

Clos Farming Estates v Easton (2002) 11 BPR 20,605 New South Wales Court of Appeal

[The appellant developed land (‘Le Clos Verdun’) on the south bank of the Hastings River near Wauchope. In 1988 the respondents agreed to purchase lot 27 from the developer. Each lot in the estate comprised two parts: Part A, a residential component; and Part B, a farming component. The parties entered into a number of contracts concerning potential viticulture enterprises to be carried out on Part B of lot 27. The Deposited Plan covering the estate was registered by the Land Titles Office in 1989, as was the s 88B instrument setting out a number of restrictions. One of these restrictions, the Fourteenth Restriction, was known as the ‘Easement for Vineyard’. The purpose of the Restriction was to allow the owner of the benefited land (lot 86), Clos Farming Estates (‘Clos’) or its delegates, to enter the burdened land and carry out viticulture works, harvest the grapes and then sell them. In addition, Clos was entitled by the Restriction to deduct the costs associated with the harvests from any proceeds of sale. All lots other than lot 86, including lot 27, were burdened. The contracts entered by the respondents at the time of agreeing to purchase the property incorporated the terms of this arrangement, so that the multiple owners of lots on the estate were in a position to operate a single viticulture production unit through Clos. Clos had the right to control and manage the operation and then sell the product remitting the proceeds of sale to the owners, less the costs associated with the harvest. In 1995, Clos lodged a caveat on lot 27 purportedly to protect its rights as previously described in the ‘Easement for Vineyard’. By 1998, the contractual infrastructure had expired. In 2000, the respondents took steps to have the caveat removed from the title to lot 27. Clos then applied to the Court seeking a declaration that its interests as recorded in the caveat were caveatable. The respondents cross-claimed, seeking a declaration that the Easement for Vineyard was not a valid easement. Bryson J at first instance held that the Easement for Vineyard did not create any interest in land.] Santow JA: ‘The category of easements must alter and expand with the changes that take place in the circumstances of mankind’: Lord St Leonards in Dyce v Lady James Hay (1852) 1 Macq 305 at 312–313. Do the present circumstances create an easement, albeit novel? [page 961]

Or, is the right purportedly created not merely a permissible exercise in adaptive novelty, but one which falls outside the legal requirements for easements? Bryson J concluded that the easement was invalid because the Fourteenth Restriction failed both the second and fourth conditions for the creation of a valid easement first recognised in the classic

judgment of Evershed MR in In Re Ellenborough Park [1956] Ch 131 … [that is, that the easement must ‘accommodate’ the dominant tenement; and that the right claimed as an easement must be capable of forming the subject matter of a grant]. In the present case, conditions one and three were not in issue but conditions two and four were. The second condition — ‘accommodating the dominant tenement’ … Bryson J concluded that whether the right granted accommodated and served the dominant tenement depended on whether the right granted was connected with the normal enjoyment of the dominant tenement. That is a question of fact, dependent on the nature of the dominant tenement and the right granted. It was not enough that the land be a convenient incident to the right. Rather the nexus must exist in a real and intelligible sense (Judgment at [22]). Additionally, Bryson J recognised that facilitation of the business or commercial use in which the dominant land is involved may, in limited circumstances, be nonetheless sufficient to create the requisite nexus, provided the criteria for an easement is satisfied (Judgment at [36]). Bryson J concluded that in reality the Fourteenth Restriction did not accommodate lot 86 as a piece of land. This was because he concluded that there was no evidence supporting any ‘accommodation, advantage or enhancement of lot 86’. Thus ‘Lot 86 could be a convenient incident to action under the Fourteenth Restriction: but that is not enough’ (Red Book, 38 at para 47). The Appellant submitted that his Honour erred in reaching this conclusion. It was submitted that the Fourteenth Restriction rendered lot 86 a more convenient place from which Clos Farming as dominant owner conducts its business of farm management and that this established a sufficient accommodation. It was submitted that the requirement that the easement sufficiently accommodate the dominant tenement is in effect a requirement that the easement make the property better and more convenient. This may be achieved, it was argued, as in this case, merely by benefiting some trade carried out on the property; In Re Ellenborough Park; Clapman v Edwards [1938] 2 All ER 507; Frater v Finlay (1968) 91 WN (NSW) 730; Moody v Steggles (1879) 12 Ch D 261, the latter was a case where the owner of a public house was empowered to affix a signboard on the wall of the defendant’s house, that being held to be a valid easement. As Fry J reasoned (at 266): It is said that the easement in question relates, not to the tenement, but to the business of the occupant of the tenement, and that therefore I cannot tie the easement to the house. It appears to me that that argument is of too refined a nature to prevail, and for this reason, that the house can only be used by an occupant, and that the occupant only uses the house for the business which he pursues, and therefore in some manner (direct or indirect) an easement is more or less connected with the mode in which the occupant of the house uses it. Thus it was contended that in assessing whether the Fourteenth Restriction benefited the dominant tenement so as to accommodate it in the relevant sense, consideration of the contractual infrastructure supporting the Clos farming system was required. Counsel for the Appellant contended that the Fourteenth Restriction thus needed to be assessed in its commercial context. That in this way it became clear that the dominant tenement was

[page 962]

benefited, through benefiting the trade and industry carried out on lot 86. In sum, the Appellant contended that as lot 86 was used for the purposes of carrying out farming and harvesting works, and the servient Clos farms were used for viticultural purposes, this clearly established the necessary nexus between the dominant and servient lots. In written submissions in reply, counsel for the Respondent emphasised that the Appellant had not sought to challenge the long established principle that the dominant tenement, as land, must nonetheless be benefited by the easement. The Respondents acknowledged that a right benefiting a trade carried out on the dominant tenement may in appropriate circumstances be a valid easement. But this is provided that the conduct of the trade is a necessary incident to the normal enjoyment of the land, not merely an independent business exercise. The Respondents submit that in accordance with the authority dating back to 1863 (Hill v Tupper (supra)) lot 86 as the supposed dominant tenement was not relevantly benefited by the rights conferred by the Fourteenth Restriction. This was because it was merely a convenience and matter of efficiency that lot 86 be used for the purposes of farm management. Secondly it was put that there was no feature of lot 86 that rendered it the natural or only place from which to carry out harvesting and associated works. Highlighted was that, in the agreed statement of facts, there was no evidence which indicated that farm management, as distinct from storage, was actually carried out on that lot. The supposed connection was thus not a real one. I would agree … [T]he arguments put by the Appellant do not show that Bryson J made any error in finding that there was not a sufficient accommodation of the dominant tenement. The Appellant was unable to establish that the connection between the land and the industry carried out on the land was more than just a mere convenience as required to establish the requisite accommodation. There was nothing particular about lot 86 which made it the only or even the most appropriate lot of land in the estate to carry out farm maintenance works. It was merely one of many lots which could have been designated for this use at the time of the creation of the estate and registration of the s 88B instrument which brought the Fourteenth Restriction into existence. Nor was there any evidence that lot 86 was genuinely so used; in fact evidence such as there was is to the contrary. It may be granted that physical contiguity of lot 86 to the servient tenement is not necessary, if (as here) sufficiently close to be sensibly described as appurtenant. But here any supposed connection between lot 86 and the supposed servient tenement went no further than to render the latter but ‘a convenient incident to the exercise of the right’, were it exercised at all, yet constituted incongruously by that vastly expansive congeries of entitlements. Moreover, the suggestion cannot be sustained that accommodation of the dominant tenement should be found in the supposed commercial necessity on the part of the owners (and likewise the liquidators) of Clos Farming to ensure that the rights that they purportedly hold have economic value. Even if correct, pure commercial interests of themselves, though not necessarily incompatible with an easement, are not sufficient to justify, and may even militate against, the creation of such a right in rem … [Mason P and Beazley JA agreed with Santow JA that there was no valid easement.]

10.15 Questions 1.

Why was the interest in Re Ellenborough Park held to be more than a licence, and more than a right ‘to attend Lord’s Cricket Ground without payment’?

2.

What is the difference between an easement and a licence?

[page 963]

3.

Was the court prepared to treat a jus spatiandi as a proprietary interest?

4.

Was the interest intended to be created in Clos Farming Estates not capable of being an easement?

5.

Does this case demonstrate that the courts approach the question of

opening

the

category

of

permissible

easements

too

conservatively?

10.16

Consider the decision of the English High Court in Regency Villas

Title Limited v Diamond Resorts (Europe) Limited [2015] EWHC 3564 (Ch). 10.17C

Regency Villas Title Limited v Diamond Resorts (Europe) Limited [2015] EWHC 3564 (Ch) High Court of Justice Chancery Division

[This case concerned what were said to be easements enjoyed by the claimants as timeshare owners of Regency Villas. The predecessors in title to the parties entered into a registered transfer which provided, inter alia, ‘… the right for the Transferee its successors in title … to use the swimming pool, golf course, squash courts, tennis courts, the ground and basement floor of Broome Park Mansion House, gardens and any other sporting or recreational facilities (hereafter called “the facilities”) on the Transferor’s adjoining estate.’ The court reasoned:] Purle J: … I now consider whether the rights in question do not qualify as easements because they amount to no more than mere rights of recreation. Ellenborough Park is authority for the proposition that an easement permitting the dominant owner to walk over all parts of the servient tenement purely for pleasure can exist in law, following Duncan v Louch (1845) 6 QB 904. That being so, the use of the pleasure garden took effect as an easement. It is a relatively small step to extend that to the enjoyment of sporting and other recreational facilities. The objection that a mere right of recreation cannot take effect as an easement is therefore apt to mislead, unless the limits of the proposition are understood. The key may lie in the use of the word ‘mere’, which may connote a right which does not benefit dominant land at all because there is none, as in Mounsey v Ismay (1865) 3 H & C 486, or which is wholly extraneous to, and independent of, the use of the dominant land as such (Ellenborough Park at 174). Outside those examples, rights of recreation can take effect as easements, so long as they accommodate dominant land, are not too wide and vague, do not amount to rights of joint occupation and do not deprive the servient owner of proprietorship or legal possession. There is no English (or Scottish) authority authoritatively determining whether or not an easement can exist to use (say) a golf course, swimming pool or tennis court, but in my judgment there is no legal impediment to the grant of such an easement, provided the intention to grant an easement, as opposed to a merely personal right, is evident on the proper construction of the grant construed in the light of the material surrounding circumstances. Ellenborough Park has been followed and applied by the Supreme Court of Canada in recognising as easements rights of ‘free access to the waters of … the bay to persons purchasing subdivisions’. This was a resort development fronting the beach. Applying the statement in Ellenborough Park at p 683 that ‘wandering at large is of the essence of such a [page 964]

right’ the Supreme Court said that these observations applied all the more emphatically in the case of a beach pertinent to a resort development: Dukart v District of Surrey et al (1978) 86 DLR 609, 617. That observation is relevant to this case as well. Ellenborough Park was also considered by the Manitoba court in Blankstein, Fages and

Fages v Walsh [1989] 1 WWR 277, in the case of cottages used for summer recreation. The acquisition of an easement by prescription to use adjoining land known as the ‘playground’ as a family recreational area was rejected on the facts, as the use was permissive. Nevertheless, the court recognised that the rights claimed were capable of existing as easements. In Grant v Macdonald [1992] 5 WWR 577, the right to build and use a swimming pool and other improvements on part of a neighbour’s land (the pool was never in fact built but a gazebo was) was regarded as capable of being an easement by the British Columbia Court of Appeal, after consideration of Ellenborough Park. In Australia, Ellenborough Park was applied to recognise as an easement the grant of the right to use a common area known as Outlook Park Reserve in favour of adjoining owners ‘for the purpose of recreation or a garden or a park’, the court observing at p 559 at line 45 that enjoyment of a defined area for recreation not given to the public, but given to a limited number of lot holders was just as certain as the rights referred to in other cases, or the right to walk for pleasure referred to in Duncan v Louch (above): Riley v Pentilla [1974] VR 547. City Developments v Registrar General of the Northern Territory (2000) 135 NTR 1 concerned the use of a lake and natural foreshore within a resort complex. Thomas J, sitting in the Supreme Court of the Northern Territory, following Ellenborough Park, Dukert and Riley v Pentilla, held that there was no reason in law why an easement could not be granted for recreational purposes. I agree. Against this line of authorities must be considered a dictum of Lord Scott in the Scottish case of Moncrieff v Jamieson [2007] 1 WLR 2620. He doubted at p 2636E whether the grant of a right to use a neighbour’s swimming pool could ever qualify as a servitude (the Scottish equivalent of an easement) as the swimming pool owner would be under no obligation to keep the pool full of water and the grantee would be in no position to fill it if the grantor chose not to do so. The right to use the pool would, he opined, be no more than an in personam contractual right at best. That would with respect depend upon the terms of the grant, though I can see that in the purely domestic context the court might lean towards a construction that the rights were personal. In any event, the example given by Lord Scott has no application to the present case. I reject the suggestion that the rights in this case are as a matter of construction to be construed as merely personal to the parties to the 1981 Transfer. They form part of a group of rights the first two of which (rights of way and of passage) are clearly easements. Further, the rights are expressed to benefit successors and occupiers from time to time: compare Ellenborough Park at p 167. Moreover, construing the rights as purely personal would produce the unexpected consequence referred to in paragraph 29 of this judgment. Unlike the example given by Lord Scott in Moncrieff, I am not concerned with neighbours in the purely domestic context but with a grant made by a developer for a number of timeshare owners who are able to act (as was contemplated at the time) collectively through RVOC. Thus, I do not see why the claimants could not provide their own water supply (adapting Lord Scott’s example) if they needed to fill the pool, if necessary from a tanker. I see no compelling reason to construe these rights as personal, and very good reason for construing them as easements.

[page 965]

10.18

The subdivision of the land which has the benefit of an easement

raises the question whether the easement continues to benefit the individual lots into which the dominant land is later divided. In Gallagher v Rainbow (1994) 179 CLR 624; 121 ALR 129; 68 ALJR 512, the High Court considered whether easements over a private road in a subdivision, which were granted for the dominant tenements or ‘any part thereof’, would enure to the benefit of the smaller lots which were to be created by further subdivision of the dominant tenements. In interpreting the terms of the document creating the easement, the majority relied on a presumption that an easement is appurtenant to the dominant tenement and each part of it. They held that this presumption had not been rebutted, so that the easements would accommodate the new lots.10 10.19

In London and Blenheim Estates Ltd v Ladbroke Retail Parks Ltd

[1994] 1 WLR 31; [1993] 4 All ER 157, A transferred land of which he was the registered owner to B. A retained part of the land and granted B an easement over the retained part. Included in the agreement for sale was a provision that if B should purchase additional land capable of being benefited by the easement within five years of the original transfer then, on B giving to A written notification of the purchase, that additional land should also have the benefit of the easement. B purchased additional land capable of being benefited. Before he gave the required notification to A, the land was sold to W. The purchasers from B sought a declaration that they and their successors

in title were entitled to the benefit of the easement in relation to the additional land. The English Court of Appeal held that for an easement to come into existence, the dominant tenement had to be identified before the grant or the contract to grant the easement. Because the additional land was not known when the contract of sale was made between A and B, the grant of the right to nominate additional land to be benefited by the easement was not capable of being an easement which could bind successors in title to the servient tenement.

The dominant and servient tenements must not be owned and occupied by the same person 10.20

This requirement is usually said to be an illustration of the general

common law principle that a person cannot acquire rights against himself or herself. The rule has been largely abrogated by statute. Under NSW, s 88B(3) (c)(ii), an easement may be created by registration of a plan of subdivision in the office of the Registrar-General, even though at the time of registration both the land benefited and the land burdened are in the same ownership. Conveyancing Act 1919 (NSW) s 69 applies to land under the Torrens System and operates in the same way as s 88B(3)(c)(ii). Similarly, under s 46A of the Real Property Act 1900, a person may create an easement despite owning both the benefited and burdened land, if both parcels are Torrens title, and an easement will continue to exist if dominant and servient tenements come to be held by the same person: s 47(7). In Queensland, a

registered plan of subdivision can only create easements if the lot burdened and benefited is in common ownership or the easement in gross is created in favour of a public utility provider: Land Title Act 1994 (Qld) ss 86–88. In the Australian Capital Territory, Land Titles Act 1925 (ACT) s 103D allows registration of an easement over Torrens system land where title to both lots is in the same registered proprietor, or the owner of the benefited lot has an interest in the burdened

[page 966]

lot; see also Transfer of Land Act 1893 (WA) s 136H; Real Property Act 1886 (SA) s 90C. The Land Titles Act 1980 (Tas) s 109 prevents unity of seisin from destroying easements implied by legislation. The provision is to the same effect for registered easements generally. What purpose is served by these provisions? At common law, the rule requiring separate ownership and occupation of the dominant and servient tenements does not apply unless both pieces of land are owned and occupied by the same person. It is possible, for example, that a tenant may acquire an easement over neighbouring land owned by his or her landlord, notwithstanding that the landlord holds the fee simple estate in both pieces of land.11 In Cardwell v Walker [2004] 2 P& CR 9 it was held that such an easement, once granted, continues to bind the landlord and the landlord’s successors in title for the duration of the lease. However, the rule may have the effect of extinguishing an existing easement in the case where

the dominant and servient tenements fall into the ownership and occupation of a single person: see 10.112.

The easement must be capable of forming the subject matter of a grant 10.21C

Regency Villas Title Limited v Diamond Resorts (Europe) Limited [2015] EWHC 3564 (Ch) High Court of Justice Chancery Division

[For the facts of this case, see above at 10.17C.] Purle J: … As to the requirement that the right must be capable of forming the subject matter of a grant, Ellenborough Park at p 164 identified the following questions which may also be relevant in this case: (i) whether the rights are expressed in language which is too wide and vague; (ii) whether such rights would amount to rights of joint occupation or substantially deprive the park owners of proprietorship or legal possession; (iii) whether such rights would constitute mere rights of recreation, possessing no quality of utility or benefit. There is nothing vague or of excessive width in the present rights. They clearly extend to all recreational and sporting facilities on the estate, and to the gardens, and must in my judgment include facilities that were not there or planned in 1981, or which may have been significantly improved since then. To construe the rights as limited to the actual facilities which were on site or planned in 1981 is unrealistic and might inhibit the servient owner from introducing improvements or replacements or adding facilities which would be for everyone’s benefit. I say that because any alteration to the facilities, if the rights did not extend to the new or replacement facilities, might amount to a substantial interference with the claimants’ existing rights. That cannot have been intended on any sensible construction of the rights. Moreover, such a construction would allow the defendants to advantage from their own default or that of their predecessors, who filled the outdoor pool in before the defendants constructed a new one in the basement of the Mansion House. The point is perhaps academic as the rights under the 1981 Transfer expressly extend to the basement, where the pool now happens to be. [page 967]

There is no difficulty in identifying what the facilities are and have been from time to time. In addition, there is no practical difficulty in framing and applying rules and regulations applicable to all users of the facilities, distinguishing between ordinary members of the public and timeshare owners. This was confirmed to me expressly as regards the golf course (the most contentious element of the case) by the defendants’ manager, and the position is no different regarding other facilities. The defendants are clearly entitled, so long as there is no substantial interference with the claimants’ rights, to regulate the use of the facilities in the interests of good management. They do this using their own staff, who are daily on site. This confirms that the defendants are in a real sense in possession and control of the estate. The claimants accept that they cannot use all the facilities at the same time and that they have to comply with the rules and regulations governing their use (except as to payment). The rights granted are to be construed as entitling the claimants to use the facilities and gardens subject to proper restrictions and regulation made in the ordinary course: compare Ellenborough Park at p 168. This does not however include payment, even though some payments have in practice been made. Moreover, the fact that an accommodation on payment was reached for many years does not without more mean that the rights have been lost: compare Ellenborough Park at 169. There are many examples of easements which cannot be enjoyed by all dominant and servient owners simultaneously, of which perhaps the most prosaic example is use of a toilet: see Miller v Emcer Products Ltd [1956] Ch 304. Moreover, a dominant owner can only claim that his rights are infringed if there is substantial interference with those rights, which necessarily carries with it the need for give and take between shared users of the rights and the servient owner. Mr Latimer complains of the intensification of use arising from the fact that there are thousands of potential users given the large number of timeshare owners, who in general only have rights for at most a week or two every year. This is a bad point. There are twenty six timeshare units in the Regency Villas development, and there are different owners for the different weeks. Each unit accommodates six people. Thus in any given week, the maximum users are (26 × 6) = 156 users on a large estate which can readily cope with that number of people in addition to the other timeshare users and members of the public who also use the facilities. Mr Latimer argues that this is really a case of joint possession which is on the wrong side of the line for easements. I do not agree. The Defendants are in possession and control of all the facilities on site. They regulate the use of those facilities and run the estate as a commercial business open to the public as well as to timeshare owners. They have in no sense been ousted and their ability to exercise ownership rights and to remain in possession remains, though qualified (as in the case of any easement) by the existence of the rights in question.

10.22 Questions

1.

What remedies are available to a person who claims that the defendant is interfering with his or her easement?

2.

How is the right to use a garden different from a right of ‘mere recreation and amusement’ as Lord Evershed MR concluded in Re Ellenborough Park? In Duncan v Louch (1845) 6 QB 904; 115 ER 341, the plaintiff’s claim to have a right to walk from his property to a watergate on the River Thames was upheld. The court accepted that this right was an easement, analogous to a right of access to a common garden for the purposes of ‘walking about the garden’.

[page 968]

10.23

Re Ellenborough Park was followed in Riley v Penttila [1974] VR

547, a case which also concerned a subdivision which included an area of land ‘for the purposes of recreation or a garden or a park’. As Gillard J commented (at 549): It was submitted, however, that the right conferred by Keam was so indeterminate as to defy precise definition. It was urged the enjoyment of the area for creation was the kind of jus spatiandi which the Court of Appeal suggested in the Ellenborough Park Case could not form the subject of an easement. In my opinion, enjoyment of a defined area for recreation not given to the public, but given to a limited number of lot holders is just as certain as the rights referred to in the above cases, or the right to walk for pleasure referred to in Duncan v Louch (1845) 6 QB 904; 115 ER 341, which was approved in the Ellenborough Park Case by the Court of Appeal at (Ch) pp 184–5. Having regard to the decision of the Court of Appeal on the right there granted, it seems to me that the right set out in the instrument of transfer to each of the transferees from Keam was

sufficient to found an easement. It was more than a mere personal advantage to the transferee of the lot. It was capable of being the subject of a grant at law. In fact, as already noticed, it was in form a grant at law. For gracious living it has been found for a very long time, as the English authorities well illustrate, necessary to have space in areas around a house for the purposes of a garden and recreation, and even of a park. Undoubtedly, it adds to the enjoyment of the occupation of such house property. Although each block here, according to modern standards, would be regarded as a large allotment, nevertheless it would undoubtedly add to the enjoyment and occupation of each block to have the added liberty of using the contiguous large private area, closed to the public, for the purpose of recreation, garden, or a park. Accordingly, so far as it is necessary to find as a fact I am satisfied on the evidence that the grant constituted a right in the nature of an easement appurtenant to and for the enjoyment of the lots transferred.12

10.24

Re Ellenborough Park and Re Regency Villas Title Limited referred to

the principle that a right cannot amount to an easement if it confers on the owner of the dominant tenement the power to co-occupy part of the servient tenement. This principle is illustrated by the decision in Copeland v Greenhalf [1952] Ch 488; [1952] 1 All ER 809 where the defendant proved that for 50 years he and his father before him had used part of the plaintiff’s land as a place to store vehicles connected with his business. The defendant’s premises were on the other side of the road from the plaintiff’s land. The defendant claimed a prescriptive right to continue storage. The court rejected the argument that the defendant had acquired an easement, Upjohn J concluding that (at Ch 498; All ER 812–13): [T]he right claimed goes wholly outside any normal idea of an easement, that is, the right of the owner or the occupier of a dominant tenement over a servient tenement. This claim … amounts to a claim to the joint user of the land by the defendant. Practically, the defendant is claiming the whole beneficial user of the strip of land on the south-east side of the track there; he can leave as many or as few lorries there as he likes for as long as he likes; he may enter on it by himself, his servants and agents to do repair work thereon. In my judgment, that is not a claim which can be

established as an easement. It is virtually a claim to possession of the servient tenement, if necessary to the exclusion of the owner; or at any rate, to a joint

[page 969]

user, and no authority has been cited to me which would justify the conclusion that a right of this wide and undefined nature can be the proper subject matter of an easement.

10.25

In A-G of Southern Nigeria v John Holt & Co (Liverpool) Ltd [1915]

AC 599 at 617, it was suggested that the right to use another’s land for the purposes of storing goods might exist as an easement.13 In Clos Farming Estates v Easton (2002) 11 BPR 20,605 (see 10.14C above) the court considered whether the intended easement met the fourth condition from Ellenborough Park. Santow JA (with whom Mason P and Beazley JA agreed) concluded as follows: Bryson J held that the rights purportedly conferred by the Fourteenth Restriction on its own and in conjunction with the scheme of restrictions, deprived the title-holders to the burdened lots from any real proprietorship over the burdened land, such that the rights sought to be conferred on the farm managers were inconsistent with the proprietorship and possession by the servient owners (Judgment at [49]–[50]). In support for this conclusion Bryson J highlighted that although the servient owners own the vines, that is the uppermost limit of their rights of ownership. In contrast, the dominant owner has a plethora of rights, such as rights to: cultivate and harvest the vines; take and sell the produce; prevent the titleholder from using the land for other agricultural purposes; to exclude others from the lot; and limit the recreational usage of the lot. Most significantly, the production and accumulation of profits from use of the land is wholly within the control of the dominant owner, with the servient owners having minimal capacity to exercise any control over the agricultural produce and economic use of the land (Judgment at [59]). In this regard reference was made to the fact that under the Fourteenth Restriction there were minimal rights reserved to the

servient owners to hold the dominant owners accountable for the conduct of the commercial enterprise through the web of restrictions on the rights of the servient owners [judgment at [52]]. On any assessment of the Fourteenth Restriction it is clear that the rights in toto, when given effect, are not merely novel; they breach what is fundamental to constituting an easement at law in the two respects identified. The Rights purportedly granted by the Fourteenth Restriction are extensive leaving little by way of residue, including as they do rights to: enter; plant; maintain; harvest; market; package and then sell any produce from the vines. In addition those Rights purport to confer an entitlement to deduct from the proceeds of sale the costs of, and associated with, the harvest. Certainly the novelty of the Fourteenth Restriction per se should not be detrimental to the claim to easement. Novelty alone is insufficient as bar to the recognition of the creation of an easement … The Fourteenth Restriction, independent of any further restrictions comprising the system, applies to a very significant portion of the lot. It leaves the owner with merely his rights of residual recreational activities that are totally subordinated to the over-arching rights of Clos Farming. When the Fourteenth Restriction is placed in its context of those further restrictions that apply to the lot in total, the servient owner’s rights are so attenuated as no longer to meet the description of exclusive possession.

[page 970]

10.26

Clos Farming Estates v Easton was applied in Tiller v Hawes [2005]

NSWSC 1232. Smart AJ held that if an easement purported to create a right of way that gave the dominant tenement holder the right to stop the servient tenement owners from using the right of way with the consequence that ‘the right of ownership and occupation remaining for the servient owner is sterile and nominal’ (at [47]), it would not be upheld. The right to park cars and to store materials on the servient tenement has given rise to considerable judicial disagreement. For instance, in Buchholz v Kempsey Shire Council [2005]

NSWSC 235 Austin J agreed that a right to park cars can form the subject matter of an easement. But the right must not be so extensive as to deprive the owner of the servient tenement of their ownership of the land, as where the dominant tenement holder was given rights to park in a designated space from 8.30am–6pm from Monday to Friday: Batchelor v Marlow [2003] 1 WLR 764. The question of the boundary between rights of possession and easements arose more recently in White v Betalli [2007] NSWCA 243 where an owner of a strata unit was given the right to store a boat on a part of the premises. Santow and Campbell JJA held (at [39] and [207] respectively; McColl JA dissenting) that this right was not so extensive as to deprive the other lot owner of some use of the area, and could therefore qualify as an easement. 10.27C

Ryan v Sutherland (2011) 16 BPR 30,101 Supreme Court of New South Wales

[The defendant owned Lot 1 which had the benefit of a ‘restriction as to user’ over Lot 2, owned by the plaintiff. The purported ‘restriction’ gave the defendant ‘full and free exclusive use of by the registered proprietor of the dominant tenement of that area noted as area subject to restriction as to user within the above-mentioned plan with which right shall be capable of enjoyment, and every person authorised by the registered proprietor of the dominant tenement [Lot 1], to go and repass and utilise the above-described area for recreation and/or for the establishment of or erection of facilities to the benefit of the dominant tenement’. The relevant deposited plan and associated instrument was registered under s 88B of the Conveyancing Act on 23 December, 1996. The plaintiff sought a declaration that the restriction was void.] Black J: Mrs Ryan contends that, when characterised as an easement, the restriction as to user would be invalid because an easement which gives exclusive and unrestricted use of a piece of land would not satisfy the fourth requirement [from Ellenborough Park] noted

in paragraph 8 above. Mrs Ryan relies on the principle set out in Reilly v Booth (1890) 44 Ch D 12 at 26, where Lopes LJ observed that: The exclusive or unrestricted use of a piece of land, I take it, beyond all question passes the property or ownership in that land, and there is no easement known to law which gives exclusive and unrestricted use of a piece of land. It is not an easement in such a case, it is property that passes. Different approaches were subsequently adopted to a right to use land in Wright v Macadam [1949] 2 KB 744 which upheld the validity of an implied grant of a right to store coal in a shed, although that right was incompatible with the servient owner’s right of possession, and Copeland v Greenhalf [1952] Ch 488 where an easement to store vehicles on a neighbour’s land was held to be invalid as inconsistent with the servient owner’s right to possession of the [page 971]

servient land. The decision in Copeland v Greenhalf was followed in Grigsby v Melville [1972] 1 WLR 1355 and Harada v Registrar of Titles [1981] VR 743. In London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1992] 1 WLR 1278, Judge Paul Baker QC reviewed the case law as to easements for storage of goods and parking. His Lordship referred to Copeland v Greenhalf and observed at 1286 that: The matter must be one of degree. A small coal shed in a large property is one thing. The exclusive use of a large part of the alleged servient tenement is another. His Lordship also observed at 1288 that: The essential question is one of degree. If the right granted in relation to the area over which it is to be exercisable is such that it would leave the servient owner without any reasonable use of his land, whether for parking or anything else, it could not be an easement though it might be some larger or different grant. The rights sought in the present case do not appear to approach anywhere near that degree of invasion of the servient land. If that is so … I would regard the right claimed as a valid easement. His Lordship’s decision was upheld by the Court of Appeal on different grounds in London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1994] 1 WLR 31. In Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [1996] NSWSC 86; (1996) 7 BPR 15,078 at 15,080, McLelland CJ in Eq held that the right to use land for the purpose of parking motor vehicles was a permissible easement and observed that: Even if everything said in Copeland could be considered to be good law, which is doubtful (see Wright v Macadam [1949] 2 KB 744) it is clear in my opinion that that case is distinguishable on the facts (see also Hedley v Roberts [1977] VR 282 and Evanel Pty Ltd v Nelson (1995) 39 NSWLR 209; 7 BPR 14,388). In my view a

right to use land for the purpose of parking cars cannot be excluded by any principle of the kind expressed in Copeland from the category of permissible easements, which it has been said ‘must alter and expand with the changes that take place in the circumstances of mankind’ (see Commonwealth v Registrar of Titles [1918] HCA 17; (1918) 24 CLR 348 at 353, quoting Dyce v Hay (1852) 1 Macq HL 305 at 312). In Clos Farming Estates Pty Ltd (recs & mgrs apptd) v Easton [2001] NSWSC 525; (2001) 10 BPR 18,845, the plaintiff sought to rely on an easement entitling it to plant and cultivate grape vines on the servient land, to harvest the grapes, to sell or otherwise dispose of them and to retain any profits from the enterprise. Bryson J held that that interest was not a valid easement where the owner of the servient tenement retained no more than nominal ownership of the land. That case is distinguishable from the present facts in that the easement affected the entirety of the defendant’s land. In Weigall v Toman [2006] QSC 349; [2008] 1 Qd R 192 at [13]–[14], Wilson J upheld the validity of an easement granting exclusive use of a garage standing on a section of the easement and noted that the validity of an easement purporting to confer on the owner of the dominant tenement a right of an exclusive character to use the servient tenement is a matter of degree; that such a right is invalid if it robs the servient owner of the reasonable use of his land; and that relevant factors include proportionality between the servient tenement as a whole and that part of it over which the exclusive right is given; the extent of the exclusivity claimed; whether the easement arose by prescription or by express grant; and practicalities. [page 972]

In Moncrieff v Jamieson [2007] UKHL 42; [2008] 4 All ER 752; [2007] 1 WLR 2620, the House of Lords adopted a somewhat different approach to that adopted in London & Blenheim Estates. Lord Hope of Craighead observed that ‘the fact that the servient proprietor is excluded from part of his property is not necessarily inimical to the existence of a servitude’ (at [24]). Lord Scott of Foscote expressed the view that an easement could validly give the dominant owner ‘sole use for a limited purpose’ since that is not inconsistent with the ‘servient owner’s retention of possession or control’ (at [55]). His Lordship doubted the correctness of the approach adopted in London & Blenheim Estates and observed that the question whether an easement deprived the owner of reasonable use of the land had to be determined by reference to the land over which the easement is enjoyed, rather than the whole of the servient owner’s land. However, his Lordship also observed at [59] that he did not see why a land owner should not grant rights of a servitudal character over his land to any extent that he wishes, and that: I would, for my part, reject the test that asks whether the servient owner is left with any reasonable use of his land, and substitute for it a test which asks whether the servient owner retains possession, and subject to the reasonable exercise of the right in question, control of the servient land.

Lord Neuberger of Abbotsbury observed that he was not satisfied that a right was not an easement ‘simply because the right granted would involve the servient owner being effectively excluded from the property’ (at [140]) and that a right could be an easement although the dominant owner effectively enjoyed exclusive occupation, on the basis that the essential requirement was that the servient owner retained possession and control (at [143]). In Owners of East Fremantle Shopping Centre West Strata Plan 8618 v Action Supermarkets Pty Ltd [2008] WASCA 180, Buss JA (with whom McLure JA and Murray AJA agreed) held that an easement for parking was a valid easement where it satisfied both the tests in London & Blenheim Estates and Moncrieff v Jamieson. In Brydall Pty Ltd v Owners of Strata Plan 66794 [2009] NSWSC 819 at [15], McDougall J noted that the question whether an exclusive easement would deprive the owner of the servient land of the whole of the beneficial use of the parcel of land subject to the rights may not be a relevant consideration, for two reasons which his Honour identified as follows: One is that the test (referred in Copeland v Greenhalf [1952] Ch 488) may overstate even the position in England. The second is that, as I have indicated, the trend of authority in this country is to look at whether the rights asserted impede the reasonable use of the servient tenement as a whole. As to the first proposition: to the extent that Copeland is authority for the proposition that I have stated, the decision of the House of Lords in Moncrieff v Jamieson [2007] UKHL 42; [2007] 1 WLR 2620 appears to cast doubt on it. See in particular the speech of Lord Scott of Foscote at 2642 [59]. As I understand it, the other members of the House shared his Lordship’s views. I do not think that it is relevant, at the level of principle, that this was an appeal from the Scottish courts and not from the Court of Appeal of England and Wales. In my view, the restriction as to user, if construed as an easement, would satisfy the test set out in London & Blenheim Estates, as applied to the whole of Lot 2 in accordance with the trend of the Australian cases to which McDougall J referred in Brydall Pty Ltd v Owners of Strata Plan 66794. It appears from inspection of the plans in evidence before me that the restriction as to user affects a relatively small part of Lot 2 and it does not (by contrast with the easement in Clos Farming Estates Pty Ltd (recs & mgrs apptd) v Easton) confer exclusive or unrestricted [page 973]

use of the whole of Lot 2 on Mrs Sutherland. I do not think it could be said that the restriction as to user has the result that Mrs Ryan retains no more than nominal ownership of Lot 2 (in the language of Clos Farming Estates Pty Ltd (recs & mgrs apptd) v Easton), so far as she continues to have possession and control of the house which occupies the larger part of that lot. On balance, I also consider that the restriction as to user would also satisfy the alternative test set out in Moncrieff v Jamieson, referring to the part of the land which is the subject of the easement rather than the whole of Lot 2. The use permitted by the restriction as to user is limited to the specified purposes of (1) recreation, (2) the

maintenance and establishment of plantings and gardens and/or (3) the establishment of or erection of facilities to the benefit of the dominant tenement. I would read the third of those purposes as taking its character from the first and second so that it does not permit Mrs Sutherland to use the relevant area for any purpose. While it is not necessary for me to determine the precise limits of that third purpose, it would not, in my view, permit the erection of, for example, an industrial facility on that area of the land. In my view, the owner of Lot 2 retains possession and control of the relevant part of the land, including the ability to restrain the use of the land other than for the specified purposes, although the owner of Lot 1 is permitted the use of it for the specified purposes. Mrs Ryan also retains some use of the land itself, which she has in fact exercised by reinforcing the brushwood fence on it as noted in [6] above.

10.28

In Moncrieff v Jamieson [2007] 1 WLR 2620 the owners of a

servient tenement on the isle of Shetland granted a right of way over their land to the owners of ‘Da Store’, a property situated between the sea and a cliff. The right of way was expressed to include a right to drive a vehicle from the public road over the servient land; but there was no express grant in the instrument of a right to park cars on the road. The topography of the dominant tenement, being accessible only by a steep ladder down a cliff, or alternatively by sea, made it impossible to drive a car onto it, and therefore park on it. The question arose as to whether the owners of the dominant tenement were entitled to park their car at the end of the driveway, or on a separate small area of the servient tenement holder’s land adjacent to the driveway, as an ancillary right to the right of way. There is well-established authority that ‘the grant of an easement is prima facie also the grant of such ancillary rights as are reasonably necessary to its exercise or enjoyment’, per Parker J in Jones v Pritchard [1908] 1 Ch 630 at 638. Given the unusual facts of the case, the majority held that a right to park was ancillary, although in general such rights are not ancillary to the grant of a right of way. Their

Lordships also noted that a right to park might qualify as an easement in some circumstances.

10.29 Questions 1.

In what circumstances will a right to park a car on the servient tenement qualify as an easement?

2.

Is Batchelor v Marlow no longer good law? Can Moncrieff be reconciled with Copeland v Greenhalf?

3.

In Moncrieff Lord Neuberger alluded to a broader conceptual problem when he surmised that: [I]f the right to park a vehicle in a one-vehicle space can be an easement, it may be hard to justify an effectively exclusive right to store any material not

[page 974]

being an easement, which could be said to lead to the logical conclusion that an occupational licence should constitute an interest in land.

What is this broader conceptual problem? 4.

If these kinds of easements were acceptable, would they be at odds with the reasoning in King v David Allen; 1.24C? Should such easements be recognised? How would they compare with the grant of a lease over land for the purpose of parking a car?

10.30

In Registrar-General (NSW) v JEA Holdings (Aust) Pty Ltd (2015) 88

NSWLR 321; 17 BPR 33,845; [2015] NSWCA 74 the respondents held title to lots in a subdivision. On a transfer to the first respondent’s predecessor in title of lot 4, a covenant was entered into purporting to burden lot 4 limiting the use of the surface of the land to car parking. The covenant was noted on the title of lot 5, the benefited land, but had not been noted on the title to lot 4. The first respondent claimed an indefeasible title to lot 4 free of any obligations imposed by the covenant. One issue before the court was whether the wording of the covenant could be construed so as to amount to a grant of an easement and, if so, whether the easement was ‘omitted’ within the terms of s 42(1)(A1) Real Property Act, 1900 (NSW) (see 10.130 below). In commenting upon the decisions in Clos Farming and Moncrieff, Basten JA made the following observations (at [149]–[152]): Parties on both sides of the record agreed that car parking was a right capable of constituting an easement. As a leading property law text has noted, ‘[m]uch of the recent controversy surrounding the non-possessory character of easements has centred on the proper classification of that most valuable asset of the modern citizen — the right to park a car’: K Gray and SF Gray, Elements of Land Law (5th ed, 2009, Oxford UP) at [5.1.66]. The only remaining question was whether the right conferred under the 1963 transfer would effectively exclude the owner of lot 4 from possession and use of that land if the right to park cars were exercised to its full extent. Such questions inevitably involve matters of degree and evaluation which will depend on the circumstances of each case. JEA Holdings devoted much of its submissions to challenging the finding of the primary judge as apparently inconsistent with the decision of this Court in Clos Farming Estates Pty Ltd v Easton [2002] NSWCA 389; 11 BPR 20,605. The circumstances which arose in that case are sufficiently described in the joint reasons: they are dissimilar in significant respects from the present case. The Registrar-General (and [the second respondent]) placed reliance on the decision of the House of Lords in Moncrieff v Jamieson [2007] 1 WLR 2620; [2007] UKHL 42. The effect of

Moncrieff, as Gray and Gray have noted, was to ‘rationalise the case law in a manner notably more sympathetic to easements which involve substantial exclusion of the servient owner from his land’: at [5.1.64]. Statements in more extreme cases of exclusion, such as Clos Farming, are not inconsistent with that approach. The limitation on use of lot 4 by the owner of that lot, while capable of extending from time to time to much or even all of the surface area of the parking lot, was a shared right, with the registered owner, to the use of the lot for car parking. Further, it expressly subsisted with the rights of the owner to use any part of the stratum at a height greater than 12 feet above the surface of the land and to use the underground area to such depth as might be valuable to it …

[The court held that the right granted over lot 4 was capable of being construed as an easement.]

