GOOD-NOTES REAL PROPERTY

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70317 – Real Property – Notes
Introduction ........................................................................................................................................................ 3
Tenures and Estates ............................................................................................................................................. 4
Tenure ........................................................................................................................................................................... 4
Estate ............................................................................................................................................................................ 5
Native Title .......................................................................................................................................................... 8
Definition of Native Title ............................................................................................................................................... 8
Proving Native Title ....................................................................................................................................................... 8
The Impact of Native Title ............................................................................................................................................. 9
Extinguishment of Native Title ...................................................................................................................................... 9
Fixtures ............................................................................................................................................................. 10
With Regard to All the Facts and Circumstances ........................................................................................................ 10
Degree and Purpose of Annexation (Defunct) ............................................................................................................ 10
Application of the ‘All Facts’ Test................................................................................................................................ 11
The Test Today ............................................................................................................................................................ 12
Waste ................................................................................................................................................................ 13
Permissive Waste ........................................................................................................................................................ 13
Voluntary Waste ......................................................................................................................................................... 13
Equitable Waste .......................................................................................................................................................... 13
Ameliorating Waste .................................................................................................................................................... 13
Trespass to Land ................................................................................................................................................ 14
The Common Law ....................................................................................................................................................... 14
The Common Law Establishes Trespass ...................................................................................................................... 14
Relevant legislation ..................................................................................................................................................... 15
Legislation Assists the Trespasser ............................................................................................................................... 15
Torrens Title ...................................................................................................................................................... 16
Two Systems of Land Ownership ................................................................................................................................ 16
Indefeasibility of Title.................................................................................................................................................. 16
The Centrality of the Register ..................................................................................................................................... 17
Exceptions to Indefeasibility ....................................................................................................................................... 17
Co-Ownership .................................................................................................................................................... 24
Types of Co-Ownership ............................................................................................................................................... 24
Equity .......................................................................................................................................................................... 25
Creation of Co-Ownership .......................................................................................................................................... 25
Severance .................................................................................................................................................................... 26
Ending Co-Ownership ................................................................................................................................................. 28
Rights Between Co-Owners Inter Se ........................................................................................................................... 28
Unregistered Interests under Torrens Title.......................................................................................................... 30
Unregistered Mortgages ............................................................................................................................................. 30
Caveats ........................................................................................................................................................................ 30
Priorities between Unregistered Interests ................................................................................................................. 33
Mortgages ......................................................................................................................................................... 37
Creation of Mortgages ................................................................................................................................................ 37
Equity of Redemption ................................................................................................................................................. 37
Tacking ........................................................................................................................................................................ 38
Penalty Provisions ....................................................................................................................................................... 39
Powers of Mortgagee.................................................................................................................................................. 40
Duties of Mortgagee when Exercising Right to Sell .................................................................................................... 42
Old System, Qualified and Possessory Title ......................................................................................................... 45
Priorities under OST .................................................................................................................................................... 45
Deeds .......................................................................................................................................................................... 45
The Register of Deeds ................................................................................................................................................. 46
Primary Applications ................................................................................................................................................... 46
Qualified Title .............................................................................................................................................................. 47
Possessory Title (copied from above) ......................................................................................................................... 47
Easements ......................................................................................................................................................... 48
Elements of an Easement ........................................................................................................................................... 48
Creation of an Easement............................................................................................................................................. 49
Indefeasibility and Easements .................................................................................................................................... 52
Changing / Modifying / Extending the Easement ....................................................................................................... 52
Remedies..................................................................................................................................................................... 53
Extinguishment ........................................................................................................................................................... 53
Profits a Prendre ................................................................................................................................................ 53
Leases................................................................................................................................................................ 54
Essential Characteristics.............................................................................................................................................. 54
Leasehold Covenants .................................................................................................................................................. 55
Assignment of Leases & Sub-Leasing .......................................................................................................................... 59
Termination and Forfeiture ........................................................................................................................................ 61
Freehold Covenants ........................................................................................................................................... 63
Positive Covenants ...................................................................................................................................................... 63
Restrictive Covenants.................................................................................................................................................. 64
Enforcing Covenants ................................................................................................................................................... 65
Extinguishment of Covenants ..................................................................................................................................... 68
Introduction a
Introduction
TERM
Real Property
Corporeal hereditaments
Incorporeal hereditaments
Right in rem
Right in personam
Right sui generis
Chattel
Ouster
Kane Kersaitis (11011386)
DEFINITION
Land and interests in land
Tangible interest in real property
Corporeal – tangible
Hereditament – inheritable
Intangible interest in real property
–e.g. easements
A property right – can enforce rights against everybody and nobody in particular
Generally a contractual right – it is a right between defined and nominated
persons
A unique right
– e.g. native title rights
An item of personal property – i.e. not a fixture
When one co-owner ejects another co-owner without a mutual agreement
70317 - Real Property - Notes
Introduction
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Tenures and Estates a
Tenures and Estates
Tenure
No one holds land absolutely
o In an allodial system (allodialism), land is held absolutely
o In a tenurial system, land is held of the crown
Derives from the collapse of the Roman Empire and the rise of Feudalism
The “paramount Lord” owns the land – i.e. the crown
Australian Tenure
Australian gained the tenurial system as we were a settled colony
o British Imperial Law indicated that a conquered colony left the legal system in place
o Cooper v Stuart (1889) 14 App. Cas. 286
confirmed that Australia was settled – “An Englishman brings as much of the common law
with them as is relevant to the circumstances of the colony”
o Attorney-General v Brown (1847) 1 Legge 312 (Supreme Court of NSW)
Brown owned land in Newcastle and wanted to mine for coal, but the Crown argued a
reservation on the land prevented him from doing so
Brown argued that the Crown could not succeed as it did not have the power to grant land
subject to reservations – i.e. that sovereignty was imported but that ownership of the land
was not imported
The court rejected this concept – all land was owned absolutely by the paramount Lord. The
doctrine of tenure was a legal fiction in the UK (due to the battle of Hastings in 1066), but a
reality in NSW
o This remained essentially unchanged until Mabo in 1992...
Tenure and Native Title
Radial title
o Mabo v Queensland (No 2) (1992) 175 CLR 1
Overruled the concept of terra nullius but did not reclassify NSW as conquered
Held that the Crown got sovereign rights, but not beneficial rights, over property which may
have been already owned
Brennan J said that the Crown had ‘radical title’ – that was the right they held which
supported tenure and prevented us from owning land outright
It is the ‘concomitant of sovereignty’ – a legal fiction of ‘power’
Radical title – concept of power – I can create and end ownership (etc), but I do not
actually own the thing
Beneficial title – concept of ownership
Kane Kersaitis (11011386)
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Tenures and Estates
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Tenures and Estates a
Estate
Estates are different bundles of rights and powers exercisable in respect of land
o Yanner v Eaton (1999) 201 CLR 351, [17] (Gleeson CJ, Gaudron, Kirby and HayneJJ) – “But even this
[metaphor] may have its limits as an analytical tool or accurate description”
o Alienability and exclusive possession are key characteristics, but there are a total of eleven indicative
factors
Types:
o Freehold estates – uncertain duration
Fee simple
Life estate
Fee tail (now abolished)
o Leasehold estates – certain duration
o Remainders and reversions
Fee Simple
Most basic form of estate – gives the widest range of powers over the land
o Fee – inheritance
o Simple – the most simple form
o The Commonwealth v New South Wales (1923) 33 CLR 1, 42 (Isaacs J):
“A fee simple is the most extensive in quantum, and the most absolute in respect to the rights
which it confers, of all estates known to the law.”
Creation of a fee simple estate
o At common law: “To A and his heirs”
o Conveyancing Act 1919 (NSW) s 47(1) indicates that it can be created with any words, and s 47(2)
indicates that where land is conveyed without limitation it is construed to be a fee simple estate
e.g. “To A in fee simple” or “To A forever”
Trading
o Inter vivos transactions – the estate may be traded whilst owners are alive
o Testamentary disposition – you may leave the estate to another in your will
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Tenures and Estates
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Tenures and Estates a
Life Estate
An estate granted to somebody for the period of their life
o Life estate pur autre vie – grants the land to X for the life of Y
Creation of a fee simple estate
o Can be created out of fee simple – you can always create an interest less than the one you own
o Conveyancing Act 1919 (NSW) s 47(2) indicates that you must be clear in an intention to create a life
estate – if it is not clear it will be an estate in fee simple
e.g. “To A for life”
Trading
o Intervivos transactions – the estate may be traded whilst owners are alive
o Testamentary disposition – you may leave the estate to another in your will
But note that this is not an inheritable estate! Therefore if you are the owner of a life estate,
you cannot leave it to another.