[page 975]

10.31

Whilst the fourth requirement of an easement specified in Re

Ellenborough Park discourages the recognition of new types of easements, novel easements do continue to be found. Thus, in Bradley v Heslin [2015] EWHC 3267 (Ch), the issue arose as to whether a right to close gates across a right of carriageway could amount in law to an easement. In this case, it was the owner of the dominant tenement who claimed the easement. The court was of the view that a right to hang and close gates was a right capable of being an easement and, as such, could be acquired by prescription.14

TYPES OF EASEMENTS Rights of way

10.32

A right of way is one of the most common forms of easement. In

practice, the most frequent issues arising in relation to easements are whether the acts of the owner of the dominant tenement are authorised by the terms of the easement in question and whether the acts of the servient owner constitute interference with those rights. The extent and nature of the right of way will be determined by the express terms of the grant ‘construed in light of the circumstances’: per McHugh J in Gallagher v Rainbow (1994) 179 CLR 624 at 629. The following case demonstrates some of the difficulties of interpretation which may confront courts, and the principles applicable to the construction of easements. 10.33C Perpetual Trustee Co Ltd v Westfield Management Ltd (2007) 12 BPR 23,793 New South Wales Court of Appeal [In 1988, the then owner of premises known as Glasshouse (now owned by the appellant) granted a right of way burdening its property and benefiting the then owner of Skygarden (now owned by the respondent). The instrument was registered on 26 April 1988. Westfield later acquired two other, remoter properties known as Imperial Arcade and Centrepoint. All four properties face Pitt Street Mall, Sydney, and are adjoining. The primary judge, Brereton J, held that, on the proper construction of the right of way, persons and vehicles authorised by Skygarden were entitled to use the right of way over Glasshouse for the purpose of crossing Skygarden in order to access both Imperial Arcade and Centrepoint. The appellant challenged this ruling on the ground that on a proper construction of the easement, the respondent was limited to access to Skygarden only. It also contested the admissibility of certain evidence to aid in the construction of the easement.] Hodgson JA: The submissions and issues in this case have made it necessary for me to consider with some care the principles that apply in relation to determining the extent of use permitted by the grant of an easement, and in particular the relevance to this question of what is contemplated by the parties at the time of the grant. In Gallagher v Rainbow (1994) 179 CLR 624 at 640, McHugh J stated that ‘the Court

will not construe the grant in a way that would enable an easement to be used in a manner [page 976]

that goes beyond the use contemplated by the parties at the time of the grant’. I believe this proposition needs to be applied with care, because it could be taken as suggesting two related propositions that are, in my opinion, incorrect. First, it could be taken as suggesting that consideration of what is ‘contemplated by the parties’ is a separate exercise from construing the grant, whereas in my opinion it is not; and secondly, it could be taken as suggesting that the investigation of what is contemplated by the parties can be pursued in some way beyond the appropriate method for determining what was the intention of the parties as manifested by the grant itself, considered having regard to the circumstances in which the grant was made. In my opinion, there is just one question, what does the grant authorise; and that question is to be determined by construing the grant. One way of posing the question is to ask, what use was intended to be authorised by the grant; but no separate investigation into the use contemplated by the parties is either necessary or permissible. However, in determining this question, regard may be had to surrounding circumstances, including the physical circumstances of the dominant and servient tenements and the use actually being made of them at the time of the grant. This in turn gives rise to the question of whether other circumstances may be taken into account, such as communications between the parties prior to the grant of the easement. One view could be that such circumstances can be taken into account, to the extent to which they can be taken into account in construing an ordinary contract: Codelfa Constructions Pty Limited v State Rail Authority (NSW) (1987) 149 CLR 337 … In The Shannon, there was a grant of an easement which did not explicitly identify the dominant tenement. The grantor had already conveyed some land to the grantee, on which the grantee had erected a factory, which was constructed so that it could readily be extended on to adjoining land. The grantor then conveyed the adjoining land to the grantee, together with a right of way ‘for all purposes for [the grantee] and their successors in title’. The English Court of Appeal held that, because the identification of the dominant tenement was not clear, evidence was admissible of the circumstances in which the grant was made, including the grantee’s communication to the grantor that it intended to extend its factory on to the land then being conveyed; and the Court concluded that the dominant tenement was the whole of the grantee’s land. I believe that the propositions I have stated are generally in accordance with the weight of authority. Before reviewing some of the cases, however, I will refer to three other principles that may be relevant in determining whether certain use of the servient tenement is authorised by an easement. First, there is the principle that, for a grant of an easement to bind the servient tenement rather than merely to operate as between the parties, the use authorised must be such as to benefit the dominant tenement: Attorney-General v Horner (No 2) [1913] 2 Ch 140 at 196; Todrick v Western National Omnibus Co Limited [1934] 1 Ch 561 at 579–80 and 591.

Second, there is the principle of the law of nuisance that unreasonable use of land causing unreasonable damage to other land is actionable nuisance; so that even though a use of the servient tenement may otherwise be within what was granted by the easement, if this use is carried out unreasonably so as to cause unreasonable damage to the servient tenement, it may be restrained as a nuisance. This was an alternative ground on which relief was granted in Todrick both at first instance and on appeal; and sometimes it is not entirely clear whether the Court is acting on this principle or acting on a construction of the grant as to what use was authorised by it. [page 977]

Third, there is the rule that, if there is ambiguity in an instrument granting an easement, the instrument will be construed against the grantor. However, I agree with the primary judge that this rule is one of last resort: see [5] of his judgment … [His Honour then cited the primary judge’s discussion of the rule in Harris v Flower.] In Harris v Flower, the dominant land was 80 Royal Hill, Greenwich (‘the pink land’), which had the benefit of a right of way from Prior Street over the servient land. The dominant owner also owned adjoining land at 72 Royal Hill (‘the white land’), which was at the rear of a public house that enjoyed its own access from Royal Hill. An earlier plan to construct assembly rooms on 72 Royal Hill, with access into the public house and 80 Royal Hill, was not approved, and there was no access from No 72 to No 80. Subsequently, a plan was proposed for the construction of a factory and warehouse, partly on No 72 and partly on No 80. Although the servient owner’s contention that there had been a loss of the right of way by abandonment failed, on appeal it was held that a right of way appurtenant to No 80 could not be used for the purpose of approaching buildings erected partly on No 72 and partly on No 80. Romer LJ stated the ‘rule’ (at 132): If a right of way be granted for the enjoyment of close A, the grantee, because he owns or acquires close B, cannot use the way in substance for passing over close A to close B. However, the judgments suggest that the position is not so absolute as that sentence taken alone might suggest, but depends on whether use of the easement to access the remoter land (Lot B) would increase the burden of the easement on the servient land beyond the terms of the grant, without the servient owner’s consent, thus directing attention to the terms and circumstances of the grant … Admissibility of evidence … As regards the disputed matter set out in [16] of this judgment, in my opinion this was not relevant to the objective circumstances in the light of which the document was to be construed. This material concerned the subjective ideas of persons associated with the grantor, and communications between them. In my opinion, the subjective ideas and purposes of the grantor are irrelevant. This material does not support any inference as to communications between the grantor and grantee of the easement: in particular, it does

not support an inference that it was communicated between the grantor and grantee that the easement itself was intended to subject Glasshouse to use of the servient tenement for access to Imperial Arcade and Centrepoint. Accordingly, in my opinion the primary judge was in error in admitting this material … Construction of the easement It is clear that the easement was given in circumstances where: (1) physical provision had been or was being made in the servient tenement which was sufficient to provide for the amount of traffic that could be expected for the purposes of Imperial Arcade and Centrepoint, or for reasonably anticipated developments of these sites; (2) the objective circumstances (including the creation of the Pitt Street Mall) supported the existence of a rational objective of achieving a result where access [page 978]

to Imperial Arcade and Centrepoint was provided through the servient tenement, and the policy of the Council was, if possible, to achieve this; and (3) the Skygarden development was to provide for physical arrangements appropriate for access over Skygarden to Imperial Arcade and Centrepoint. The question then is, did the grant, in these circumstances, manifest an intention that Skygarden be given the right to authorise Imperial Arcade and Centrepoint and persons wishing to access Imperial Arcade and Centrepoint to use the servient tenement for the purpose of going to the dominant tenement and then going across it in order to access Imperial Arcade and Centrepoint? A positive answer to the question has some support from the physical adaptation of the premises, and from the wording of the grant, including the words ‘for all purposes’ and the words ‘every person authorised by it’. However, there are in my opinion stronger indications in favour of a negative answer. The right being granted had to be, in the words of the Court of Appeal of England in Peacock, a right ‘to use the way for the purposes of the dominant tenement only’. There was nothing in the wording of the relevant instrument or in the circumstances to suggest any intention or contemplation that the owner of Skygarden would acquire Imperial Arcade and/or Centrepoint, in order that one of the uses it could make of Skygarden would be for access to Imperial Arcade and/or Centrepoint. There is no suggestion in the circumstances that access to Imperial Arcade and/or Centrepoint could otherwise be for the purposes of Skygarden, in the same way as access to a car park could be of benefit for a dominant tenement, as in the case of Shean. In those circumstances, the only purpose of the dominant tenement which could be served by access across it to Imperial Arcade and Centrepoint would appear to be use as a tollway, or perhaps as a means for bargaining with the Council for planning concessions. It seems unlikely to me that the parties intended that the dominant tenement have the benefit of the right of way for those purposes.

Although the words ‘to and from [the dominant tenement] or any such part thereof’ do not exclude the possibility that the right should extend to going to the dominant tenement and then going across it to further land, and then returning across the dominant tenement and then going from it across the servient tenement, the words tend to suggest that it is access to and from the dominant tenement that is the purpose of the easement, and not access to further land reached only by going across the dominant tenement. Certainly, if it had been intended that the grant extend to the authorisation of others to go across the dominant tenement to further properties, the words ‘and across’ could readily have been added. Finally, there are the terms of the easement that apportion expenses, risks and responsibilities. Clause (3), providing for the cost of routine maintenance and repair to be borne equally, subject to cl (4), would seem surprising if the servient tenement was to be used for access to four properties, not two; and particularly so if Skygarden was being authorised to get some additional benefit from its use by charging a toll or obtaining some planning benefit from the Council. Clause (4), providing that the cost of repair of damage caused by either party or its respective servants or agents should be borne by that party, would be surprising if (the owner of) Skygarden was given authority to authorise Imperial Arcade and Centrepoint to use the right of way for access to those properties, since plainly Imperial Arcade and Centrepoint would not in those circumstances be regarded as servants or agents of Skygarden. The result would be that damage caused by Imperial Arcade or Centrepoint or their servants or agents would have to be borne equally by Glasshouse and Skygarden. [page 979]

Again, if Skygarden could authorise Imperial Arcade and Centrepoint to use the right of way for access to their premises, it seems anomalous that Glasshouse should be required to submit to this where there is no requirement for Imperial Arcade and Centrepoint to maintain insurance, along the lines provided in cls (7) and (8) of the easement. It would also be anomalous that there was no indemnity from Imperial Arcade and Centrepoint of the kind provided in cl (9) of the easement. Having regard to all these considerations, in my opinion the easement does not entitle the owner of Skygarden to authorise use of the easement for access to Imperial Arcade and Centrepoint. In my opinion, the contrary decision of the primary judge was in error, the error resulting from a preparedness to look for the intention or contemplation of the parties outside what was manifested by the grant itself, construed in the circumstances, the admission of certain evidence for that purpose, and addressing the question of the use contemplated for the site of the easement in a general sense, rather than focusing on the use intended and contemplated by the grant itself for the benefit of the dominant tenement only. [Beazley and Tobias JJA agreed with Hodgson JA to allow the appeal.]

10.34

Westfield appealed to the High Court which dismissed the appeal:

Westfield Management Pty Ltd v Perpetual Trustee Pty Ltd (2007) 233 CLR 528. The court (Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ) agreed with Hodgson JA that the omission of the words ‘and across’ in the instrument indicated an intention that the easement was not intended to provide access to remoter land (at [18]). The High Court also agreed with Hodgson JA (at [31]–[34]) that the apportionment of expenses and responsibilities indicated an intention that the easement was for the benefit of Skygarden only. Finally, the court made some general comments about the intention test: 10.35C Westfield Management Pty Ltd v Perpetual Trustee Pty Ltd (2007) 233 CLR 528 High Court of Australia Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ: Extrinsic material In going on to allow the appeal, Hodgson JA (again correctly) remarked that the decision of the primary judge appeared to be the product of an error in preparedness to look for the intention or contemplation of the parties to the grant of the Easement outside what was manifested by the terms of the grant. Extensive evidence of that nature had been led by Westfield on affidavit with supporting documentation. In this court, counsel for Perpetual submitted that some but not all of the extrinsic evidence had been admissible; in particular, the evidence said to supply part of the ‘factual matrix’ but which post-dated a deed dated 26 February 1988 containing a covenant to grant the Easement was inadmissible. So also was said to be evidence of the subjective intention of the then owner of Glasshouse which had not been communicated to the then owner of Skygarden. Perpetual accepted that what had been admissible was evidence of a preceding oral agreement between those parties: this had been to the effect that the Easement was to permit access to Skygarden via Glasshouse. [page 980]

However, in the course of oral argument in this court it became apparent that what was engaged by the submissions respecting the use of extrinsic evidence of any of those descriptions, as an aid in construction of the terms of the grant, were more fundamental considerations. These concern the operation of the Torrens system of title by registration, with the maintenance of a publicly accessible register containing the terms of the dealings with land under that system. To put the matter shortly, rules of evidence assisting the construction of contracts inter partes, of the nature explained by authorities such as Codelfa Construction Pty Ltd v State Rail Authority of NSW, did not apply to the construction of the easement. Recent decisions, including Halloran v Minister Administering National Parks and Wildlife Act 1974, Farah Constructions Pty Ltd v Say-Dee Pty Ltd, and Black v Garnock, have stressed the importance in litigation respecting title to land under the Torrens system of the principle of indefeasibility expounded in particular by this court in Breskvar v Wall. The importance this has for the construction of the terms in which easements are granted has been remarked by Gillard J in Riley v Penttila and by Everett J in Pearce v City of Hobart. The statement by McHugh J in Gallagher v Rainbow, that: [t]he principles of construction that have been adopted in respect of the grant of an easement at common law … are equally applicable to the grant of an easement in respect of land under the Torrens system … is too widely expressed. The third party who inspects the Register cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee. It is true that in Overland v Lenehan Griffith CJ admitted extrinsic evidence to show a misdescription of the boundaries of the land comprised in a certificate of title. This is a matter now dealt with in the RP Act by the provisions in Pt 15 (ss 136–138) for the cancellation and correction of instruments. Subsequently, in Powell v Langdon Roper J accepted as applicable to the construction of a particular grant of a right of way (apparently over land under the RP Act) a statement by Sir George Jessel MR in Cannon v Villars. This was that the content of the bare grant of a right of way per se was to be ascertained by looking to the circumstances surrounding the execution of the instrument, including the nature of the surface over which the grant applied. The situation with which the Australian courts were concerned in the above cases bore little resemblance to that in the present case, where the evidence goes to the intentions and expectations of the parties to the Instrument respecting the development of an area in the central business district of Sydney. To some degree the attraction of ‘the common law approach to the construction of grants of easement’ has been to counter arguments that a right of way may be used only for the purposes for which the way was used at the time of the grant. But to accept the proposition that the user under a registered easement may change with the nature of the dominant tenement, so long as the terms of the grant are sufficiently broad, does no violence to the principles of the Torrens system.

Subsequent changes in circumstances may found an application under s 89 of the Conveyancing Act for modification or extinguishment. The conduct of the immediate parties to a dispute may found a personal equity of the kind considered in Mayer v Coe and accepted in Breskvar v Wall, and also may bear upon a claim for injunctive relief, as Kearney J indicated in Andriopoulos v Marshall. But this was not what was involved in the significance attached by [page 981]

the primary judge to the evidence of what may or may not have been in the contemplation of Jamino and Mastwood, or their affiliates and advisors, at or before the grant of the Easement in 1988. These matters were used to guide, if not control, the construction of what appeared on the register. It may be accepted, in the absence of contrary argument, that evidence is admissible to make sense of that which the Register identifies by the terms or expressions found therein. An example would be the surveying terms and abbreviations which appear on the plan found in this case on the DP. But none of the foregoing supports the admission in this case of evidence to establish the intention or contemplation of the parties to the grant of the easement. Conclusion and orders The appeal fails and should be dismissed with costs.

10.36

The question of how to interpret Torrens title easements has arisen

in a number of recent decisions. In Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 the court held that only information in the folio of the register, such as the deposited plan, the registered instrument, and the physical characteristics of the benefited and burdened parcels, are admissible. The physical characteristics (a steeply sloping block) were relied on by Slattery J in van Brugge v Hare (2011) 16 BPR 30,217 to allow the use of an inclinator. In Neighbourhood Association DP No 285220 v Moffatt (2008) NSW ConvR ¶56-208; [2008] NSWSC 54 the earlier grant of a statutory licence was held inadmissible to point to the purpose behind the registered easement, and in Currumbin Investments Pty Ltd v Body Corporate Mitchell

Park Parkwood CTS [2012] 2 Qd R 511; [2012] QCA 9, the Queensland Court of Appeal applied the more restrictive approach in Westfield to reject the files of town planners acting for the developer to interpret the terms of the easement. As between the parties, any negotiations that indicated rights and obligations in derogation of, or supplementary to, rights conferred in the registered instrument would be enforceable as in personam rights: Westfield Management Pty Ltd v Perpetual Trustee Pty Ltd (2007) 233 CLR 528 at [43].15

10.37 Questions 1.

What is the rule in Harris v Flower? Is this case an application of this rule? What is the rationale behind the rule?

2.

What is the basic rule of construction of easements?

3.

What kind of evidence is permitted for the purposes of construction of an easement?

4.

Can the court look at all the surrounding circumstances at the time of the grant?

[page 982]

5.

Why did the appellant succeed in establishing that the grant did not allow access to the two remoter sites? Is the result in this case consistent with the overall aims of the Torrens system?

Is the statement of McHugh J in Gallagher v Rainbow a correct 6.

statement of the intention test?

7.

How relevant is NSW, s 88(1) to the resolution of the issue raised in Westfield?

8.

Are the remoter properties — the relevant dominant tenements — ‘identified’ for the purposes of that section in the easement?

9.

Is the approach to extrinsic evidence in Westfield too narrow to identify the intentions of the parties?

10.38

X purchased one of six houses in a cul-de-sac, which had been

transferred to his predecessor in title together with a right of way ‘of the fullest description’, over a private road which provided the only means of access to the houses. Later, X purchased the vacant lot next door, which adjoined his house. The only means of access to this lot was over the grounds of his house. X decided to build a house partly on the vacant lot, and partly on the grounds of his existing house, so that there was access from the new house to the private road. The plaintiffs, who owned a house in the cul-desac, objected on the ground that X had no right of way over the road to the vacant block of land. After X began to build the house the plaintiffs took proceedings, claiming a declaration that there was no right of way over the road to the vacant land, and an injunction restraining X, his servants, agents and licensees from using the road to reach the vacant land. Did the grant of a right of way ‘of the fullest description’ confer a right of way over the road to the vacant land? The court in Bracewell v Appleby [1975] Ch 408; [1975] 1

All ER 993 held that it did not.16 In Jelbert v Davis [1968] 1 All ER 1182 the grant of a ‘right of way at all times and for all purposes over the driveway leading to the main road’ benefited the dominant tenement, agricultural land. When the dominant tenement holder was given permission to convert some of the land to a caravan site for 200 vehicles, the court held not to allow a right of way because it was ‘far beyond anything contemplated at the time of the grant’. For the construction of an easement to carry water through underground pipes and enter on the land for the purpose of repairing pipes, see Ex parte Purcell [1982] Qd R 613. 10.39

In some states there are legislative definitions of various types of

easements. See, for example, Conveyancing Act 1919 (NSW) s 88A(2), Sch 4A (various types of easements in favour of the Crown and prescribed authorities), s 88BB (party-wall easements), s 181A(1)–(3), Sch 8 (various types of easements); Conveyancing and Law of Property Act 1884 (Tas) ss 34A, 34B and Eighth Schedule (right of carriageway, footway, drainage and party wall); Transfer of Land Act 1958 (Vic) s 72(3) and Sch 12 (right of carriageway); Transfer of Land Act 1893 (WA) s 65 and Schs 9, 9A (various easements) (right of carriageway); Real Property Act 1886 (SA) s 89 and Fifth Schedule (right of way), s 89A and Sixth Schedule (other easements); Land Titles Act 1925 (ACT) s 81 and First Schedule.

[page 983]

In S & M Ceramics Pty Ltd v Kin [1996] 2 Qd R 540 the respondents’

predecessor in title had been granted the right to ‘pass and repass’ over the appellant’s land to gain access to the rear of a shop. At the time the easement was granted there was sufficient room on the dominant tenement to allow the parking of vehicles at the rear of the property, but this area was later covered by buildings. The issue in the case was whether the easement to pass and repass included the right to park on the servient tenement for the purpose of loading and unloading goods. The Queensland Court of Appeal (by majority) held that it did not: When terms of the grant were being drafted it would have been easy to include specifically the right to stop for the purpose of loading and unloading if it had been intended to cover that situation. The limited language of the grant which the parties have chosen to employ should be observed without expansion of meaning beyond what the words on their face would fairly encompass. A right to park vehicles cannot be regarded as obviously incidental to the express right to traverse nor can the right to park or stop be regarded as supported by any implication from the circumstances as they existed at the date of the grant.17

In Butler v Muddle (1995) 6 BPR 97, 532, Young J commented that ‘unless parking is a necessary part of [an easement for] passing and repassing, one does not normally conclude that parties intended to confer a right of parking’. 10.40

In Kyren Pty Ltd v Cinema Place Pty Ltd (2006) 244 LSJS 142;

[2006] SASC 93, the appellant owned a private road in Adelaide over which the respondent had a right of way, benefiting two titles, which were part of its larger holding. Later the respondent constructed a building on the land requiring access for large vehicles during construction. The Full Court held that it is necessary to have regard to the circumstances existing at the time of the grant. It found that the grant was broadly expressed and provided that the

use of the right of way for large vehicles was within the reasonable contemplation of the dominant tenement at the time of the grant. In Owners of Corinne Court v Shean Pty Ltd (2000) 23 WAR 1 the dominant tenement (Lot 19) was an office block. A person visiting the block by car passed over the right of way in question and parked their cars on another lot (Lot 20). The Full Court of the Western Australian Supreme Court held that this was within the grant of a right of way expressed as being ‘for all purposes connected with the use and enjoyment of’ Lot 19, because those who parked on Lot 20 did so exclusively for the purpose of visiting Lot 19. The easement therefore met the requirement of accommodating Lot 19. Is it necessary for the precise path of the easement over the servient tenement to be identified? Maurice Toltz Pty Ltd v Macy’s Emporium Pty Ltd [1970] 1 NSWR 474; (1969) 91 WN (NSW) 598 concerned the grant of an easement which was not precisely specified but which permitted the grantee to cross the ground floor of a furniture shop to gain access to the stairs to an upper storey. Hope J held that the right of way was not void for uncertainty, but that the grantee must choose the most direct way. In State Transit Authority v Australian Jockey Club (2003) 11 BPR 21,107, Young J considered whether easements had arisen by prescription in relation to pathways across land held by the plaintiff. His Honour first considered whether the test in Albon v Dremsall (1610) 1 Brownlow 216; 123 ER 763 that ‘[a] right of way should generally speaking have a terminus a quo and a terminus ad quem, so as to be bounded and circumscribed to a place certain’, had been satisfied. While the evidence could be seen to show that no particular paths were utilised by the AJC and its people, but rather that people would cross from one side to the other on

[page 984]

whatever path that pleased them, ‘so long as one has a fair definition of the terminus a quo and the terminus ad quem, a prescriptive easement can be obtained even though there is some fuzziness on the tracks that were used’. Where a right of way does not specify the height or width of the right, the owner of the dominant tenement will have such rights as are reasonable in the circumstances for the enjoyment of the easement.18 10.41

The courts frequently have to adjudicate disputes between the

parties to a right of way over whether one party has substantially interfered with the rights of the other. The complainant may be either the dominant owner or the servient owner. In Buckley v Timbury (2013) 17 BPR 32,187; [2013] NSWSC 1009, the plaintiff, having the benefit of a right of way over rural land as owner of the dominant tenement, alleged that the defendants obstructed the right of way by installing a solar powered gate, blocking drains under the right of way with rocks and installing rocks on a grass verge which prevented easy mowing of the grassed area. Slattery J expressed the relevant legal principles at 10.42C. 10.42C

Buckley v Timbury (2013) 17 BPR 32,187; [2013] NSWSC 1009 Supreme Court of New South Wales

Slattery J: … The applicable legal principles in respect of all the situations that have arisen here may be shortly stated, starting with the gate. Gates across easements. A real and substantial interference with the enjoyment of a right of way is actionable: Pettey v Parsons [1914] 2 Ch 653 at 662. The question of substantial interference from a gate is one of fact to be determined upon the

circumstances of the particular case. Contests about gates across easements often appear in the books. From them clear principles have developed. The first of these, Petty v Parsons concerned the right of a servient owner to erect a gate and keep it open at certain times and closed at other times. In the leading judgment Lord Cozens-Hardy MR stated the applicable law (at 662) as follows: It must not be forgotten that this is not a highway; it is a private road. It must not be forgotten that the rights of interference with a right of way are by no means the same in the case of a public highway as in the case of a private road. In a public highway any obstruction is a wrong if it is appreciable. That I think is the recognised distinction. Any appreciable obstruction in a highway can be prevented by indictment or otherwise, but in the case of a private right of way the obstruction is not actionable unless it is substantial. There must be a real substantial interference with the enjoyment of the right of way. It is contended by the defendant that any gate which interferes with the full and absolute enjoyment of any and every inch of way is per se and necessarily an obstruction in respect of which he was justified in pulling down, as he did, this gate. On the other hand the plaintiff alleges that she is absolutely entitled to put up and maintain a gate at the east end of the blue road … [page 985]

Swinfen Eady LJ held that the erection of the gate, and keeping it open during nonworking hours, was not a substantial interference. His Lordship stated the principle in the following way (at 665): The law is that when an easement has been granted the grantor cannot derogate from his grant, that is to say he cannot substantially interfere with the easement as granted. The question we have to consider is whether the erection of the gate will be a substantial interference with the easement as granted. Pickford LJ agreed and said that, in relation to a right of way over private land, ‘… so long as there is reasonable access to the land, and a reasonable opportunity of exercising the right of way, there is not any obstruction to it, and there is no derogation from the grant’. The Australian cases generally distinguish between gates on urban and on rural land. Prima facie, leaving a gate open on rural land is not an injury — there must be actual damage consequent upon the gate being left open: Hender v Gohl [1928] SAStRp 63; [1928] SASR 325. And the plaintiffs are not entitled to complain of any interference with their use and enjoyment of the servient land, if the interference is merely incidental to any reasonable exercise of the defendants’ right: Gohl v Hender [1930] SAStRp 36; [1930] SASR 158 at 163 per Napier J, reaffirming views he expressed in the Full Court hearing: Hender v Gohl [1928] SAStRp 63; [1928] SASR 325. In Hender v Gohl [1928] SAStRp 63; [1928] SASR 325 the plaintiffs, the owners of the servient tenement, used the tenement for grazing. In order to prevent their stock from straying, they erected a swing gate. The plaintiffs alleged that the defendants had

persistently neglected and refused to close the gate after passing through. As a consequence, the plaintiffs claimed they had to maintain constant watch and to employ someone to close the gate. In the absence of the plaintiffs showing that they had suffered loss due to the actions of the defendant, the South Australian Full Court held that the defendants were not obliged to close the gate after passing through. The Full Court in Hender v Gohl [1928] SAStRp 63; [1928] SASR 325 approved the statement of the law in Pettey v Parsons and Murray CJ said (at 329): A duty such as that [ie, to close the gate after passing through — my interpolation] …. can only arise from contract, Statute or the common law. No contract or Statute binding the defendant to close the gate after using it was referred to, and, in my opinion, there is no principle of the common law that goes to the extent required. All that the common law says is, Sic utere tuo ut alienum non laedas. Accordingly, the owner of the land subject to a right of way may erect a gate, provided it does not substantially obstruct the right of way, and the owner of the right of way may open the gate for the purpose of passage, provided he does not substantially injure the owner of the land. To merely leave the gate open is not an injury. There must be actual damage consequent upon the gate being left open. This appears to me to be in accordance with the ordinary law as to a private nuisance arising from the use of property … It was not shewn that the plaintiffs had suffered any loss due to the conduct of the defendant or any person for whom she was responsible. The Chief Justice was of the opinion that the result of the case should follow from the absence of any evidence of damage. Napier J agreed and said inter alia (at 330): Assuming that the plaintiff was entitled to maintain his gate, I agree with the Chief Justice that every omission to close it is not necessarily a breach of duty, giving a right [page 986]

of action; but I think with him that it might be an unreasonable use or exercise of the rights of way to open the gate and leave it open, and if actual loss or damage resulted I think that this would be an unreasonable, and therefore an unauthorised, interference with the plaintiff’s use and enjoyment of the servient land. If this is the position, the rights of the parties should be capable of adjustment upon the ordinary ‘rule of give and take, live and let live’, between neighbours. His Honour then held that in order to give a right of action it would be necessary for the plaintiff to prove that the gate was left open upon some particular occasion or occasions by the defendant etc, under circumstances which amounted to an unreasonable use or exercise of the right of way, and that actual loss or damage had resulted. In a later action between the same parties, Gohl v Hender [1930] SAStRp 36; [1930] SASR 158, arising out of the same basic facts, Napier J found in favour of the plaintiff as it was, or may be necessary to keep in the stock depastured on the land. Napier J found that in the previous Full Court case (where he was also a member of the

bench that heard the Full Court case) there had been no evidence of damage to the plaintiff. He then dealt with the question of whether the plaintiffs’ right to maintain the gate implied an obligation on the part of the defendants to close it after use. He said (at 163 and following): … [I]n the ordinary course of things I think that any person who is entitled to open the gate in the exercise of the right, and thereby to interfere with the plaintiffs’ property for the purpose of passing through it, acts unreasonably if, having opened the gate, he leaves it open when he knows, or ought to know, that it is, or may be, necessary to keep in the stock depastured on the land. Justice Napier held the plaintiffs were ‘entitled to maintain an unlocked gate for the purpose of preventing stock depastured on the land from escaping therefrom so long as the same is not a substantial interference with the easement of the defendant, and that so long as the plaintiffs are entitled to maintain the said gate the defendants and the servants and agents of the defendant are under a duty or obligation to close the same when they or any of them have opened it in the exercise of the rights conferred by the easement, unless the circumstances of the particular occasion afford some sufficient reason or excuse for leaving it open’. Napier J granted an injunction to restrain the defendants from any unreasonable use of the right of way by leaving the gate open in breach of the duty or obligation aforesaid. In 1986 Neasey J approved and applied Gohl v Hender [1930] SAStRp 36; (1930) SASR 158 in Stewart v Cooper [1986] TASSC 3; [1986] ANZ ConvR 631. He considered it obvious that one of the primary needs of those using rural land for stock grazing is to prevent their stock straying: In the case of the plaintiff’s land, a reasonably necessary way to prevent straying of stock is to erect gates at both ends of the right of way. That such a purpose on the part of the plaintiff is reasonable has been recognised by the defendant, as is shown by the erection of a gate on the northern boundary by agreement after the defendant purchased from the plaintiff’s brother. A principal purpose of this gate obviously was, I infer, to prevent stock straying from either property into the other. Furthermore, in order to effectuate the purpose of erecting that gate, the defendant made it a condition of the tenancy of his house that the tenant should keep the gate closed; and that was done. The present tenant, Mr Stokes, who gave evidence for the defendant, said in effect that it would be a great nuisance for him to have to open and shut the [page 987]

gate at each time of passage, and that if he was obliged to do it he would probably have to leave the property. I do not accept that evidence at face value. Mr. Stokes is in an advantageous position as tenant in relation to alternative accommodation which he might be able to obtain and afford, and I discount his evidence that he would feel obliged to leave if he had to open and close the gates.

Neasey J in Stewart v Cooper [1986] TASSC 3 at [17] summarised the guiding principles as follow: (1) in the case of a right of way over private land, the owner of the dominant tenement does not have a right of access to and use of the right of way wholly unobstructed by any limitation placed upon such use by the owner of the servient tenement; (2) only a ‘substantial’ interference with the right of way is actionable — that is, one which is ‘a real substantial interference with the enjoyment of the right of way’; and (3) that as long as the owner of the dominant tenement is given reasonable access to and use of the right of way, there is no substantial interference with the enjoyment of it. More recently Young J, as his Honour then was, considered the authorities dealing with whether gates should be considered to be a substantial interference with a right of way Denton v Phillpot (1990) NSW ConvR 55-543 (‘Denton v Phillpot’). In addition to the authorities already cited, his Honour considered and applied the following statements of principle: Denton v Phillpot at 590,029. It is not unreasonable that the person entitled to use the right of way should be subjected to the slight inconvenience which the maintenance of protected gates imposes on his user: Siple v Blow (1904) 8 OLR 547 at 554. Even the locking of a gate is not necessarily a substantial interference, but the Courts will easily find that locked gates do amount to actionable disturbance of rights of way: Jackson on the Law of Easements and Profits at p155. But if there is a good reason for having a gate, such as the interests of security, and the dominant owner is given a key to the gate, then Courts have not been over anxious to find that there has been a substantial interference: Denton v Phillpot at 590,030. Blocking the drains. The argument about the effect of blocked drains interfering with the surface of the road was in substance an argument about Mr Buckley ‘s ancillary right to do ‘whatever is reasonably necessary to make the grant effective’: Burke v Frasers Lorne Pty Ltd (2008) NSWSC 988 at [21] per Brereton J. Ancillary rights can extend to remaking road surfaces, building bridges and making the way passable. The question is always whether the particular activity or action concerned is ‘reasonably necessary for the effective and reasonable exercise and enjoyment of the rights expressly granted’: Butler v Muddle (1995) 6 BPR 13,984 and Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324. Such ancillary rights can be extensive, vary in nature, and their categories are not closed: Bland v Levi [2000] NSWSC 161; (2000) 9 BPR 17,517 and Owners of Strata Plan 48754 v PD Anderson Holdings Pty Ltd [1999] NSWSC 580. The question here is whether Mr Timbury’s deliberate blocking of the drains interfered with Mr Buckley’s ancillary rights to preserve a smooth road surface over the easement. Rocks on the grassy verge. The dominant tenement owner has an ancillary right to undertake works in respect of the easement, which are reasonably necessary for the effective and reasonable exercise and enjoyment of the easement. Mowing the lawn is an ancillary act to protect the easement from the danger of fire. That is not a risk which the dominant tenement owner should ordinarily be required to bear in a rural area where the road is the only vehicular access to a house. The removal of native brush and

undergrowth to clear obstructions and allow passage through the easement is well established: Treweeke v 36 [page 988]

Wolseley Road Pty Ltd [1973] HCA 27; (1973) 128 CLR 274 per McTiernan J at 280. That has been extended to dominant tenement owners to keep a track along the easement open and clear of native vegetation: Mantec Thoroughbreds Pty Ltd v Batur [2009] VSC 351. Safe passage is an important feature of passage. Construction of bridges to ensure safe passage is a well recognised right of a dominant tenement owner: Burke v Frasers Lorne Pty Ltd (2008) 14 BPR 26,111. Removal of fire hazard may also be permitted. Although much may ultimately depend on the general probability of fire. Mowing or removal in summer may be more readily supported.

10.43

In Philip v JPM Developments Pty Ltd (2015) 17 BPR 33,887;

[2015] NSWSC 145, the defendant’s land was burdened by a right of way which operated under s 181A and Sch 8 of the Conveyancing Act 1919. The defendant obtained development consent to build a house over the right of way, the right of way continuing under the proposed house through an arched tunnel 2.1 metres high. The plaintiffs alleged that the development constituted a substantial interference with their enjoyment of the right of way. In finding that the proposed development, in the context of a densely populated area where space was at a premium and given the height restriction, was an unreasonable interference with the plaintiffs’ right of way, Sackar J observed that reaching a conclusion required a commonsense judgment upon the particular circumstances of the case. The terms of the easement were broad and required a broad interpretation.

Rights to light and air

10.44

Easements to light and air became particularly important in the

nineteenth century with dramatic increases in urban density, and the absence of planning legislation.19 In Commonwealth v Registrar of Titles (Vic) (1918) 24 CLR 348; 24 ALR 106, the High Court of Australia recognised the right to the uninterrupted access of light and air as an easement, despite the fact that the right was not limited to access to defined apertures in a building. Under the Lands Acquisition Act 1920, the Commonwealth had acquired a right ‘to the uninterrupted access and enjoyment of light and air to the doors and windows of the building or buildings erected or to be erected’ on parcel A, over a 10-foot-wide strip of parcel B. The High Court held that an easement expressed in the above terms could exist at common law. Griffith CJ pointed out that although no reported decision had recognised such an easement, the categories of easements were not closed. He referred to several suggested novel easements, such as an easement for the passage of aeroplanes, and an easement for the passage of electricity wires. He saw no difference in principle between these and an easement for the passage of the sun’s rays, or an easement entitling the holder to the free passage of moving air. Importantly, however, such a right cannot be acquired by prescription because of the impossibility on the part of the servient tenement holder interrupting it: Harris v De Pinna (1886) 33 Ch D 238 at 262.

[page 989]

10.45 Questions

1.

What difficulties could be created by recognising the right to the uninterrupted access of light and air as an easement? Might the recognition of such an easement unduly restrict the owner of the servient tenement in the enjoyment of the land?

2.

The easement of light may become of major importance if the use of solar energy becomes widespread.20 Is recognition of this right at odds with the reasoning in Phipps v Pears (below 10.50), or the prohibition on rights such as an ius spatiandi qualifying as an easement?

3.

How does the principle of the numerus clausus bear on this question, if at all?

Rights of support 10.46

At common law, rights of support of one’s own land from one’s

neighbour’s land are not easements, but are natural rights issuing from the land: Dalton v Angus (1881) 6 App Cas 740; Minter v Eacott (1952) 69 WN (NSW) 93; A’Beckett v Warburton (1888) 14 VLR 308. Rights to support a building on land, however, may be an express easement: Dalton v Angus (1881) 6 App Cas 740. Rights of support will be examined below at 10.97.

Party walls 10.47

Special rules apply to party walls. At common law, where a common

owner sold buildings that were mutually supported by a party wall, there

would be implied such cross-easements as were necessary to carry out the common intention of the parties in relation to the use of the wall: Richards v Rose (1853) 9 Exch 218; Walsh v Elson [1955] VLR 276. The position in New South Wales and Tasmania is governed by statute, so that where a wall is described as a party wall in transfer documents, mutual cross-easements of support arise: Conveyancing Act 1919 (NSW) s 181B(1); Conveyancing and Law of Property Act 1884 (Tas) s 34B.

Fencing easements 10.48

The issue arose in relation to a duty to fence in Jones v Price [1965]

2 QB 618; [1965] 3 WLR 296; [1965] 2 All ER 625 (CA) and Crow v Wood [1971] 1 QB 77; [1970] 3 All ER 425. In the latter case, Lord Denning MR commented that: ‘It is not an easement strictly so-called because it involves the servient owner in the expenditure of money … But it has been treated in practice by the courts as being an easement’: at QB 84; All ER 428. In Australia, the obligation to fence, akin to an easement, is now largely covered by legislation.21

[page 990]

Other examples of easements 10.49

Other rights that have been held to be easements are: the right to

park cars (London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1994] 1 WLR 31; [1993] 4 All ER 157 (CA)); a right to enter a neighbour’s land to

use a toilet located there (Hedley v Roberts [1977] VR 282); the right to enter on land for the purposes of maintaining an external wall and fixtures on the wall (Beck v Auerbach (1986) 6 NSWLR 454; Ward v Kirkland [1967] Ch 194; [1966] 1 All ER 609 (in New South Wales, such an easement is explicitly recognised by Conveyancing Act 1919 (NSW) s 181A, Sch 8, Pt 5)); a right of access to air to a defined aperture (Cable v Bryant [1908] 1 Ch 259); a right to cause a nuisance on the servient tenement, for instance, by noise (Re State Electricity Commission of Victoria and Joshua’s Contract [1940] VLR 121), or by depositing noxious waste on it (Pwllbach Colliery Co Ltd v Woodman [1915] AC 634) (but right to spread coal dust by wind too indefinite); a right to use an airfield for testing aeroplanes (Dowty Bolton Paul Ltd v Wolverhampton Corporation (No 2) [1976] Ch 13); and the right to bring goods through the doorway of an adjacent shop: Wilcox v Richardson (1997) 43 NSWLR 4; 10.61C. The holder of the dominant tenement has ancillary rights to ensure enjoyment of the easement, such as the right to repair pathways and pipes: Jones v Pritchard [1908] 1 Ch 630. Rights that have been held not to qualify as easements are: rights to a view, or prospect (Aldred’s Case (1610) Co Rep 57b; 77 ER 816); the right to hit cricket balls onto neighbouring property: Miller v Jackson [1977] QB 966; or where the rights amount to possession of the servient tenement. A right to uninterrupted radio or television reception is not capable of being an easement: Hunter v Canary Wharf Ltd [1997] AC 655, nor is a right to privacy: Browne v Flower [1911] 1 Ch 219.

Protection from the weather?

10.50

In Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35, the Court of

Appeal had to consider whether an easement of protection from the weather could exist. In rejecting the concept of such an easement, Lord Denning said: There are two kinds of easements known to the law: positive easements, such as a right of way, which give the owner of land a right himself to do something on or to his neighbour’s land: and negative easements, such as a right of light, which gives him a right to stop his neighbour doing something on his (the neighbour’s) own land. The right of support does not fall neatly into either category. It seems in some way to partake of the nature of a positive easement rather than a negative easement. The one building, by its weight, exerts a thrust, not only downwards, but also sideways on to the adjoining building or the adjoining land, and is thus doing something to the neighbour’s land, exerting a thrust on it. But a right to protection from the weather (if it exists) is entirely negative. It is a right to stop your neighbour pulling down his own house. Seeing that it is a negative easement, it must be looked at with caution. Because the law has been very chary of creating any new negative easements.

[page 991]

Take next this instance from the last century. A man built a windmill. The winds blew freely on the sails for 30 years working the mill. Then his neighbour built a school house only 25 yards away which cut off the winds. It was held that the miller had no remedy: for a right to wind and air, coming in an undefined channel, is not a right known to the law: see Webb v Bird (1862) 13 CBNS 841; 143 ER 332. The only way in which the miller could protect himself was by getting his neighbour to enter into a covenant. The reason underlying these instances is that if such an easement were to be permitted, it would unduly restrict your neighbour in his enjoyment of his own land. It would hamper legitimate development. Likewise here, if we

were to stop a man pulling down his house, we would put a brake on desirable improvement. Every man is entitled to pull down his house if he likes. If it exposes your house to the weather, that is your misfortune. It is no wrong on his part. Likewise every man is entitled to cut down his trees if he likes, even if it leaves you without shelter from the wind or shade from the sun. There is no such easement known to the law as an easement to be protected from the weather. The only way for an owner to protect himself is by getting a covenant from his neighbour that he will not pull down his house or cut down his trees. Such a covenant would be binding on him in contract: and it would be enforceable on any successor who took with notice of it. But it would not be binding on one who took without notice.

10.51 Questions 1.

Are the policy reasons expressed by Lord Denning MR convincing? Would his arguments retain their force if the rules governing acquisition of easements by prescription were changed substantially? On this point, see Victorian Law Reform Commission, Easements and Covenants: Final Report 22, 2010, recommending against the extension of the category of negative easements (at 28–30).

2.

Lord Denning referred to an easement of support, which entitles its holder to prevent actions on neighbouring land which withdraw support from buildings on the dominant tenement. Could this not be regarded as a ‘negative’ easement?

3.

Why would the Court of Appeal have been prepared to recognise a restrictive covenant not to pull down a house which provided protection from the weather, but not an easement of this kind?

4.

Compare Phipps v Pears with Ford v Heathwood [1949] QWN 11, where the Supreme Court of Queensland held that an easement of protection by a windbreak could be enforced. Did the decision in Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437: see 8.64 (preventing the building of interfering structures) create a proprietary interest in the plaintiff?

5.

What is the difference between: a.

an easement giving a right to the flow of air;

b.

a restrictive covenant preventing one’s neighbour from building so as to interfere with the flow of air; and

c.

an obligation not to derogate from a grant which prevents one’s neighbour building so as to interfere with the flow of air?

[page 992]

6.

Is there an overlap between these categories of proprietary rights over the land of another? If so, what is the significance of the overlap?22

7.

A licence may also confer rights similar to those of an easement: King v David Allen [1916] 2 AC 54; [1916–17] All ER Rep 268;

1.26C. How does a licence differ from an easement?

10.52

There is some doubt whether a duty to expend money can be an

easement. Thus, in Rance v Elvin (1985) 50 P & CR 9, it was held that a duty imposed on a landowner to pay for a water supply transmitted by pipe under his land to the neighbouring property could not amount to an easement. In Frater v Finlay (1968) 91 WN (NSW) 730, it was held that the grantor of an easement can validly attach to his or her grant a condition that the grantee shall expend certain sums of money on the dominant tenement on the basis that the obligation ‘is an easement or part of an easement, or is an incident to an easement’ (at 734 per Newton DCJ). The case of Rufa Pty Ltd v Cross [1981] Qd R 365 adopted a similar rule, allowing the burden of a positive covenant to run so as to bind successors in title of the original parties to make proportionate contributions to an extension of a party wall between their properties. The Full Court of the Supreme Court of Queensland endorsed this result, ruling in favour of the holder of the benefit of the covenant. The majority (Lucas SPJ and DM Campbell J) decided that such a right was capable of forming the subject matter of a grant. What effect do these decisions have upon the principle that the burden of covenants cannot run at law or in equity? In Clifford v Dove (2004) 11 BPR 21,149, the plaintiff held an easement over the defendant’s property. It included the right to use cattle yards on the defendant’s servient land, and equipment that was a fixture on that land. After years of protracted disputation, the defendant dismantled the cattle yards and removed the fixtures. The plaintiff sought a mandatory injunction requiring reconstruction of the yards and replacement

of the fixtures. Bryson J acknowledged that ‘it is not difficult to see inconveniences in this state of the law’, but held that as this was positive covenant, it was not enforceable. His Honour held that Frater v Finlay was an example of the benefit and burden principle, which did not apply in this case because the defendant did not accept the benefit of the cattle yards. 10.53

In New South Wales, the distinction between easements and

covenants has been blurred by the Conveyancing Act 1919 s 88BA(1), which permits the creation of a covenant requiring maintenance or repair of the site of an easement or other land that is subject to the easement, or both. The covenant may bind the person from time to time having either the benefit or burden of the easement. The covenant may be imposed by registration of the relevant instrument under the Real Property Act or under the deeds registration system: s 88BA(2). The instrument including the covenant must clearly indicate the land to be maintained or repaired, the land to which the benefit of the covenant is appurtenant and the land which is subject to the burden of the covenant: s 88BA(3). When registered, it binds the land: see Butt, ‘New Easement Law in New South Wales’ (1996) 70 ALJ 348.

[page 993]

CREATION OF EASEMENTS Express and implied grants 10.54

An easement may be created, or granted, by the holder of the fee

simple estate in the servient tenement in favour of the person holding an estate in the dominant tenement. The easement, although it will be usually created in fee simple, may be created for a duration equivalent to the duration for which estates can exist in the land, for example, an easement for life, or for a term of years. A person holding an estate less than fee simple in the servient tenement may create an easement for a duration less than or equal to the duration of his or her own estate. An easement may also be ‘reserved’, as where an owner transfers part of his or her land, but retains a right of way over the transferred land. Easements can be created in four different ways. Firstly, whether in the form of grants or reservations, they may be expressly created by the parties to a transaction. This is the most common way that easements are created. Secondly, they may be implied. Thirdly, they may be acquired by ‘long user’, or prescription. Fourthly, easements can be created by the court where reasonably necessary.

Easements expressly created 10.55

Express grant Under the general law, for an easement to be effective

as a legal interest in the servient tenement, it must be created by deed: see 4.15. No particular form of words is necessary for the grant. At law, an easement which does not comply with this requirement gives the owner of the dominant tenement a mere licence in the servient tenement. However, equity, acting on the principle of Walsh v Londsdale (1882) 21 Ch D 9; 4.66C, may regard an informal document as effective to create the easement. It should be noted that an equitable easement must possess the characteristics required by Re Ellenborough Park as discussed at 10.2.

10.56

In the case of the Torrens system, registration takes the place of the

deed: see 10.113. The Torrens legislation in each state provides a means of creating easements by executing a transfer in approved form and registering it: Real Property Act 1900 (NSW) s 46: see 10.150. In addition, legislation in most jurisdictions provides for the creation of easements expressly by the registration of a plan of subdivision. So, in New South Wales s 88B(3)(c)(ii) provides that on registration of a plan indicating an easement, the easement vests in the owner of the benefited land. Such easements are to be recorded on the folios of the register of the benefited and burdened land: NSW, s 88B(3A); and Real Property Act 1900 (NSW) s 47.23 If an easement is created by oral contract or by an informal document, preceded by a contract, equity regards the easement as enforceable, provided the agreement satisfies formal requirements (see 4.16ff) or is supported by sufficient acts of part performance: see Talga Investments Pty Ltd v Tweed Canal Estates Pty Ltd [1974] 1 BPR 9675. This will be the case where, for example, the owner of the dominant tenement, acting in reliance on the oral agreement, incurs expense in improving his or her own land. In McManus v Cooke (1887) 35 Ch D 681, the owner of the dominant tenement, relying on his neighbour’s oral agreement to grant an easement of light, put in a

[page 994]

skylight. It was held that the neighbour could not obstruct the access of light to the skylight.24 Easements can also arise by acquiescence (ER Ives

Investments Ltd v High [1967] 2 QB 379), or estoppel: Crabb v Arun District Council [1976] Ch 179: see 4.147C. 10.57

Express reservation A landowner selling portions of his or her land

may expressly reserve easements over the land conveyed. At common law, the vendor faced difficulties expressly reserving easements in the conveyance, as the easements did not exist at the time of execution of the conveyance. Two devices were used to overcome this obstacle. The first was to include in the conveyance a reservation of an easement in favour of the vendor and to ensure that the purchaser executed the conveyance. This had the effect of a conveyance by the vendor to the purchaser and a regrant by the purchaser of the easement to the vendor: Wickham v Hawker (1840) 7 M & W 68; 151 ER 679. See now NSW, s 45A; Vic, s 65; Qld, s 9; Tas, s 34C. 10.58

The second device was for the vendor to declare a use of the

easement intended to be reserved. The use was executed by statute: NSW, s 45(1); Vic, s 194; Tas, s 74. Only Tasmania retains this device, because of the repeal of the Statute of Uses in New South Wales (in 1971) and Victoria (in 1980). In New South Wales, any reservation of an easement must comply with the provisions of NSW, s 88, if it is to be enforceable against persons other than parties to the dealing. It appears that in South Australia and Western Australia, it is still necessary for the grantee to execute the conveyance if the grantor wishes to reserve the easement.

Easements created by implication — implied grants

10.59

Implied easements arise where parties have failed to expressly create

easements, but nonetheless the easement is necessary for the property enjoyment of the dominant tenement. Easements may be impliedly granted in five ways: (1) under the rule in Wheeldon v Burrows; (2) by general words; (3) by necessity; (4) by common intention; and (5) by the manner of description of the property. 10.60

Continuous and apparent easements: the rule in Wheeldon v

Burrows Easements may be created under the rule in Wheeldon v Burrows (1879) 12 Ch D 31; [1874–80] All ER Rep 669, extracted in Wilcox v Richardson (1997) 43 NSWLR 4, below. Wheeldon v Burrows itself (which concerned an implied reservation of an easement) is extracted in 10.79C. In Wheeldon v Burrows, the term ‘quasi-easement’ is used to refer to rights which someone habitually exercises over his or her own land, but which in another’s hands after a grant become easements. The following case is a typical example of the operation of the rule. 10.61C

Wilcox v Richardson (1997) 43 NSWLR 4 New South Wales Court of Appeal

[The respondents were the grantees of a Crown lease (Lot 276) at Kiama Harbour on the south coast of New South Wales. Two distinct businesses were operated from within Lot 276. A takeaway business for the sale of fish and other food was operated in the southern

[page 995]

portion of the lot. In the northern portion of the lot was a wet fish shop. In January 1991, the respondents sold their takeaway business to Mr Ray Richardson (brother of one respondent) and

his partner Ms Margaret Smith for $150,000, and agreed to grant them a sublease of ‘Shop 1’ at a rent of $350 per week. On 22 December 1994 Mr Richardson and Ms Smith sold the takeaway business to the appellants, and executed an assignment of the sublease. It was agreed at trial that the area occupied exclusively by the takeaway shop was approximately 4060 square feet; however, certain ‘common’ areas of the building were used in the operation of both businesses. The sublessees and, later, following assignment of the sublease, the appellants, used these common areas (which included a staff lavatory, a store room at the northern end of the building, an ice box adjacent to the eastern boundary of the southern shop, a filleting bay, large portions of the first floor, and access to all such areas) despite the fact that they had not been granted exclusive possession of these areas by the sublease. The trial judge held that the appellants only had a right to use a common area of the building if the right to use the area was reasonably necessary for the operation of the appellants’ business.] Handley JA: In my opinion the [trial] judge’s findings and the underlying evidence provided the necessary factual sub-stratum for the appellants’ arguments that they had rights over the relevant areas outside the servery … The third basis relied on was the principle in Wheeldon v Burrows (1879) 12 Ch D 31 stated by Thesiger LJ (at 49) as follows: … on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasi-easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted. The rule in Wheeldon v Burrows illustrates the relevance of surrounding circumstances to the implication of terms and reflects the working out of the general principle ‘that a grantor shall not derogate from his grant’ (at 49). As Lord Wilberforce said in Sovmots Ltd v Environment Secretary [1979] AC 144 at 168: ‘The rule is a rule of intention, based on the proposition that a man may not derogate from his grant.’ … Wheeldon v Burrows was neither cited to the trial judge nor relied on in the appellants’ written submissions lodged prior to the hearing. Mr Biscoe [for the first respondent] submitted that in these circumstances this Court should not entertain this line of argument. I would reject this submission because, as I have attempted to demonstrate, the rule in Wheeldon v Burrows is not a special rule of the law of conveyancing, but is only an illustration, in particular circumstances, of the operation of the ordinary rules governing implications in contracts: see Nelson v Walker (1910) 10 CLR 560 at 586–587; Sovmots Ltd v Environment Secretary [1977] QB 411 at 441– 442; [1979] AC 144 at 175. Easements and other ancillary rights, sometimes described as apparent accommodations (see Halsbury’s Laws of England, 4th ed, vol 14 ‘Easements’, par 69;

Dowse v Wynyard Holdings Ltd (1961) 79 WN (NSW) 122 and Auerbach v Beck (1985) 6 NSWLR 424), are implied in accordance with the rule in Wheeldon v Burrows, where they are necessary for the reasonable enjoyment of the property expressly granted. The judge sometimes appeared to apply the more stringent test of what was ‘necessary’, but at other times he referred to what was ‘reasonably necessary’ in either case for ‘the operation of the take-away’. The test, [page 996]

expressed in those terms, invited a negative answer if it was possible to operate the takeaway without the use of the additional areas. The true test, implicit in the general authorities, and explicit in Wheeldon v Burrows, is the more liberal test of whether the implied rights were ‘necessary to the reasonable enjoyment of the property granted’. The difference is significant, because rights which are not necessary for the operation of a business may be necessary for its reasonable operation and hence for the reasonable enjoyment of land leased for that business. Expressed in other words, such rights may be needed ‘to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men’: The Moorcock (1889) 14 PD 64 at 68. It is clear from the judgment of Thesiger LJ that the test of what is necessary for the purpose of the rule in Wheeldon v Burrows is not the strict test relevant for the implication of an easement of necessity: see also Wheeler v J Saunders Ltd [1996] Ch 19 at 31, per Peter Gibson LJ. What is necessary for this rule is what ‘conduces to the reasonable enjoyment of property’ (ibid). Moreover in Schwann v Cotton [1916] 2 Ch 459 at 469, Lord Cozens-Hardy MR said: ‘The word necessary must not be taken in a rigid sense. The better phrase is that which is used by Lord Campbell … “convenient and comfortable enjoyment of the property” …’. Thus the expression means needed or required for the reasonable enjoyment of the property granted. … On the evidence of use accepted by the judge, I have no hesitation in holding that the appellants are entitled to implied easements and ancillary rights in addition to those he found. I am reinforced in this conclusion by his finding, previously referred to, that the use of ‘significant’ portions of the building outside the servery was necessary to the operation of the take-away business at least in anything like its current form. Meagher JA: … His Honour seems to have held that because: (a) there was no exclusive use of lot 276 outside the area found by him; and (b) it was not absolutely essential to the operations of the southern shop that any other area be used, the rights of the sublessees did not extend beyond that 4,060 square feet area. This, in my view, cannot be sustained; the appellants have proved that they had rights of a Wheeldon v Burrows (1879) 12 Ch D 31 kind over additional areas, that is, a quasi-easement of a ‘continuous and apparent’ nature which was ‘reasonably necessary for the enjoyment of the property granted’ by the sub-lease. These ‘additional areas’ are the areas which it was proved were used in common with the proprietors of the northern shop. Mr Biscoe QC learned senior counsel for the respondents, resisted this proposition because of his Honour’s finding that these areas were not essential for the conduct of the southern shop. In my view this

is to apply too stringent a test. The additional areas were ‘reasonably necessary’ within the rule. To take an example: if you are going to fillet fish, it is ‘reasonably necessary’ to have a filleting bay; and this ‘reasonable necessity’ does not disappear because it would be possible to fillet the fish in one’s kitchen at home. [Powell JA expressed agreement with the judgments of Meagher and Handley JJA.]

10.62

In Borman v Griffith [1930] 1 Ch 493, the principle of Wheeldon v

Burrows was applied to create an easement in favour of the lessee of a house over a drive which ran from the highway over the lessors’ land to the house. Maugham J stated the principle as follows: [W]here, as in the present case, two properties belonging to a single owner and about to be granted are separated by a common road, or where a plainly visible road exists over the one for the apparent use of the other, and that road is necessary for the reasonable enjoyment of the property, a right to use the road will pass with the quasi-dominant tenement, unless by the terms of the contract that right is excluded.

[page 997]

10.63

In Hansford v Jago [1921] Ch 322; [1920] All ER Rep 580, it was

held that the principle could apply to a strip of land other than a made-up road, provided there were indications that the strip was intended to be used for a right of way. Other cases of continuous and apparent easements include the right to use underground drains or pipes (Schwann v Cotton [1916] 2 Ch 120; [1916–17] All ER Rep 368; Taylor v Browning (1885) 11 VLR 158) and a right to the support of a building: Re Roche and Murdoch’s Contract [1921] VLR 296. For other Australian cases in which the doctrine was applied, see Lancaster v Lloyd (1927) 27 SR (NSW) 379 (easement of drainage); Tarrant

v Zandstra (1973) 1 BPR 9381. Where the owner of land subdivides it into parcels and disposes of the parcels at the same time, the purchaser of each parcel acquires the same easements over the other parcel or parcels as he or she would have had had the other parcel or parcels been retained by the common vendor: Swansborough v Coventry (1832) 9 Bing 305; 131 ER 629; see also Cleveland v Roberts [1993] 2 NZLR 17. Aldridge v Wright [1929] 2 KB 117 modified this simultaneous conveyance extension of rule in Wheeldon v Burrows to situations where the purchasers of the dominant and servient tenements were ‘aware of’ the simultaneous conveyances. 10.64

Rejecting a claim for a Wheeldon v Burrows easement over the right

to use a grease trap in a strata unit complex, the court in Cuzeno Pty Limited v Owners — Strata Plan 65870 [2013] NSWSC 1385 took into account the presumed intention of the parties having regard to the circumstances surrounding the grant. These included communications between the parties which were consistent with the notion that the subject of the use of the grease trap was for the owner’s corporation to determine: at [97]. Such an analysis reflects the true basis of the rule in Wheeldon v Burrows as being grounded on the implied intention of the parties. ‘The rule is a rule of intention, based on the proposition that a man may not derogate from his grant’: Sovmots Ltd v Environment Secretary [1979] AC 144 at 168. 10.65

General words: old system If a deed of conveyance of general law

land omits to mention expressly an easement created for the benefit of the land conveyed, legislation in most Australian jurisdictions causes the deed to

operate as an express grant of certain easements. Vic, s 62, copied from English legislation, is typical. 10.66E

Property Law Act 1958 (Vic)

62 General words implied in conveyances (1) A conveyance of land shall be deemed to include and shall by virtue of this Act operate to convey, with the land, all … liberties, privileges, easements, rights and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof, or, at the time of conveyance demised, occupied or enjoyed with, or reputed or known as part or parcel of or appurtenant to the land or any part thereof. (2) A conveyance of land, having houses or other buildings thereon, shall be deemed to include and shall by virtue of this Act operate to convey, with the land, houses or other buildings all … liberties, privileges, easements, rights and advantages whatsoever, appertaining or reputed to appertain to the land, houses or other buildings conveyed, or any of them, or any part thereof, or, at the time of conveyance demised, occupied

[page 998]

or enjoyed with, or reputed or known as part or parcel of or appurtenant to, the land, houses or other buildings conveyed, of any of them, or any part thereof. (3) This section shall apply only if and as far as a contrary intention is not expressed in the conveyance, and shall have effect subject to the terms of the conveyance and to the provisions therein contained. …

10.67

Compare NSW, s 67; Qld, s 239; SA, s 36; Tas, s 6; WA, s 41. The

provision only applies on a conveyance of land. Thus, a contract of sale or an agreement for a lease will generally not attract its operation. For the definition of conveyance, see NSW, s 7(1); Vic, s 18(1); Qld, s 3; WA, s 7; SA, s 7; Tas, s 2. This provision may have the important effect of creating new easements out of rights which grantors previously had over their own land, and which had the character of ‘quasi-easements’. The following case demonstrates the interplay between some of the rules governing implied grants of easements. 10.68C

Ward v Kirkland [1967] Ch 194; [1966] 1 All ER 609 Chancery Division

[Before 1928 the incumbent of a benefice (the rector) owned two neighbouring blocks of land, one a cottage, the other a farmhouse. A wall of the cottage provided a portion of the boundary between the two blocks; this wall could be maintained only by the occupier of the cottage entering the farmyard. Prior to 1928 the farmyard and cottage were occupied by different persons. There was evidence, discussed in the extract below, concerning the entry by occupier of the cottage onto the farmyard in order to maintain the wall. In 1928 the cottage was conveyed to the predecessors in title of the plaintiff, the plaintiff receiving his conveyance in 1954. In 1942 the defendant occupied the farmyard as a tenant of the rector and in 1958 the farmyard was conveyed to the defendant as purchaser. In 1958 the defendant refused to permit the plaintiff to enter the farmyard in order to repair the wall. One of the issues before the court was whether the plaintiff had acquired an easement over the farmyard permitting him to enter the yard in order to maintain the wall.] Ungoed-Thomas J: … I come now to the three issues in the case. I will deal with them quite separately. First, the maintenance issue: that is, whether the plaintiff has a right to go onto the defendant’s land to do maintenance work on the side of his cottage abutting in the defendant’s land. This raises various questions which I will deal with separately.

[Ungoed-Thomas J first held that the right to maintain the wall was capable of existing as an easement. It was argued that such a right would effectively exclude the servient owner from possession of his land, but Ungoed-Thomas J considered that the effect of this easement on the servient owner was not dissimilar from that of a right of way.] Then the question arises, assuming that this right is capable of being an easement, how was the easement claimed created? An easement, of course, in its strict sense, excludes quasi- easements enjoyed by a dominant tenement over a servient tenement, or, I should say, a quasi-dominant over a quasi-servient tenement, whilst those tenements are in common ownership; so that an easement strictly so called could only in this case be created by a conveyance to the Milwards in 1928, or by user since 1928. The easement could not exist before 1928, because the two [page 999]

lands were in common ownership, and such a right could then only exist as a quasieasement. The conveyance to the plaintiff in 1954 cannot have created the easement, though, of course, it may have transmitted it. For the plaintiff it is submitted that the easement arises (1) by implication of law. First, then, implication of law. Did the right to maintain the wall pass as an easement on the occasion of the conveyance in 1928 by the rector as common owner of the farm and the cottage? The source of the law on this subject is Wheeldon v Burrows … It seems to me that in the absence of a continuous and apparent feature designed or appropriate for the exercise of the easement on the servient tenement, there is not a continuous and apparent easement within the requirements of Wheeldon v Burrows in the case of alleged positive easements. I, therefore, come to the conclusion that the easement claimed was not created by implication of law. [His Lordship referred to s 62(1) and (2) of the Law of Property Act 1925: see 10.71.] Those two subsections would clearly be sufficient to pass any advantage of the nature claimed here and certainly any quasi-easements enjoyed by the tenant before conveyance. The use of the defendant’s property, as claimed, to maintain the plaintiff’s wall could be such an advantage within s 62; and it is well established that an advantage enjoyed by permission is within the section, eg Wright v Macadam [1949] 2 KB 744 at 748; [1949] 2 All ER 565 at 569. But it is submitted that advantage was, on the evidence in this case, enjoyed by permission given separately for each particular occasion of its enjoyment; that the advantage ceased to exist when the enjoyment, for which permission was given, had taken place, and did not therefore constitute an advantage enjoyed with the land at the time of the conveyance as required by s 62. But, on its wording, s 62 would apply to an advantage enjoyed by a common owner for one of his two properties over the other of his two properties, as distinct from his enjoyment of that advantage merely as owner of that other property, in as much as it would be unrealistic to

consider whether he gave himself permission; and this tends to indicate that what the section looks at is not permission in any form at all but actual practice. In Long v Gowlett [1923] 2 Ch 177 at 200; [1923] All ER Rep 335 at 346, Sargent J says: As it seems to me, in order that there may be a ‘privilege, easement or advantage’ enjoyed with Whiteacre over Blackacre so as to pass under the statute, there must be something done on Blackacre not due to or comprehended within the general rights of an occupying owner of Blackacre, but of such a nature that it is attributable to a privilege, easement, right or advantage, however precarious, which arises out of the ownership or occupation of Whiteacre, altogether apart from the ownership or occupation of Blackacre. The words ‘however precarious’ emphasise that this case turned upon that distinction which I have indicated between enjoyment exclusively for the purposes of the alleged dominant tenement or enjoyment of an advantage which might be attributable to the possession and ownership of the alleged servient tenement. It emphasises, too, that the precariousness of the enjoyment is an irrelevant consideration for the purposes of s 62 … [His Lordship then referred to further observations of Sargent J pointing to the danger of including within s 62 ‘imperceptible rights or advantages, corresponding with intermittent practice or user as between two tenements of the common owner and occupier of both’.] Section 62 does not require that the advantage should be a continuous and apparent easement. The objection which Sargent J emphasises there to the intermittent and nonapparent user being included within the ambit of s 62 is obviously, if I may say so with great [page 1000]

respect, a most substantial objection. That, however, as an objection, appears to me to be met, in our case, by the peculiar circumstances from which the need to use the yard arises, ie in order to maintain the wall, it being conceded, as is clear and obvious on inspection, that the only possible and practicable way of maintaining the wall is by using the yard. In this case, the farm and the yard were in separate occupation at the time of the 1928 conveyance. The advantage of maintaining the cottage wall as claimed was enjoyed at the time of the conveyance, and it is not defeated merely by being permissive, even, in my view, if permission were given on each occasion of user, since it appears to me that s 62 is directed to ascertaining whether the advantage was enjoyed in practice irrespective of permission or the form which permission takes. But was permission in fact, on the evidence, granted on each separate occasion in this case? … The conclusion to which I come is that this practice was followed without permission being granted, and the right to maintain the wall was a right which falls within s 62 of the Law of Property Act 1925 and passed, or perhaps more accurately, was transformed into an easement from a quasi-easement, by the 1928 conveyance …

Injunctions and damages accordingly

10.69 Questions 1.

Is an easement created by the operation of s 62 a legal easement?

2.

In what circumstances will s 62 operate to grant an easement to a purchaser where the doctrine in Wheeldon v Burrows will not do so?

3.

In what circumstances will the doctrine apply where s 62 will not?

4.

What policy is the doctrine in Wheeldon v Burrows designed to effectuate? What is the rationale of the doctrine?

5.

Is there any substantial reason for restricting the doctrine, as does Ungoed-Thomas J, to the case where there is some feature on the defendant’s land designed or appropriate for the exercise of the easement? Ungoed-Thomas J suggests that s 62 only operates to pass an easement when the privilege, easement, right or advantage is exercised by the owner of the land over one part of the land as an incident of ownership of the quasi-dominant tenement, and not simply because of ownership of the servient tenement. This would appear to exclude the case where the lots were in common occupation as well as ownership at the time of sale. In Wheeler v JJ Saunders Ltd [1995] 3 WLR 466; [1995] 2 All ER 697 an easement did not arise under the Wheeldon v Burrows principle because it was held inconsistent with an express covenant to erect a fence to prevent stock escaping.

10.70

Compare this case with Green v Ashco Horticulturist Ltd [1966] 1

WLR 889; [1966] 2 All ER 232, where a tenant, who used a passageway at the rear of the demised premises from time to time with the consent of the landlords, was held not to acquire an easement over the passageway despite a renewal of his lease. The reason was that the landlords’ consent had to be obtained on each occasion and that consent was always subject to the exigencies of their own business. Section 62 operated only in favour of those users which could be the subject of a grant of a legal right and ‘a purported grant of a right of way for such periods as

[page 1001]

the servient owner may permit one to use it would not confer any right at all’. Although this case indicates the judicial restrictions on the scope of s 62, it also suggests the trap the section presents for the unwary. Since a renewal of a lease is a ‘conveyance’ within s 62, kind-hearted landlords who permit the tenant to use, say, a right of way over the retained land, may find their generosity rewarded by the tenant’s licence being elevated into an easement: see Wright v Macadam [1949] 2 KB 744; [1949] 2 All ER 565 (landlord’s permission to tenant to use coal shed on the landlord’s premises held to amount to an easement upon a renewal of the lease). It should be noted that the landlord succeeded in the court below and immediately thereafter pulled down the shed. The Court of Appeal did not issue a mandatory injunction to

restore the shed, but merely awarded the tenant 10s damages.25 In Goldberg v Edwards [1950] Ch 247 a tenant gained access to his premises either by a separate entrance or through the front door of the landlord’s adjacent dwelling. When the landlord leased the dwelling to a third party, the plaintiffs argued that an easement had arisen under Wheeldon v Burrows. The English Court of Appeal held that the easement was not necessary to the reasonable enjoyment of the property where another access existed. 10.71

In Sovmots Investments Ltd v Secretary of State for the Environment

[1979] AC 144; [1977] 2 WLR 951; [1977] 2 All ER 385, the House of Lords had to consider whether a local authority, having made a compulsory purchase order against the appellants in respect of 36 maisonettes, had also acquired easements over the land retained by them. These included a right in the tenants of the maisonettes to use a fire escape and a goods lift, a right of support for the maisonettes from the appellants’ building below them, rights of passage for water, soil, electricity, and other services through the appellants’ building and a right of access to the outside of the building for window cleaning, maintenance and repair. It was argued, inter alia, that it was unnecessary for the local authority to have specific statutory power to acquire these rights, because they would automatically pass to the local authority under either the rule in Wheeldon v Burrows (1879) 12 Ch D 31; [1874–80] All ER Rep 669; 10.79C or the Law of Property Act 1925 s 62. In considering the application of the rule in Wheeldon v Burrows, Lord Wilberforce said (at AC 168; WLR 958; All ER 391) that: [T]he rule is a rule of intention, based on the proposition that a man [sic] may not derogate from his grant. He cannot grant or agree to grant land and at the same time deny to his grantee what is

at the time obviously necessary for its reasonable enjoyment. To apply this to a case where a public authority is taking from an owner his land without his will is to stand the rule on its head: it means substituting for the intention of a reasonable voluntary grantor the unilateral, opposed, intention of the acquirer.

Their Lordships also expressed the view that s 62 cannot operate unless there has been some diversity of ownership or occupation of the quasidominant and quasi-servient tenements before the conveyance: at AC 176; WLR 965; All ER 397–8 per Lord Edmund-Davies. There was no such diversity of ownership or occupation in the Sovmots case, as the maisonettes had never been occupied before the compulsory purchase order. It appears therefore that if both tenements are in common occupation as well as ownership before the sale of the quasi-servient tenement, s 62 does not convert the rights enjoyed by the owner-occupier over the quasi-servient

[page 1002]

tenement into easements. This is an important restriction on the scope of s 62.26 A further limit on s 62 is that it cannot create easements out of rights which do not satisfy the requirements for easements: Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35; 10.50. Both s 62 and the doctrine in Wheeldon v Burrows can be excluded by contrary intention.27 10.72

In Victoria, s 62 has been held to apply to Torrens title: National

Trustees, Executors & Agency Co v Long [1939] VLR 33. Although NSW, s 67, Qld, s 239, and Tas, s 6 are expressed not to apply to Torrens title land,28 the Torrens statutes offer similar rights to purchasers. For instance, s 51 of

the Real Property Act 1900 (NSW) contains a partly comparable provision for Torrens title land. It provides that on registration of a transfer of Torrens title land, the transferor’s ‘estate or interest’ set out in the transfer passes to the transferee ‘with all rights, powers and privileges thereto belonging or appertaining’. It therefore appears to pass to a transferee all existing easements, irrespective of whether they were referred to in the transfer: Vaneris v Kemeny (1977) 1 BPR 9655.29 In any event, the benefit of easements transferred by s 51 would not generally be enforceable against successors in title of the registered proprietor who secured registration without fraud: see 10.112ff. 10.73

Easements of necessity An easement of necessity arises where an

easement is necessary for the use of the land granted or retained. A typical example of such an easement is Barry v Hasseldine [1952] Ch 835; [1952] 2 All ER 317. In that case, the plaintiff’s predecessor in title purchased land which was surrounded by land either retained by the vendor or owned by strangers. For some time, access to the highway from the land so purchased was obtained over a disused airfield, but the owner of the airfield ultimately revoked permission for the use of the field. The plaintiff then claimed to be entitled to a right of way over the land retained by the vendor. It was held that the plaintiff was entitled to the easement by way of implied grant, since the easement was one of necessity. The plaintiff’s case was not barred by the permissive right over the airfield, since that permission was liable to be determined at any time, nor was it barred by the fact that the vendor did not own all the land surrounding that of the plaintiff. On the other hand, an argument based upon necessity was rejected in Bolton v Clutterbuck [1955]

SASR 253, mainly on the ground that an easement of necessity will be implied only where the land cannot be used at all; such an easement will not be implied merely because it is ‘necessary to the reasonable enjoyment’ of the land. Thus, where a vendor sold a building of a frontage of 24 foot together with six foot of the adjoining building, the rest of which she retained, there was no implied reservation of easements of way and support over the six-foot strip, even though that strip contained the only staircase in the building and also contained uprights and cross beams which supported the roof of the building. It was said that the vendor would be able to use the building by erecting a new wall and staircase. 10.74

Similarly, in Titchmarsh v Royston Water Co Ltd (1899) 81 LT 673,

a way of necessity was not implied despite the fact that the only access to the highway from the land purchased was by a cutting 20-foot-deep. It was held that the easement was not absolutely necessary,

[page 1003]

as the purchasers could construct a road through the cutting to the highway, albeit at considerable expense: see also Wong v Beaumont Trust Ltd [1965] 1 QB 173; Manjang v Drammeh (1990) 61 P & CR 194. In Parish v Kelly (1980) 1 BPR 9394 at 9401, Rath J took a more generous view, suggesting that ‘the existence of legal access does not necessarily exclude the implication of a way of necessity. The nature of the legal access is to be considered, in particular whether it is constructed, and if it is not, the problem and expense

in constructing it. If the legal access is a trafficable pedestrian way, there may be a strong reason for not implying of necessity a carriageway, but I do not think it is a conclusive reason’. In Torrisi v Magame Pty Ltd [1984] 1 NSWLR 14, Powell J took the view that reasonable necessity may be sufficient. Can this approach be reconciled with earlier decisions? 10.75

In North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd

[1971] 2 NSWLR 150, the plaintiff sought a declaration that it was entitled to a right of way of necessity over the defendant’s land. The plaintiff company had subdivided land and sold a portion of it to the defendant. The land retained had no access to any existing street and was zoned under the municipal council’s planning scheme as ‘reserved for special use — parking’. The plaintiff company intended that the council should acquire the land retained as an addition to an existing council car park nearby. Because of the plaintiff’s intention to sell the land to the council, neither the plaintiff nor the defendant intended that a right of way over the land sold should be reserved in favour of the plaintiff. After negotiations with the council to buy the land had broken down, the plaintiff company commenced proceedings for a declaration. Hope J dismissed the action. He took the view that a right of way by necessity only arises in order to give effect to the actual or presumed intention of the parties, and does not depend on any principle of public policy relating to landlocked land. In the instant case, it was at least necessary to show that the grantor intended to retain access over the land granted by him in favour of the land retained by him. This the plaintiff was unable to do. The case is discussed in a Note (1972) 46 ALJ 471.

10.76

However, it was noted in Nickerson v Barraclough [1981] 2 WLR

773; [1981] 2 All ER 369 that easements of necessity do not arise ‘at large’. They arise only in association with a ‘severance’ of land. In that case, the Court of Appeal took a different view. Brightman LJ (at WLR 784; All ER 379) concluded that ‘the doctrine of way of necessity is not founded upon public policy at all but upon an implication from the circumstances’. No easement of way could be implied over the defendant’s lane shown on the earlier plans, since the clear words of the conveyance negated such an easement. It was accepted that at the time of the original conveyance to the plaintiff’s predecessor in title it must have been intended that there would be some means of access to the plaintiff’s land, but the position of this easement was left undescribed.30 In Abrahams v Flynn (1996) ANZ Conv R 149, the plaintiffs claimed that an easement of necessity had arisen in favour of a property retained by the owner when the land was subdivided. The alleged easement would have permitted entry on to the land transferred for the purposes of repairing and maintaining a building at the rear of the retained land. The plaintiffs were unsuccessful. Mandie J held that it was not strictly necessary for the enjoyment of the land for the easement to exist,

[page 1004]

in the sense that the land could not be used at all if it were not granted. He distinguished Auerbach v Beck (1985) 2 NSWLR 424, where it was held that an easement to enter land for the purposes of repairing a wall had been impliedly granted, on the basis that that case dealt with an implied grant,

rather than an implied reservation. He also held there was insufficient evidence to permit inference of a common intention that an easement should arise. An easement of light cannot be susceptible to a claim of necessity: Ray v Hazeldine [1904] 2 Ch 17 at 20 per Kekewich J. An easement of necessity can arise even if it involves demolishing a building on the servient to gain access: Sweet v Sommer [2004] EWHC 1504. Modern legislative controls over subdivision are likely to prevent new subdivisions creating landlocked land. New South Wales, Queensland and Tasmania have statutory provisions enabling a court to impose a statutory right of user over land to overcome the problem of access to landlocked land: see 10.96. 10.77

Easements implied from common intention On general contractual

principles, a vendor may be obliged to create an easement in favour of a purchaser over land retained by him or her if the contract, on its proper interpretation, requires him or her to do so. Such an obligation may be implied rather than expressly stated and is usually attributed to the common intention of the parties. In Re State Electricity Commission of Victoria and Joshua’s Contract [1940] VLR 121, the commission agreed to purchase portion of the vendor’s land for the purpose of operating an electrical substation. It was held that the commission was entitled to an easement over the vendor’s retained land, enabling it to transmit across that land such noise as might arise from the proper use and operation of the substation. The implication must be ‘inherent in the very nature of the transaction itself’: (see R J Finlayson Ltd v Elder, Smith & Co [1936] SASR 209 at 234). It is necessary that the parties actually intended the land granted to be used in some particular manner: Pwllbach Colliery Co Ltd v Woodman [1915] AC 634

at 647. Should the courts be anxious to imply an easement in favour of a purchaser where the vendor sells under threat of compulsory acquisition? In Wilcox v Richardson (1997) 43 NSWLR 4 (see 10.61C) the court held that cl 4(b) of the incorporated memorandum demonstrated the appropriate common intention: ‘To use the leased premises solely for the carrying on of the purpose referred to in ITEM 2 of the reference schedule and to keep the demised premises open for business during ordinary business hours unless prevented by any circumstances beyond his control.’31 10.78

Easements implied from a description of the property In the case of

a grant of land described as ‘bounded by’ or ‘abutting on’ a road, the grantor is to be regarded as having impliedly granted a right of way over the road: Mellor v Walmesley [1905] 2 Ch 164. In this case the land sold was described as ‘situated on the seashore’. It was in fact separated from the shore by land owned by the vendor. The purchaser was held to have an impliedly granted easement over the intervening land. This principle applies to the Torrens system: Dabbs v Seaman (1925) 36 CLR 538; 10.142C.

[page 1005]

Easements created by implication — implied reservation 10.79C

Wheeldon v Burrows (1879) 12 Ch D 31; [1874–80] All ER Rep 669 Court of Appeal

[T held the fee simple estate in certain land, including vacant land with a frontage to a street, a millwright’s shop, a silk factory and workshops at the rear of and abutting on the vacant land. In one of the workshops, the windows opened on to the vacant land. T sold part of the vacant land and the millwright’s shop to the plaintiff’s husband. The lot was conveyed ‘together with all walls, fences, sewers, gutters, drains, ways, passages, lights, watercourses’ and ‘easements and appurtenances whatsoever to the said piece of land and hereditaments belonging or in any way appertaining’. No rights were reserved by the vendor in respect of the land retained by him. The plaintiff was the devisee of this land. Later, T conveyed the silk factory and the workshop to the defendant. The defendant claimed that he had a right to the access of light to the windows in the workshop and knocked down boardings which the plaintiff had erected to obstruct the light to the windows. The plaintiff brought an action for trespass, claiming an injunction to restrain further trespass. Bacon V-C held in favour of the plaintiff, and the defendant appealed.] Thesiger LJ: … We have had a considerable number of cases cited to us, and out of them I think that two propositions may be stated as what I may call the general rules governing cases of this kind. The first of these rules is, that on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasieasements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted. The second proposition is that, if the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant. Those are the general rules governing cases of this kind, but the second of those rules is subject to certain exceptions. One of those exceptions is the well-known exception which attaches to cases of what are called ways of necessity; and I do not dispute for a moment that there might be, and probably are, certain other exceptions, to which I shall refer before I close my observations upon this case. Both of the general rules which I have mentioned are founded upon a maxim which is as well established by authority as it is consonant to reason and commonsense, viz that a grantor shall not derogate from his grant. It has been argued before us that there is no distinction between what has been called an implied grant and what is attempted to be established under the name of an implied reservation; and that such a distinction between the implied grant and the implied reservation is a mere modern invention, and one which runs contrary, not only to the general practice upon which land has been bought and sold for a considerable time, but also to authorities which are said to be clear and distinct upon the matter. So far, however, from that distinction being one which was laid down for the first time and which is to be attributed to Lord Westbury in Suffield v Brown (1864) 4 De GJ & s 185; 46 ER 888, it appears to me that it has existed almost as far back as we can trace the law upon the subject; and I think it right, as the case is one of considerable importance, not merely as regards the parties, but as regards vendors

and purchasers of land generally, that I should go with some little particularity into what I may term the leading cases upon the subject. [page 1006]

[Thesiger LJ discussed several cases and concluded that a grantor who wished to reserve any right over the land granted had to reserve the right expressly.] Other cases which have been cited during the argument illustrate the exceptions to the second of those general rules. As I have already said, there is an undoubted exception in cases where the easement is what is called a way of necessity. Thus in Pinnington v Galland (1853) 9 Ex 1 at 12; 156 ER 1 at 5, which was a case for disturbance of a right of way, there were five closes, two of them called the Holme Closes, which were separated by the others from the only available highway, and which were conveyed subsequently in point of time to the conveyance of the remaining closes through which this way de facto ran. In deciding that the way still existed, Martin B appears to me to have put the case entirely upon the exception to which I am referring. He says this: It no doubt seems extraordinary that a man should have a right which certainly derogates from his own grant; but the law is distinctly laid down to be so, and probably for the reason given in Dutton v Taylor (1700) Lutw 1487; 125 ER 819 sub nom Dutton v Taylor, that it was for the public good, as otherwise the close surrounded would not be capable of cultivation. Now those last words clearly shew that the whole foundation of the judgment in the case of Pinnington v Galland was that the way claimed in the case was a way of necessity, and it is equally clear, as it seems to me, that Martin B and the court whose judgment he delivered in no way disputed the general maxims to which I have referred … These cases [Pinnington v Galland and Davies v Sear (1869) LR 7 Eq 427] in no way support the proposition for which the appellant in this case contends; but, on the contrary, support the propositions that in the case of a grant you may imply a grant of such continuous and apparent easements or such easements as are necessary to the reasonable enjoyment of the property conveyed, an-d have in fact been enjoyed during the unity of ownership but that, with the exception which I have referred to of easements of necessity, you cannot imply a similar reservation in favour of the grantor of land. Upon the question whether there is any other exception, I must refer both to Pyer v Carter (1857) 1 H & N 916; 156 ER 1472, and to Richards v Rose (1853) 9 Ex 218; 156 ER 93; [1843–60] All ER Rep 827; and, although it is quite unnecessary for us to decide the point, it seems to me that there is a possible way in which these cases can be supported without in any way departing from the general maxims upon which we base our judgment in this case. I have already pointed to the special circumstances in Pyer v Carter, and I cannot see that there is anything unreasonable in supposing that in such case, where the defendant under his grant is to take this easement, which had been enjoyed during the unity of ownership, of pouring his water upon the grantor’s land, he

should also be held to take it subject to the reciprocal and mutual easement by which that very same water was carried into the drain on that land and then back through the land of the person from whose land the water came. It seems to me to be consistent with reason and commonsense that these reciprocal easements should be implied … Richards v Rose, although not identically open to exactly the same reasoning as would apply to Pyer v Carter, still appears to me to be open to analogous reasoning. Two houses had existed for some time, each supporting the other. Is there anything unreasonable — is there not, on the contrary, something very reasonable — to suppose in that case that the man who takes a grant of the house first and takes it with the right of support from that adjoining house, should also give to that adjoining house a reciprocal right of support from his own? … For these reasons, therefore, the appeal should be dismissed. [James and Baggallay LJJ agreed with Thesiger LJ.]