You can leave a life estate pur autre vie to another, or create a life estate, in a testamentary
disposition
The doctrine of waste
o As a life estate is not a permanent inheritable interest, you cannot permanently alter the state of
the land – for better or worse
o Four types: voluntary, permissive, equitable, ameliorating – will be covered below
o The ‘remainderman’ can sue in tort under this doctrine for any changes or damage
Fee tail
A form of estate which we inherited from England but is now abolished (but you need to know in case you
come across it in practice)
o Conveyancing Act 1919 (NSW) s 19 abolishes fee tail – an attempt to create it will instead create a
fee simple estate
o Conveyancing Act 1919 (NSW) s 19A changes all existing fee tail estates to fee simple estates
‘Tail’ indicates a limitation on who may inherit the land – e.g. the oldest male descendant
It could be defeated so that you didn’t have to pass to first male descendant, but it was very complex and
expensive.
Leasehold Estates
They are exactly what you think they are - leases (i.e. to rent)
o See later notes for greater detail
We must know how long it is going to go for
A common residential lease goes for 6 months to 1 year – precise and certain duration
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Tenures and Estates
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Tenures and Estates a
Simultaneous Estates – Remainders and Reversions
“To A for life” = reversion in the grantor
o In this case it reverts to the grantor because you haven’t said who gets it afterwards
o Your own fee simple is like “relabelled” as a fee simple in reversion – we tend to say that you get an
estate in reversion
“To A for life, remainder to B in fee simple”
o A life estate is granted to A, but a fee simple estate in remainder is also created for B
B is called the ‘remainderman’
o They’re BOTH property though as they both exist and therefore both can be transacted (as property
is inherently alienable) – A and B have simultaneous estates in relation to the one piece of land
However, A has possession now and B has possession in the future
o Form of notification of a life estate
“X of a Life Estate and Y of an estate in remainder” OR “Y of a life estate until [details of the
specific event] and Z of an estate in remainder”
(Y can be the original grantor or a third party)
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Tenures and Estates
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Native Title a
Native Title
Definition of Native Title
Mabo v Queensland (No 2) (1992) 175 CLR 1
o “Native title has its origins 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 according to those laws and
customs.”
at 58 (Brennan J)
o Known as the “normative” approach: Members of the Yorta Yorta Aboriginal Community v Victoria
(2002) 214 CLR 422
s 223 Native Title Act 1993 (Cth)
o (1) The expression native title or native title rights and interests means the communal, group or
individual rights and interests of Aboriginal peoples or Torres Strait Islanders in relation to land or
waters, where:
(a) the rights and interests are possessed under the traditional laws acknowledged, and the
traditional customs observed, by the Aboriginal peoples or Torres Strait Islanders; and
(b) the Aboriginal peoples or Torres Strait Islanders, by those laws and customs, have a
connection with the land or waters; and
(c) the rights and interests are recognised by the common law of Australia.
A right sui generis – a unique right
o It’s not really a property right –
Inalienable
Communal
Exclusive possession (?)
Proving Native Title
Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422
o Must be based on the legal systems of the community – not just normal customs or habits
o Must be ‘substantially uninterrupted’ since sovereignty – the custom must maintain its traditional
nature
Must be physically uninterrupted – i.e. relocation or dispossession quashes a claim
Whilst the court acknowledged that custom changes, the word ‘traditional’ in s 223 was read
by the court as restricting this in terms of modern technology
o Read s 223 as defining native title, rather than supplementing the common law. Each element in s
223 must be met for a claim to succeed.