[page 1007]

10.80

It follows from this case that the general rule is that easements

cannot be impliedly reserved: ‘By virtue of its origin in the morality of grant, the rule in Wheeldon v Burrows applies only to grants, and not to reservations, of easements’.32 But the grantor may rely upon an implied reservation in two exceptional cases: easements of necessity (see 10.73), or on the principle expressed in Richards v Rose (1853) 9 Ex 218; 156 ER 93; [1843–60] All ER Rep 827 that reciprocal easements required to implement the common intention of the parties will be impliedly reserved to the grantor: see 10.77. Also, where the owner of land subdivides it into parcels and disposes of the parcels at the same time, the purchaser of the quasi-dominant tenement acquires the same easements over the other parcel or parcels as he or she would have had had the other parcel or parcels been retained by the common vendor: Swansborough v Coventry (1832) 9 Bing 305; 131 ER 629; see also

Cleveland v Roberts [1993] 2 NZLR 17. This is known as the simultaneous conveyance exception. Aldridge v Wright [1929] 2 KB 117 modified this extension of the rule to situations where the purchasers of the dominant and servient tenements were ‘aware of’ the simultaneous conveyances.

Acquisition by long user 10.81

The law provides means of legitimising ‘rights’ which have been

enjoyed de facto over long periods. This has been seen in relation to the Limitation Acts (see 2.72ff), but a similar approach has been followed in recognising rights in the nature of easements enjoyed as of right for many years. The doctrines employed for this purpose, notably the doctrine of lost modern grant, operate in a different manner from the Limitation Acts. The latter have the effect of barring the title of a landowner whose cause of action has been lost by the lapse of time. The doctrine of lost modern grant, for example, operates positively by enabling the claimant to acquire a legal interest corresponding to the ‘rights’ exercised over the servient tenement. Notwithstanding the differences in form, the principles governing the acquisition of easements by long user rest on a similar policy basis to that underlying the Limitation Acts.33 10.82

In England, there are three routes by which easements may be

acquired by long user. The first is prescription at common law, whereby a grant of an easement will be presumed if user as of right over another’s land can be shown to have continued ‘from time whereof the memory of men runneth not to the contrary’. That time is held to be the year 1189 as fixed by

the Statute of Westminster 1275. Although user as of right for 20 years or more will give rise to the presumption, the claim will be defeated if it is shown that the grant could not possibly have been made in fact prior to 1189. For obvious reasons, this doctrine is not applicable to Australia: Hamilton v Joyce [1984] 3 NSWLR 279 at 287. 10.83

Secondly, in order to remedy the defects of common law

prescription, the courts developed the doctrine of lost modern grant. According to this doctrine, the grant of an easement will be presumed irrebuttably from 20 years user as of right where the use has been open and uninterrupted: Bakewell Management Ltd v Brandwood [2004] 2 WLR 955. Initially, the basis of the doctrine was that the courts would infer an actual grant from the user so that the doctrine could be rebutted by showing that a grant had not been made. Subsequently, it ripened into a substantive doctrine, independent of any inquiry as to whether an actual grant had been made. This doctrine applies in the Australian states and territories (Delohery

[page 1008]

v Permanent Trustee Co of New South Wales (1904) 1 CLR 283; 10.93), and is explained and developed in the case extracted below.34 10.84

Thirdly, easements may be acquired by long user under the

Prescription Act 1832. This Act was not part of the inherited law in New South Wales and there is no equivalent in New South Wales: Cooper v Corporation of Sydney (1853) Legge 765 (FC in Eq). However the Act has

been adopted in Western Australia, enacted in Tasmania and appears to apply in South Australia: Act 6 Will IV No 4 (1836) (WA); Prescription Act 1934 (Tas); White v McLean (1890) 24 SALR 97 (the correctness of this decision was reserved by Walsh J in Anthony v Commonwealth (1973) 41 ALJR 43 at 91) but accepted by the South Australian Supreme Court in banco in Golding v Tanner (1991) 56 SASR 482.35 10.85C

Dalton v Angus & Co (1881) 6 App Cas 740; (1881–5) All ER Rep 1 House of Lords

[Two dwelling houses stood side by side, each receiving lateral support from the soil on which the other rested. After more than 20 years, the plaintiff’s house was converted into a coach factory. As part of this conversion, girders were inserted into a stack of brickwork so that the building required more lateral support from the soil of the adjoining land. This conversion of the dwelling house into a coach factory was done quite openly. More than 20 years after the conversion, the owners of the adjoining house employed a contractor, Dalton, to pull down the house. The contractor was to shore up adjoining buildings and make good any damage. The contractor employed a subcontractor on similar terms. When the house was pulled down and the soil beneath it was excavated, the plaintiff’s stack of brickwork fell, bringing with it most of the factory. The action was brought by Angus & Co, the proprietors of the coach factory, against Dalton, and the Commissioners of Her Majesty’s Works and Public Buildings, the proprietors of the adjoining land. The history of the case is extremely complex, but in substance was as follows. At the trial, Lush J directed a verdict for the plaintiffs, subject to a reference to ascertain damages, and extended time to enable the plaintiffs to move for judgment. On motion for judgment, however, the Queen’s Bench Division gave judgment to the defendants. The Court of Appeal reversed this decision, and the defendants appealed to the House of Lords.] Lord Selborne LC: … The questions upon these appeals may be reduced, shortly, to two: the first, whether a right to lateral support from adjoining land can be acquired by 27 years’ uninterrupted enjoyment for a building proved to have been newly erected at the commencement of that time; the second, whether (if so) there was anything in the circumstances of this case,

[page 1009]

as appearing in the evidence, sufficient either to disprove the acquisition of such a right, or to make it dependent upon some question of fact, which ought to have been submitted to the jury … In the natural state of land, one part of it receives support from another, upper from lower strata, and soil from adjacent soil. This support is natural, and is necessary, as long as the status quo of the land is maintained; and, therefore, if one parcel of land be conveyed, so as to be divided in point of title from another contiguous to it, or (as in the cases of mines) below it, the status quo of support passes with the property in the land, not as an easement held by a distinct title, but as an incident to the land itself, sine quo res ipsa haberi non debet [‘without which that thing cannot be had’]. All existing divisions of property in land must have been attended with this incident, when not excluded by contract; and it is for that reason often spoken of as a right by law; a right of the owner to the enjoyment of his own property, as distinguished from an easement supposed to be gained by grant; a right for injury to which an adjoining proprietor is responsible, upon the principle, sic utere tuo, ut alienum non laedas [‘so use your own property as not to injure another’s’] … [T]he doctrine laid down must, in my opinion be understood of land without reference to buildings. Support to that which is artificially imposed upon land cannot exist ex jure naturae [by virtue of a natural right] because the thing supported does not itself so exist; it must in each particular case be acquired by grant, or by some means equivalent in law to grant, in order to make it a burden upon the neighbour’s land which (naturally) would be free from it … Land which affords support to land is affected by the superincumbent or lateral weight, as by an easement or servitude; the owner is restricted in the use of his own property, in precisely the same way as when he has granted a right of support to buildings. The right, therefore, in my opinion, is properly called an easement … though when the land is in its natural state the easement is natural and not conventional … If at the time of the severance of the land from that of the adjoining proprietor it was not in its original state, but had buildings standing on it up to the dividing line, or if it were conveyed expressly with a view to the erection of such buildings, or to any other use of it which might render increased support necessary, there would then be an implied grant of such support as the actual state or the contemplated use of the land would require, and the artificial would be inseparable from, and (as between the parties to the contract) would be a mere enlargement of, the natural. If a building is divided into floors or ‘flats’, separately owned (an illustration which occurs in many of the authorities), the owner of each upper floor or ‘flat’ is entitled, upon the same principle, to vertical support from the lower part of the building itself: Caledonian Railway Co v Sprot (1856) 2 Macq 449; [1843–60] All ER Rep 109. I think it clear that any such right of support to a building, or part of a building, is an easement … These principles go far, in my opinion, to establish, as a necessary consequence, that such a right of support may be gained by prescription. Some of the learned judges appear to think otherwise, and to doubt whether it could be the subject of grant. For that doubt I am unable to perceive any sufficient foundation … Be the theory [of prescription] what it may, its true foundation, in point of fact, is that which the

Romans called usucapio, under the conditions defined by Sir Edward Coke (1 Co Lit 1136, 114a). Both to customs and prescriptions, these two things are incidents inseparable, viz possession or usage, and time. Possession must have three qualities, it must be long, continual, and peaceable. [page 1010]

All these conditions are capable, in my judgment, of being fulfilled as to the right of support to buildings, and, when they are fulfilled, I am unable to understand why the right should not be held to be prescriptively established. The policy and purpose of the law on which both prescription and the presumptions which have supplied its place, when length of possession has been less than immemorial, rest, would be defeated, or rendered very insecure, if exceptions to it were admitted on such grounds as that a particular servitude (capable of a lawful origin) is negative rather than positive; or that the inchoate enjoyment of it before it has matured into a right is not an actionable wrong; or that resistance to or interruption of it may not be conveniently practicable. I assume, for the present purpose, that a man who places on his own land, where it adjoins that of his neighbour, a weight which increases its pressure upon his neighbour’s land, is not thereby guilty of an actionable wrong. If this be so, the reason probably is, that the act is lawfully done upon his own land, and that the owner of the adjoining land suffers no actual or appreciable damage from the increased amount of pressure which it has to bear, except so far as the continuance of that pressure, if uninterrupted, may tend to ripen into a right, and so to enlarge the servitude to which this land was previously subject. But against this he has his own remedy, if he chooses to prevent and interrupt it. That power of resistance by interruption does and must in all such cases exist, otherwise no question like the present could arise. It is true that in some cases (of which the present is an example) a man acting with a reasonable regard to his own interest would never exercise it for the mere purpose of preventing his neighbour from enlarging or extending such a servitude. But, on the other hand, it would not be reasonably consistent with the policy of the law in favour of possessory titles, that they should depend, in each particular case, upon the greater or less facility or difficulty, convenience or inconvenience, of practically interrupting them. They can always be interrupted (and that without difficulty or inconvenience), when a man wishes, and finds it for his interest, to make such a use of his own land as will have that effect. So long as it does not suit his purpose or his interest to do this, the law which allows a servitude to be established or enlarged by long and open enjoyment, against one whose preponderating interest it has been to be passive during the whole time necessary for its acquisition, seems more reasonable, and more consistent with public convenience and natural equity, than one which would enable him, at any distance of time (whenever his views of his own interest may have undergone a change), to destroy the fruits of his neighbour’s diligence, industry, and expenditure … [Lord Selborne then decided that the right of support came within s 2 of the Prescription Act.]

Supposing, however, that s 2 of the Prescription Act might not be held to apply to the easement of support, the same result would practically be reached by the doctrine, that a grant, or some lawful title equivalent to it, ought to be presumed after 20 years user. As to this, I think it unnecessary to say more than that I agree with the view of the authorities taken by Lush J, by the majority of the judges in the Court of Appeal, and by all the learned judges who attended this House (unless Bowen J, who preferred to rely upon the equitable doctrine of acquiescence, is an exception) in their answer to the first two questions proposed to them by your Lordships. Upon the other three questions proposed to the learned judges, which involve the doctrine of clam, as applied to the easement of support, there has been much difference of opinion. Four of the learned judges being in the plaintiff’s favour, and the other three thinking that the jury were not properly directed on that point. [page 1011]

The inquiry on this part of the case, is, as to the nature and extent of the knowledge or means of knowledge which a man ought to be shewn to possess, against whom a right of support for another man’s building is claimed. He cannot resist or interrupt that of which he is wholly ignorant. But there are some things of which all men ought to be presumed to have knowledge, and among them (I think) is the fact, that, according to the laws of nature, a building cannot stand without vertical or (ordinarily) without lateral support. When a new building is openly erected on one side of the dividing line between two properties, its general nature and character, its exterior and much of its interior structure, must be visible and ascertainable by the adjoining proprietor during the course of its erection. When (as in the present case) a private dwelling house is pulled down, and a building of an entirely different character, such as a coach or carriage factory, with a large and massive brick pillar and chimney stack, is erected instead of it, the adjoining proprietor must have imputed to him knowledge that a new and enlarged easement of support (whatever may be its extent) is going to be acquired against him, unless he interrupts or prevents it. The case, is in my opinion, substantially the same as if a new factory had been erected, where no building stood before. Having this knowledge, it is, in my judgment, by no means necessary that he should have particular information as to those details of the internal structure of the building on which the amount or incidence of its weight may more or less depend. If he thought it material, he might inquire into those particulars, and then if information were improperly withheld from him, or if he received false or misleading information, or if anything could be shewn to have been done secretly or surreptitiously, in order to keep material facts from his knowledge, the case would be different. But here there was no evidence from which a jury could have been entitled to infer any of these things. Everything was honestly and (as far as it could be) openly done, without any deception or concealment. The interior construction of the building was, indeed, such as to require lateral support, beyond what might have been necessary if it had been otherwise constructed. But this must always be liable to happen, whenever a building has to be adapted to a particular use. The knowledge that it may or may not happen is in my opinion enough, if the adjoining proprietor makes no inquiry. I think, therefore, that in this case the kind and degree of knowledge which the adjoining

proprietor must necessarily have had was sufficient; that nothing was done clam, and that the evidence did not raise any question on this point which ought to have been submitted to the jury. My opinion, therefore, upon the whole case is in favour of the respondents, the plaintiffs in the action, and against the appellants; and the motion which I have to make to your Lordships is, that the judgments of the court below be affirmed, and the appeal dismissed with costs … [Lord Blackburn took the view that an easement of support could be acquired by prescription, and that in the circumstances of this case an easement had been acquired under the doctrine of lost modern grant. He also expressed the view that acquisition of an easement under this doctrine does not depend on acquiescence by the owner of the servient tenement, but on expediency and the public good. In the case of an easement of support, all that was required was that it be known that some support was enjoyed by the building. The requirement that enjoyment be open meant no more than this. Lord Watson expressed his agreement with the Lord Chancellor. Lord Coleridge concurred with the Lord Chancellor and Lord Blackburn. Lord Penzance reluctantly concluded that the appeal should be dismissed, expressing reservations about the course the authorities had taken. In particular, he considered that, in principle, a claim to the support of a house should arise as soon as the house is built.]

[page 1012]

10.86 Questions 1.

What is the rationale Lord Selborne LC puts forward for the doctrine of prescription? Does this rationale rest on the acquiescence of the person against whom the claim is made?

2.

How persuasive is the suggestion made by Lord Penzance in his judgment that as soon as a house is built on land the owner should have a right of support enforceable against neighbouring

landowners, without having to wait 20 years for the right to be recognised? A general discussion of rights of support follows at 10.97.

10.87

The doctrine of prescription requires the use to have been ‘as of

right’. That is, the claimant must show that he or she exercised the use as though entitled to do so as an incident of ownership of the dominant land — otherwise there is no basis in presuming a lost grant. Acquiescence by the servient owner lies at the root of prescription: R (Beresford) v Sunderland City Council [2003] 3 WLR 1306. Furthermore, the doctrine of prescription requires the right to have been exercised nec vi (without force), nec clam (without secrecy) and nec precario (without permission) before a title by prescription can arise. In Dalton v Angus & Co, it was argued that the right of support had been used secretly, in that the owner of the servient tenement was unaware of the user. The argument was rejected on the ground that the owner had the means of ascertaining that his land was being used to support the building on the dominant tenement. Note that Lord Blackburn thought that acquiescence of the holder of the servient tenement was not necessary. In Hamilton v Joyce [1984] 3 NSWLR 279, the Supreme Court of New South Wales held that the presumption of lost modern grant did not apply when the failure to object to the exercise of rights over the land was attributable to doubts about the state of the owner’s title. The basis for this view was that the doctrine of lost modern grant rests upon acquiescence of the person

against whom the claim of an easement is made. Is this view consistent with Dalton v Angus (1881) 6 App Case 740; [1881–5] All ER Rep 1? 10.88

The leading case accepting a plea of clam and tending to refute Lord

Blackburn’s view is Union Lighterage Co v London Graving Dock Co [1902] 2 Ch 557; [1900–3] All ER Rep 234. In that case, the owner of a dock and an adjacent wharf, in order to make the dock secure, inserted some underground supports leading from the dock to the wharf. The supports were not visible from the wharf, although two nuts on the piles of the wharf could be detected. The dock would collapse if the supports were removed. In time, the dock and wharf came under separate ownership, and the wharf owners, as soon as they learned of the supports intruding into their land, took action to have them removed. It was held, Vaughan Williams LJ dissenting, that they were entitled to succeed, the defendants’ claim to an easement of support by way of prescription failing on the ground that the enjoyment of the right of support was not ‘open’ — ‘that is to say, of such a character that an ordinary owner of the land, diligent in the protection of his interests, would have, or must be taken to have, a reasonable opportunity of becoming aware of that enjoyment’: per Romer LJ at 571. On the other hand, in Lloyds Bank Ltd v Dalton [1942] Ch 466, it was held that a prescriptive right of support had been obtained in respect of a yard and outbuilding that had been supported for 44 years by a dyeworks on the neighbouring land. The plea of clam failed on the ground that the successive owners of the dyeworks, assuming them to have been reasonable persons, diligent in the protection of

[page 1013]

their interests, either must have known or must be taken to have had reasonable opportunity of becoming aware of the fact that the dyeworks were supporting the north-east part of the plaintiff’s yard and of the outbuilding standing thereon: see also Milne v Jones (1910) 13 CLR 168; Ironside v Cook (1981) 41 P & CR 326. For another application of this principle, see Gangemi v Watson (1994) 11 WAR 505, where an easement was held to arise by long user, although the servient tenement (a laneway) had effectively been abandoned by the owner. Seaman J commented that the owner had the means of knowledge of use of the land, and the fact that he had never visited the land or observed its use did not prevent the easement from arising. 10.89

A claim to an easement by long user will also fail if it can be shown

that the user was forcible (as where the claimant periodically uses a right of way despite the continual protests of the owner of the servient tenement and his or her attempts to lock the gates) or, in the more usual case, that the user was by permission. User by permission is not user as of right, and it is open to the licensor to revoke his or her permission at any time. The paradigm case of user by permission is where a periodic sum is paid in respect of the right: Gardner v Hodgson’s Kingston Brewery Co Ltd [1903] AC 229. However, where user is originally by permission, but later occurs for at least 20 years without reliance on that permission, an easement may arise under the doctrine of lost modern grant: Healey v Hawkins [1968] 1 WLR 1967; [1968] 3 All ER 836. A further limit on the doctrine is that there can be no

user as of right, for the purposes of acquiring an easement by prescription, if both tenements are in common possession. In this case, the right is said not to be enjoyed as an easement but in virtue of the claimant’s occupation of both blocks: Outram v Maude (1881) 17 Ch D 391. 10.90

The claimant to an easement by long user must show continuous

user of the right throughout the 20-year period. What amounts to continuous user will depend upon the particular easement that is claimed. Thus, in Hollins v Verney (1884) 13 QBD 304 at 307–38, a case interpreting the provisions of the Prescription Act 1832, but concerning the same issue for these purposes, Lindley LJ pointed out that: [C]ommonsense … is enough to show that in order to establish a right of way under s 2, it cannot be necessary to prove an actual continuous user of the way by day and by night for 20 years without any cessation whatever. Whatever fairly amounts to an actual enjoyment as of right of the way claimed for the full period of 20 years mentioned in s 2, is sufficient.

In the event, it was held by the Court of Appeal that the use of a right of way for the purpose of removing wood was not sufficiently continuous, in that the right of way had been used only three times in over 25 years. In Diment v N H Foot Ltd [1974] 1 WLR 1427; [1974] 2 All ER 785, the use of a right of way on about six to 10 occasions in each year was regarded as sufficient in extent and regularity to be capable of creating a right of way under the doctrine of lost modern grant. Recently, in Thomopoulos v Faulks [2006] VSC 262, a laneway was used to access a garage at the rear of a property. The court held that that there had been insufficient usage of the laneway to create the easement sought because the lane was only used when the plaintiff believed the owner would not see them.

10.91

The authorities suggest that for the doctrine of lost modern grant to

apply, the user must be by the holder of the fee simple estate in the dominant tenement against the holder of the fee simple estate in the servient tenement. This rule has two consequences. First, a lessee cannot acquire an easement by long user on his or her own behalf, but can claim an

[page 1014]

easement on behalf of the landlord. Second, if the period of user occurs while a tenant is in possession of the land alleged to be subject to an easement, the fee simple owner is not bound. An easement by long user cannot exist for a term of years. The latter principle was laid down in Bright v Walker (1834) 1 CM & R 211; 149 ER 1057, and applied in Wheaton v Maple & Co [1893] 3 Ch 48. In Kilgour v Gaddes, the Court of Appeal held that the exercise of a right of way by a tenant over another piece of land which was also in the possession of a tenant did not give rise to an easement under the English Prescription Act 1832. The Court of Appeal held that the Act (and possibly the common law) only permitted an easement to be acquired by a fee simple owner against a fee simple owner. The tenant could not acquire an easement on behalf of the landlord over land occupied by another tenant of the same landlord, because the landlord would be acquiring an easement against himself. The rule preventing acquisition of an easement for a fixed period by long user seems inconsistent with the principle that an easement can be expressly granted for a term of years.36 In Rodwell v G R Evans & Co Pty Ltd [1978] 1 NSWLR 448, the New South Wales Court of Appeal also doubted

the correctness of the view that an easement for a limited period could not be obtained by long user. The court (Reynolds, Hutley and Samuels JJA) commented that: … there is a grave reason to doubt the proposition that an easement based on the presumption of lost grant cannot exist, and provide a right good against all successors in title of holders of the limited interest, after the necessary user has taken place (at 451).

In Hamilton v Joyce [1984] 3 NSWLR 279, Powell J expressed doubt about the correctness of the Court of Appeal’s view in Rodwell v G R Evans & Co and reaffirmed the principle that user must be by or on behalf of a fee simple owner against a fee simple owner. However, he accepted the proposition in Pugh v Savage [1970] 2 QB 373 at 382; [1970] 2 All ER 353 at 359 per Cross LJ that if user commenced against a fee simple owner, time could continue to run against that owner even if the land was later leased to a tenant. Pugh v Savage was followed on this point in Piromalli v Di Masi [1980] WAR 173. Where 20 years user can be shown, the onus is on the holder of the servient tenement seeking to defeat the claim of an easement to establish that, at the time user commenced, the servient tenement was not in possession of the fee simple owner: Davis v Whitby [1974] Ch 186; [1974] 1 All ER 806.

10.92 Questions 1.

Does an increase in the amount of use over the prescription period prevent the acquisition of an easement under the doctrine of lost modern grant?

2.

See Cargill v Gotts [1981] 1 WLR 441; [1981] 1 All ER 682 discussed in Glover, ‘Easement: Effect of Statute and Increased Burden’ (1980) 130 NLJ 1217. How does the acquisition of easements by operation of the doctrine of lost modern grant differ from the acquisition of title in land by adverse possession? When do these two principles overlap?

3.

Do you agree with Lush J’s assessment of the doctrine in Angus & Co v Dalton (1877) 3 QBD 85 at 94 as a ‘revolting fiction’?

[page 1015]

10.93

In Delohery v Permanent Trustee Co of New South Wales (1904) 1

CLR 283, the High Court held that the doctrine of prescription permitting acquisition of easements by long user was applicable to New South Wales by virtue of the Imperial Statute, 9 Geo IV, c 83 (1828). This Act provided that all laws and statutes in force within the realm of England at the time of the passing of the Act ‘shall be applied in the administration of justice in the Courts of New South Wales and Van Diemen’s Land respectively, so far as the same can be applied in the said colonies’. The question was relevant to Victoria and Queensland, which in 1828 formed part of New South Wales, as well as to Tasmania. Griffith CJ, who delivered the judgment of the court, drew a distinction between the fiction that a grant had been made and lost, and the substantive law as to the acquisition of title by prescription. Although the doctrine of lost modern grant may not have formed part of the

substantive law of England, but rather was an artificial rule of pleading, the law on the acquisition of rights by long user was a very ancient branch of real property law. The period of user required to establish a right had varied from time to time, but by the year 1786, an unexplained enjoyment for a period of 20 years or upwards was sufficient to establish a right. The Chief Justice then went on to discuss whether the law of prescription was part of the common law introduced into New South Wales on settlement (at 310–13): [W]e think that the law of prescription, which is, in various forms, part of the law of most civilised countries, cannot be regarded as a law of local policy adapted solely to the locality in which it was made, but must be regarded as a general regulation of property. In this regard we are unable to draw any distinction in principle between prescription at common law and prescription by statute … [T]he test prescribed by the statute is not whether the law is suitable or beneficial, but whether it can be applied. It is plain that a law may be applicable in the sense that it can be administered, although it may, as a matter of opinion, be considered not ‘applicable’, in the sense of being suitable or beneficial. The statute does not, indeed, itself use the term ‘applicable’, from the use of which in a double sense confusion has arisen … We cannot see that there would be any difficulty in administering the law of prescription, so far as it regards ancient lights, in a new country, so soon as occupation had proceeded to such an extent as to allow of a continued enjoyment for 20 years. Possibly in determining whether the enjoyment was unexplained, some different, and, indeed novel considerations might arise, but this would not render impracticable the administration or application of the law itself … On full consideration we are of opinion that the law of prescription as to ancient rights was a law which could be applied in New South Wales within the meaning of the Statute 9 Geo IV, c 83, and therefore became part of the law of the colony at that time, even if it had not been brought with them by the first colonists.

Does Delohery’s case mean that the presumption of a lost grant, which arises after 20 years user, cannot be rebutted by evidence that no grant was in

fact made? On this issue, there were a variety of views among the judges who participated in Dalton v Angus & Co. 10.94

In Tehidy Minerals Ltd v Norman [1971] 2 QB 528; [1971] 2 All

ER 475, the English Court of Appeal made a detailed analysis of these views and concluded as follows (at QB 552; All ER 491): In our judgment Angus v Dalton decides that, where there has been upwards of 20 years’ uninterrupted enjoyment of an easement, such enjoyment having the necessary qualities to

[page 1016]

fulfil the requirements of prescription, then unless, for some reason such as incapacity on the part of the person or persons who might at some time before the commencement of the 20 year period have made a grant the existence of such a grant is impossible, the law will adopt a legal fiction that such a grant was made, in spite of any direct evidence that no grant was in fact made. If this legal fiction is not to be displaced by direct evidence that no grant was made, it would be strange if it could be displaced by circumstantial evidence leading to the same conclusion, and in our judgment it must follow that circumstantial evidence tending to negative the existence of a grant (other than evidence establishing impossibility) should not be permitted to displace the fiction.

10.95

A similar view was taken in Thwaites v Brahe (1895) 21 VLR 192,

where, however, the presumption was held to be rebutted by proof that the presumed grantor lacked legal competency to make the grant. In that case, the presumed grantors were trustees of land for a religious community and it would have been in breach of the trust, as constituted by the Crown grant, for them to have made the grant. The Full Court stated (at 199) that, although the presumption of a grant would not be rebutted by mere proof that a grant had not in fact been made, ‘if it can be shown that for any reason the

supposed grantor could not lawfully have made a grant of the easement, that is sufficient to rebut the presumption of a lost grant’. On the other hand, in Tuckett v Brice [1917] VLR 36, it was held that the presumption of a grant was not rebutted merely by proof that the fee simple estate in the servient tenement was held by trustees and that the grant of an easement would have been in breach of trust. It was said that the only incapacity which would preclude a grant being presumed was an incapacity arising from ‘an insufficient legal estate, or from a restraint imposed by an Act of Parliament, or some such limitation’. The Court of Appeal again considered the issue in Oakley v Boston [1976] QB 270; [1975] 3 All ER 405. The defendant relied on the doctrine of lost modern grant in order to establish a right of way over land which had been glebe land (land used by a church) until 1952. It was accepted that sufficient acts of continuous user had occurred. The plaintiff, who was a successor in title to the rector, had no power to grant rights of way over glebe land. The Court of Appeal accepted the view that if this were the case an easement could not arise under the doctrine of lost modern grant. After analysing the relevant legislation, the Court of Appeal concluded that rectors had power to grant rights of way over glebe land, but that the approval of the Ecclesiastical Commissioners was necessary before an easement could be validly granted. There was no direct evidence that such approval had been given. Nor was there evidence that the commissioners were aware of the rector’s acquiescence in the user of the glebe land. Thus, it could not be presumed from their conduct that they had given approval to grant of a right of way. In these circumstances, an easement could not arise under the

doctrine of lost modern grant. Goulding J commented that there were difficulties in saying that the commissioners could be credited with the kind of acquiescence which enables the court fairly to presume a fictitious grant. He added that there were also ‘considerable difficulties in applying a doctrine of acquiescence to persons in a fiduciary position who have an active duty to others to fulfil before they can exercise their powers’. To what extent is this comment relevant to the fact situation in Tuckett v Brice? 10.96

Although Delohery’s case authoritatively establishes that easements

may be acquired by 20 years use in Australia, the actual decision in the case (which concerned acquisition of an easement of light), would now be different. All states prohibit the acquisition of easements of light by long user after certain specified dates. All states, except South Australia, make similar provision in respect of easements of air flow. For example, Vic, s 195 provides that after

[page 1017]

7 October 1907, no right to the access or use of light to or for any building shall be capable of coming into existence by reason only of the enjoyment of such access or use for any period or of any presumption of a lost grant based on such enjoyment. In similar vein, s 196 provides that after 30 October 1924, no grant of an easement shall be presumed from evidence only of user or enjoyment of the access of air to a defined aperture on the dominant tenement. See also NSW, s 179; Qld, s 178; SA, s 22 — applying only to

easements of light; Prescription Act 1934 (Tas), ss 9, 10. The original Western Australian provision was the Light and Air Act 1902 (WA). The current provision is WA, s 121, which prohibits the express creation of easements of light or air for a term exceeding 21 years without the written consent of the governor, and also requires the grant or other instrument creating the right to be registered on the title of the servient tenement. In New South Wales and Queensland, it appears that the legislation abolishes retrospectively any easement of light or air already obtained by prescription before the specified date. The legislation provides that no right shall be ‘deemed to exist’ or to be capable of coming into existence. In Tasmania, the legislation seems to have a similar effect with respect to easements of light acquired by prescription before the specified date, but to preserve easements of air acquired before 1962. Queensland has also abolished the acquisition of easements of way by prescription or lost modern grant: Qld, s 198A. Given the difficulties which landowners may have in preventing the acquisition of an easement of support by a neighbour, should such provisions be extended to cover easements of support? It once appeared that easements could not be acquired by 20 years use against the Crown: Thwaites v Brahe (1875) 21 VLR 192 at 201. But against this view, see now Pekel v Humich (1999) 21 WAR 24, where a prescriptive easement (a carriageway) was held to be acquired against the Crown. In New South Wales, this is affected by statute. Under s 178 of the Conveyancing Act 1919 (NSW), no ‘grant of way’ can be presumed by or against the Crown or persons holding land in trust for public purposes. The New South Wales Court of Appeal in Williams v State Transit Authority of NSW (2004) 60

NSWLR 286 declared that s 178 applies to both public and private ‘ways’. Nevertheless, the section leaves open that other forms of prescriptive easements may be acquired against the Crown.

Rights of support 10.97

As noted above at 10.46, at common law the owner of land has a

natural right to support of his or her land from a neighbour’s land. The excavator will be liable for subsidence that results on the neighbour’s land; but liability does not extend to the subsidence, or ensuing damage to, buildings on the land: Dalton v Angus (1881) 6 App Cas 740 at 792 per Lord Selborne LC; Kebewar v Harkin (1987) 9 NSWLR 738. The exception to this rule is that if it can be established that the land would have subsided independently of the additional weight of the buildings, the neighbour can recover for damage to both: Stroyan v Knowles (1861) 6 H & N 454; Public Trustee v Hermann [1968] 2 NSWR 94. Of course, if a landowner wishes to secure rights of support for buildings, he or she may do so by means of an express grant or reservation of an easement (Dalton v Angus (1881) 6 App Cas 740; Public Trustee v Hermann [1968] 2 NSWR 94), or by means of acquiring an easement by prescription. In New South Wales, Queensland and the Northern Territory, statute has replaced the common law rule. In New South Wales, a negligence test applies, so that a landowner or any other person who, by removing support, causes any reasonably foreseeable damage to land will be liable: NSW, s 177. The removal of supporting buildings that causes damage will also entail

liability, but only if the buildings have replaced the support that originally was provided by land

[page 1018]

in its natural or reclaimed state: subs (4). ‘Supported land’ is not defined to exclude buildings; accordingly, where support is removed, compensation for foreseeable damage to buildings will be available. In Queensland and the Northern Territory, an obligation in the nature of strict liability is imposed on land not to withdraw support from any ‘other land or from any building, structure, or erection’ on that land: Qld, s 179; NT, s 162.37 Dalton v Angus & Co was applied in Kebewar Pty Ltd v Harkin (1987) 9 NSWLR 738; 63 LGRA 412 to deny the right of support of a higher lot over an adjacent lower lot, the court emphasising that the right of support is not a Wheeldon v Burrows type of easement.38

Creation of easements by court order 10.98

The Queensland Law Reform Commission, in its Report on Property

Law Reform (1973), recommended legislation empowering the court to create easements in favour of private parties, on payment of compensation to the owner of the servient tenement where such easements are necessary in the interests of effective user of the dominant land. The Commission’s recommendation has been adopted (Qld, s 180; Property Law Act 1974) and similar legislation has been passed in New South Wales (Conveyancing Act

1919 s 88K), Tasmania (Tas, s 84J; Land Titles Act 1980 (Tas) s 110(4)– (12)), and the Northern Territory: Law of Property Act (NT) ss 163–164. Under the Queensland legislation, an order is not to be made unless the court is satisfied that: (a) it is consistent with the public interest that the dominant land should be used in the manner proposed; and (b) the owner of the servient land can be adequately recompensed in money for any loss or disadvantage which the owner may suffer from the imposition of the obligation; and (c) either — (i)

the owner of the servient land has refused to agree to accept the imposition of such obligation and the owner’s refusal is in all the circumstances unreasonable; or

(ii) no person can be found who possesses the necessary capacity to agree to accept the imposition of such obligation.

Similarly, under the New South Wales provision, the court can impose the easement only if it is satisfied that the applicant has made ‘all reasonable attempts’ to obtain it by consent. An order can be made ‘if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement’. In Tipler v Fraser [1976] Qd R 272 the requirement of ‘reasonable necessity’ was held to be not as strict as ‘absolute necessity’ so that an easement may be granted even if an easement might be acquired over

[page 1019]

a different parcel of land. In Re Seaforth Land Sales Pty Ltd’s Land (No 2)

[1977] Qd R 317 the court held that what is ‘reasonably necessary’ must be determined objectively: see also Tregoyd Gardens Pty Ltd v Jervis (1997) 8 BPR 15,845. A precondition of the grant of an easement is that the owner of the servient land can be adequately compensated. The amount of compensation is measured by reference to the servient owner’s loss, not the dominant owner’s gain: 117 York Street Pty Ltd v Proprietors Strata Plan 16123 (1998) 43 NSWLR 504 ($23,000 awarded as opposed to the dominant owner’s benefit in excess of $250,000). The servient tenement holder is usually entitled to costs in defending the matter, unless they have behaved unreasonably and thereby made the proceedings more costly: Katakouzinas v Roufir Pty Ltd (1999) 9 BPR 17,303. Section 88K does not confer power on the court to create an easement in gross: Bonvale Enterprises Pty Ltd v Halfpenny Investments Pty Ltd (2005) 62 NSWLR 698. Courts are mindful of the confiscatory nature of these provisions and do not lightly interfere with the rights of the potential servient tenement holder: Woodland v Manly Municipal Council [2003] NSWSC 392. 10.99

There have been many decisions in recent years on the scope and

application of s 180 and analogous legislation in other states. Of particular focus, is the meaning of the term ‘reasonably necessary’ in the legislation. The decision below in Peulen v Agius provides one such example. 10.100C

Peulen v Agius [2015] QSC 137 Supreme Court of Queensland

[The applicants sought an order under s 180 Property Law Act 1974 (Qld) for a statutory right of user over adjoining land owned by the respondents. The predecessors in title to the applicants had

used a portion of the land of the respondents as a driveway and prime means of access for many years without objection from the respondents. The applicants were not aware at the time of purchase that they had no enforceable legal right to use the driveway.] The Chief Justice: … Reasonably necessary in the interests of effective use of the land in any reasonable manner The starting point for any determination of the grant of a statutory right of user is Lange Parade Pty Ltd v Peluso, where Douglas J conveniently summarised the relevant principles as follows: (a) (b) (c) (d)

One should not interfere readily with the proprietary rights of an owner of land. The requirement of ‘reasonably necessary’ does not mean absolute necessity. What is ‘reasonably necessary’ is determined objectively. Necessary means something more than mere desirability or preferability over alternative means; it is a question of degree. (e) The greater the burden of the imposition that is sought the stronger the case needed to justify a finding of reasonable necessity. (f) For a right of user to be reasonably necessary for a development, the development with the right of user must be (at least) substantially preferable to development without the right of user. (g) Regard must be had to the implications or consequences on the other land of imposing a right of user. [page 1020]

The concept of ‘reasonably necessary’ implies an objective test. The use of ‘reasonably’ as an adjectival qualifier of ‘necessary’ indicates that it is a continuum concept, and therefore a question of degree. However, as ‘necessary’ is the subject noun, it is clear that the semantic meaning of ‘reasonably necessary’ is more proximate to necessity than mere convenience, prudence or desirability. This will generally depend on the relevant factual matrix of the case. The applicants are not required to demonstrate that the grant is ‘absolutely necessary’ or that there would be no effective use of the land if the statutory right of user was refused. In this respect, the position under the Property law Act 1974 (Qld) s180 deviates from the traditional position at common law, where an easement would only be imposed because it was ‘absolutely necessary’. However, the use of the word “necessary” requires something more than: 1. 2.

‘Mere desirability or preferability over alternative means’; or That which is ‘convenient or nice to have’.

As held by Young J in D & D Corak Investments Pty Ltd, ‘one must look for a requirement

that is far closer to necessity than it is to convenience’. The proposed use must also be something more than ‘substantially preferable’ to the existing use of the land. In considering ‘reasonable necessity’, the court must have regard to the implications or consequences for the servient tenement as a result of the imposition of the proposed statutory right of user. The applicants must show that the grant of the statutory right of user is necessary in the interests of the effective use of the land in the manner proposed, not every potential or theoretical use. As held by McMurdo J: an applicant does not have to demonstrate that each and every use (in any reasonable manner) of its land is one for which the obligation of user is reasonably necessary. Instead, an applicant can point to a particular use and seek to make its case in relation to it. This reasoning emanates from the seminal decision of Hanger CJ in Re Seaforth, where his Honour held that: The applicant must show that in the interests of effective use of the land in this particular manner, the grant of statutory right of user in some form is reasonably necessary. The concept of ‘reasonable manner’ is rarely construed separately from ‘reasonable necessity’. However, it is important to recognise that it incorporates a distinct criterion into the applicable statutory test. The court is required to enquire into whether the use of the dominant tenement, not the servient tenement, is a use in a ‘reasonable manner’. In this respect, the court considers not only the broad purpose of the relevant parcel of land (for example, residential usage), but also the specific purpose of the use of the relevant segment of land giving rise to the necessity for the statutory right of user. Interference with privacy and utility of the respondents’ land The respondents’ claim that the imposition of the statutory right of user will interfere with their privacy and quiet enjoyment of [the servient land]. Although loss of privacy or utility is a relevant factor in considering the burdens of the owner of the servient tenement, the court must assess the extent of any asserted adverse consequences. In accordance with the surveyor’s plans, the dwelling of the respondents is remote relative to the existing driveway. The respondents do not utilise the driveway for access purposes. [page 1021]

The applicants only propose to use the driveway for residential purposes, indicating that usage would by relatively limited. Nevertheless, the respondents claim that the relevant portion of the vacant corridor currently occupied by the driveway presents an obstacle to their farming operations. Apparently, that portion of land is traversed by agricultural vehicles and machinery to access two agricultural sections on [the servient land]. …. The function of the power to

grant a statutory right of user is to permit the Court to adjust the relevant rights and obligations of the respective parties to achieve an economically efficient outcome. As real property is a scarce and valuable resource, there is a public interest in ensuring that land is utilised in a productive and economical manner. This balances the importance of protecting personal property rights with the public interest in promoting allocative efficiency in land usage. The imposition of an easement, as a shared use of land, will invariably result in a degree of inconvenience to the servient tenement owner. However, the inconvenience occasioned to the respondents as a result of the imposition of the right of way is comparatively minor. This is evidenced by their failure to significantly object to the … historical use of the same carriageway. Accordingly, any disruption of quiet enjoyment, privacy or utility may be adequately rectified by an award of monetary compensation. The respondents allege that a grant of a statutory right of user in the form of a right of access is not reasonably necessary because an alternative access point exists … The Queensland Supreme Court has consistently held that a statutory right of user granting a compulsory easement for right of way may be reasonably necessary in the interests of effective use of the land in any reasonable manner notwithstanding the existence of an alternative access point. This case is broadly analogous with Hodgskin and Kindervarter, within which this court granted a statutory right of user in the form of a right of way. The cost associated with establishing the new driveway represents approximately 25.7% of the total value of the property. Expert evidence from the respondents indicates that the burden on the servient tenement as a result of the imposition of the easement is ‘nominal’, although it may interfere with their farming operations. On balance, the cost of establishing the alternative access to the equivalent standard of that obtainable through the existing driveway is disproportionate to: (a) the value of [the dominant land]; and (b) the burden of the easement on [the servient land]. Depreciation in market value of servient tenement Any depreciation to the market value of property is a relevant factor in ascertaining the burden imposed on the servient tenement. At this stage, in determining ‘reasonable necessity’, it is clear that the focus should be on the burdens to the servient tenement. This is because the appreciation of the dominant tenement is of limited relevance to the need for the easement. Therefore, the respondents’ assessment by reference to the value of the easement, even if accurate, does not provide an effective measure of the burden to the servient tenement. … Therefore, any valuation should be specific to the relevant portion of the servient tenement subject to the proposed statutory right of user. Despite the considerable limitations of the valuation evidence, this court is satisfied that any depreciation in market value caused by the statutory grant of user will be relatively nominal and may be adequately rectified by monetary compensation. … The applicants propose to use [the dominant land] for residential accommodation, and the relevant driveway for vehicular access. Residential accommodation and vehicular access clearly use the dominant tenement in a ‘reasonable manner’. The court is required only to

[page 1022]

consider the existing uses of land, not any counterfactual uses of land which may involve the relocation of the existing driveway or dwelling. The imposition of the statutory right of user would cause only minor disruption of the respondents’ quiet enjoyment, privacy and utility of [the servient land]. … [D]epreciation in the market value of [the servient land] as a result of the imposition of the statutory right of user is nominal. Any losses or harms sustained by the respondents are adequately remediable by a monetary award of compensation. In contrast, the costs associated with establishing equivalent alternative access … are disproportionate to the value of the property and the burden on the servient tenement. Although the construction of the alternative access route does not require the removal of the existing driveway, it would result in uneconomic and inefficient waste of infrastructure and resources. Accordingly, the imposition of the statutory right of user is essential to the effective and productive use of [the dominant land]. In this respect, the imposition of the statutory right of user is not merely convenient, prudent or desirable, but reasonably necessary in the interests of the effective use of [the dominant land] in a reasonable manner. The alternative proposition urged by the respondents is inefficient, uneconomic and wasteful. [footnotes omitted]

10.101

The judgment of Basten JA in Shi v Abi-K Pty Ltd (2014) 87

NSWLR 568; [2014] NSWCA 293 provides a useful analysis of the element of ‘reasonably necessary’ in the New South Wales legislation (s 88K, Conveyancing Act 1919). 10.102C

Shi v Abi-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293 New South Wales Court of Appeal

Court of Appeal: Basten, Barrett and Ward JJA: … The critical element in this provision is the requirement that the easement be ‘reasonably necessary’ for the effective use or development of the land sought to be benefited (‘the developer’s land’). Whether or not the condition is satisfied in a particular case is likely to require consideration of the following factors: (a) the capacity of the developer’s land for use or development of particular kinds; (b) the nature of the specific proposed development;

(c) the manner in which the proposed development is to be effected; (d) the effect of the easement, if granted, on the servient tenement. That is not to suggest that each factor is separate and distinct; clearly they will overlap. Factors (a) and (b) — the dominant tenement The need to have regard to the first two factors, (a) and (b), is implicit in the language of the chapeau of s 88K(1). These factors involve an assessment of the land and the proposed development. No doubt an easement could not be described as reasonably necessary if the proposed development to which it was appurtenant was not a reasonable use of the developer’s land. In Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445; 16 BPR 31,257 this Court adopted a passage from the judgment of Hodgson CJ in Eq in 117 York Street Pty [page 1023]

Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504 at 508–509. That passage read, in part: In my opinion: (1) the proposed easement must be reasonably necessary either for all reasonable uses or developments of the land, or else for some one or more proposed uses or developments which are (at least) reasonable as compared with the possible alternative uses and developments; and (2) in order that an easement be reasonably necessary for a use or development, that use or development with the easement must be (at least) substantially preferable to the use or development without the easement. The first proposition is stated in somewhat abstract terms which suggests an exercise of some breadth and complexity. It cannot be intended that an applicant provide evidence of (or the court consider) what might constitute all reasonable uses of particular land. Nor, which is presumably intended to be a less demanding test, is it likely that there will be several proposed developments, or at least ones involving more than variations on a theme. Where a particular proposed development has received planning approval, there will usually be an evidential burden on the owner of the servient tenement to demonstrate that the proposed development is not at least reasonable having regard to the capacity and zoning of the developer’s land. So far as the second condition is concerned, this is not a case in which the development (or any substantially similar development) would be permissible without some form of drainage. Accordingly the issue is not whether the development itself is to be described as ‘reasonable’ but whether the proposal for drainage is one properly described as ‘reasonably necessary’. Hodgson CJ in Eq then turned to consider whether the two propositions he had articulated contradicted the statement in another case that it was not for the court to judge the reasonableness of the particular development, noting that that statement may

not have been intended to be of general application. Hodgson CJ in Eq continued (at 509B): If there are some possible reasonable uses or developments of the land for which a proposed easement is not reasonably necessary, then it seems to me that the easement cannot be ‘reasonably necessary for the effective use or development’ of the land, at least unless there is some proposed use or development, for which the proposed easement is reasonably necessary, which is itself a reasonable use or development. It may be that the particular proposed use or development would need also to be preferable to the alternatives; but whether or not that is so, it would in my opinion certainly need to be at least reasonable. It seems likely that this second passage was intended to restate in slightly different terms the same two propositions which had been set out previously. It is not necessary for present purposes to consider that language further. It is, however, necessary to refer to a passage in Moorebank Recyclers referring to a judgment of Preston CJ of LEC in Rainbowforce Pty Ltd v Skyton Holdings Ltd [2010] NSWLEC 2; 171 LGERA 286. At [155] the court said: In Rainbowforce …, Preston CJ …, gave a relatively wide meaning to the concept of effective use and development (at [72]) stating that if use or development of land for some planning purpose such as residential, commercial or industrial cannot be achieved without the creation of the easement, the easement is reasonably necessary for such use or development to be effective. To the extent that Preston CJ was suggesting that subject to the other matters which he stated required consideration, an [page 1024]

easement would be reasonably necessary for the effective use and development of the land if it was required for any proposed development, regardless of the development’s desirability or economic effect, the proposition, with respect, is too wide. … In a case such as the present, where the easement is said to be necessary for the commercial development of the land, it is sufficient in our opinion to show that the proposed development is one which is appropriate to the area in which the land is situated and is at least an economically rational use of the land. This passage contains two propositions which may be noted. First, the passage referred to in Rainbow force was a statement that if ‘use or development of land for some planning purpose … cannot be achieved without the creation and use of an easement’ apparently meaning, ‘if there is not any planning purpose which cannot be used without an easement’, then the easement is reasonably necessary. That statement would be unimpeachable. The Court in Moorebank Recyclers appears to have read it as if ‘some’ meant ‘some but by no means all’ possible planning purposes. If that were the correct

reading, the statement would indeed allow the imposition of an easement in too wide a category of cases. (Unsurprisingly, Hodgson CJ in Eq avoided such ambiguity.) Secondly, the last sentence quoted was said to be consistent with the passage extracted from Hodgson CJ in Eq in 117 York Street. Accepting that to be so, the tests of ‘appropriate to the area’ and ‘an economically rational use of the land’ might appear to lower the hurdle somewhat, as they are tests which will be readily satisfied in the present case. Thus, it would be difficult to accept that a use which had been approved by a local council was not ‘appropriate to the area in which the land is situated’. Further, it would be difficult to accept that a use which had been proposed by a commercial developer was not ‘at least an economically rational use of the land’. Factors (c) and (d) — effect of proposed easement The manner of carrying the proposed development into effect will engage a consideration of the need for the easement to allow for the “effective use or development”, as identified, of the dominant tenement. That will mean having regard to the effect of the proposed easement on the servient tenement, as explained in Moorebank Recyclers at [117]. That principle was not challenged in the present case. The general principle is that ‘the greater the burden on the servient tenement, the stronger the case needed to justify a finding of reasonable necessity’: at [156]. As the Court in Moorebank Recyclers further noted at [157]: If the effect of the imposition of an easement was to effectively preclude a reasonably available development or use of the servient tenement appropriate to that land, then it would require a strong case of reasonable necessity before the easement would be imposed. It is also not in doubt that the nature of the proposed easement must be considered, having regard to the possibility of other methods by which the proposed development could be achieved: Moorebank Recyclers at [158]. In the present case, the developer’s land was a double block; the proposed development involved the demolition of existing structures and the construction of a townhouse development involving six units. There was no suggestion but that appropriate steps for drainage were reasonably necessary as an integral part of the proposed development. There was an issue as to whether there was any reasonable alternative form of drainage.

[page 1025]

10.103

In New South Wales, the Access to Neighbouring Land Act 2000

(NSW) provides another mechanism for the grant of an easement by the court. This Act allows the Local Court to make orders permitting access to

land by persons who own adjacent land and who are not entitled to easements over the land: s 8. Access may be granted for the purpose of carrying out work on the applicant’s land, such as construction and repair, or ascertaining the course of drains, sewers, pipes and cables: s 12. The applicant must restore the land to its original condition, and indemnify the owner against damage: s 21. The Access to Neighbouring Land Act 1992 (Tas) provides a similar mechanism for creating easements. The Victorian Law Reform Commission in its Easements and Covenants: Final Report 22 (2010) (at 39–55) recommended that a similar power be conferred on the Victorian Civil and Administrative Tribunal while recommending that easements of necessity and prescriptive easements be abolished. Do statutes of this nature offer a preferable path to resolving the conflicting rights of neighbours than the doctrines of prescription and implied easements?39

Remedies 10.104

A dominant tenement holder can prevent interference with an

easement, but only if it is ‘substantial’ or ‘material’: Powell v Langdon (1944) 45 SR (NSW) 136; Ex parte Purcell (1982) 47 P & CR 433. A plaintiff who seeks a remedy for interference with the enjoyment of an easement has two options. The first is to bring an action for nuisance, not trespass, because an easement does not confer a right to possession: Paine & Co v St Neot’s Gas & Coke Co [1939] 3 All ER 812. Other remedies may include legal damages, an injunction, or equitable damages under Lord Cairns’ Act in lieu of an injunction. In many cases the major issue for the court will be whether the acts constitute an actionable interference with the plaintiff’s rights. In turn,

this may depend upon a determination of the extent of the easement. Second, a person whose enjoyment of an easement has been substantially interfered with may enter the servient land and put an end to or ‘abate’ the interference: Davies v Williams (1851) 16 QB 546.40 A self-help remedy, abatement is not favoured by the courts: Burton v Winters [1993] 1 WLR 1077. However, abatement is allowed where ‘positively necessary’: Roberts v Rose (1865) LR 1 Ex 82. There are particular difficulties in determining whether an easement of light has been infringed.41 In Prospect County Council v Cross (1990) 21 NSWLR 601, Bryson J held there may be interference with the rights created by an easement even where there is no physical impediment to the exercise of those rights. The council had exercised its rights under the relevant easement to run its electricity lines above the defendant’s land. The court granted the council an injunction to remove a garden shed, children’s play house and an above-ground pool from the surface of the land because the risk imposed on the council by the potential danger to users of the structures was a substantial interference with the exercise of its rights under the easement. A court may grant a mandatory injunction where the interference has amounted to destruction of structures necessary for the enjoyment of the easement. So, in Clifford v Dove (2003) 11 BPR 21,149, the servient tenement holder was ordered to rebuild cattleyards she had demolished, which the dominant holder had a right to use.

[page 1026]

EXTINGUISHMENT OF EASEMENTS 10.105

Easements can be extinguished in five separate ways. Firstly, an

easement may be abandoned. Secondly, an easement may be extinguished by express release. Thirdly, an easement may be extinguished by an alteration to the dominant tenement so extensive as to constitute excessive use. Fourthly, as we have seen above, an easement may be extinguished upon the unity of dominant and servient tenement. Finally, statutory extinguishment may signal the end of the life of an easement.

Abandonment 10.106C

Treweeke v 36 Wolseley Road Pty Ltd (1972–73) 128 CLR 274; 1 ALR 104 High Court of Australia

[Mrs Treweeke, the appellant, applied for a declaration that the land of which she was registered proprietor, No 34 Wolseley Road, Point Piper, was not affected by a right of way over the property. The right of way was created in 1927 and was appurtenant to the respondent’s land, No 36 Wolseley Road. The right of way was registered on both the appellant’s title and the respondent’s title. The right of way was over a strip of land three-feet-wide along the north-west boundary of the appellant’s property as means of access to the beach at Double Bay. Hope J of the Supreme Court of New South Wales dismissed the application. The appellant appealed to the High Court.] McTiernan J: Section 89(3) [of the Conveyancing Act 1919 (NSW)] provides that the Supreme Court may on the application of any person interested make an order declaring whether or not in any particular case any land is affected by an easement, and the nature and extent thereof, and whether same is enforceable, and if so by whom … Section 89(1) provides that where land is subject to an easement the Supreme Court may from time to time, on the application of any person interested in the land, by order wholly extinguish the easement upon being satisfied that by their acts and omissions, the persons referred to in (b) may reasonably be considered to have abandoned the easement wholly. Such

persons are the persons of full age and capacity for the time being entitled to the easement. The strip of land in respect of which the right of way was granted slopes downwards to the beach over ledges of rock. At these places the strip of land is impassable. During the period of Mrs Treweeke’s residence at no 34 Wolseley Road, which began in 1928, she has made improvements within the vicinity of the north-western side boundary of the property, but not on a large scale. The improvements consisting of steps and paths were to facilitate walking along that side of the fence. These improvements do not reach as far as the precipitous part of the land. They included a low retaining wall to retain the soil where Mrs Treweeke has made a garden. She also planted shrubs at other places. A comparatively low fence was placed across each of the two of the ledges of rock — it would seem for reasons of safety. Before Mrs Treweeke resided there bamboo was planted in the vicinity of the north-western boundary, on Mrs Treweeke’s side. She increased this plantation of bamboo. The growth covers the strip of land established by the grant as the locus in quo of the right of way. Mrs Treweeke deposes by her principal affidavit that the part of the strip of way over which the bamboo extends is impassable. Passage over the strip of land is obstructed by a swimming pool, the framework of [page 1027]

which extends above and beyond high-water mark, the limit of Mrs Treweeke’s water frontage. The swimming pool was built by Mrs Treweeke in 1956. The other works which have been mentioned were constructed later, at intervals. The case upon which Mrs Treweeke’s application rests is stated in para 20 of her principal affidavit. The strip of land the part of the right of way is referred to in the paragraph as ‘the blue strip’, an expression used in a plan. The paragraph reads: I am not aware of any person ever having passed or attempted or sought to pass along the blue strip or any part thereof from the property no 36 Wolseley Road or in exercise or purported exercise of any right of way along the blue strip or any part thereof, nor has any person ever complained to or communicated with me concerning any obstruction to passage along the blue strip or any part thereof, until the receipt by me of a letter from Messrs Freehill, Hollingdale & Page the solicitors for the respondent hereto in September 1968. No 36 Wolseley Road is a building divided into home units, the owners of which are shareholders of the respondent company. It acquired this property in 1959, shortly after the company was incorporated. Under the terms of the grant of the right of way the registered proprietor of the dominant tenement, his tenants, servants and persons authorised by the registered proprietor are entitled to pass and repass on the strip of ground between the place at which it is in contact with the dominant tenement and the place at the other end at which it is in contact with the high-water mark. The respondent, of course, is not capable of enjoying the right of way personally. There is no suggestion that it disclaimed the right of way. Mrs Treweeke’s statement is relevant in so far as it applies to owners or tenants of the home units and the respondent itself.

[No proceedings were brought by the owners or tenants of the home units before Mrs Treweeke’s application, although at one stage a solicitor’s letter was sent to Mrs Treweeke objecting to the obstruction caused by the swimming pool.] It was always impossible to use the right of way at the place where each fence was put, by reason of the steepness of the place. In any case, neither fence is immovable. It would appear that at the place where the low retaining wall is built the strip of land was usable as a means of passage towards the beach. The wall is not immovable. As regards the obstruction caused by the growth of bamboo, this could be dealt with by removing some of the growths by a job of pruning. It is a curious feature of the case that owner of the servient tenement is relying upon things done by herself which she says are obstructions to passage along the strip of land subject to the right of way. It is said in Gale on Easements (14th ed 1972) p 351: It is not every interference with the full enjoyment of an easement that amounts in law to a disturbance; there must be some sensible abridgment of the enjoyment of the tenement to which it is attached, although it is not necessary that there should be a total destruction of the easement. It is said (at 352, 353): ‘as regards the disturbance of private rights of way, it has been laid down that … in the case of a private right of way the obstruction is not actionable unless it is substantial’ … Presumably the complaint on behalf of the respondent company was made only in respect of the swimming pool because no other interference with the right of way appeared to the company’s advisers to be actionable. A question which I think arises in respect of the extent [page 1028]

of user of the right of way is whether, having regard to the difficulties of passage due to the physical features of servient tenement a right to deviate onto the land within the servient tenement adjoining the strip of land is implied in the grant and whether by reason of the construction of the swimming pool such a right arose. It is said in Goddard, A Treatise on The Law of Easements (7th ed) p 425: … it may happen, and frequently has happened that a way has become impassable from want of ordinary repair, or it may happen that it is impassable through the act, right or wrong, of the owner of the soil. In all these, and possibly in other cases, an important question is likely to arise whether a person entitled to use the way may pass over the adjoining land, or whether he must keep to the path, however inconvenient it may be, or give up his right altogether if the way is absolutely stopped; and it is clear that these questions may arise, both as to private and as to public ways. And at 429:

If a way is rendered impassable by the act of the grantor, the authorities show that the owner of a right of way would be justified in passing over the adjoining ground, provided it belongs to the grantor of the easement, and provided the act of deviation was a reasonable thing in connection with the user of the right. The construction of the swimming pool is not the act of the grantor of the right of way now in question. It is Mrs Treweeke’s act. The persons entitled under the grant of the right would in my opinion be justified in passing over the ground within the servient tenement that adjoins the swimming pool … In my opinion the absence of any complaint by any person entitled to the enjoyment of the right of way does not in the circumstances raise an equity upon which Mrs Treweeke can obtain either declaration sought pursuant to s 89(3). Each declaration is sought in the face of the existing registered title of the respondent to the easement. As regards the request for an order under s 89(1)(b), there is no proof of extinguishment of the right of way by agreement, that is by express release. Mrs Treweeke’s case is that extinguishment was effected by acts and omissions amounting to abandonment of the right of way … The relevant ‘acts or omissions’ would need to be things done or omitted by a dominant owner holding an estate in fee simple in the dominant tenement which would amount to abandonment of the right of way or from which abandonment could be reasonably presumed. There is no proof of any act or omission on the part of the respondent which has the character of abandonment in relation to the right of way. The same is true as regards previous dominant owners. Mrs Treweeke’s evidence in her affidavit is tendered presumably to prove lack of use of the right of way by the occupants of the premises on the dominant tenement, which, as already stated, are home units. It is now shown that any occupant was competent to extinguish the right of way by express or implied release. It is said in Gale on Easements (14th ed 1972) p 317: … as an easement, when once created, is perpetual in its nature, being attached to the inheritance and passing with it, some acquiescence on the part of the absolute owner of the dominant tenement is necessary to give effect to any act of abandonment. There is no evidence of such acquiescence on the part of the respondent. It cannot reasonably be presumed that the intention of any occupant of the home units was to abandon the right of way. Residents of the home units gave evidence that they were informed by the agent of the respondent of the existence of the right of way. The evidence, which the learned judge acted [page 1029]

upon to make his finding of some use of part of the right of way, prevents an inference from Mrs Treweeke’s evidence that no person from the home units ever went along any part of the strip of land in respect of which the right of way was granted. [McTiernan J held that the building of a wire fence in 1933, which was inexpensive and

movable, was not intended as an abandonment of the easement.] The important element in the case is non-user of the total length of the strip of land as a way. Part of it was frequently used as far as an opening in the boundary fence to which the strip of land is adjacent. Residents of the home units went through that opening and proceeded from there over the neighbouring allotment to the beach. Their reason for turning aside from the boundary would appear to be that the strip of land was not passable further on. 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. An obligation to do so does not arise at law or in equity. The case is one of mere non-user. It is established that a right will not be extinguished by non-user alone. … There is no proof of user of the right of way along the total length of the strip of land since the creation of the right of way, a period longer than 40 years. The duration of the period of non-user is only material as one element from which the dominant owner’s intention to retain or abandon his easement may be inferred; and what period may be sufficient in any particular case must depend on the strength of the other indications of intention and all other accompanying circumstances. If, however, the period of suspension of user is of very long duration, it appears that the suspension alone may raise a prima facie presumption of abandonment to the extent of throwing upon the person seeking to uphold the right the burden of showing that some indication of his intention to preserve the right was manifested during the period of suspension: Halsbury’s Laws of England (3rd ed) vol 12, p 564. The non-user of the total length of the way can reasonably be put down to its precipitous condition at places. It is not reasonable to attribute non-user to renunciation of such a pleasant amenity as a path to the beach at Double Bay. There is ample evidence of the utilisation of passable parts of the locus in quo of the right of way as the first stage of daily journeys to the beach by residents of no 36 Wolseley Road, the dominant tenement. There is evidence of a survey being procured by the owner of one of the home units to determine the precise course of the right of way along the north-western boundary of the servient tenement. There is evidence that the respondent’s agent informed some of the people residing at no 36 Wolseley Road about the existence of the right of way when purchasing their home units. The correspondence which is in evidence proves that the respondent complained to Mrs Treweeke about the swimming pool when the survey established that it obstructed the right of way. In my opinion, upon the whole of the evidence there is clear proof of the intention of the respondent to retain the right of way. I do not think it can be presumed that release of the right of way occurred at any time before or since the respondent acquired the property, no 36 Wolseley Road. In my opinion the appeal should be dismissed. [Mason J agreed that the easement had not been abandoned. In his view the non-user of the easement, and the failure of the persons having the benefit of the easement to take any action with respect to the obstruction placed on the property by Mrs Treweeke, were not acts from which an inference of abandonment should be drawn. He regarded these acts as

[page 1030]

‘equally consistent with the existence of an intention not to use the right of way whilst an alternative means of access remained available’. He expressed doubt as to the applicability of the common law doctrine of abandonment to an easement registered under the Torrens system in a case where the purchaser of the dominant tenement has relied upon the state of the register. Walsh J dissented. In his view the acquiescence by the owners and occupiers of the servient tenement in the erection of obstructions to the right of way were sufficient evidence of an intention to abandon the easement.]

10.107 1.

Questions

Why did McTiernan J hold that the easement of way had not been abandoned? On his analysis what acts would have been necessary to show abandonment?42

2.

In what circumstances will non-user for a lengthy period be held to indicate abandonment?43

3.

10.108

Is the test for abandonment too strict?

In Proprietors Strata Plan No 9,968 v Proprietors Strata Plan No

11,173 [1979] 2 NSWLR 605, Needham J rejected a claim that an easement of way for vehicular traffic to the rear of a block of units had been abandoned within the meaning of NSW, s 89(1)(b). It was argued that in the case of a registered easement over Torrens system land, the registered proprietors of the dominant tenement could not be prejudiced by the acts or omissions of predecessors in title. Needham J (at 616) concluded that the judgments in

Treweeke v 36 Wolseley Road Pty Ltd prevented him from accepting the submission: I am bound to hold that, in considering whether an easement should be held to have been abandoned, where a notification of that easement appears on both certificates of title, I must have regard to the acts or omissions of registered proprietors who were predecessors in title of the present registered proprietor. I may be entitled, as a matter of discretion, to take account of the fact that the [registered proprietor of the dominant tenement who] recently became registered, bought on the faith of the register and has actively pursued its rights.

The views expressed by Needham J may be contrasted with the dicta of Gillard J in Riley v Penttila [1974] VR 547 at 572–74, in relation to the common law doctrine of abandonment. His conclusion was as follows: The easement is notified as appurtenant to an estate in land described in a certificate of title. The certificate of title is conclusive evidence that the person named therein is the proprietor of such estate. The incumbrance of such easement on the servient tenement is created by the registration of the instrument of transfer and remains as an incumbrance on that title until it is removed pursuant to the Act by a successful application to the

[page 1031]

Registrar under s 73 [see 10.97]. Until this is done by the Registrar, then, in my opinion, no abandonment in fact will affect the conclusive evidence to be found in the certificate of title that the person named thereon is the owner of the estate in the dominant tenement to which the easement is stated therein to be appurtenant.

Bearing in mind that the issue confronting the court in each case was rather different, which approach better serves the goals of the Torrens system? It appears that an easement cannot be abandoned by a dominant

tenement owner who does not know that the easement exists: see Obadia v Morris (1974) 232 EG 333; Shelmerdine v Ringen [1993] 1 VR 315. The strictness of the test for abandonment evident in Treweeke v 36 Wolseley Road Pty Ltd was endorsed in Long v Michie [2003] NSWSC 233, where a right of way was held not to be abandoned despite non-use for over 60 years, and the building of numerous obstructions of the way. An example of a successful claim for abandonment is Duran (Holdings) Pty Ltd v Cavacourt Pty Ltd (2000) 10 BPR 18,099. The right of way had not been used for 30 years, and a brick wall had been erected between the dominant and servient lands for over 20 years. Also, the difference in levels of the two tenements was so great that it was impossible for ordinary vehicles to cross them. In Effeney v Millar Investments Pty Ltd and Others (2011) 16 BPR 30,275 (also, at [86], [91]– [93]), the court considered Treweeke v 36 Wolseley Road Pty Ltd finding that an easement to access a cycleway had not been abandoned even though it had not been used for some time, because of no ‘clear or fixed intention … to abandon any future use of the right of way’ (at [93] per Ward J). It was also held that the recently enacted deeming provision, s 89(1A) — ‘For the purposes of subsection (1)(b), an easement may be treated as abandoned if the Court is satisfied that the easement has not been used for at least 20 years before the application under subsection (1) is made’ — did not apply as there was evidence of slight use of only part of the route included in the easement.

Express release 10.109

The dominant owner may expressly release the servient owner

from the easement. Although a deed is required at common law to effect a valid release (NSW, s 23B(1)), equity on the usual principles will give effect to an informal release. Thus, if the servient owner, in reliance on an informal release by the dominant owner, acts to his or her prejudice, equity will hold the informal release to be effective: Waterlow v Bacon (1866) LR 2 Eq 514; Pearce v The Lord Mayor, Alderman and Citizens of the City of Hobart [1981] Tas R 334 at 357. 10.110

The Torrens legislation in some states provides a means of

removing easements from the certificate of title where they have been expressly released.44 Some states empower the Registrar to remove abandoned easements from the certificate of title.45 In New South Wales, an easement may also be released on the registration of a plan for the land: NSW, ss 88B(2) (c1), (3A), 195D. Unlike the situation in relation to adverse possession, at common law there is no precise period of non-user which will result in the extinguishment of an easement. However, in these states nonuser for a sufficient period (20 years in New South Wales, Western Australia, Tasmania and 30 years in Victoria) may constitute sufficient proof that the

[page 1032]

easement has been abandoned. In South Australia the Real Property Act 1886 s 90B(1) gives the Registrar-General the power on application by the proprietor of the dominant or servient land or on the Registrar-General’s own initiative to:

(a) vary the position of, or extend or reduce the extent of, an easement over the servient land; (b) vary an easement by extending the appurtenance of the easement to other land owned by the proprietor of the dominant land; or (c) extinguish the easement.

Although the written consent of the owners of the dominant and servient land is normally required, it can be dispensed with in certain circumstances: s 90B(3)–(4). If the Registrar has no statutory power to remove abandoned easements, or fails to exercise his or her power, does the common law doctrine of abandonment apply to registered easements?

Alteration to the dominant tenement 10.111

If the dominant tenement comes to assume a very different

character, the easement may come to an end. So, cases have held that excessive use of an easement may lead to its extinguishment.46 In Jelbert v Davis [1968] 1 WLR 589, conversion of agricultural land to a camping site was held to cause excessive use of the land. In Ray v Fairway Motors (Barnstaple) Ltd (1968) 20 P & CR 261 the servient owner built a shed onto a party wall. When the dominant owner excavated next to the party wall, it cracked and bulged. The Court of Appeal held that if the damage had been caused by the changed use, the right to support would be lost. On the facts, it had not. Compare Graham v Philcox [1984] QB 747; [1984] 2 All ER 643, where the court held that the enlargement of a flat by the incorporation of downstairs premises was not so significant as to lead to excessive use.

Unity of dominant and servient tenement

10.112

It has already been seen that one requirement of an easement is

that the dominant and servient tenements must not be both owned and occupied by the same person. It follows that if one person acquires the fee simple estate in both the dominant and servient tenements, and is in possession of both tenements, the easement is normally extinguished at common law. However, in Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 2 NSWLR 1, the burdened and benefited land came into the hands of a single owner but the easement was the only means of access from the benefited land. The easement was held to continue in existence. Needham J commented (at 10) that ‘unity of ownership or possession does not cause to disappear a right of way (or other easement) where that way or other easement is necessary to the use of the land which previously had the benefit of that easement’. If one person acquires the fee simple estate in one tenement and a particular estate in the other, the easement is merely suspended during the period of unity of title. If there is only unity of possession, but not unity of title, again the easement is merely suspended during the period of unity of possession and will revive upon that unity of possession terminating.

[page 1033]

This rule is now largely abrogated by statute in the case of Torrens land in New South Wales and Tasmania: NSW, s 47(7); Tas, s 109.

10.113

In Tasmania, the operation of this common law rule has been

affected by the Conveyancing and Law of Property Act 1884 s 9A, which provides: 10.114E Conveyancing and Law of Property Act 1884 (Tas) 9A Revival of easements, &c, on disunity of seisin (1) Where — (a) the seisin in fee simple is united of two parcels of land of which there was theretofore separate seisin in fee simple; and (b) over or upon one of those parcels any easement or restriction then existed for the benefit of the other — the provisions of this section apply when the seisin of the two parcels is to be disunited in fee simple. (2) There shall be implied, unless the contrary intention appears — (a) in any contract of sale of either parcel which leads to the disunity a provision that it is sold — (i)

with all such rights and advantages as belonged to it; and

(ii) with all such burdens and disadvantages as it was subject to — when it belonged to the predecessor in title of the person in whom seisin was united as mentioned in subsection (1); and (b) in the conveyance of either parcel which effects that disunity — (i)

such grants and reservations as will create afresh the easements; and

(ii) such covenants, conditions and declarations of trust as will renew the restrictions — to which the other parcel was subject for its benefit or it was subject for the other parcel’s benefit, when it belonged to that predecessor.

10.115

Questions

1.

What is the purpose of this legislative provision?

2.

Should it be copied in the other states? See also Land Titles Act 1980 (Tas) s 109 which provides that registered easements are not extinguished by unity of seisin, but provides a procedure by which the registered proprietor may have the easement expunged.47

[page 1034]

Statutory extinguishment 10.116

In some states provision is made permitting the extinguishment of

easements over both general law and Torrens system land by court order in the same way that restrictive covenants may be released, that is, that they have become obsolete, or have been abandoned: see 10.93C. This power was referred to but not exercised in Treweeke v 36 Wolseley Road Pty Ltd. See NSW, s 89; Qld, s 181; Transfer of Land Act 1893 (WA) s 129C; Tas, Pt XVA. In the case of Western Australia the power is only exercisable with respect to Torrens system land.48 The Tasmanian legislation also contains a unique provision under which the Recorder of Titles, or in certain cases the Supreme Court, may direct that land subject to an easement of way be vested in the owner of the dominant tenement. A direction may be given whether,

after being so vested, the land shall remain subject to the easement of way. (This could be important if the land was subsequently sold separately from the dominant tenement.) Provision is made for the payment of compensation to the owner of the servient tenement: Tas, s 84J. As in the case of abandonment, proof that an easement has become ‘obsolete’ as required by s 89(1)(a) (NSW) is difficult to establish: Long v Michie [2003] NSWSC 233. In Tomara Holdings v Pongrass (2002) 10 BPR 19,531 the easement was held not to be obsolete even though development consent was necessary to exercise it. In South Australia and Victoria, the court has no power to order the Registrar to remove an easement from the register. Rather, the Registrar has the power: SA, ss 90A–90E; Vic, s 73. See also Yip v Frolich (2003) 86 SASR 162.

EASEMENTS AND THE TORRENS SYSTEM 10.117

Easements over land under the Torrens legislation may be

expressly granted by registration of an instrument in the appropriate form, and expressly reserved in an instrument of transfer by which the land is transferred. The legislation in all Australian states provides for registration of easements on the certificate of title of either the dominant or servient tenement, and, in most cases, of both tenements.49 Provisions of this kind contemplate the registration of easements created by instruments in registrable form. On registration, the easement will be indefeasible. If an easement is not registered on the certificate of title of the servient

tenement, the question arises whether the indefeasibility principle operates to defeat it. This question may arise in several ways. The easement may have been in existence at the time when the land was brought within the Torrens system, but omitted from the certificate of title at the time the land was brought under the Act. The easement may have been duly registered on the

[page 1035]

certificate of title of the servient land, but later omitted from or misdescribed on the register: James v Registrar-General (1967) 69 SR (NSW) 361; [1968] 1 NSWR 310; 10.121. By loose conveyancing practices, easements that should have been created expressly may be created by implication only: Dabbs v Seaman (1925) 36 CLR 538; 10.142C. The question also arises with respect to easements created by implication of law, for example, under Wheeldon v Burrows (1879) 12 Ch D 31; (1974–80) All ER Rep 669, or the doctrine of lost modern grant: cf Dobbie v Davidson (1991) 23 NSWLR 625; 73 LGRA 402; 10.124C. In general, there are three distinct issues to examine in relation to unregistered easements under the Torrens system. Firstly, does the easement in question (express, implied or prescriptive) come within one of the statutory exceptions to indefeasibility? Secondly, if the easement is not within the statutory exception, is it enforceable against the registered proprietor, or other unregistered interest holders? Thirdly, is the easement of a kind that, though

not registered, is capable of taking advantage of a description of the land on the register: Dabbs v Seaman (1925) 36 CLR 538.

General exemption of unregistered easements to indefeasibility — Victoria, Western Australia and Tasmania 10.118

In Victoria and Western Australia, the position is clear. Vic, s

42(2)(d) expressly exempts ‘easements howsoever acquired subsisting over or upon or affecting the land’ from the effect of the indefeasibility provision. A similar exception is made in Western Australia: WA, s 68. In James v Stevenson [1893] AC 162, the Privy Council, on appeal from the Supreme Court of Victoria, held that the omission of easements from the certificates of title of both the dominant and servient tenements when those certificates of title were originally issued, did not relieve the servient tenement of its liability. In Nelson v Hughes [1947] VLR 227, it was held that the Transfer of Land Act 1928 did not prevent easements being acquired over Torrens system land by virtue of the doctrine of lost modern grant. In National Trustees Executors and Agency Co of Australasia v Long [1939] VLR 33, Mann CJ held that an easement of way had been acquired over Torrens system land through the operation of s 62 of the Property Law Act 1958 (Vic) and also under the doctrine of lost modern grant. In Stevens v Allan (1955) 58 WALR 1, it was held that easements could be created under the Torrens system by virtue of the doctrine of Wheeldon v Burrows. A similar conclusion had previously been reached in Victoria in Taylor v Browning (1885) 11 VLR

158. The exception in relation to easements is also relatively broad in Tasmania. Tas, s 40(3)(e) provides that the title of a registered proprietor is not indefeasible so far as regards: (i)

an easement arising by implication or under a statute which would have given rise to a legal interest if the servient land had not been registered land; and

(ia) an easement created by deed before the servient tenement became subject to this Act or repealed Act; and (ii) an equitable easement, except as against a bona fide purchaser for value without notice of the easement who has lodged a transfer for registration.

10.119

In Pearce v The Lord Mayor, Aldermen and Citizens of the City of

Hobart [1981] Tas R 334, the Tasmanian Supreme Court extended the class of unregistered easements which were enforceable by relying on Land Titles Act 1980 s 40(3)(b), which provided that a title is not indefeasible ‘where two or more folios of the Register subsist for conflicting estates in

[page 1036]

respect of the same land’, in which case the title which was first brought under the Torrens system prevails over the title which was subsequently brought under the system. The court held that the effect of the provision was to give precedence to the certificate of title of the dominant tenement, on which the easement was recorded, over the later certificate of title of the servient tenement, on which the easement did not appear. However, this decision was overruled by the Full Court in Parramore v Duggan (1994–95) 4 Tas SR 64, which held that s 40(3)(b) applied only to

conflicting estates in land, and that an easement was not an estate. The case concerned an easement created by express grant when both the dominant and servient lots were under the general law. The dominant tenement was brought under the Torrens system before the servient land. The certificate of title of the dominant land referred to the easement, while the certificate of title of the servient tenement did not. When the case went to the High Court (1995) 187 CLR 633; 132 ALR 46, the issue relating to the effect of s 40(3) (b) was not reargued (but see Toohey J at CLR 642, ALR 46). However, the High Court held that the easement was unenforceable because the registered proprietor of the servient tenement received the protection of indefeasibility. Section 40(3)(c)(ii) was held not to cover the situation, as the easement did not arise by implication or under a statute and was not an equitable easement. The purpose of the legislation was to protect easements which were incapable of registration. Toohey J commented (at CLR 649; ALR 52): ‘It is understandable that easements arising by implication are given express statutory protection for there is nothing capable of being registered …’. By contrast, an easement created by express grant could have been protected by registration. The case leaves open the possibility that an easement arising under the Prescription Act 1934 (Tas) may be an exception to indefeasibility, but this may not be the case for easements arising under the doctrine of lost modern grant. For a Tasmanian case on prescription, see Wilkinson v Spooner [1957] Tas SR 121, but note the difference in current legislative provisions. Are such broad exceptions consistent with the aims of the Torrens system?

Partial exemption to indefeasibility in favour

of ‘omitted and misdescribed easements’ — other jurisdictions 10.120

In the other states, the position is more complex. The Qld, s

185(1)(c) excepts from the operation of the indefeasibility provision: … the interest of a person entitled to the benefit of an easement if its particulars have been omitted from or misdescribed in the freehold land register.