Yanner v Eaton (1999) 201 CLR 351
o s 211 indicates that traditional, domestic harvesting does not need a hunting licence
o However, the Defendant was hunting using a modern harpoon
o The court indicated that this was not traditional – although the community had always hunted
crocodiles, it was being done in a way that was not traditional
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Native Title
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Native Title a
The Impact of Native Title
Part 2, Division 3, Subdivision P – Right to Negotiate
o Allows Native Title holders to negotiate the terms on which a mining licence is issued
o Not a veto power, but can result in a package for royalties or support going to the Indigenous
community
o Issuing a mining licence suspends, rather than extinguishes, native title
Extinguishment of Native Title
Fejo v Northern Territory (1998) 195 CLR 96
o Involved an area were an estate in fee simple was granted, but surrendered to the Crown shortly
afterwards without having ever been used or even visited
o The court held that an estate in fee simple extinguishes native title
It does not matter that rights under the estate were not utilised
Native title cannot be resumed even if the estate ceases to exist (i.e. is surrendered to the
Crown)
Wik Peoples v Queensland (1996) 187 CLR 1
o Involved an area where a pastoral lease was granted
o The majority looked at the historical purposes of pastoral leases
The Crown intended to regulate expansion in the outback, and probably did not intend to
give exclusive possession – therefore native title could still exist
Held that native title is extinguished by a pastoral lease to the extent of inconsistency
i.e. Establish what native title rights are and what pastoral rights are. Where they
cannot co-exist, the pastoral rights
o The minority held that pastoral leases were regular leases – exclusive possession was the right they
inherently granted, and that native title was therefore extinguished.
Kane Kersaitis (11011386)
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Native Title
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Fixtures a
Fixtures
More often than not, the contract for sale of land specifies what is considered a fixture and a chattel
Five times when a fixtures question might arise:
o Vendor v purchaser
o Mortgagor v mortgagee (e.g. mortgagee in possession)
o Wills, where the real property is left to X but personal property to Y
o Lessors (landlords) v lesees (tenants)
o Life tenant v remainderman
Tenants fixture – a fixture which the tenant placed there.
o Re Roberts; ex parte Brook (1878) 10 Ch D 100 – A tenant’s fixture must be removed before the
landlord/tenant relationship comes to an end, otherwise it becomes property of the landlord. In a
life estate relationship it must be removed ‘a reasonable time’ after the lesee’s passing.
Brain v Brand (1876) 1 App Cas 762
o Where a tenant has brought a chattel onto the land there are two questions to ask:
1. Has the chattel become a fixture?
2. If so, is the fixture a tenant’s fixture (which can be removed from the land)?
With Regard to All the Facts and Circumstances
Dunn v L M Ericsson (1980) ANZ Conv R 300
o Commercial office was leased for five years, with an option to renew the lease for another five years.
The tenant leased a telephone exchange from Ericsson and fitted it during this lease.
o Issue: Was the telephone exchange a chattel or a fixture?
o Held that whether a chattel has become a fixture must be resolved with regard ‘to all the facts and
circumstances’. The fact that the telephone exchange was bolted to the ground was not conclusive –
it was affixed for the better enjoyment of it, and not because it had become a fixture.
o NB: Hobson v Gorringe [1897] 1 Ch 782 established that a leased item could become a fixture
NAB v Blacker (2000) 104 FCR 288
o NAB (mortgagee) attempt to reclaim Blacker’s (mortgagor’s) farm, but Blacker rmvd irrigation equip.
o Conti J reaffirmed the position in Dunn v Ericsson (which had been largely ignored) and indicated
that the issue had to be resolved objectively and with regard to all the facts and circumstances
o Conti J also held that ‘each case depends on its own facts’ and that the degree/purpose of
annexation tests were simply factors to be considered
o Held that the irrigation equipment was a chattel, affixed to the land for its better enjoyment
Degree and Purpose of Annexation (Defunct)
Holland v Hodgson (1872) LR 7 CP 328
o Dispute between the mortgagee and trustee in bankruptcy for the owner of a factory with 400
wooden looms in it. Each loom was anchored to the floor much like school tables at the time were.
o Held that the test to determine whether a chattel had become a fixture was the degree and purpose
of annexation – the fact that they were affixed to the floor, and were part of a properly appointed
factory, meant they were a fixture.
o The degree and purpose of annexation establishes whether an item is presumptively a fixture
Australian Provincial Assurance Co Limited v Coroneo (1938) 38 SR (NSW) 700
o Indicated that under the Holland v Hodgson test, the fact that something had been affixed for its
own better enjoyment was irrelevant. If it had been fixed with the intention of permanently
remaining there, then it was a fixture of the land.