South Australia, the Northern Territory and the Australian Capital Territory also except omitted and misdescribed easements: SA, s 69(d) (not described or misdescribed); ACT, s 58(1)(b); and NT, s 189(1)(c)(3). As will be seen below, the exception in favour of omitted and misdescribed easements is qualified by additional statutory provisions in South Australia and the Northern Territory. Until recently, the New South Wales Torrens legislation also contained an exception in favour of ‘omitted and misdescribed’ easements. 10.121

There is considerable case law on the meaning of the omitted and

misdescribed exception. Prior to the decision in Australian Hi-Fi Productions Pty Ltd v Gehl [1979] 2 NSWLR 618, it had been held that easements in existence before the land was brought under the Act, but omitted from the register when the land came under the Torrens system,

[page 1037]

were protected by the exception: see Jobson v Nankervis (1943) 44 SR (NSW)

277. This included easements based on the implied intention of the parties and easements arising from necessity: see Auerbach v Beck (1985) 6 NSWLR 424; affirmed at (1986) 6 NSWLR 454. The view that the exception was confined to such easements was rejected in James v Registrar-General [1968] 1 NSWR 310; (1967) 69 SR (NSW) 361. In that case, the New South Wales Court of Appeal held that an easement which had been registered on the certificate of title of the servient tenement, but mistakenly omitted when a new certificate was issued, came within the exception. James v RegistrarGeneral was followed on this point by McLelland CJ in Eq in Berger Bros Trading Co Pty Ltd v Bursill Enterprises Pty Ltd [1970] 1 NSWR 137, 142 (upheld on different grounds by the High Court (1971) 124 CLR 73; 45 ALJR 20). It was also followed by the Queensland Supreme Court in Rock v Todeschino [1983] 1 Qd R 356, thus resulting in an easement contained in a registered plan of subdivision, which had not been recorded when new certificates of title were issued, being enforceable against a subsequent registered proprietor of the servient tenement. Along similar lines, in Papadopoulos v Goodwin [1983] 2 NSWLR 113, Wootten J in the Supreme Court of New South Wales held that the failure of the Registrar-General to record an easement created in a transfer of land lodged for registration, on the certificate of title of the servient land (whether it was an existing title, or a new title issued at the time of the transaction), was an omission coming within the provision. 10.122

The general judicial expansion of the category of ‘omitted and

misdescribed’ easements was halted abruptly in Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618. In this case, the land was under the

operation of the Real Property Act 1900 (NSW), at the time when the easement was said to have arisen. The subdivision and sale of the benefited land would have given rise to an implied easement under the doctrine in Wheeldon v Burrows (1879) 12 Ch D 31 (10.79C) if the land had been under the general law, but the easement was not recorded on the register. The New South Wales Court of Appeal held that a subsequent purchaser of the servient tenement was not bound by the easement because it was not registered. Mahoney JA, with whom Samuels and Reynolds JJA agreed, took the view that for an easement to come within the ‘omitted or misdescribed’ exception it was necessary to show that the easement was not registered ‘because something which should have been done was not done’: at 622. Since there had been no failure on the part of the Registrar-General, or his staff, to record something which should have been recorded (as would have been the case if a document creating the easement had been lodged for registration), the implied easement did not come within the ‘omitted or misdescribed’ provision. Mahoney JA suggested that in relation to land already under the Act, easements could arise only by instruments executed and registered under the Act, though he left open the situation in relation to easements created by long user. Although Gehl’s case was concerned with the creation of an easement under the Wheeldon v Burrows principle, this interpretation of ‘omitted’ had implications for easements arising in other circumstances. 10.123

Gehl’s case was applied in a number of later New South Wales

cases: MCA Camilleri Building and Constructions Pty Ltd v HR Walters Pty Ltd (1981) 2 BPR 9277 (implied easement of support not enforceable against a

subsequent registered proprietor of servient tenement); Dewhirst v Edwards [1983] 1 NSWLR 34 (easement by long user not enforceable against a subsequent registered proprietor of servient tenement); and Torrisi v Magame Pty Ltd [1984] 1 NSWLR 14 (easement created by implication, arising from necessity or based on

[page 1038]

proprietary estoppel not enforceable against a subsequent registered proprietor of the servient tenement). Thus, it appeared that in New South Wales at least, easements arising over Torrens system land could only bind the servient tenement if they had been created by registration of an instrument, but subsequently omitted from the register as the result of a mistake by the Registrar. Easements created by implication under the principle in Dabbs v Seaman (1925) 36 CLR 538 (10.142C) may have been another exception. See also Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343, in which the Court of Appeal distinguished Gehl’s case and held that it was an implied incident of a registered right of way that, when necessary, the owner of the dominant tenement should have the right to go into the servient tenement in order to maintain the right of way. The meaning of the ‘omitted and misdescribed’ exception was reconsidered by the New South Wales Council of Appeal in Dobbie v Davidson (1991) 23 NSWLR 625; 73 LGRA 402. The case arose under the former s 42(1)(b) of the Real Property Act 1900 (NSW), which was in similar terms to the

current Queensland, South Australian, Australian Capital Territory and Northern Territory legislation. 10.124C

Dobbie v Davidson (1991) 23 NSWLR 625; 73 LGRA 402 New South Wales Court of Appeal

Kirby P: This appeal raises an important question concerning the meaning of the word ‘omission’ as it appears in s 42(1)(b) of the Real Property Act 1900 (the Act). That paragraph appeared as s 42(b) of the Act as it stood at the time of the alleged omission. A right-of-way is acquired over a neighbour’s property: The meaning to be assigned to the word ‘omission’ appearing in s 42 is the second of two points which remained for decision in the appeal. On the first, I agree with Priestley JA’s analysis of the evidence and with his conclusion. The purpose of the rule by which a prescriptive right is upheld by a law is ultimately to guard the peaceful enjoyment of the use of land where that use has endured for more than twenty years, as of right. The evidence in this case showed that the disputed access road across ‘Lumley Park’ (owned by the appellants) to ‘Ellerslie’ (owned by the first respondents) had been used continuously for almost sixty years. The predecessors to the first respondents had used it without the slightest hindrance. A detail from the country plan shows the relationship between the two properties, the nearby town of Bungonia, the disputed right-of-way and the ‘paper road’ which was the means of access to ‘Ellerslie’ which would have to be developed and used if the present appeal were to succeed. The evidence showed that the use of the road constituting the right-of-way to ‘Ellerslie’ was extensive. In connection with access to that property it had been used by bullock drays and bullock wagons; horse drawn vehicles carrying products; carts, trucks, cars and tractors; visitors, tradespeople, shearing teams, droving stock, electricity and bush fire brigade vehicles; shooters; for carting and baling hay and by children. None of the aforementioned people using the road over this time ever sought permission from the owners of ‘Lumley Park’. They just used it without dispute until the present litigation began. To support the contention that all of this was merely ‘permitted’ by the predecessors in title to the appellants, and not done as of right, reliance was placed by the appellants upon the alleged words of Mr Lionel Hansell who was on the property from the early 1900’s until 1965 and upon two letters. [page 1039]

I acknowledge that the line between conduct ‘by permission’ and conduct ‘as of right’ will sometimes be difficult to draw. What begins as an act of neighbourly indulgence may come, in time, to bear the stamp of legal right. The indicia of a claim of right will be

found in the circumstances. Relevant to assigning conduct to one category rather than the other will be: (i) the time during which the conduct has been peacefully followed; (ii) the persistence of the conduct, despite supervening sale and the acquisition of new owners by the dominant and servient tenements; (iii) the unlimited variety of the persons who have utilised the alleged right-of-way; (iv) the absence of physical impediments or obstructions to that use; and (v) the knowledge of the use by the owners of the servient tenement yet their failure to attempt to forbid, limit or control the use of the right-of-way by the owners of the dominant tenement and those having dealings with them. All of the foregoing features were present in the facts of this case. The only significant evidence to rebut the conclusion that the continuous user had been as of right was a letter of 1988 written by the solicitors for the first respondents and set out by Priestley JA in his reasons. That letter refers, in terms, to the ‘permission’ given by the former occupier of ‘Lumley’ for access to ‘Ellerslie’. I have come to the conclusion that it was open to the trial judge (Waddell CJ in Equity) to view this letter as an attempt by the solicitors to do nothing more than to formalise written proof of a right-of-way already acquired by prescription. It would certainly appear true that the use of the right-of-way began as a matter of ‘permission’. But its uninterrupted use for so long, by so many people, without hindrance, check or control converted the licence to a right. It was a right acquired, in due course, by the first respondents. It is notable that the appellants did not claim that they had purchased their land in ignorance of that right. The first challenge to the conclusions of the trial judge therefore fails. An established right-of-way is not included in the register: That conclusion requires the Court to consider whether, pursuant to s 42 of the Real Property Act 1900, the appellants, as registered proprietor of ‘Lumley’, held that land free of the first respondents’ right-of-way because (as was common ground) that interest was not notified on the register book. To overcome the want of notification on the register, the first respondents relied upon that exception to the exemption from other claims which appears in par (b) and which reads: (b) in the case of the omission or misdescription of any right-of-way or other easement created in or existing upon any land. The question posed by this paragraph, relevant to the resolution of this appeal concerns the meaning of ‘omission’. If it simply means ‘left out’ or ‘not there’ there is no doubt that the first respondents’ right-of-way was omitted from the interests notified on the register book when the land was brought under the Act in 1964. Construed in that way, there would be no contest then but that the appellants took their land subject to the first respondents’ omitted right-of-way. However, the appellants contended that ‘omission’ in the context of s 42(b) meant not just that the right-of-way was missing from the register but that it was ‘not there’ because something which ought to have been done under the Act, as by the Registrar General (the second respondent) or someone else had not been done. In support of this construction of the section, the appellants relied upon a decision of this Court in Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618. In that decision, Mahoney JA gave the reasons of the Court which comprised Reynolds and Samuels JJA as well as himself.

[page 1040]

The Solicitor-General appeared for the Registrar-General to urge that Australian Hi-Fi Publications Pty Ltd v Gehl could be distinguished. If not, he submitted, the Court should give leave to re-argue the holding in Australian Hi-Fi Publications Pty Ltd v Gehl on the ground that it mis-stated the meaning of ‘omission’ in s 42(b) when the language, history, purpose and operation of the paragraph were considered. Reasons why ‘omission’ means ‘left out’ in this context: If, for the moment, I leave the authority of Gehl to one side, a number of reasons lead me to conclude that ‘omission’ in s 42(b) of the Act (now s 42(1)(b)) means ‘left out’ or ‘not there’. [Kirby P then listed a number of reasons for overruling Gehl’s case. They included: the ordinary meaning of the term ‘omit’ does not include notions of blameworthiness; to ignore fault is more consistent with the purpose of the legislation; the interpretation of the term in other jurisdictions, such as South Australia and New Zealand does not incorporate a requirement of blame; to follow them would be to advance the important policy of making the respective Torrens systems more consistent; to adopt the broader meaning of ‘omit’ would afford protection to a much greater range of valuable rights; and the injustice, after Gehl, of having to rely on a Registrar-General’s fault to claim. His Honour continued:] Distinguishing or over-ruling recent authority: … My own preference is therefore to agree with Priestley JA’s ultimate conclusion that this Court need not and should not follow Australian Hi-Fi Publications Pty Ltd v Gehl in reaching its conclusion in this case. Australian Hi-Fi Publications Pty Ltd v Gehl adopted an unduly narrow meaning of the word ‘omission’. Later and more detailed consideration of the question in this case suggests that the alternative meaning is preferable. If it is complained that this introduces uncertainty into a branch of the law where certainty is at a premium, it is legitimate to answer that for more than a century the meaning of ‘omission’ now preferred had been adopted by courts of law in other jurisdictions and in the practice of the Registrar-General of this State. If uncertainty was introduced, it was by this Court’s decision in Australian Hi-Fi Publications Pty Ltd v Gehl which has now stood for but twelve years. In my opinion, it is desirable now to acknowledge that the view taken of the word ‘omission’ in Gehl was not the preferable view. Only in this way will a conceptually viable approach to the meaning of the word for all purposes of s 42 be established with the authority of the Court. [Handley JA also agreed with the reasoning and orders of Priestley JA.]

10.125 1.

Questions

Can the situation in Australian Hi-Fi Publications Pty Ltd v Gehl be distinguished from the situation in Dobbie v Davidson?

2.

Is the effect of Dobbie v Davidson that implied easements arising under the doctrine of Wheeldon v Burrows (1879) 12 Ch D 31 could now be regarded as ‘omitted’, within the exception?

3.

Are Kirby P’s reasons for adopting a broader interpretation of ‘omitted’ convincing?

4.

Which interpretation is more consistent with the aims of the Torrens system?

[page 1041]

10.126

What implications does Dobbie v Davidson have for an equitable

easement created by agreement between the dominant and servient tenement holder, which is not registered? Could such an easement be regarded as ‘omitted’? This issue was considered in Queensland in Stuy v BC Ronalds Pty Ltd [1984] 2 Qd R 578, where two adjoining registered proprietors each agreed to grant the other an easement of way over a common driveway running between the two lots. The Full Court of the Supreme Court of Queensland held that the principle of indefeasibility prevented enforcement of the equitable interest arising from the agreement against a registered transferee from one of the proprietors. Connolly J (delivering the main

judgment) took the view that s 44 referred to easements omitted when land was brought under the Torrens system or (possibly) to registered easements which were later omitted from a certificate of title. He left open the question whether easements by implication arising under Wheeldon v Burrows (1879) 12 Ch D 31 came within the exception in s 44. However, in the case of easements expressly created, he said that: … a creation [of easement] by act of parties in relation to land under the Act can only occur by the registration of an instrument. The most fundamental principle of the Torrens system is that it is not a system of registration of title but a system of title by registration: at 581–82.

Is this approach consistent with that taken in Dobbie v Davidson? 10.127

In an earlier Queensland case, Pryce and Irving v McGuinness

[1966] Qd R 591, it was held that a vendor had retained an easement of way of necessity over land sold by him, despite the fact that the land was under the Torrens system. Hanger J, however, expressly stated that such easements could not be said to have been ‘omitted’ from the register or certificate of title within the meaning of Qld, s 44. What reasons might have influenced Hanger J to reach such a decision? Could a better solution be found for the problem created by the existence of landlocked land? See now Property Law Act 1974 (Qld) s 180; 10.89. 10.128

Can an easement arising by long user come within the exception in

favour of ‘omitted and misdescribed’ easements? In Golding v Tanner (1991) 56 SASR 482, the South Australian Supreme Court held that although doctrines permitting acquisition of easements by long user were introduced into South Australia at the time of settlement, these doctrines had limited

application to land under the Torrens system. Relying in part on the decision in Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 (10.122), the majority of the court (King CJ and Cox J, Debelle J not deciding this point) held that the failure to register an easement acquired by lost modern grant or prescription was not an ‘omission’ falling within the exception. 10.129

In South Australia and the Northern Territory, the effect of the

‘omitted and misdescribed exception’ is limited by s 84, which provides that: No easement hereafter created by express grant or transfer over or in respect of any servient land under the provisions of this Act shall be binding on any registered proprietor subsequently taking the land bona fide for valuable consideration, unless such easement shall be entered on the original certificate of such land, and also upon the duplicate certificate.

Does this provision prevent the enforcement of easements arising by implied grant against a subsequent purchase of the servient tenement? In Golding v Tanner (1979) 56 SASR 482,

[page 1042]

King CJ suggested that it could not be read as prohibiting creation of easements by long user. He commented (at 485): Section 84 remains puzzling. It could be read as implying that only easements created by express grant or transfer are possible with respect to land under the Act, but I think that it is unlikely that the legislation would have intended to legislate upon such an important point in such an indirect way. It could be read as implying that although easements created by express grant or transfer are not binding upon registered proprietors subsequently taking bona fide for value, easements created

by implication or arising from prescription or lost modern grant are so binding. I think, however, that it is equally unlikely that the legislation would have intended to effect such an important departure from the principle of indefeasibility in such an indirect manner. On the whole I think that the most likely explanation of the section is that the legislature considered, for some reason, that it was desirable to clarify the legal position of easements created by express grant or transfer but did not consider that to be necessary in the case of easements arising by implication or long user.

In South Australia, see also s 83. 10.130

In New South Wales, the exception in relation to omitted or

misdescribed easements is now narrower, as the result of s 42(1)(a1) inserted by Property Legislation Amendment (Easements) Act 1995, which now limits it to: … the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act.

There are two parts to this provision. The first part relates to all easements in existence at the time the land was brought under the Torrens system. This provision preserves the ruling in Beck v Auerbach (1986) 6 NSWLR 454, which held that the exception for omitted and misdescribed easements then contained in the Real Property Act 1900 (NSW) s 42(b) covered easements in existence before the land was brought under the Torrens system and omitted from or misdescribed in the register. Accordingly, implied easements, easements of necessity and easements that arise by prescription existing immediately prior to the land being brought under the Torrens system will bind the registered proprietor, even if no fault can be established

on the part of the Registrar-General: Dobbie v Davidson (1991) 23 NSWLR 625; 73 LGRA 402. The second part of s 42(1)(a1) relates to easements created at a time when the land was already under the Torrens system. It appears to be much more restrictive in scope. As Butt suggests (at 742), the words ‘validly created’ refer to instruments which are executed, and registered, in accordance with s 46. The provision does not cover the situation where the owners of the dominant and servient tenement execute a document creating the easement, which is lodged for registration but not registered. It follows that only express easements registered and subsequently omitted from or misdescribed on the register will be enforceable against a registered proprietor by force of this provision. There appears to be no scope for implied easements, or prescriptive easements, to come within this paragraph: they can never be ‘validly created’ and can therefore never bind registered proprietors who take without fraud. In consequence, the effect of James v Registrar-General (1967) 69 SR (NSW) 361; [1968] 1 NSWR 310 seems to be preserved. In that case, the New South Wales Court of Appeal by majority held that a registered easement over Torrens system land which was

[page 1043]

accidentally omitted when a new certificate of title was issued, was enforceable against a person who subsequently became registered proprietor. See also Papadopoulos v Goodwin [1983] 2 NSWLR 113. The indefeasibility

principle does not prevent the registered proprietor of Torrens system land from having the benefit of an easement over general law land, even though that benefit is not noted on the registered proprietor’s certificate of title: Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 2 NSWLR 1 at 11 per Needham J. 10.131

The provisions of s 42(1)(a1) were considered by the High Court

of Australia in Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149; [2013] HCA 11. The joint judgment of Hayne, Crennan, Kiefel and Bell JJ approved the analysis of the Court of Appeal in Dobbie v Davidson. In relation to omitted easements with respect to land under the Torrens system, in order for an easement to be omitted within the terms of s 42(1)(a1), the easement had to be first validly created. Thus, where a right of way had been validly created and registered on the title and later removed from the register by the Registrar General with the consent of the owners of both the dominant and servient tenements, there was no relevant omission. A relevant ‘omission’ was founded on the supposition of a continued valid existence of the easement. 10.132

The plurality reasoned:

‘Omission’ of an easement No doubt it is important to recognise that the primary definition of ‘omission’ is ‘[t] he action of omitting or leaving out, or fact of being omitted; failure or forbearance to insert or include; also, an instance of this’ and that the primary definition of ‘omit’ is ‘[t] o leave out, not to insert or include’. Each definition directs attention only to the action described; neither directs attention to how or why the action of omitting or leaving out occurred. As the reasons of Priestley JA in Dobbie demonstrate, the history of Torrens title legislation and the treatment of cases of ‘omission’ of unregistered easements point to reading ‘omission’, in the

collocation ‘case of the omission or misdescription of an easement’, as according with these dictionary definitions and meaning no more than ‘left out’ or ‘not there’. Hence, in Dobbie, where an easement existing before the land was brought under the RPA was not recorded on the Register when the land was first brought under the RPA, the Court of Appeal rightly held that it was a ‘case of the omission’ of an easement regardless of what had brought about the absence of the easement from the Register. On this understanding of ‘omission’, s 42(1)(a1) both presupposes the continued existence and provides for the continued effect of that which has been omitted notwithstanding it does not appear on the relevant folio of the Register. It is an understanding capable of ready application to an easement created under a Commonwealth Act or under a State Act other than the RPA. The presupposition for applying s 42(1)(a1) (that the easement continues to exist) is accurate. Section 42(1)(a1) then provides for its continued effect in respect of the land. It is an understanding which is also capable of application to easements created under the RPA, at least in the case of an easement created by registration of the relevant dealing under the RPA but not recorded on the folio relating to the servient tenement. The easement in that case continues to exist because it has been registered and not removed from the Register. Section 42(1)(a1) then provides for its continued effect in respect of the land.

[page 1044]

Other considerations intrude when an easement created under the RPA by registration of a dealing has later been removed by the Registrar-General. When an easement has been previously recorded on the Register, but is no longer recorded because it has been deliberately removed from the Register, it could be said that the easement was ‘not there’. It is more accurate, however, to say that the easement is ‘no longer there because it has been removed’. The significance to be given to the fact of the easement’s removal from the Register requires attention to fundamental principles. The relevant exception to the paramountcy of the registered proprietor’s title is ‘in the case of the omission’ of an easement (where the hypothesis is that the easement continues to exist but is not recorded). Because the RPA provided for title by registration, the deliberate removal from the Register of an easement created by registration cannot be treated as a ‘case of the omission … of an easement’ for the purposes of s 42(1)(a1). The presupposition for the operation of s 42(1) (a1),

that the easement continues to exist, is not valid. The easement has been removed from the Register.

10.133

The meaning of ‘omission’ in s 42(1)(a1) was again considered by

the New South Wales Court of Appeal in Registrar-General (NSW) v JEA Holdings (Aust) Pty Ltd (2015) 88 NSWLR 321; 17 BPR 33,845; [2015] NSWCA 74. An easement was created by a transfer in 1964, the land transferred being the dominant tenement. The easement was noted on the folium of the register constituting the dominant tenement but was never noted on the servient tenement folium. The primary judge held that the easement was not relevantly omitted because it was never validly created in accordance with the legislative provisions then in force. The Court of Appeal, in upholding the appeal, reasoned that registration of the transfer in 1964 created the easement and the ability of the Registrar-General to make a notation of the easement on the title of the servient tenement was facultative and not mandatory. The easement having been validly created, there was a relevant omission from the folio of the register constituting the title to the servient tenement and the servient owner took title subject to the easement. Presumably, the form of the legislation currently in force, s 36(6A), which states that ‘[a] dealing is registered when the Registrar-General has made such recording in the Register with respect to the dealing as the RegistrarGeneral thinks fit’ would not change the result if the facts in JEA Holdings were to occur today.

Enforceability of easements that do not come within the statutory exception

10.134

The fact that an easement does not come within one of the

statutory exceptions to indefeasibility is not fatal to its enforceability. A distinction must be drawn between unregistered express easements, and easements which arise by implication or prescription.

Unregistered express easements 10.135

In the case of express easements, whether created by document so

as to come within the doctrine of Walsh v Lonsdale or by equitable doctrines such as acquiescence or estoppel, if they remain unregistered they will be vulnerable to the registration of a subsequent proprietor without fraud. But they will be enforceable in the same way that other unregistered interests are under the Torrens system. If protected by a caveat, they will prevent the registration of

[page 1045]

inconsistent interests; and they will take priority over earlier or later equitable interests in accordance with general equitable principles; 5.162ff. Also, the unregistered status of an easement will not prevent its enforcement of an easement against a registered proprietor on an in personam basis: Bahr v Nicolay (No 2) (1988) 164 CLR 604; 78 ALR 1; 5.102C. So, an easement may be enforceable as an in personam right where the purchaser of the servient tenement acquired the property on the understanding that he or she will take subject to an easement created by agreement between the vendor

and a third party: see Goff v Albury Sailors, Soldiers and Airmen’s Club Ltd (1996) ANZ Conv R 166.

Unregistered implied easements 10.136

Implied easements under the rule in Wheeldon v Burrows (1879) 12

Ch D 31, if not always exceptions to indefeasibility, may still operate as between the parties to the transaction on an in personam basis. In Wilcox v Richardson (1997) 43 NSWLR 4 (10.61C), the Court of Appeal unanimously held that easements under the rule in Wheeldon v Burrows could exist under the Torrens system so as to bind the parties to the transaction. It followed that the owners of the dominant tenement had rights to use common areas in relation to their fish shop. The status of implied easements under the Torrens system was considered recently by the New South Wales Court of Appeal. 10.137C

McGrath v Campbell (2006) 68 NSWLR 229 New South Wales Court of Appeal

[In 1980, McGrath and Campbell purchased their respective Lots 12 and 6, from a common vendor. Lot 6 fronted the main street of Toronto. It had been continuously accessed by the respondents and by the common vendor (Mrs Chiplin) before them, via a rear driveway that crossed the appellant’s land. There was no registered easement in favour of Lot 6. But the respondents had successfully argued before the primary judge, Barrett J, that there was an implied easement in their favour which was enforceable as an in personam exception to indefeasibility on the basis of the Aldridge v Wright extension to the rule in Wheeldon v Burrows: see 10.79C. This extension of the rule covers simultaneous conveyances of the dominant and servient tenements, where the easement was continuous and apparent at the time.] Tobias JA: The answers to the questions posed in the previous paragraphs are relevant to the critical question of whether a Wheeldon v Burrows implied easement over Lot 12 for

the benefit of Lot 6, which as a result of the simultaneous transfers of Lot 6 to the Campbells and Lot 12 to the McGraths, gave rise to an equity or right in personam enforceable against the McGraths as registered proprietors of Lot 12 on the basis that they were personally bound to recognise that equity and give effect to it as an exception to the indefeasibility provisions of the RP Act. The governing provision of the RP Act establishing the indefeasibility of the estate of the registered proprietor of land under Torrens title is s 42 … It was common ground that the exception referred to in subparagraph (a1) above had no application to the present case. It was further common ground that if the McGraths were to take title to Lot 12 subject to the right of way claimed by the Campbells, it could only be upon the basis that the principle of indefeasibility encapsulated by s 42(1), in the words of Mason CJ and Dawson J in Bahr [page 1046]

v Nicolay (No 2) at 613 (omitting citations), did not preclude: ‘a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself …’ Under the former s 42(1)(b) of the RP Act, it was apparent from the decision of this Court in Australian Hi-Fi Publications (at 627) that an easement by implication has limited enforceability under the rights in personam exception to indefeasibility of title. Such an easement was enforceable only as between the proprietors of the dominant and servient lands which were involved in the transaction which gave rise to the easement. Further, so long as the registered proprietor of the servient land at the time the easement arose remained registered as proprietor, the registered proprietor of the dominant land could seek a court order directing the servient proprietor to take all steps necessary (including executing the appropriate documents and lodging them for registration) to secure the benefit of the easement by having it registered. However, unless the easement was registered in this way, once the servient land was transferred to a new registered proprietor taking without fraud, the easement could no longer be enforced. According to Woodman and Nettle, The Torrens System in New South Wales at 10245, the position under s 42(1)(a1) is the same. Sections 46 and 47 of the RP Act describe formalities for creating valid easements, the assumption behind these formalities being that easements will be reduced to writing and registered, but that until that happens an easement cannot be said to be ‘validly created’. Accordingly, by limiting omitted easements to those that are ‘validly created’ under the RP Act or some other Act, s 42(1) (a1) precludes implied easements from being enforced against a registered transferee of that land or interest. However, according to the learned authors, it does not preclude the dominant owner from enforcing the implied easement against the servient land or interest where the ownership of the servient land or interest has not changed since the circumstances that gave rise to the implication of the easement. Yet the legal basis as to why a Wheeldon v Burrows easement binds in equity the registered proprietor of the retained land notwithstanding the indefeasibility of provisions of the RP Act has not always been made clear … I have already referred in [75] above to what, to me, is the true jurisprudential basis of a Wheeldon v Burrows easement at common law. Subject to the ultimate effect of this Court’s recent decision in Williams

(see [61] above), it would seem that a common owner (registered proprietor) is bound by a personal equity to recognise that he or she has burdened the land retained by him or her (the servient tenement) by transferring to another that part of the land having the benefit of an implied easement which he or she as created (the dominant tenement) while both tenements were in common ownership and which it was his or her presumed intention to transfer with that benefit attached. Having impliedly granted to the transferee of the dominant tenement the benefit of that easement, it would be unconscionable for him or her to derogate from that grant. The Campbells thus submit that the implied Wheeldon v Burrows easement in favour of Lot 6 arose upon the transfer by Mrs Chiplin of that lot to the Campbells. Had Mrs Chiplin retained ownership of Lot 12, the Campbells would have been entitled to enforce that interest against her. Furthermore, it was recognised as a consequence of the decision in Australian Hi-Fi Publication that if Mrs Chiplin had retained ownership of Lot 12 and subsequently sold it to the McGraths, they would have taken the land free of the implied right of way upon the registration of the transfer. But, it was submitted, the simultaneous transfers of Lot 6 to the Campbells and Lot 12 to the McGraths gave rise both to an implied right of way in favour of Lot 6 and an implied reservation of the right of way out of Lot 12. [page 1047]

As I have already acknowledged, the foregoing proposition may well be the case with respect to land under old system title. But in my opinion, the simultaneous transfers alone could not give rise to a ‘personal equity’ binding upon the McGraths as the registered proprietors of Lot 12 in circumstances where they have not in any way contributed to the creation of the implied easement or conducted themselves in any way which could be regarded as unconscionable. In particular, their reliance upon their strict legal rights — that is, the indefeasibility of their title to Lot 12 effected by s 42(1) of the RP Act — was in no way unconscionable. On the contrary, the position in the present case is, if anything, analogous to the forgery cases where the registered proprietor of the relevant interest in respect of which equitable relief is sought, has done nothing to contribute either to the forgery or to the registration of the forged instrument. There must, in my opinion, have been some conduct on the part of the McGraths or those for whom they were responsible which would make it unconscionable for them to retain the benefit of the servient land free from the burden of the claimed right of way. In my view, there was no such conduct. Thus the mere simultaneous transfer of the two lots by Mrs Chiplin to the Campbells and McGraths respectively, and to the knowledge of each, was, in my opinion, insufficient to give rise to an equity binding upon the McGraths. This is so notwithstanding that Mr McGrath was generally aware that the driveway over Lot 12 had been used in the past to gain access to the rear of Lot 6, due to his familiarity with the locality. I would add this. The Aldridge v Wright extension to a Wheeldon v Burrows easement is, as I have already noted, dependent upon the presumed intention of all three parties that the easement is to benefit the dominant tenement and to burden the servient tenement. This presumed intention is the basis for an implied term in the grant by the

common vendor to the transferee/purchaser of each tenement. It arises by operation of law. But mere knowledge on the part of the transferee of the putative servient tenement that both tenements are to be transferred by the common vendor simultaneously does not involve any relevant conduct on the part of that transferee. He or she has not created the easement and he or she is not a party to the transfer to the purchaser of the putative dominant tenement. Although aware that such a transfer is to occur, the purchaser of the putative servient tenement is not only unaware of the terms of the contract between the common vendor and the purchaser of the putative dominant tenement but also has no control over those terms or, for that matter, when the transfer is to take place. There was no suggestion in the present case that the simultaneous transfers were due to any request or conduct on the part of the McGraths. As far as one can tell, it came about solely for the benefit and at the insistence of Mrs Chiplin. In these circumstances there was no conduct on the part of the McGraths to which any equity could attach to bind them personally. One further aspect of the personal equity issue should be mentioned. The relief granted by the primary judge to the Campbells was analogous to rectification of the Register. The equitable basis of the remedy of rectification of a contract is that in its executed form the contract does not represent or embody the actual common intention of the parties: Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350; Codelfa at 346; see [74] above. The requirement of an actual, as distinct from a presumed, common intention in the context of the equitable remedy of rectification, it seems to me, may be applied by analogy to the present case. In other words, no relevant equity arises to bind the McGraths unless it is established that it was the actual common intention of all three parties that Lot 6 should have the benefit of, and that Lot 12 should be subject to the burden of, a right of way over the driveway. In my view, even if that was the intention of Mrs Chiplin and the Campbells, it was not that of the McGraths. Turning to the Aldridge v Wright exception to the second rule [page 1048]

articulated by Thesiger LJ in Wheeldon v Burrows, which presumes an implied reservation by the grantor over the servient tenement where there is a simultaneous transfer of both the putative dominant and servient tenements by the grantor to two separate ownerships, I do not consider that it is sufficient to give rise to a personal equity which bound the McGraths and which the Campbells were entitled to enforce against them. This is so notwithstanding the knowledge of the McGraths of the past use of the driveway over Lot 12 to gain access to the businesses conducted in the building upon Lot 6 and of their knowledge of the simultaneous transfer of Lot 6 to the Campbells. Accordingly, for the aforementioned reasons, in my view the primary judge erred in his finding that the present case came within the in personam exception to statutory indefeasibility so that the RP Act did not prevent the enforcement by the Campbells against the McGraths of an implied right of way over the driveway on Lot 12. [I]n my opinion, the simultaneous transfers alone could not give rise to a ‘personal equity’ binding upon the McGraths as the registered proprietors of Lot 12 in circumstances

where they have not in any way contributed to the creation of the implied easement or conducted themselves in any way which could be regarded as unconscionable … their reliance upon their strict legal rights — that is, the indefeasibility of their title to Lot 12 effected by s 42(1) of the RP Act — was in no way unconscionable … Thus the mere simultaneous transfer of the two lots by Mrs Chiplin to the Campbells and McGraths respectively, and to the knowledge of each, was, in my opinion, insufficient to give rise to an equity binding upon the McGraths. [Giles and Hodgson JJA agreed with Tobias JA.]

10.138

Questions

1.

Why were the McGraths not bound by the easement?

2.

Would the vendor have been bound if she had retained Lot 12?

3.

Would a subsequent purchaser from her have been bound?

4.

Is the position of purchasers under simultaneous conveyances different if the land is old system?

5.

In what circumstances would the McGraths have been bound?

6.

Is it accurate to say that Wheeldon v Burrows easements are based on unconscionability?

7.

Are Wheeldon v Burrows easements legal easements?

8.

Is it convincing to argue, as Tobias JA does, that the present case is ‘analogous to the forgery cases’?

9.

Consider the following analysis: In the leading judgment, Tobias CJ sought to define the jurisprudential basis for the simultaneous conveyance exception to Wheeldon v Burrows (McGrath v Campbell at [64]–[82]). He identified the fundamental difficulty with the exception, that is, that the principle of non-derogation from grant, which underpins Wheeldon v Burrows, can have no relevance to the purchaser of the new servient tenement (at [76]). That person is a grantee, not a grantor, and non-derogation cannot explain why the easement is enforceable against him or her.

[page 1049]

Analysing the cases, Tobias CJ argued that, while orthodox Wheeldon v Burrows easements rely on a presumed intention on the part of the grantor to grant an easement to the dominant tenement, the simultaneous conveyance exception relies on an additional imputed intention on the part of the purchaser of the servient tenement to take title subject to the easement. Tobias CJ said that an imputed intention is analogous to an implied term in a contract (at [64]–[82]) … Tobias CJ went on to hold that there was ‘no evidence’ from which such an intention could be imputed to the appellants, rather only knowledge that the driveway had been used to access Lot 6 when it was owned by Mrs Chiplin (at [78]). With respect, it is arguable that this misconstrues the evidence that is necessary to impute an intention to the owner of the putative servient tenement. The early cases make it clear that all that is necessary is that there was a quasi-easement at the time of the simultaneous conveyance and that it was apparent to the purchaser of the putative servient tenement. The requirement that the circumstances ‘be such that the probability that the implication of such a term was intended must be so strong than a contrary intention cannot be supposed’ is not evident in these cases. The facts of McGrath v Campbell would satisfy these earlier criteria and the common law would then impute to the appellants an intention to be burdened by the easement, regardless of their subjective intention.’50

Does this argument provide the basis for suggesting that the primary judge in McGrath was right to find that the basis for an in personam right was established?

Prescriptive easements 10.139

In determining whether it is possible to acquire an easement over

Torrens system land by prescription, the provisions in Torrens legislation preventing or restricting the acquisition of title by adverse possession may have some relevance: see NSW, Pt 7A (note particularly s 45C); SA, Pt VIIA

(note particularly s 251); ACT, s 69; NT, s 198. In Golding v Tanner (1991) 56 SASR 482, all members of the South Australian Supreme Court held that a registered proprietor who had purchased property after user had commenced would not take subject to it. However, the court went on to hold that where the same person was the registered proprietor throughout the period of user, this could give rise to a right in personam against that person, who could then be called upon to execute and lodge for registration a document creating the easement. Earlier authority in New South Wales was more restrictive. In Kostis v Devitt (1979) 1 BPR 9231 and Dewhirst v Edwards [1983] 1 NSWLR 34, Powell J held that the easements by prescription were inconsistent with the Torrens system, and thus unenforceable. The following decision casts doubt on those conclusions.

[page 1050]

10.140C

Williams v State Transit Authority of New South Wales (2004) 60 NSWLR 286 New South Wales Court of Appeal

[In 1911 the predecessor of the State Transit Authority (STA) resumed a small parcel of land on the western edge of the Royal Randwick Racecourse. It initially constructed tram lines, and later a Busway, for public transportation serving the large number of patrons attending the racecourse. The STA sought an order that four caveats placed on the title to the land by the Australian Jockey Club (AJC) be removed, so that it could complete the sale of the land to Anson City Developments (Australia) Pty Limited (the second cross-defendant). In its defence, the AJC argued that it and people associated with it used the Busway for the purpose of access to and from the Racecourse. Certain properties near the Racecourse are owned by the AJC, in particular Lot

57 Doncaster Avenue which is a block of vacant land giving access to buildings used by AJC employees. On race days these employees, along with members of the media who park on that side of the Racecourse, access the Racecourse by utilising a series of possible paths across the Busway. The AJC claimed a series of rights over the Busway or against the STA personally, including a claim that the AJC had acquired an easement over the Busway for access to the Racecourse land by prescription. The primary judge, Young CJ in Eq, held that an easement by prescription could be enforced by an in personam action.] Mason P: The AJC accepts that s 42(1)(a1) provides no basis for undermining the title of a registered proprietor through application of the doctrine of lost modern grant. But it submits that a right in personam can arise where there has been no change in registered proprietor in the 20 year period of use of the easement. This was the conclusion of the primary judge and bases itself largely on the reasoning in Golding v Tanner. In Golding, the parties were the registered proprietors of adjoining parcels of land. Each had held the interest for over 20 years. The plaintiffs asserted that over this period they had used a road which traversed the defendant’s land in order to gain access from their property to a public road. The case threw up the issue whether the doctrine of lost modern grant applied to Torrens-title land, but (as will be seen) in a context where the South Australian statute is different to the Real Property Act 1900 (NSW). The Full Court of the Supreme Court of South Australia held that the doctrine applied in the limited sense that it could ground a personal right against someone who was registered proprietor throughout the period of prescriptive user. It was held that the doctrine of lost modern grant was not inconsistent with the terms of the Real Property Act 1886 (SA) unless there has been a change in the registered proprietor of the servient land during the period of adverse user, in which case s 84 of the Act [the provision roughly corresponding with the old s 42 of the New South Wales Act] will protect the title of the registered proprietor. King CJ held that the fictitious grant that is part of the doctrine of lost modern grant can supposedly be a registrable instrument granting an easement (at 484), but that the nonregistration of an easement which had never been submitted for registration could not be described as an ‘omission’. In this his Honour followed the reasons of this Court in Australian Hi-Fi Publications. This was the reason why the doctrine could not be invoked to defeat the registered title of a later owner. Nevertheless, it was held that an easement arising from lost modern grant could give rise to rights enforceable against a registered proprietor in personam. King CJ distinguished Anthony because s 88 of the South Australian Act had been amended in 1985 to remove the reference to an instrument, thereby leaving the word ‘created’ (in s 84) [page 1051]

freed of its association with the word ‘instrument’. Section 88 was therefore apt to include an easement based upon lost modern grant arising in personam against the registered proprietor throughout the period of 20 years adverse user. Cox J agreed with

the reasons of the other members of the Full Court. Debelle J emphasised that he was addressing a claim to enforce a right personally as against the defendant in consequence of the acts or omissions of the defendant himself (at 488–9). In this context, general principles as to indefeasibility and the objectives of Torrens title legislation did not stand in the way of the claim at issue. His Honour observed that easements by prescription had been upheld in Victoria, Tasmania and Western Australia, although not in New South Wales or the Northern Territory. As to the latter two jurisdictions he cited Jobson, Kostis, Australian Hi-Fi Publications and Anthony. Debelle J then set out the relevant provisions of the South Australian Act and their legislative history. He observed (at 491) that the question whether easements by prescription can arise under that Act turned upon s 88. In its current form (post-1985) it provided that: Whenever any right-of-way or other easement appurtenant to land under the provisions of this Act over land also under its provisions shall hereafter be granted or created, the Registrar-General shall make such entry on the original and duplicate certificates for the dominant and servient lands as he thinks fit. Debelle J observed that this enabled to be registered a right of way ‘granted or created’ after the Act came into force. Further, the word ‘created’ had a wider connotation than the word ‘granted’ and it indicated an intention to signify rights of way coming into existence by means other than an express grant (at 491). His Honour referred to legislative history in South Australia indicative of the language used in that State to prohibit certain types of easements by prescription. The terms of s 88 did not use that language and they were held wide enough to include a right of way arising by prescription. The same cannot be said for s 42(1)(a) of the New South Wales Act which is confined to an omitted or misdescribed easement ‘validly created under this or any other Act’. A right of way arising by prescription is not so created: see s 46. Debelle J accepted (at 492) that the Act precluded an easement arising by prescription where the adverse user had occurred over a period during which there had been successive registered proprietors of the servient land: But there does not appear to be any provision which precludes an easement arising by prescription where the acts or omissions upon which the claim to the prescriptive right is grounded are the acts and omissions of the registered proprietor against whom the prescriptive right is claimed. His Honour saw this conclusion as reinforced by the legislative history of s 88 of the South Australian Act. That history enabled him to distinguish Anthony … I confess to very considerable unease about accepting the central reasoning in this South Australian decision. The doctrine of lost modern grant is a common law doctrine whereby a legal title to an interest in land is acquired. It did not arise in any context involving rights enforceable in personam backed up by equitable remedies. It did not lead to an order requiring the servient owner to take further steps to perfect an equitable title into a legal title. The very fiction upon which the doctrine proceeds presumes a ‘grant’, ie a deed that would (if it existed) be immediately effective to confer the relevant legal interest. But the fiction is that the deed was executed and delivered, leaving nothing more to be done for the creation of an easement at law. Young CJ in Eq recognised that

the AJC’s rights in personam were equitable in nature and he therefore addressed a priority dispute as between the AJC [page 1052]

and Anson (see at [89], [106]). In my opinion, it is to pile fiction upon fiction to extend the doctrine of lost modern grant into the Torrens system, because (assuming no relevant exception to s 42 or its equivalents) that system contemplates title at law as arising only upon registration. To transpose the fiction of lost modern grant into a Torrens context one has to presume considerably more than the loss of an executed (and delivered) deed. At the very least, one would have to presume the execution and delivery of a registrable instrument. But logic suggests that one has to go further and presume delivery accompanied by certificate of title, since that is the normal way in which the person entitled to have an interest registered goes about perfecting such title so far as lies in the grantor’s power. Indeed, the title is only perfected through the act of a third party (the Registrar General), and there is no basis for inferring that officer’s acquiescence in the user giving rise to the common law doctrine. In Scott v Davis (2000) 204 CLR 333, Gummow J remarked (at 376) that: ‘The spirit of the times is unfavourable to the preservation of existing legal fictions and hostile to the creation of new ones’. I therefore would not be prepared to extend the doctrine in the manner suggested in Golding unless driven by strong considerations of precedent. In fact, the legislation and precedential history in this State point in the opposite direction … The AJC submits that the policy of the law is to make every presumption necessary to give a legal origin to acts of long user. There are certainly statements of highest authority in support of that principle (see above). It does not follow axiomatically that the doctrine of lost modern grant must adapt itself to the context of the Torrens system, or that the Torrens system must adapt itself to the doctrine of lost modern grant. The Torrens system has its own policies, including the basal concept of title by registration. In any event, as I have endeavoured to show, the adaptation of the doctrine as the basis of a novel personal right involves piling fiction upon fiction. It goes beyond presuming the delivery of a certificate of title along with the presumptively missing memorandum of transfer (cf Golding at 484). Rather, it would involve adopting a common law doctrine as to the legal title as the basis of a novel and different concept, ie a personal right against the continuing registered proprietor. To reject the incorporation into the Torrens system of the limited version of the doctrine of lost modern grant suggested by Golding is not to deny the effect of the wellestablished authorities, relied upon by the AJC, in support of in personam rights (Barry v Heider (1914) 19 CLR 197 at 213, Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 653– 4). Such incorporation would however stretch the doctrine to breaking point, contradict the basal principles of title by registration and displace long-established authority in this State … At the end of the day it becomes unnecessary for this Court formally to refuse to follow Golding, because the New South Wales Act is different to the Act considered in Golding. If anything, it is stronger than the original South Australian enactment construed by Walsh J in Anthony. [His Honour referred to NSW, ss 46 and 47.] In Golding, Debelle J (at 491) relied heavily on the provisions of s 88 of the South Australian statute and, in

particular, on the fact that, in his opinion, an easement by prescription was ‘created’ within the meaning of that provision. He accordingly held that the legislature had not intended that easements or rights of way should only come into existence pursuant to an express grant or by transfer as contemplated by s 84. Section 88 of the South Australian statute has its equivalent in s 42(1)(a1) of the New South Wales Act. Section 42 contains the only statutory exceptions to the indefeasibility of the title of a registered proprietor of Torrens title land in this State. It is clear that, unlike s 88 of the South Australian statute, the exception referred to s 42(1)(a1) does not extend to easements by prescription: see [123] above. In these circumstances, it follows that Golding is, at the very least, distinguishable from the present case. [page 1053]

I have already indicated that there is a relevantly unbroken line of authority in this State precluding the creation of easements after land comes under the Act except by way of registrable instrument. There are obvious reasons why a court should be cautious about any change to settled law in relation to real property. The reasoning of the Full Court of South Australia placed substantial reliance upon the amendment to s 88 of the South Australian Act that was effected in 1985. The absence of a similar legislative change in this State reinforces my conclusion that the doctrine of lost modern grant cannot be invoked to create an entitlement to an easement by virtue of user of the servient tenement after the land has come under the Real Property Act. [Sheller and Tobias JJA agreed with Mason P.]

10.141 1.

Questions

Does the decision in Williams mean that it is no longer possible to acquire an easement by prescription in New South Wales?

2.

Does Williams overrule Golding v Tanner?

3.

Is this case only relevant in New South Wales, or do the reasons offered by Mason P apply to prescriptive easements in all Australian jurisdictions?

4.

Is Mason P’s reason for rejecting the argument that a prescriptive

easement could qualify as an in personam right (because it ‘would however stretch the doctrine to breaking point, [and] contradict the basal principles of title by registration’) convincing?51 5.

Consider the following argument by Butt when referring to Williams: Since prescriptive easements and implied easements share a common feature arising by operation of law and without any registrable dealing, refusal to recognise the in personam enforceability of prescriptive easements must logically cast doubt on the in personam enforceability of implied easements. Given the relevant similarities between prescriptive and implied easements, it is difficult why it [the logic] should not apply.

Do you agree? Is there a ‘logical’ contradiction between the reasoning in Williams and McGrath?

[page 1054]

10.142C

Dabbs v Seaman (1925) 36 CLR 538 High Court of Australia

Starke J: All the difficulties in this case have been created by loose and careless conveyancing. Maria Jenkins, the registered proprietor of certain lands under the Real Property Act of New South Wales, subdivided it, and lodged a plan of the subdivision in the Office of the Registrar-General. The subdivision was clearly for building purposes. In August 1913, she, by the direction of Seaman, who had purchased portion of the subdivided lands from her, transferred to Sidney Louis Smith all her estate and interest as such registered proprietor in a piece of land containing one acre, and described as part of lot 1 on the plan of subdivision and shown on the plan attached … Maria Jenkins was the registered proprietor of the land marked ‘Lane’, and Seaman was entitled to the land in fee simple in equity as the purchaser from Maria Jenkins. The lane, as a matter of fact, also gave entrance from Shirley Road to other portions of the

land purchased by Seaman from Maria Jenkins which lay at the back of the one acre transferred to Smith. It will be noticed that the lane was not transferred to Smith. There is no express reference in the transfer to any easement, though s 46 of the Real Property Act provides that: Where land under the provisions of this Act or any estate or interest in such land is intended to be transferred or any right of way or other easement is intended to be created or transferred the registered proprietor may execute a memorandum of transfer’ in one of the forms in the Schedule to the Act, ‘which memorandum shall, for description of the land intended to be dealt with, refer to the grant or certificate of title of such land, or shall give such description as may be sufficient to identify the same, and shall contain an accurate statement of the estate, interest, or easement intended to be transferred or created. The certificate of title issued to Smith followed the description in the plan of the land attached to the transfer, but made no express reference to any easement over the lane. Under the general law, the cases decided that if land — particularly building land — is conveyed described as abutting on streets or ways and the land granted is separated from the streets or ways by a strip of land belonging to the grantor, the effect is that the grantee has a right of way over the strip to the road … It makes no difference that the land in the conveyance is described by reference to a plan attached to it nor does it make any difference that the abutting land is described as a street or way or as a lane — which is only a narrow passage or way — or even as a narrow strip coloured on an attached plan, running along a boundary of the land. Sometimes these decisions have been referred to the principle that a man must not ‘derogate from his own grant’ and at other times to the principle that a man is ‘estopped from denying that there are streets which are in fact ways’ … These two principles are not quite the same, for in the case of the former a grant is implied from the description contained in the conveyance, whilst ‘estoppel arises’ according to Lord Halsbury LC ‘where you are precluded from denying the truth of anything which you have represented as a fact although it is not a fact’ (Farquharson Brothers & Co v King & Co [1902] AC 325 at 330; [1900–3] All ER Rep 120 at 123), or, more accurately, where, in the words of Lord Blackburn, the rights of the parties are regulated, ‘not by the real state of the facts, but by that conventional state of facts which the … parties agree to make the basis of their action’: Burkinshaw v Nicholls (1878) 3 App Cas 1004 at 1026; cf Gale on Easements (9th ed) [page 1055]

pp 152, 153. But the distinction in theory is unimportant, if the benefit of the estoppel enures, as clearly it does, for the grantee and his transferees or assigns. Consequently, if this were a case of a conveyance under the general law, Smith would have been entitled to a right of way along the 20 foot lane abutting on the land transferred to him by Jenkins at the direction of Seaman. And in Little v Dardier (1891) 12 NSWLR (Eq) 319, decided in the year 1891, these principles were applied to land under the Real Property Act. That decision was, in my opinion, right, either because the grant of a right of way was implied from the words and description used in the transfer, or because an equitable claim or

right to the way arose by reason of estoppel: Barry v Heider (1914) 19 CLR 197. And in any case it would be difficult to depart from a decision which has been acted on for so long a time and upon which possibly many titles depend. The remaining question is whether Smith’s rights over the lane in question were transferred to the appellant Emily Dabbs. Smith died, and the Public Trustee became his legal personal representative. By transfer in the month of April 1922 the Public Trustee transferred all his estate and interest in all the land mentioned in Smith’s certificate of title to Emily Dabbs, and she was, by endorsement on that certificate, registered as proprietor of the land. But the land was not expressly mentioned in the transfer, nor was any right of way over it expressly given. What is the effect of that transfer? It purports to transfer a parcel of land described in a certificate of title, which discloses, upon examination, that the land abuts on one of its sides on the lane. Under the general law a grant of land passed all that was ‘legally appendant or appurtenant thereto’ without the words ‘with the appurtenances’: see Norton on Deeds, p 249. In practice ‘general words’ were usually added so as to pass all appurtenances enjoyed with the land. But in New South Wales, as in England, legislation has rendered this addition unnecessary: Conveyancing Act, 1919, s 67. It may be that the same result has been achieved under the Real Property Act by the definition of land in s 3: ‘In the construction and for the purposes of this Act’, the section provides: and in all instruments purporting to be made or executed thereunder (if not inconsistent with the context and subject matter) … the following terms shall bear the respective meanings set against them:— … ‘Land’ — Land, messuages, tenements, and hereditaments corporeal and incorporeal of every kind and description or any estate or interest therein, together with all paths, passages, ways, watercourses, liberties, privileges, easements, plantations, gardens, mines, minerals, quarries, and all trees and timber thereon or thereunder lying or being unless any such are specially excepted. And the title of the servient tenement is subject to any easement existing over the land although the same has not been registered: Real Property Act, ss 42, 47. But it is unnecessary to decide the point because Smith’s representative has transferred to Emily Dabbs a piece of land described in his certificate of title by means of a plan, as abutting on the lane. Now if Smith’s representative had owned the lane he could not, as we have seen, have denied the right of Emily Dabbs to use it. On similar principles, if Smith’s representative has a right of way over the lane, incident to the land which he sold to Emily Dabbs, then, if he has not expressly or impliedly granted that right to her, he is estopped from denying, and must be taken to have granted to her the right of way he had in or over the land. Emily Dabbs thus succeeds in establishing her right by the application of legal principles to the forms of transfers executed in this case, but somewhat, I am afraid, at the expense of justice. She never bargained for a right of way over the lane at the time of the purchase, and the learned judge who tried the action was satisfied that she had been informed that she was [page 1056]

buying the one acre of land and not any right to or over the lane. But a right of way over the lane was in point of law, in my opinion, granted or transferred to her, or must be assumed to have been so granted or transferred, and consequently her appeal must be allowed. Isaacs J: This appeal vitally concerns the safety of titles to land in New South Wales and, indeed, in Australia. The first step, and a very necessary one, is to clear the issues. When the mists of irrelevancy disappear, the question resolves itself into the following proposition, which I hold to be good law and to be absolutely necessary if titles under the Real Property Act are to be indefeasible: Where A, a registered proprietor of land under the Real Property Act, transfers to B a part of his land described by a plan indicating that the transferred land is bounded on one side by a 20 foot lane situated on the other part of the transferor’s land and the transfer is duly registered, then, in the absence of either a provision to the contrary on B’s certificate of title or some subsequent personal legal or equitable relation to the contrary between B and the owner of the adjoining land, B, as long as he remains registered proprietor of the land so transferred and described, is entitled (1) to have the land marked ‘twenty feet lane’ preserved as such, and (2) to a right of way over the land … 3 Indefeasibility … The appellant being named in the relevant ‘entry’ on the certificate entered 16 May 1922 as the transferee of Smith’s estate, the certificate is ‘conclusive evidence’ that she is seised or possessed of an estate in fee simple in the ‘land therein described’. 4 Construction What, then, is the ‘land therein described’? It was argued that that could only mean the physical substance contained within the metes and bounds marked red without reference to anything beyond those limits. I do not agree with that argument. The ‘land therein described’ means the parcel delimited with all the inherent characteristics with which the term of delimitation invest it. I say ‘inherent’ in order to distinguish them from characteristics that are mere additions distinct in themselves but attached by some act quite independent of the original quality of the subject land. For instance, an easement to pass through a neighbour’s garden is a superadded right of way and not an inherent characteristic of the subject land. Such an easement would properly fall within the terms of s 47 of the Real Property Act. But a right of access to the sea or a navigable river is an inherent quality of a riparian tenement. In the present case the ‘land therein described’ is the parcel edged red bounded on the south by Shirley Road — a public road — and bounded on the east by a ‘twenty feet land’. Its contiguity to a lane 20 feet wide is an inherent characteristic of the land described. The parcel, if Shirley Road or the lane were eliminated, would possess a quite different character. It would cease to be a parcel of which the owner is a frontager to public road or a private lane. The accessorial right is included in the grant itself, and is evidenced by the certificate without a special memorial or specification. The principle recognising the right in such circumstances has been settled in many cases, of which Roberts v Karr (1809) 1 Taunt 495; 127 ER 926, is the root … In Roberts v Karr Lawrence J says: ‘if a man buys a piece of ground described as abutting upon a road, does he not contemplate the right of coming out into the road through any part of the

premises?’ … It is important to observe that the ‘estoppel’ arises on the ‘construction’ of the deed … Unless land shown on a certificate by a plan only is thereby ‘described’, it is not described at all, and s 40 would have no operation upon it. And if it is thereby described, as it must necessarily be, the plan showing the contiguity of the land to the subject land brings the case precisely within the authorities cited … [page 1057]

5 Estoppel In view of the argument as to the estoppel established by the doctrine of Roberts v Karr, it is necessary to say a few words respecting its nature. Estoppel in that case simply means that the conveyance or lease or other instrument is based upon a conventional state of facts, and therefore to dispute that conventional state of facts in order to set up another state of facts is an attempt to destroy the very basis of the transaction … The governing principle is stated in Blackburn’s Contract of Sale (3rd ed) p 204, that ‘when parties have agreed to act upon an assumed state of facts, their rights between themselves are justly made to depend on the conventional state of facts, and not on the truth’ … But a question may always arise whether there has been adopted, for the purposes of an instrument and as its conventional basis, any given state of facts. That must be determined upon its construction … If on the true construction of a conveyance it is found that a recorded state of facts is part of the very thing affected by the instrument, then the party so effecting it cannot dispute the state of facts without disrupting the transaction itself. If he succeeded, he would be leaving something other than was originally done. In the process of construction a court may be required to examine the document to determine whether that state of facts is clearly enough adopted … The result, so far, is that the estoppel relevant to this case is the estoppel which as a rule of law arises, not, it is true, upon the operative words of the transfer or certificate, but upon the true construction as to the land transferred of the appellant’s certificate founded on the transfer by Jenkins by direction of the respondent. The construction being established that, as an essential part of the transaction and the certificate, the land is described as fronting a 20 foot lane on land belonging then to Jenkins or Seaman and now to Seaman, it is not permissible to Seaman to contradict or impugn that conventional state of facts. In order to test the position of the present appellant, suppose immediately after Smith became the registered proprietor Seaman had set up his present claim, basing it as here on the alleged fact that the land had been intended solely for the residual part of lot 1, is it not plain he would have failed? Even if he had proved Smith’s knowledge of that fact, he would have failed. The answer would have been that he had nevertheless accepted for the purpose of that transaction the conventional fact that the land transferred was to have the 20 foot lane abutting upon it … The appellant stands in the same position now as Smith did then. Assuming, what is not proved, that the lane was intended solely for the residual land, and assuming the appellant was told so, how could that affect her rights in respect of Smith’s land according to the certificate? Those rights were rights of grant depending solely on the subject described, and not dependent on covenant or any other purely personal obligation of Seaman …

So far it is clear that Seaman is estopped by his transfer and by Dabb’s certificate from diminishing even by a wall the space of 20 feet described as a lane. Dabb’s lane is entitled to that clear space to the east. 6 Right of way The next question is, has the appellant also a right of way over the 20 foot lane? The answer depends on the natural import of the word ‘lane’ used in the collocation and in such a document as we have before us. No direct definition of ‘lane’ appears in any Act and therefore … its ordinary meaning must be found. The ordinary meaning of ‘lane’ is a passage or way. It is a species of the same genus as street and road, their common characteristic being a place along which persons pass from one place to another. A ‘lane’ imports a narrower passage than ‘street’ or ‘road’ … In the present case the restrictive building [page 1058]

covenant adds to the certainty that in the present case ‘lane’ must be understood in its ordinary and popular sense of a place in the nature of a way or passage. That is the primary meaning ascribed to it in the Oxford Dictionary, namely: ‘A narrow way between hedges or banks; a narrow road or street between houses or walls; a bye-way’. The illustrations show how deeply rooted in the word ‘lane’ is the sense of a way or passage from Chaucer to the present day. Drury Lane in London, Flinders Lane in Melbourne, are notable instances of the use of the word in its primary sense. There are numerous instances in every capital city of a similar use. There can be no doubt that was the essential meaning attributed to it by Seaman and by Jenkins in August 1913 … The conclusion appears to me irresistible that the appeal should succeed. [Higgins J dissented on the ground that the appellant could acquire an easement only by registering an express grant. As this had not been done and there was no notification of the easement upon the register, the claim had to fail. The argument based upon estoppel failed, as Seaman had made no misrepresentations and Dabbs and his wife were aware that it was not intended for use by them as a right of way.]

10.143

Questions

1.

What is the ratio decidendi of this case?

2.

To what extent is the decision in the case based upon estoppel? If

it is, what is the relevance of this fact to the position of a purchaser of the servient tenement? 3.

To what extent was the reasoning of Starke and Isaacs JJ dependent upon the fact that the land was under the Torrens system?

4.

Why does Starke J say that the decision in favour of the appellant is at the ‘expense of justice’?

5.

Does this suggest the case should have been decided the other way?

6.

Does Isaacs J agree that the result is unjust?

7.

In Jobson v Nankervis (1943) 44 SR (NSW) 277 at 280, Nicholas J said that: Dabbs v Seaman decides that a right of way may exist over land described in a certificate of title, although not shown on the certificate and not in existence before the land was brought under the Act, but the circumstances under which it may come into existence are exceptional, and are limited to easements which arise by implication from the description appearing on the certificate or from estoppel.

Is this a correct analysis of Dabbs v Seaman? 8.

Does the majority in Dabbs v Seaman take the view that an easement may be acquired over Torrens system land by estoppel? See Baalman, ‘Easement by Estoppel’ (1958) 31 ALJ 800. Is this statement consistent with the recent cases on estoppel such as Waltons v Maher and Crabb v Arun District Council?

[page 1059]

10.144

Dabbs v Seaman was referred to in Highmist Pty Ltd v Tricare

Australia Ltd [2005] QCA 357 where Jerrard JA cast doubt on its application beyond facts closely analogous to it, citing the observation of Young J in Bellevue Crescent Pty Ltd v Marland Holdings Pty Ltd (1998) 43 NSWLR 364 at 372 that: Anyone who relies on Dabbs v Seaman in the light of its subsequent history is a bold person. From Jobson v Nankervis (1943) 44 SR (NSW) 277 onwards it has been considered that Dabbs v Seaman is a very special case and must be closely confined because it is outside all general principles.

Vic, s 96(2) provides that: [M]ention of an abuttal in any folio of the Register shall not give title to the abuttal or be evidence of the title of any person who is referred to in the description as owner or occupier of the land upon which any abuttal stands or of any land constituting an abuttal.

Would the decision in Dabbs v Seaman be the same in Victoria?

PROFITS À PRENDRE Introduction — general 10.145

A profit à prendre has been described as ‘a right to take something

off another person’s land’: Duke of Sutherland v Heathcote [1892] 1 Ch 475 at 484 per Lindley J. If the right is to amount to a profit, the ‘thing taken’ must be part of the land as, for example, minerals, crops, timber, soil, or must be a wild animal at large upon it as, for example, deer or rabbit. Moreover, the

object taken must be capable of being ‘owned’ at the time of taking. Thus, the right to take water from a stream cannot exist as a profit because the water, according to the common law, when it was taken was not owned by anybody, and was not part of the soil. A profit may exist over land but with the precise location left for the grantee to choose: Ellison v Vukicevic (1986) 7 NSWLR 104. A profit à prendre is an incorporeal hereditament and may exist either in gross or appurtenant to land. It may exist for the enjoyment of the grantee (and successor in title to the grantee) exclusively (a several profit) or in common with others (a profit in common). A profit appurtenant is like an easement and must comply with the requirements for a valid easement. A profit may be granted in perpetuity or for a term: Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 18 NSWLR 577. It has been held that a profit à prendre can exist over Torrens system land, despite no reference to profits in most Torrens statutes: see Ellison v Vukicevic (1986) 7 NSWLR 104.52 10.146

A profit is an interest in land; but in some circumstances a profit à

prendre may be confused with a sale of goods. The distinction is important for, among other reasons, the requirements for passing the property in goods are quite different from the requirements for the passing of property in land. The issue was considered in Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 18 NSWLR 577. The case concerned an investment scheme relating to the cultivation of pine tree seedlings. The investment company was to manage the

[page 1060]

plantations and harvest the trees when they were mature. Powell J, after an extensive review of the authorities, held that the agreement had created a profit (at 500): These judgments have the additional virtue of pointing up what seems to me to be the true distinction between the grant of a profit à prendre and what is, in reality, a contract for the sale of standing timber, if need be, coupled with a licence to enter, to fell, and to remove. That distinction, so it seems to me, is, not as is suggested in some of the cases, the existence — in which case there is said to be a sale — or non-existence — in which case there is said to be a grant of a profit à prendre — of an obligation on either ‘vendor’ or ‘purchaser’ to fell and sever the trees … rather, so it seems to me, the distinction is to be found to lie in the intention of the parties: is it the intention of the parties that the trees may be, or are to be felled and removed within a reasonably short time — in which case the arrangement is one of sale — or is it intended that the trees shall be retained for a considerable period of time while they grow to maturity — in which case the arrangement is one involving the grant of a profit à prendre.53

In Ashgrove Pty Ltd v Commissioner of Taxation (1994) 53 FCR 452; 124 ALR 315, the Federal Court held that an agreement for the sale of growing timber was an agreement for the sale of goods rather than an agreement to create a profit à prendre. In New South Wales an amendment to the Conveyancing Act 1919 in 1987 allows for the creation of a ‘forestry right’ which allows the holder of the interest to enter on land to cultivate trees and to construct such buildings and facilities on the land as are required for the cultivation: s 87A. A forestry right is deemed to be a profit à prendre (s 88AB); restrictions on the use of land subject of a forestry right can be imposed by an instrument which describes the land in a manner enabling it to

be identified and specifies the particulars of the restriction: s 88EA. The Act also provides requirements for enforceability in that the land subject to the burden of the profit and, if the profit is appurtenant, the land benefited, must be clearly identified in the instrument creating the profit: s 88AA; Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426. 10.147C

Clos Farming Estates v Easton (2002) 11 BPR 20,605 New South Wales Court of Appeal

[For an outline of the facts, see 10.14C. The appellants also argued that their rights over the land constituted alternatively a profit à prendre, a ‘profit a rendre’ or a licence coupled with an interest.] Santow JA: In seeking to give a legal character to the rights purportedly conferred, counsel for the Appellant suggested that the rights alternatively were in the nature of a profit à prendre or in the nature of a profit à rendre or in the nature of a license coupled with a grant. At first instance Counsel for Clos Farming, suggested as an alternative to the easement argument, that the interest in land was in the nature of a profit à prendre. That is, while not a true profit, [page 1061]

it was by nature a quasi profit. In rejecting that the Fourteenth Restriction could be classified as either a profit à prendre or a right in the nature of a profit à prendre, Bryson J briefly analysed the meaning of a profit à prendre. He expressed it as a right to take something off another person’s land where the thing taken must be capable of ownership and be either soil or minerals from the tenement, natural produce or animals ferae naturae (Judgment at [59]). In delineating this concept, Bryson J noted that a profit à prendre could not include a right to carry out processes of cultivation or harvesting (Judgment at [68]). He held that the rights of the Fourteenth Restriction could not be characterised as a profit à prendre, as the right to enter, establish and carry out vineyard works, cannot be seen as a right to take part of the land (at [68]). Likewise, he rejected that the Fourteenth Restriction conferred rights sufficiently analogous to a profit à prendre to be an interest in land (Judgment at [70]). On Appeal, counsel for the Appellant, submitted that it was beside the point whether or not what was created was a true profit à prendre. This was because the notion of an interest in land, akin but not identical to a profit, has a distinguished pedigree: Mills v

Stokman (1966–1967) 116 CLR 61, Australian Softwood Forests v Attorney General (1981–1982) 148 CLR 121. The Court was referred to Mason J’s judgment in Australian Softwood Forests v Attorney General (supra) at 132–133 where he held: I have not been able to discover a case in which an obligation to take something off a person’s land has been considered to be a profit à prendre. But I do not think that this negates the possibility that the grower’s rights amount to an interest in the nature of a profit à prendre. Mason J, as Bryson J points out, was prepared to require the interest in pine trees under the contractual arrangements there in question as ‘… something in the nature of a profit à prendre, if not a profit à prendre’. The effect of the arrangement in that case was, in Mason J’s view, that property in the trees passed to the grower before planting, their growth in the ground was for his benefit, he had an interest in land and a licence to enter the land in order to take possession of the fruits of his interest, and he had an obligation rather than a right to cut and move them at maturity. At first instance in Corporate Affairs Commission v Australian Softwood Forest Pty Ltd [1978] 1 NSWLR 150 Helsham CJ in Eq was of the view that there was no profit à prendre. Reasoning by analogy it was submitted that it is only a small step to recognising that the rights in this present case are also of this nature. A factor supporting this conclusion was that in Australian Softwood Forests v Attorney-General the fact that the parties had intended to create an interest in land was important. Likewise in this present case, Counsel for the Appellant emphasised that in the creation of the s 88B instrument there was a discernible intention to make the rights conferred by the Fourteenth Restriction an interest in land. In assessing whether the right is analogous to, or in the nature of, a profit á prendre, it is necessary to consider first principles. In Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426, Young J gave an overview of the fundamental principles to satisfy this category. First, the profit must come from the land itself, with it not being sufficient that the user of the land can make a profit out of trading on it (at 431). Second, the right must be to take something from the land. A right to tend or to grow cannot be considered a right to take (at 431). Third, the right must only allow the removal of a crop that does not require attention after initial planting. These rules points to the importance of the distinction between fructus industriales and fructus naturales (at 431). [page 1062]

Bryson J (at [63]) clearly delineates that distinction: It seems that literal translation does not establish the exact distinction between fructus naturales and fructus industriales. The exposition given by Campbell CJ in Race v Ward (1855) 4 Ellis & Blackburn 702, 119 ER 259 at 709, 262 was not apparently an attempt at an exhaustive statement but it is of some use; his Lordship said, while distinguishing claims of a right in respect of water in a river and open

running stream or in a spring: ‘This is no part of the soil, like sand, or clay, or stones; or the produce of the soil, like grass, or turves, or trees. … they all come under the category of profit á prendre, being part of the soil or the produce of the soil …’. It seems unlikely that his Lordship was referring to trees produced as a process of plantation and cultivation. In Lowe (Inspector of Taxes) v J W Ashmore Ltd [1971] 1 Ch 545 Megarry J, whose reputation in land law is very high, said at 557: ‘As for the definition of a profit as a right to take something off the land of another, it is clear that this, indeed, it is. But the converse does not hold: not all such rights are profits. To be a profit, the right must be a right to take part of the land or the creatures on it; what is taken must, when taken, be susceptible of ownership; and the right must be created by a transaction capable of creating an interest in land. A profit in the soil, giving the right to take sand, gravel and so on, is a well-known form of profit, and so is a profit of turbary, giving the right to dig and take turf or peat for fuel.’ Although the use of Latin does not, in this instance, facilitate understanding, the concept that a tree or the fruit of a plant growing wild is a natural product of the soil or fructus naturalis, while a cultivated tree or plant or its fruit or product is not, relates fairly readily to the classic concept referred to in Race v Ward and Lowe v Ashmore. Consideration of other cases highlights other important factors which limit the types of rights which may fall within the category of profit á prendre. In Clayton v Corby (1843) 5 QB 415 Lord Denman CJ delivering judgment for the Court held that a right to enter a property, dig up clay, sand, gravel earth, soil and turf and then to take it away, was not valid. It was held that such rights must have limits and restrictions in order to be valid. The right cannot be valid if it purports to allow the user to take all of the property. This decision was affirmed in the later case of Lord Chesterfield v Harris [1908] 2 Ch 397. Accordingly, it is necessary that there be some restriction on the rights of the holder of the profit á prendre in relation to the extent of the right to take from the property. This rule, though not well developed in recent times, may indicate that, like an easement, a profit á prendre cannot sterilise and neutralise the servient owner’s rights. Considering these features of profit á prendre, the essential defect with the argument that the rights conferred by the Fourteenth Restriction are in the nature of a profit á prendre is that the restriction is far more extensive than allowing or requiring the Appellant to enter the land and take natural product of the land from the property. The Fourteenth Restriction is not just analogous to a profit á prendre. In some respects it is entirely at odds with that category altogether. As found by Bryson J, the rights pursuant to the Fourteenth Restriction are extensive and highly intrusive. They confer not just limited rights of entry to take away natural property, but include rights to enter and plant and tend the vines and the right to recover payment for the costs associated with such works and the sale of any produce. The rights considered as a whole are far greater than any rights contemplated in the traditional concept of a profit à prendre. Moreover, it is difficult to see how an analogy can be drawn with the concept of an interest ‘in the nature of’ a profit à prendre as recognised in Australian Softwoods Forests v AttorneyGeneral. The specific right to recover costs (the essence of the [page 1063]

value of the Clos farming system) goes far beyond anything contemplated in the notion of an interest ‘in the nature of’ a profit à prendre. Further, as the Respondents argued, the concept of an interest in the nature of a profit à prendre as developed by the line of authorities referred to by the Appellant is not analogous to the present case. For instance in Mills v Stokman (supra) the interest was a profit à prendre. But it had not been registered on the title and so could only take effect in equity as an equitable profit à prendre. In Australian Softwoods Forests v Attorney-General the case was not concerned with whether the rights involved were interests recognised by the Real Property Act. Rather it was whether they amounted to an interest in land for the purposes of the Companies Act 1961 (NSW) dealing with the requirement for a prospectus. As a variation of the profit à prendre argument, Counsel for the appellant raised for consideration the concept of a profit à rendre. Such a profit is a right or obligation to enter land to put there something of benefit to the land (Butt, P, Land Law, 4th ed (2001)). Young J in Permanent Trustee Australia Ltd v Shand (supra) at 431, defined a profit à rendre as an incorporeal hereditament being ‘… a right to go onto the land and to put on it something of benefit to it …’. It was suggested that the rights of the Fourteenth Restriction may also fall into this category. One difficulty with analysing the present rights as forming part of this category is that such a profit à rendre is not commonly used in modern times to the point where they may have become obsolete; Halsbury’s Laws of England, 4th ed, Vol 14, para 240 cited by Butt, Land Law (supra) at [1689] but who indicates more recent authority to the contrary. There has been recent judicial dicta that the category may still be alive, if an endangered species, awaiting future use and consideration by the courts (see Permanent Trustee Australia Ltd v Shand at 431B-C. In Hornsby Council v Roads and Traffic Authority (1997) 41 NSWLR 151 at 155, Meagher JA lists the profit à rendre alongside other estates of easements and profit à prendres). In Permanent Trustee Australia Ltd v Shand it was said that the benefit to be given needed to be a benefit to the land and not just a benefit for the user. Again, the right to recover payment seems at odds with such a concept. I would conclude that the Trial Judge was correct in concluding that not only was this not a profit à rendre but that it was not a profit à prendre, being a process of industry rather than a natural process and not one constituting, in the words of Megarry J ‘the right to take part of the land or the creatures on it’ Lowe (Inspector of Taxes) v J W Ashmore Ltd [1971] 1 Ch 545 at 557. Bryson J correctly adds a further reason for so concluding, found in ‘the nature of the other acts [distinct from cultivation and harvesting such as the right to costs] authorised by the easement’ (para [68]). Could the interest be characterised as a licence coupled with a grant? Having regard to the language of the Fourteenth Restriction it is clear that the developer had no intention of creating a licence coupled with a grant, Bryson J’s reasoning on this point is clearly right. Considering the words of the instrument, it is difficult to see how the language of the Fourteenth Restriction betrays any intention to create a licence, and then coupling it with a grant of an interest in property. Second, it is important that what is granted is capable of being a property right. In National Provincial Bank v Ainsworth [1965] AC 1175, Lord Wilberforce stated the test:

Before a right or an interest in land can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties and have some degree of permanence or stability. [page 1064]

Thus in relation to the second element required for this part of the argument, ‘the grant’, it is still necessary that the right be capable of being classed as proprietary. The difficulty of considering the various rights under the Fourteenth Restriction in totality as property is that the right to costs is not definable nor identifiable by third parties and cannot be treated as permanent or stable. In the course of the argument, the issue of severance was not raised. Indeed the very idea of severing the dominant owner’s right to the costs of any works would be inimical to the Appellant’s interests, as the Fourteenth Restriction would lose all commercial utility and be stripped of value completely. Hence even if the other rights of entry, harvesting and maintenance, could be characterised as proprietary, they would be of little value without a right to reimbursement for costs incurred. Thus the Fourteenth Restriction only makes sense in its totality and so cannot be characterised as proprietary. The interest as sui generis? This argument that the Fourteenth Restriction, although not conforming to any of the basal principles for recognised interests in land, should nevertheless be accepted as a sui generis interest in land must also fail. This is primarily because the Appellant was unable to establish in law or by evidence any reason why the Court should allow the Fourteenth Restriction to have potentially perpetual effect as an incorporeal hereditament, aside from the claim that it was the clear intention of the developer that the rights were to have effect as an interest in land. But fervent wish is not enough. If such an argument were accepted, then it would be possible for many ordinary commercial arrangements to be given perpetual effect in rem merely because the original parties or the original developer possessed and made clear such an intention. The reluctance of Courts to recognise rights and interests in land that too greatly interfere with and limit owners’ rights of exclusive possession strongly militates against such a result. [Mason P and Beazley JA agreed with Santow JA that no profit had been created.]

10.148 1.

Questions

Why did the appellants fail to establish that they had a profit à prendre?

2.

Does a profit à prendre require a dominant tenement?

3.

What policy reasons are there to justify judicial reluctance to recognise new proprietary interests?

4.

Should the appellants have succeeded in their claim to have a novel interest recognised?

5.

Would this result have better recognised the intentions of the parties when the contracts were originally entered into?

6.

What is a profit à rendre?

7.

How does a profit à prendre differ from a profit à rendre?

8.

Why was the right claimed in this case not such a profit?54

[page 1065]

Creation of profits à prendre Old system 10.149

The express creation of a profit at law requires a deed: NSW, s

23B(1). Equitable profits may be created informally under the doctrine of Walsh v Lonsdale (1882) 21 Ch D 9 as long as the agreement is in writing and signed by the party to be charged: NSW, s 54A(1). Equitable profits may also be created if there are sufficient acts of part performance of an oral agreement, or by acquiescence or estoppel. The principle of part performance of an agreement to create an interest in equity was applied to a profit à prendre in Mason v Clarke [1955] AC 778; [1955] 1 All ER 914 (a right to

hunt for rabbits) (4.40C), and also in Ellison v Vukicevic (1986) 7 NSWLR 104. Profits may be created by implied grant and reservation and in accordance with the doctrine of prescription in much the same manner as easements: Tehidy Minerals Ltd v Norman [1971] 2 QB 528.

Torrens title 10.150

The Torrens legislation of New South Wales and Tasmania

specifically envisages registration of profits: NSW, s 46; Tas, s 107. In other jurisdictions the right to register profits may be able to be inferred from more general provisions.55 On registration of the profit, the holder will receive an indefeasible title. Unregistered profits à prendre will be enforceable in the same way as other unregistered interests are under the Torrens system (see 5.142ff), and will be comparably vulnerable: Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 16 NSWLR 577. In New South Wales the relatively limited exception for omitted and misdescribed easements contained in the Real Property Act 1900 (NSW) s 42(1)(a1) does not apply to profits à prendre. It follows that only profits à prendre that were in existence at the time the land was brought under the Act are exceptions to indefeasibility. Like easements, in the case of old system and Torrens land, profits may also be created on registration of a plan under s 88B of the Conveyancing Act 1919. A profit created by instrument after 1 March 1988 is not enforceable against a later holder of an interest in the servient land unless the instrument ‘indicates’ the land burdened by the profit and the land benefited (if any) by the profit: Conveyancing Act 1919, s 88AA; Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR 426. Profits à prendre may

also be created by statute. For example, by s 25F of the Forestry Act 1916 (NSW), it is possible to grant a profit to take timber from land.

Reform 10.151

In 1966, a majority of the English Law Reform Committee

recommended abolition of the doctrine permitting acquisition of easements by prescription: see Report on Acquisition of Easements and Profits by Prescription (Cmnd 3100, 1966). The Victorian Law Reform Commission also recommended the abolition of the right to acquire easements by long user, commenting as follows: Easements by long use. These easements are no longer needed. Acquisition by long use was appropriate in England when there were no planning controls and the complexity of conveyancing made formal creation of easements extremely difficult. If a good land planning

[page 1066]

system operates and conveyancing is simple and accessible, the justification for this type of easement is lost. Moreover, a person who needs an easement can buy it from the neighbour at the going price. The English Law Commission favoured total abolition of these easements. They cannot be created over registered land in New South Wales or South Australia and need not be shown on titles in Victoria. An owner of land may not even know that the pattern of use has led to the creation of an easement.

This recommendation was reiterated in the Commission’s 2010 Report: Easements and Covenants: Final Report 22, 2010, Ch 4. Do you believe that inchoate rights should be protected?

The Victorian Law Reform Commission also recommended that in the future it should not be possible to enforce express easements against subsequent owners unless they were registered, consistent with the Torrens principle that all relevant interests be recorded on the register (at 61). To deal with the problem of a landlocked parcel of land being created, it was recommended that the Victorian Civil and Administrative Tribunal should be given the jurisdiction to make an order creating an easement on such terms, including the payment of compensation by the owner of the burdened land. Compare the position in New South Wales and Queensland where courts are given power to order easements in certain circumstances: see 10.96. Which of these approaches has most to commend it? Do such provisions remove the need for doctrines relating to the implied grant and reservation of easements? Should adverse possession and prescription be dealt with by legislation in the same way? Is it justifiable to have a 12-year period for a possessory title to extinguish documentary title but 20 years for a prescriptive easement, a lesser right?

1.

Burn and Cartwright, 634–5.

2.

See Copeland v Greenhalf [1952] Ch 488; [1952] All ER 809; 10.24.

3.

See also Hamble Parish Council v Haggard [1992] 4 All ER 147; [1992] 1 WLR 122; Mitcham City Council v Clothier (1994) 62 SASR 394; 83 LGERA 431.

4.

In this Part (10.117–10.144), the following Acts are cited by the abbreviation of the state or territory enacting them: 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); Land Titles Act 1925 (ACT); Land Title Act (NT). The relevant provisions are: NSW, ss 46, 47(1)–6(A), 56; Conveyancing Act 1919 (NSW) ss 88, 88B; Vic, s 72;

Qld, ss 82, 83, 85; SA, ss 81, 96; WA, ss 63A, 64, 65, 65A; Tas, ss 105–106; ACT, s 103B; NT, ss 81, 96. For a discussion of the machinery for creation of easements, see Bradbrook and Neave, Ch 4. 5.

For further proceedings see [1983] 2 NSWLR 113; Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 2 NSWLR 1. Also, see Sackville, ‘The Torrens System — Some Thoughts on Indefeasibility and Priorities’ (1973) 47 ALJ 526, 539–40; Re Ridgeway and Smith’s Contract [1930] VLR 111; Rodwell v G R Evans & Co Pty Ltd [1978] 1 NSWLR 448.

6.

See also Real Property Act 1900 (NSW) ss 3, 47(5).

7.

Prospect County Council v Cross (1990) 21 NSWLR 601.

8.

Victorian Law Reform Commission, Easements and Covenants: Final Report 22, 2010, 27.

9.

Easements in gross exist in the United States: see Restatement, Property (1944) para [450]. For an attack on the rule that easements cannot exist in gross, see Sturley, ‘Easements in Gross’ (1980) 96 LQR 557; McLean, ‘The Nature of An Easement’ (1966) 5 U Western Ontario LR 32.

10. See also Short v Patrial Holdings Pty Ltd (1994) 6 BPR 13,996; Skapinker, ‘Does an Easement Accommodate Each Subdivided Part of the Dominant Tenement?’ (1993) 67 ALJ 606. 11. See, for example, Borman v Griffith [1930] 1 Ch 493; 10.57; Richardson v Graham [1908] 1 KB 39; Maurice Toltz Pty Ltd v Macy’s Emporium Pty Ltd [1970] 1 NSWR 474. 12. For another application of Re Ellenborough Park, see Dukart v District of Surrey (1978) 86 DLR (3d) 609 (right to wander over a foreshore). 13. For other applications of Re Ellenborough Park [1956], see Tujilo Pty Ltd v Watts [2005] NSWSC 209; Tiller v Hawes [2005] NSWSC 1232; Bonvale Enterprises Pty Ltd v Halfpenny Investments Pty Ltd (2005) 62 NSWLR 698. 14. At para [70]. 15. Chick v Dockray (2011) 20 Tas R 167; [2011] TASFC 1; Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281. For further analysis, see Weir, ‘The Westfield Case: A Change for the Better?’ (2009) 21 Bond L Rev 182; Griggs, ‘To and From — But Not Across: The High Court — Easements, Torrens and Doctrinal Purity’ (2008) 15 APLJ 260. 16. See also St Edmundsbury and Ipswich Diocesan Board of Finance v Clark (No 2) [1975] 1 WLR 468; [1975] 1 All ER 772; Deanshaw and Deanshaw v Marshall (1978) 20 SASR 146; Ellco Farm Supplies Pty Ltd v Healy (1986) 3 BPR 9596. 17. Per MacCrossan CJ (at 545). For a discussion, see Butt, ‘Pass, But Do Not Stop’ (1996) 70 ALJ

345. 18. Loclot Pty Ltd v Pullen (2003) 56 NSWLR 592 (height); Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204 (width). 19. For a general analysis, see Bennett Moses and Sherry, ‘Unregistered Access: Wheeldon v Burrows Easements and Easements by Prescription Over Torrens Land’ (2007) 81 ALJ 1. 20. A detailed discussion of some of the problems of developing an easement of solar access can be found in Bradbrook, ‘The Development of an Easement of Solar Access’ (1982) 5 UNSWLJ 229; see also Bradbrook, Solar Energy and the Law, Law Book Co, 1984, 47–75. For discussion of an easement for access of wind for wind generation purposes, see Bradbrook, ‘The Access of Wind to Wind Generators’ [1984] AMPLA Yearbook 433. For a discussion of the types of easement recognised by law, see Bradbrook and Neave, 24–39; Bradbrook, MacCallum and Moore, 845–51. 21. Dividing Fences Act 1991 (NSW); Fences Act 1968 (Vic); Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 (Qld); Fences Act 1975 (SA); Dividing Fences Act 1961 (WA); Boundary Fences Act 1908 (Tas); Common Boundaries Act 1981 (ACT); Fences Act 1972 (NT). For discussion of the effect of the legislation, see Bradbrook, MacCallum and Moore, 831–5. See also Bradbrook, ‘Fencing Easements in Australia’ (1979) 53 ALJ 306. See also Waite, ‘Easements: Positive Duties on the Servient Owner’ (1985) 44 CLJ 458. 22. See ‘Negative Easement or Restrictive Covenant’ (1936) 9 ALJ 360; Rodwell v GR Evans & Co Pty Ltd [1978] 1 NSWLR 448. 23. Cf Subdivision Act 1988 (Vic) s 12; Land Title Act 1994 (Qld) Pt 6 Div 4; Transfer of Land Act 1958 (Vic) s 98; Tas, s 90B; Transfer of Land Act 1893 (WA) Pt IVA; Strata Title Act 1988 (SA) s 9; Real Property Act 1886 (SA) s 90; Land Title Act (NT) s 90. 24. Compare Powell v Whyte [1968] Qd R 255; Barba v Gas and Fuel Corp of Victoria (1977) 136 CLR 120; 12 ALR 649; 51 ALJR 219; 10.3C and Deanshaw and Deanshaw v Marshall (1978) 20 SASR 146. 25. See also International Tea Stores Co v Hobbs [1903] 2 Ch 165; [1900–3] All ER Rep 303; Crow v Wood [1971] 1 QB 77; [1970] 3 All ER 425; Graham v Philcox [1984] QB 747; [1984] 2 All ER 621 (CA); Lyme Valley Squash Club Ltd v Newcastle Under Lyme Borough Council [1985] 2 All ER 405. 26. See also Long v Gowlett [1923] 2 Ch 177, but cf Broomfield v Williams [1897] 1 Ch 602 (CA). 27. Squarey v Harris-Smith (1981) 42 P & CR 118 and cf Lyme Valley Squash Club Ltd v Newcastle under Lyme Borough Council [1985] 2 All ER 405.

28. NSW, 67(5); Qld, s 234A; Tas, s 91. 29. Butt argues convincingly that by parity of language the same result should occur: at 349. See also, ACT, s 77(1); NT, s 62; Qld, s 62; Tas, s 58; WA, s 82. 30. For a discussion of some of the policy questions in this area, see Bodkin, ‘Easements of Necessity and Public Policy’ (1973) 89 LQR 87; see also Coldham, ‘Easements of Necessity: Nickerson v Barraclough’ (1982) 132 NLJ 224; Bradbrook, ‘Access to Landlocked Land: A Comparative Study of Legal Solutions’ (1983) 10 Syd LR 39; see also Bradbrook and Neave, 87–8. 31. For other examples of implied easements, see Pwllbach Colliery Co Ltd v Woodman [1915] AC 634; Cory v Davies [1923] 2 Ch 95; Simpson v Weber (1925) 133 LT 46; Dillon v Nash [1950] VLR 293. 32. Gray and Gray, 679. 33. See generally Goodman, ‘Adverse Possession or Prescription? Problems of Conflict’ (1968) 32 Conv & PL 270. 34. See also Bridle v Ruby [1989] QB 169; [1988] 3 WLR 191; [1988] 3 All ER 64; Mills v Silver [1991] Ch 271; [1991] 2 WLR 324; [1991] 1 All ER 449; and Clawson, ‘Prescription Adrift on a Sea of Servitudes: Postmodernism and the Lost Grant’ (1994) Duke LJ 845. 35. The 1832 Act was designed to eliminate some of the uncertainties of the common law doctrines, although the drafting of the Act has frequently been criticised: Megarry and Wade, 878–92; Simpson, 148–51. For a decision on the Act: see Allen v Greenwood [1980] Ch 119; [1979] 2 WLR 187; [1979] 1 All ER 819; see also Bradbrook and Neave, 132 et seq. 36. It has been argued that Bright v Walker itself was based upon a misapprehension of the effect of the Prescription Act 1832: Delaney, ‘Lessees and the Doctrine of Lost Modern Grant’ (1958) 74 LQR 82. 37. For a discussion of the remedies available for withdrawal of the natural right of support, see Redland Bricks Ltd v Morris [1970] AC 652; [1969] 2 All ER 576; Economy Shipping Pty Ltd v ADC Buildings Pty Ltd [1969] 2 NSWR 97; Todovoric v McWatt [1972] Tas SR 9; Thynne v Petrie [1975] Qd R 260; Evans v Balog [1976] 1 NSWLR 36; Fyvie v Anand (1994) 6 BPR 13,743. 38. For a more detailed discussion of this issue, see Bradbrook and Neave, Ch 7 and see Anderson v Mackellar County Council [1968] 2 NSWR 217; (1968) 14 LGRA 352. In the case of strata titles, legislation in most Australian jurisdictions creates a right of support, for the common property and each unit over the other units: see Strata Schemes (Freehold Development) Act 1973 (NSW) s 8AA; Strata Schemes (Leasehold Development) Act 1986 (NSW) s 8; Subdivision Act 1988 (Vic)

s 12(2); Building Units and Group Titles Act 1980 (Qld) s 15; Strata Titles Act 1988 (SA) s 9; Strata Titles Act 1985 (WA) s 11(1); Strata Titles Act 1998 (Tas) s 13; Unit Titles Act 2001 (ACT) s 35; Unit Titles Act (NT) s 25. 39. For a general discussion, see Edgeworth, ‘Adverse Possession, Prescription and Their Reform in Australian Law’ (2007) 15 APLJ 1. 40. For discussion, see Bradbrook and Neave, 547–58. 41. See Lyme Valley Squash Club Ltd v Newcastle under Lyme Borough Council [1985] 2 All ER 405; Carr-Saunders v Dick McNeil Associates Ltd [1986] 2 All ER 888; [1986] 1 WLR 922 and Wilkinson, ‘Light Matters’ (1985) 135 NLJ 1005; Hudson, ‘Light for Inadequate Windows’ (1984) 48 Conv R 408. 42. Treweeke v 36 Wolseley Road Pty Ltd is discussed in (1974) 48 ALJ 590 and 9 MULR 774. 43. See also Swan v Sinclair [1924] 1 Ch 254; aff’d [1925] AC 227; [1924] All ER Rep 277; James v Stevenson [1893] AC 162; Riley v Penttila [1974] VR 547 at 568ff; (1974) 30 LGRA 79; McIntyre v Potter [1983] 2 VR 439; Wolfe v Freijahs Holding Pty Ltd [1988] VR 1017; Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315; Hale v Dobbie (1996) ANZ Conv R 152. 44. NSW, s 47(6), (6A); Transfer of Land Act 1958 (Vic) s 73(1); Land Title Act 1994 (Qld) s 90; Land Titles Act 1980 (Tas) s 108(1); Land Titles Act 1925 (ACT) s 103E. 45. Real Property Act 1900 (NSW) s 49; Transfer of Land Act 1958 (Vic) ss 73, 73A; Transfer of Land Act 1893 (WA) s 229A; Land Titles Act 1980 (Tas) s 108(2). 46. See also Ankerson v Connelly [1906] 2 Ch 544. 47. See also Land Titles Act 1925 (ACT) s 103E(4); Real Property Act 1900 (NSW) s 47(7); NSW, s 88B(3)(c)(iii); Land Title Act 1994 (Qld) s 88; Real Property Act 1886 (SA) s 90C(2). For a discussion of the common law principle, see Preece, ‘The Effect of Unity of Ownership of Benefited and Burdened Land on Easements and Restrictive Covenants’ (1982) 56 ALJ 587. 48. For applications of the New South Wales section, see Manly Properties Pty Ltd v Castrisos [1973] 2 NSWLR 420; Pieper v Edwards [1982] 1 NSWLR 336. The Queensland section was applied in Ex parte Proprietors of Averil Court Building Units Plan No 2001 [1983] 1 Qd R 66; Re Eddowes [1991] 2 Qd R 381; Grill v Hockey (1991) 5 BPR 11,421. 49. In this Part (10.117–10.144), the following Acts are cited by the abbreviation of the state or territory enacting them: Real Property Act 1900 (NSW); Transfer of Land Act 1958 (Vic); Land Title Act 1994 (Qld); Real Property Act 1886 (SA); Transfer of Land Act 1893 (WA); Land

Titles Act 1980 (Tas); Land Titles Act 1925 (ACT); Land Title Act (NT). The relevant provisions are: NSW, ss 46, 47(1)–6(A), 56; Conveyancing Act 1919 (NSW), ss 88, 88B; Vic, s 72; Qld, ss 82, 83, 85; SA, ss 81, 96; WA, ss 63A, 64, 65, 65A; Tas, ss 105–106; ACT, s 103B; NT, ss 81, 96. For a discussion of the machinery for creation of easements, see Bradbrook and Neave, Ch 4. 50. Bennett Moses and Sherry, ‘Unregistered Access: Wheeldon v Burrows Easements and Easements by Prescription Over Torrens Land’ (2007) 81 ALJ 491 at 504–5. 51. For further analysis, see L Bennett Moses and C Sherry, ‘Unregistered access: Wheeldon v Burrows easements and easements by prescription over Torrens land’ (2007) 81 ALJ 491; Edgeworth, ‘The Fate of Prescriptive Easements Under the NSW Torrens System’ [2004] NSW Law Soc J (Nov) 66. McGuire, ‘A New South Wales Perspective on Implied and Prescriptive Easements and the Rights in Personam Exception to Indefeasibility of Title’ (2006) 12 APLJ 228. 52. For a general discussion of profits à prendre, see Burn and Cartwright, 701–23; Simpson, 101–3, 243–48; Stein and Stone, 48–50. 53. Compare Vanstone v Malura Pty Ltd (1988) 50 SASR 110 (Mallee roots). For examples of profits à prendre, see Ex parte Henry; Re Commissioner of Stamp Duties [1963] NSWR 1079; (1963) 63 SR (NSW) 298; Emerald Quarry Industry Pty Ltd v Commissioner of Highways (1976) 14 SASR 486. 54. See Edgeworth, ‘Profits à Prendre: A Reincarnation?’ (2006) 12 APLJ 200. 55. Whalan, The Torrens System in Australia, 1982, 106–7.

[page 1067]

Mortgages

CHAPTER

11

INTRODUCTION 11.1

Credit transactions and loan arrangements play an important part in a

modern consumer-oriented society. At some time almost every Australian obtains a loan from a bank, building society, finance company or other lending institution in order to finance the purchase of a home or consumer durables such as a car or domestic appliances. In the commercial context, individuals, firms and companies raise loans for such purposes as the acquisition of land, plant and machinery, the erection of buildings and the financing of new business ventures. The credit provider may be prepared to extend credit facilities without requiring the borrower to provide security. This means that in the event of default by the debtor, the only remedy available to the creditor is a personal action for repayment of the loan. An unsecured overdraft afforded by a bank to its customer and a monthly credit account opened by a retailer are examples of unsecured loans. Often, however, the credit provider is prepared to advance money only on the basis that the loan is secured. A secured loan has the advantage that, in the event of payment default by the debtor, the creditor has recourse to the property over

which it holds security to recover its debt. In addition, the creditor enjoys priority in respect of the secured property over other creditors, except for any creditor that has a higher ranking security over the same property. If the secured property is worth as much as or more than the debt, the creditor will be paid in full irrespective of the general financial situation of the debtor and whether it is insolvent. If the value of the secured property is less than that of the debt, the creditor’s claim is secured only to that extent and any claim to the balance of the debt is unsecured. In general, the remedies available to a secured creditor in common law jurisdictions do not require the intervention of a court and may be exercised swiftly and with a minimum of formality. Security transactions take many forms and the remedies available to the creditor and the rights of the debtor depend on the form selected. 11.2

Reference has already been made to various forms of security

transactions. These include a charge (Wrightson v McArthur and Hutchinsons (1919) Ltd [1921] 2 KB 807), a hire–purchase agreement (Hobson v Gorringe [1897] 1 Ch 182; 1.83) and what has traditionally been known as a floating charge: Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1966] ALR 775; 4.203C. For an exposition of the orthodox classification of securities, see Sykes and Walker, 14–20.

[page 1068]

11.3

The mortgage is not the only means by which purchases of land may

be financed by a lender who is given a security interest in the land. A vendor

may, for example, sell land on a terms (or instalment) contract of sale. Such a contract provides for the purchaser to take possession of the premises on or shortly after signing the contract and paying a deposit and to pay the balance of the purchase price, plus interest, by instalments. The conveyance or transfer is not executed until the purchaser makes the final payment. If the purchaser defaults in payments due under the contract, the vendor normally has the right to rescind the contract, resell the premises and, where appropriate, recover any deficiency in price from the purchaser. Terms contracts create a number of problems for purchasers, particularly where the land is subject to a mortgage at the date of the contract and the vendor subsequently defaults, or where the vendor is itself a purchaser under a terms contract. The Sale of Land Act 1962 (Vic) tackles these problems principally by restricting the ability of a vendor to enter into a terms contract when the land is subject to a mortgage and by prohibiting the vendor from mortgaging the land after it has been sold under a terms contract of sale. In addition, the Act gives the purchaser under the terms contract the right, subject to certain conditions, to require the vendor to convey or transfer the land to him or her provided that he or she executes a mortgage in favour of the vendor to secure the balance of purchase moneys owing. For similar legislation, see Qld, Pt 6, Div 4; Sale of Land Act 1970 (WA).1 11.4

Traditionally the principles governing mortgages of land have also

applied to mortgages of chattels, however such mortgages were affected by special legislation such as the exceedingly complex bills of sale Acts. More recently, however, the Personal Property Securities Act 2009 (Cth) provided a major overhaul of the law governing security interests in personal property.

The Act, which commenced on 30 January 2012, introduced a national system for the registration of security interests in personal property and replaced not only the bills of sale Acts but also other state and federal registers for various personal property security interests. The Act focuses on the substance of security transactions rather than their form, and largely disregards the question of who has title to the property. Instead, the Act relies on the concept of a security interest being ‘perfected’ in one of a number of ways and, in general, a prior registered interest will take priority over a later registered interest or an unregistered interest. The definition of ‘personal property’ expressly excludes land and, in addition, the Act expressly provides that it does not apply to ‘the creation or transfer of an interest in land’ or to ‘an interest in a fixture’: s 8(1)(f)(i) and (j) respectively. Where an obligation is secured by a security interest in personal property and by an interest in land, the secured party may elect to enforce the interest in personal property under the law relating to the interest in land: ss 117 and 118. Section 119 of the Personal Property Securities Act 2009 (Cth) also provides for it to be read in conjunction with the National Credit Code which is contained in Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) and which takes effect as a law of the Commonwealth. 11.5

The National Credit Code (the Code) is a key feature of the national

consumer credit regime designed to implement the Council of Australian Governments’ (COAG) agreements of 2008. Those agreements provided for the transfer of responsibility for regulation of consumer

[page 1069]

credit, and some related financial services, to the Commonwealth. Under this legislation a comprehensive licensing regime applies to those engaging in credit activities and imposes industry-wide responsible lending requirements. The licensing regime is administered by the Australian Securities and Investments Commission (ASIC) which has been given enhanced powers of enforcement. The Code largely replicates and replaces the uniform Consumer Credit Code which was contained as an Appendix to the Consumer Credit (Queensland) Act 1994 (Qld) and which applied in the states and territories from 1996. The Explanatory Memorandum to the legislation states that the objectives of the Code remain the same as those of the earlier state-and territory-based Uniform Code, ‘namely to ensure strong consumer protection through “truth in lending”, while recognising that competition and product innovation must be enhanced and encouraged by the development of nonprescriptive flexible laws’. 11.6

The Code applies to mortgages over land if the mortgage secures

obligations under a credit contract or guarantee and the mortgagor is a natural person or a strata corporation: s 7(1). A credit contract to which the Code applies is one where, at the time the credit was entered into, the debtor is a natural person or a strata corporation and the credit is provided or intended to be provided wholly or predominantly for a personal, domestic or household purpose or to purchase, renovate or improve residential property for investment purposes and a charge is made for providing the credit which

is provided in the course of a business of providing credit: s 5(1). In addition, the Code applies to the refinancing of such credit. The Code also applies to an executory contract for the sale of land if the purchaser is entitled to possession before taking title and is obliged to make a payment other than a deposit of no more than 10 per cent or rent, without becoming entitled to a transfer or title and the amount payable under the contract exceeds the cash price (defined in Part 13 of the Code) of the land: s 10. 11.7

Where the Code applies, the debtor benefits from a range of

consumer protection provisions which include: the credit contract is to be in the form of a written document: s 14; the credit provider must give the debtor a copy of the credit contract: s 20; the credit provider must give the debtor a precontractual statement before entering into the credit contract, containing the matters set out in s 17: s 16; the precontractual disclosure statement must refer to matters such as the amount of credit, the annual percentage rate or rates, the calculation of the total amount of interest charges, repayments, credit fees and other charges, the default rate, if any, any commission paid by or to the credit provider and details of any insurance financed by the contract. In the case of a mortgage it must also provide a description of the property subject to, or proposed to be subject to, the mortgage, to the extent to which it is ascertainable: s 17; except as provided in the Code, the credit contract must not provide for

the annual percentage rate of interest to vary when the debtor is in default under the credit contract: s 30(1); the credit contract may provide for a higher rate of interest to be charged following a default in payment but only in respect of the amount in default and only while the default continues: s 230(2); a mortgage that does not describe or identify the property which is subject to the mortgage is void: s 44(1). Similarly, a provision in a mortgage that charges all the property of the mortgagor is void: s 44(2);

[page 1070]

third party mortgages are prohibited; that is, a mortgage must not secure obligations under a credit contract unless each mortgagor is a debtor under the contract or a guarantor under a related guarantee: s 48; the debtor has a right to pay out the credit contract at any time upon payment of specified charges: s 82; before a credit provider may take enforcement action under a mortgage against a debtor or guarantor, the debtor must be in default and the credit provider must serve a default notice giving the debtor at least 30 days to remedy the default and the default must not have been remedied: s 88; acceleration clauses in a credit contract may only operate if the debtor is in default under the contract and then only if the debtor (or guarantor or mortgagor as the case may be) has been served with a default notice under s

88 which contains additional information concerning how the debtor’s liability is affected by the operation of the acceleration clause: s 93;2 and Pt 3, Div 1 contains the main provisions on mortgages under the Code. 11.8

A special feature of the Code is contained in Div 3 of Pt 4 relating to

changes to the credit contract on grounds of hardship and unjust transactions. In cases of hardship, if a debtor who is unable because of illness, unemployment or other reasonable cause to meet the debtor’s obligations under a credit contract but reasonably expects to be able to meet those obligations if the terms of the contract were altered, then the debtor may apply to the credit provider to change the contract: s 72. If the credit provider does not change the contract, the debtor may apply to the court to change the contract: s 74. Of particular significance is the power given to the court by the terms of s 76 to reopen unjust transactions. In considering whether a term of a credit contract is unjust in the circumstances relating to it at the time the contract was entered into, the court may have regard to a variety of factors set out in s 76(2) which include but are not limited to the consequences of compliance or non-compliance with all or any of the provisions of the credit contract; the relative bargaining power of the parties; whether the terms of the credit contract were the subject of negotiation; whether the debtor because of age or physical or mental condition was reasonably able to protect his or her interests; and whether independent legal advice had been obtained by the debtor. An important feature of the unconscionability provisions of the Code is that a guarantor may apply for relief where the guarantee is unjust but the loan contract is not: s 76(1).

THE SECURED LOAN TRANSACTION When is a mortgage granted? 11.9

A security in the form of a mortgage may be granted in a broad range

of transactions to secure a broad range of payment obligations. For example, a purchaser may grant a mortgage

[page 1071]

in favour of a vendor to secure its obligations to pay the purchase price under a contract of sale; a borrower may grant a mortgage in favour of a lender to secure its obligations to pay interest and to repay principal under a loan agreement; and a guarantor may grant a mortgage in favour of a creditor to secure its obligations under a guarantee. As an alternative to securing its own obligations such as in the examples just given, a mortgagor may grant a mortgage to secure the obligations of a third party. Such security is known as a third party security and arises where, for example, a party that is related to a borrower grants a mortgage in favour of the lender to secure the obligations of the borrower under the loan agreement. If the third party security does not contain a personal covenant to pay on the part of the mortgagor, the lender’s recourse will be limited to the property that is the subject of the mortgage and the lender will not be able to sue the mortgagor personally for any shortfall. 11.10

The focus of this outline is on secured loan transactions (ie, loan

transactions in which a mortgage is provided as security) for the reason that this is the most common context in which a mortgage is granted. In any secured loan transaction, two threshold questions must be answered. The first question concerns the property that is the subject of the mortgage. This question is relatively non-controversial so long as the property is accurately described in the mortgage agreement and, in the case of land, in the mortgage form that is completed for registration purposes (in the case of Torrens system land, this will include the volume and folio number). The second question concerns the obligation that the mortgage secures. The obligation might be an obligation to pay a specific debt owing to the mortgagee. Alternatively, it might be an obligation to pay all amounts that are or become payable to the mortgagee now or at any time in the future during the term of the security. Known as an ‘all monies’ mortgage, the latter can prove controversial where the rights of a subsequent mortgagee intervene and the question arises as to whether the earlier mortgage has priority over the subsequent mortgagee in respect of advances made by the earlier mortgagee after the subsequent mortgage was granted. This issue concerns priorities between mortgagees and is discussed in 11.28–11.41 below.

How is a secured loan agreement structured? 11.11

A typical loan agreement is a highly engineered document that

imposes a broad range of obligations on the borrower, including the obligation to pay amounts owing to the lender such as interest and principal. In many cases, particularly loans to corporate borrowers, there will also be

obligations to provide information to enable the lender to monitor the borrower’s financial position and to comply with financial covenants (eg financial ratios such as the ratio of debt to equity). A primary purpose of the loan agreement is to ensure that the obligations of the borrower are clear and that the lender has contractual rights and powers to take action to recover amounts owing in the event that there is a breach by the borrower, including a default in its payment obligations. In a term loan (ie, a loan that has a fixed term and is not repayable on demand), the action that the lender may take upon the occurrence of an ‘event of default’ by the borrower includes accelerating the loan; namely, declaring that all amounts owing under the loan are immediately due and payable. In a secured loan transaction, the action that a lender may take upon the occurrence of an event of default by the borrower includes enforcing its rights under the mortgage.

[page 1072]

How does the law achieve a balance between the mortgagor and the mortgagee? 11.12

Because a mortgage involves the imposition of an encumbrance (or

burden) on property owned by the mortgagor and the grant of rights and powers over property to the mortgagee, it is important for the law to achieve an appropriate balance between the interests of the mortgagor and the mortgagee and to ensure that their interests are adequately calibrated and protected. Much of the law that is discussed in this chapter is concerned with

how to achieve an appropriate balance. Fundamental issues come into play in this regard, including the need to ensure that the law supports a properly functioning credit economy, one in which lenders are willing to make credit available on a cost-effective basis and on terms that, to the extent possible, can be freely negotiated and agreed by contract, at least in a commercial (ie, non-consumer) context. At the same time, the law is concerned to ensure that a mortgage operates effectively as a security, and not as a vehicle for unfair or unconscionable dealing on the part of the mortgagee, and that the mortgagor has access to remedies to prevent the mortgagor’s rights from being unreasonably compromised in this regard. This is illustrated in the equitable rules against clogging the equity of redemption, as discussed in 11.44–11.57 below. Similarly, the law is concerned to ensure that the mortgagee has access to remedies in the event that the mortgagor defaults and that the mortgagee’s powers, including the power of sale, are exercised appropriately and in a manner that is fair to the mortgagor and to other parties, such as a purchaser who acquires property as a result of the exercise of the mortgagee’s power of sale. Critical issues that need to be considered in this context include the circumstances in which the power of sale may be exercised, the applicable procedural requirements (eg notice to the mortgagor), the duties — equitable and statutory — to which the mortgagee is subject and the relief available to the mortgagor in the event of a breach of such duties. These and related issues are discussed in 11.60–11.122 below. Finally, the law is concerned to ensure that there is an appropriate balance in areas such as the mortgagor’s right to redeem, the mortgagee’s right to possession, the power to lease and the rights of the mortgagor and the

mortgagee against third parties. These and related issues are discussed in 11.123–11.142 below.

How does a mortgage support the purchase of property? 11.13

A mortgage is often of fundamental importance to a transaction for

the acquisition of property as it supports the loan that is raised by the purchaser to finance the transaction itself. Accordingly, the grant of the mortgage in favour of the lender is an integral step in the acquisition of property and needs to be factored into the sale transaction, an outline of which is provided at the beginning of Chapter 4. 11.14

In circumstances where the acquisition of property is financed by a

loan that is secured by a mortgage over the property being acquired, the lender’s solicitor will undertake a title search of the property to determine title and whether it is subject to any existing mortgages or encumbrances. The lender’s solicitor will also review the contract of sale and the relevant circumstances to determine whether there are any interests that may survive the transfer of title, such as the interests of a tenant in possession. In addition, the lender’s solicitor will usually attend settlement and take responsibility for arrangements such as the delivery of cheques to the vendor and to other parties, including the vendor’s financier (if the property is subject to an existing mortgage that needs to be discharged), and also the lodging of the relevant forms

[page 1073]

at the titles office to enable the discharge of any existing mortgages and the registration of the transfer and the new mortgage.

THE NATURE OF MORTGAGES Introduction 11.15

In Australia today, as we have seen above in Chapters 4 and 5, there

are two distinct systems of land title: Torrens and general law. General law land is rapidly disappearing, and only persists in New South Wales, Tasmania, Victoria and Western Australia. It follows that the brief discussion of the general law mortgage below focuses on only two specific themes: the historical origins of the mortgage, and the elements of the general law mortgage that provide the concepts and principles adopted by the legislatures that introduced the Torrens system mortgage. The latter is better understood by reference to its general law origins.

The general law mortgage 11.16

The earliest development of the mortgage was an attempt both to

provide security for a loan and to avoid the prohibition on usury. The creditor was given possession of the debtor’s land and consequently was entitled to the rents and profits of that land. Because the mortgagee had possession, the security was regarded as a pledge, or ‘gage’, either a living pledge (vivum

vadium) which discharged the entire debt, or a dead pledge (mortuum vadium) which discharged the interest only. Provision was usually made for the land to be forfeited to the mortgagee if the debt was not paid by the due date. Eventually, and certainly by Littleton’s time, the common form of mortgage was for the mortgagee to take the legal title to the land (by feoffment) but subject to a condition subsequent. Thus, a mortgagor who repaid the loan by the agreed date had the power to re-enter and determine the estate of the mortgagee. Subsequently, it became the custom to use a proviso for reconveyance rather than a condition subsequent to the grant, to protect the interest of the mortgagor. At common law this gave the mortgagor rights to relief in contract, but this depended on the intervention of equity to compel the reconveyance by the mortgagee. This form of mortgage remained in use in England until the Law of Property Act 1925 (UK) which permitted only two forms of mortgage: a mortgage by demise and a legal charge. In Australia, a mortgage by demise is still the usual form of mortgage for land that has not been brought under the Torrens system. The common law approach to mortgages was one of strict enforcement. If the mortgagor did not pay on the due date his or her rights were extinguished and the mortgagee became absolutely entitled to the land. However, equity took a different approach and by the beginning of the seventeenth century it had substantially transformed the law of mortgages. 11.17

Megarry and Wade, at 1081–3, trace the history of equity’s

influence: Mortgages as securities. Another facet of equity’s intervention was that it was repugnant to every idea of equity that the mortgagor should lose his property merely because he was late in repaying

the loan. At first equity intervened in cases of accident, mistake, special hardship and the like, but soon relief was given in all cases. Even if the date fixed for repayment had long passed, equity compelled the mortgagee to reconvey the property to the mortgagor on payment of the principal with interest and costs. The mortgagor was thus given an equitable right to

[page 1074]

redeem at a time when the agreement between the parties provided that the mortgagee was to be the absolute owner. No longer, therefore, did the mortgagee stand to gain by obtaining a property which might be worth much more than the debt. Equity compelled him to treat the property as no more than a security for the money actually owed to him. This equity of redemption became a valuable interest vested in the mortgagor: the measure of its value was the difference between the amount of the debt and the value of the mortgaged property. Since it was an equitable interest in the land, the mortgagor could enforce it not only against the mortgagee personally but against anyone to whom the mortgagee transmitted his fee simple, save only a bona fide purchaser without notice of the mortgage. Foreclosure. There had, of course, to be some limit to the equitable right to redeem, for otherwise the security would not have fulfilled its purpose of enabling the mortgagee to recover his capital when required. Equity therefore devised the decree of foreclosure, which was an order of the court, made on the mortgagee’s application, declaring that the equitable right to redeem was at an end, and thus leaving the mortgagee with an unhampered fee simple. However if the property was much more valuable than the debt the court would order a sale of the property, out of which the mortgagee would receive only the balance due to him, and the mortgagor would take the rest. Foreclosure could not therefore be used oppressively, and in any case a mortgagee who sought it had to come before the court … The equity of redemption. The equitable right to redeem must be distinguished from the ‘equity of redemption’, in its wider sense, although sometimes the terms are used interchangeably. First, the equitable right to redeem does not arise until the contractual date for redemption has passed, whereas the equity of redemption arises as soon as the mortgage is made. Secondly, and more important, the equitable right to redeem is a particular and singular right, whereas the equity of redemption is an equitable interest in the land consisting of the sum total of the mortgagor’s rights

in the property. Although at law he has parted with his land and has only a limited right to recover it, in equity he is the owner of the land, though subject to the mortgage; the mortgagee, on the other hand, is at law the owner but in equity a mere incumbrancer. The mortgagor’s equity of redemption, in the wider sense of the term, is thus an interest in the land which includes his right to redeem it, but is much more than a mere right of redemption. It is an interest in the land which the mortgagor can convey, devise, settle, lease or mortgage, just like any other interest in land. If, for example, a property worth £50,000 is mortgaged to secure a debt of £10,000, the value of the equity of redemption is obvious; and the mortgagor must clearly be at liberty to deal with it like any other property which is subject to the encumbrances. He may wish to sell the property (which subject to the mortgage would be worth about £40,000) or to raise a further loan on it by a second mortgage. But since before 1926 [that is, before the Law of Property Act 1925 (UK)] the mortgagee usually held the legal fee simple, any such dealings must necessarily have been equitable. Before 1926 a second mortgage was therefore usually an equitable mortgage, ie a mortgage of the equity of redemption.3

11.18

Since a general law mortgage conveys the mortgagor’s estate to the

mortgagee, subject to provision for reconveyance when the loan is repaid, the mortgage must be by deed to be effective at law: see 4.27. Where the parties have entered into an enforceable agreement to grant and accept a mortgage or where they have purported to execute a mortgage without compliance with the legal formalities, an equitable mortgage may be created on the principle of

[page 1075]

Walsh v Lonsdale (1882) 21 Ch D 9; 4.68C. Equity will not, however, grant specific performance of an agreement to grant a mortgage unless the loan has been advanced by the mortgagee: Sykes and Walker, 152. Where a lender advances money and the borrower deposits the title deeds with the lender as

security, the parties’ actions provide evidence of an oral agreement to grant a mortgage and constitute part performance of that agreement. Since the agreement is specifically enforceable, subject to the usual discretionary considerations, an equitable mortgage comes into existence: Russel v Russel (1783) 1 Bro CC 269; Theodore v Mistford (2005) 221 CLR 612; 219 ALR 296.4 In National Australia Bank Ltd v Clowes [2013] NSWCA 179, Leeming JA at [22]–[25] described the creation of an equitable mortgage as follows: An equitable mortgage may be created in a number of ways. In Theodore v Mistford Pty Ltd [2005] HCA 45; (2005) 221 CLR 612 at 621 [22] the High Court referred with apparent approval to Frederic Maitland’s statement: An equitable mortgage (enforceable by an order for foreclosure or for sale) can be made by a deposit of title deeds if they were deposited with intent that the land which they concern shall be security for the payment of a debt. The deposit may occur with or without a signed transfer in blank. It is said in Sykes and Walker, The Law of Securities, 5th ed (1993) at 790 that: It was, for a long time, usual, though the practice seems less frequent in modern times, for the deposit to be accompanied by a blank transfer signed by the mortgagor so that the mortgagee could, if the mortgagor wished, procure the passing of the legal title by filing in her or his name and registering the transfer. No writing is required in this country to create an equitable mortgage by deposit of a certificate of title. The position is different in the United Kingdom, as was noted by Lord Walker in Ross v Bank of Commerce (Saint Kitts Nevis) Trust and Savings Assn Ltd [2012] UKPC 3 at [20].5 An equitable mortgage will also arise where there is a specifically enforceable agreement between mortgagor and mortgagee to create a mortgage. In light of the foregoing, it is sufficient for there to be a specifically enforceable agreement to deposit a certificate of title, with or without a signed transfer, with the lender by way of security. “A binding promise for the delivery of a certificate of

title by way of security is a contract to create an equitable mortgage and, if specifically enforceable, creates an interest in the relevant land”: Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13; (2005) 79 ALJR 825 at 837 [68].

11.19

Mortgages applicable under the National Credit Code are now

required to be made in writing and signed by the mortgagor, which suggests that a natural person or strata corporation

[page 1076]

could not create an equitable mortgage by deposit of title deeds alone: s 42, see Duncan and Dixon, The Law of Real Property Mortgages, 2nd ed at [1.5.1]. The form of mortgage must meet strict requirements — a mortgage otherwise made is unenforceable if it does not comply with the section: s 42(4). The mortgage may be contained in a credit contract signed by the mortgagor, or on one of the documents containing a mortgage document so long as the other documents are referred to in the signed document: s 42(2). 11.20

In 2011, all state and territory jurisdictions signed the

Intergovernmental Agreement for an Electronic Conveyancing National Law. The trend towards e-conveyancing means that paper certificates will most likely be phased out in the future, diminishing the relevance of the deposit of a certificate of title in creating an equitable mortgage. At the time of writing, New South Wales, Victoria, Queensland and Western Australia had all commenced e-conveyancing through the Electronic Conveyancing network, Property Exchange Australia (PEXA).

11.21

A mortgagor of general law land retains an equitable estate in the

land known as the equity of redemption after execution of the mortgage. If this interest is mortgaged as security for a further loan (a second mortgage), the mortgage can operate only in equity: see, for example, Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482. Any subsequent mortgages must also be equitable in character, since the first mortgagee holds the legal fee simple estate. Priority conflicts between the first and subsequent mortgagees are resolved primarily by reference to the principles discussed in Chapter 6, although there are certain doctrines specifically applicable to mortgages that may alter the general law principles: see, for example, 11.31C. The equity of redemption can be measured in monetary terms: it represents the difference between the market value of the property and the amount outstanding under the loan: Bannerman, Brydone, Foster & Co v Murray [1972] NZLR 411 at 429 per Woodhouse J. The expression ‘my equity in this property’ in common parlance reflects this meaning. 11.22

In England, the most common form of mortgage deed provides for

the debt to be repaid six months from the date of the deed’s execution. However, neither the mortgagor nor the mortgagee intends that the debt should be repaid on that date. The form is merely a device used to give the mortgagee rights on default and the mortgagor an equitable right to redeem. This practice was not common in Australia although it has been used periodically in Victoria and South Australia.6

The Torrens system mortgage

11.23C Re Forrest Trust; Trustees, Executors and Agency Co Ltd v Anson [1953] VLR 246 Supreme Court of Victoria Herri ng CJ: [His Honour stated that the first question was whether s 300 of the Property Law Act 1928 applied to mortgages of land under the Transfer of Land Act. Section 300 provided that:

[page 1077]

(W)hen a mortgagee has obtained the possession or receipt of the profits of any land or the receipt of any rent comprised in his mortgage, the mortgagor or any person claiming through him shall not bring a suit to redeem the mortgage, but within fifteen years next after the time at which the mortgagee obtained such possession or receipt.] … The contention was rather that the Transfer of Land Act has created, in mortgages under the Act, a new legal interest unknown to the general law, under which the mortgagor has a statutory right to obtain a discharge of the mortgage on tender of the full amount owing. The enforcement of this right, it was maintained, was not by a suit to redeem the mortgage, but by what was more akin to a suit for specific performance of an implied contract to discharge the mortgage on tender of the full amount owing. With such a suit s 300, it was argued, is not in any way concerned, and so does not operate to bar the mortgagor’s statutory right to obtain a discharge. The basis of this argument is to be found in s 146 of the Transfer of Land Act 1928, which provides that a mortgage or a charge under the Act shall, when registered, have effect as a security, but shall not operate as a transfer of the land thereby mortgaged or charged. This provision, it was urged, serves to differentiate mortgages under the Act from mortgages under the general law, where there was a vesting of the legal estate in the mortgagee, a covenant by the mortgagor to repay the money lent with interest on a fixed day, usually six months after the date of the mortgage, and a proviso for reconveyance by the mortgagee on repayment on that day. When this time passed without repayment, the mortgagee’s estate became absolute at law, but equity raised in favour of the mortgagor an equity or right to redeem, which could be enforced in a redemption suit. Redemption in such a case involved relieving the mortgagor from the legal consequence of his failure to repay the money, as he had covenanted to do, and this legal consequence was the forfeiture of his estate. [His Honour referred to two cases, Greig v Watson (1881) 7 VLR (Eq) 79 and Perry v Rolfe [1948] VLR 297, relied on by counsel for the mortgagor. In each case there were statements to the effect that there could be no true redemption suit in relation to a

mortgage of land under the Torrens system, nor any true equity of redemption in the mortgagor.] In both of these cases an order for redemption was sought and in both an order was made, which had the effect of freeing the mortgaged land from the mortgage. What the court decided in each case was that, in making such an order, the court was not at liberty to put the mortgagor on terms, which it was usual for a court of equity to impose upon a mortgagor, who sought to redeem after his mortgagee’s estate had become absolute at law. It was sufficient for this purpose for the court to hold, as it did in each case, that in mortgages under the Act the mortgagee’s estate did not become absolute at law, as it did in the case of a general law mortgage, where the legal estate had passed to the mortgagee and there had been a failure to exercise the contractual right to redeem. Further examination and classification of the nature of the mortgagor’s claim was unnecessary. A very different question arises in the present case. Here we are concerned with a mortgagor of land under the Act whose mortgagee has entered into possession of the mortgaged land under the statutory power (conferred upon him by the Act) so to do on default by the mortgagor, and has been in such possession for more than 15 years without any acknowledgment. And what has to be done here is to discover by what appropriate legal process it was open to the mortgagor, after such possession had been taken, to recover possession in the event of his claim being disputed by the mortgagee, and then to determine whether such process can properly be said to be covered by the words ‘a suit to redeem the mortgage’ within the meaning of those words in s 300 of the Property Law Act 1928. [page 1078] The essence of redemption [in a mortgage under general law] would thus seem to be, whether it takes place in or out of court, the fulfilment by the mortgagor of his obligations under the mortgage, that is to say, payment of the moneys due thereunder, followed by whatever is necessary on the part of the mortgagee to free the land itself and the mortgagor in the use and enjoyment of it, to use the words of Lord Macnaghten in Noakes & Co Ltd v Rice [1902] AC 24. This being so, there is no reason for limiting redemption to the case where the charge is effected by means of a conveyance of the legal estate to the mortgagee, and equity found none … When the legislature introduced the statutory mortgage under the Transfer of Land Act, it took the final step in the movement towards hypotheca that the Court of Chancery was unable, by reason of its limited jurisdiction, to take, and introduced what was practically the Roman hypotheca with the addition of registration. For it introduced a registered charge to take effect as a security, which conferred on the creditor merely a group of powers to secure the money lent, such as to sell, to take possession, etc, whilst leaving the owner what he is meant to be, owner subject to his fulfilling his obligations. The group of powers thus conferred included the power of sale, that had become an almost universal feature of mortgages under the general law at the time the Act was first introduced, and the powers and rights, which a mortgagee in such a mortgage usually acquired by reason of the conveyance of the mortgagor’s land to him … The general law

mortgage was thus obviously very much in the draftsman’s mind when the relevant sections were penned, and they are obviously addressed to a profession well acquainted with equity’s contribution to the law of mortgage under the general law, and well able where the Act was silent, to supply from that contribution a method of working out and adjusting the mutual rights of mortgagee and mortgagor. Thus, to take one example, provision is made, as we have seen, to enable the mortgagee, on default by the mortgagor, to enter into possession, but not a word is said as to the basis on which the mortgagee in possession should account. Here clearly recourse must be had to the doctrines of equity on the matter. See, too, the remarks of Higgins J in Fink v Robertson (1907) 4 CLR 864 at 891, and where the equitable rule that a mortgagor must give six months’ notice or interest in lieu thereof on payment off, was held applicable to mortgages of land under the Real Property Act of New South Wales. The nature of a mortgage under the Act being what I described, it necessarily followed that there was inherent in it a right on the part of the mortgagor, upon his fulfilling his obligations under the mortgage, to have the land freed from the mortgage and from all the powers and rights of the mortgagee, which formed a substantial curtailment of the mortgagor’s dominion over the land. This is a right to redeem in the sense in which equity understood that term. The proceedings that a mortgagor under the Act can bring against his mortgagee are, I think, the same in essence as those that a mortgagor under the general law can bring against his, viz, proceedings to redeem the mortgage. The right to redeem that is being enforced may not be derived from the same source in each case, nor may the relief required to free ‘the land itself and the owner of the land in the use and enjoyment of it … to all intents and purposes as if the land had never been made the subject of the security’ to use the words of Lord Macnaghten (in Noakes & Co Ltd v Rice), be the same in each case, but in each case what equity does is to free the land and the owner in the way described upon the mortgagor fulfilling his obligations under the mortgage. And though what is required for this purpose appears very different in the two cases, viz, a reconveyance in one case and the discharge of the mortgage in the other, yet the result achieved is substantially the same. The intervention of equity in mortgages under the general law led to the mortgagor being considered the owner of the land, though he had parted with the legal estate, such ownership being subject to the rights and powers over the land which the mortgagee had for the purpose of enforcing [page 1079] his security. These rights and powers a mortgagee of land under the Act has by virtue of the statutory provisions, though he does not acquire the legal title, and the mortgagor’s dominion over the land is restricted accordingly. A reconveyance in the one case and a discharge of the mortgage in the other destroy the rights and powers of the mortgagee, and in each case restore to the mortgagor his dominion over the land. The words ‘a suit to redeem the mortgage’ seem equally apt to describe the proceedings referred to in either case. In fact I am at a loss to know how else they could be more appropriately described. There is, to my mind, no magic in the words, nor for that matter in the words ‘redemption suit’, which I would consider equally applicable to the proceedings in either case. The fact that in one case there is a forfeiture at law,

whilst in the other there is not, does not, in my opinion, affect the essential nature of the proceedings. Once equity decided that the mortgage transaction should take effect as a security, the forfeiture that took place at law lost its sting, and (apart from agreement, lapse of time, or purchase at a sale of the mortgaged property) it was only by means of an order of the Court of Equity itself, and order absolute for foreclosure, that the land became in any real sense the property of the mortgagee and then by a title newly accrued. For these reasons I have come to the conclusion that the appropriate legal process to recover possession that is open to a mortgagor of land under the Act, whose mortgagee has entered into possession under his statutory power so to do, is covered by the words ‘suit to redeem the mortgage’ within the meaning of these words in s 300 of the Property Law Act 1928 … [Herring CJ concluded that s 300 barred the right and title of the mortgagor and persons claiming through him to the mortgaged premises. Gavan Duffy and Deane JJ delivered a joint judgment agreeing with the Chief Justice.]

11.24

Herring CJ refers to the Torrens system mortgage as the ‘final step

towards hypotheca’. A hypothecation is a type of security which gives the creditor power over the encumbered property only in the event of default. The creditor does not take a transfer of ownership and is not entitled to possession: see Sykes and Walker, 17–20. As the judgment of Herring CJ shows, a Torrens system mortgage is properly classified as a hypothecation and thus reflects more accurately than the general law mortgage the nature of the transaction as the grant of a security interest to the mortgagee. The legislation in all jurisdictions provides that the mortgage, when registered, takes effect as a security but does not operate as a transfer of the land mortgaged or encumbered: ACT, s 93; NSW, s 57(1); NT, s 76; Qld, s 74; SA, s 132; Tas, s 73; Vic, s 74(2) (the successor to s 146 of the 1928 Act); WA, s 106.7 In Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd (1999) 196 CLR 245, Gaudron, Gummow and Callinan JJ concluded (at 261) that:

… under an old system mortgage of land, the legal estate having been conveyed to the mortgagee, the mortgagee prima facie is entitled to take possession of the land as soon as the mortgage has been executed. However, where the land is under the provisions of the Transfer of Land Act, whilst a mortgage has the effect of security, it does not operate as a transfer of the land to the mortgagee.

[page 1080]

11.25

A mortgagor of Torrens land remains the registered proprietor of

the legal estate even after registration of the mortgage, the latter operating by way of a statutory charge and not a transfer of the fee simple: English, Scottish and Australian Bank v Phillips (1937) 57 CLR 302, however it is well established that the mortgagee is a registered proprietor of an interest in land: Zafiropoulos v Recchi, Williamson & Arbormont Nominees (1978) 18 SASR 5. See also National Australia Bank Ltd v State of New South Wales (2009) 260 ALR 115; [2009] FCA 1066 at [6]–[11]. It follows that a second or subsequent mortgage, when registered, operates in the same manner as a first mort