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Fixtures
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Fixtures a
Application of the ‘All Facts’ Test
Palumberi v Palumberi (1986) NSW Conv R 55-287
o Each Palumberi brother owned half of a house, so they agreed that one would buy the other’s share.
However, they disputed whether or not the sale included:
Venetian blinds
Chattel – only a slight degree annexation and installed
for a basic purpose
Curtains
Chattel – Conceded immediately before the hearing
Television antenna
Chattel – installed for the enjoyment of the TV (which
was a chattel)
Carpets
Fixture – affixed and installed to improve the premises
Outside spotlight and timer
Chattel – Conceded immediately before the hearing
Light fittings
Chattel – Conceded immediately before the hearing
Stove
Fixture – affixed and installed to improve the premises
Also an essential and integral element of a kitchen
Portable heater
Chattel – Conceded immediately before the hearing
National Dairies WA Limited v Commissioner of State Revenue [2001] WASCA 112
o The dispute involved whether stamp duty was payable on certain items as fixtures
o The equipment included tanks, vats, boilers, etc. which were largely interconnected but were not
fixed other than by their own weight
o The court held that they were all fixtures and stamp duty was payable on them. Emphasis was
placed on:
The pieces of equipment being interconnected and therefore an integrated whole
Each piece of equipment was installed for an indefinite period
No evidence of any intention to remove/relocate any piece of equipment when it was
installed
Standard Portland Cement v Good (1982) 57 ALJR 151
o A large piece of land contained a cement mill which weighed 100 tonnes when empty. On sale, a
term in the contract indicated that the vendor had 12 months to remove the mill.
o The court held that this term in the contract indicated that both vendor and purchaser
acknowledged the mill was a chattel and not a fixture. Therefore the vendor was still entitled to the
mill even though 12 months had passed.
Webb v Frank Bevis [1940] 1 All ER 247
o There was a twenty year lease in place where the lesee built a large metal shed. It was built on top
of a slab of concrete, but not anchored to the concrete – it was strapped and secured so that it stood
upright and rested on the concrete by its own weight.
o Held that it was clear from the design of the shed that it was only ever intended as a temporary
structure, and it could easily be removed without being destroyed. It was therefore held to be a
chattel. Obviously the concrete slab, however, was found to be a fixture.
Leigh v Taylor [1902] AC 157
o Madam de Falbe was a life tenant who hung tapestries in her home by nailing wood to the walls,
and stretching and nailing the canvas to these strips. A conflict arose between de Falbe’s executor
and the remainderman.
o Held that the tapestries were affixed for their own better enjoyment. The court said that “Where it
is something which, although it may be attached... to the walls of the house, yet, having regard to
the nature of the thing itself, and the purpose of its being placed there, is not intended to form part
of the realty, but is only a mode of enjoyment of the thing... then it is removable and goes to the
executor (of the life tenant)” (at 158)
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Fixtures a
Spyer v Phillipson [1931] 2 Ch 183
o A lessee with a 21 year lease, without the lessor’s consent, installed antique wood panelling in an
apartment. The panelling was affixed by inserting plugs into a wall and screwing the panelling to
these plugs and evidence was adduced to indicate that this was the normal way such panelling
would be installed.
o The court indicated that these panels were tenants fixtures. It indicated that the lessee installed
them with only 13 years remaining on the lease, spent a considerable amount of them and affixed
them for their own better enjoyment. As such, they were tenants fixtures and could be removed by
the lessee at any point during his lease.
Reid v Smith (1905) 3 CLR 656
o A piece of land had a Queenslander home on it, which rested on its own weight on piers in the
ground. Upon sale, the vendor asserted that he had a right to remove the house from the land.
o Held that the house was ‘annexed to the freehold’ (i.e. a fixture). It was held that it was to be
inferred that any dwelling-house put on the land is a fixture and not a chattel.
D’Eyncourt v Gregory (1866) LR 3 Eq 382
o Ornamental stones, statues and other figures rested by their own weight in a garden.
o It was held that, on the facts of this case, these were part of a clear architectural design and were
therefore fixtures. It was noted that this would not be the case in every factual scenario, but where
it was clear that they completed the architectural design then they were fixtures.
The Test Today
1. Whether an item is a fixture or a chattel is to be determined objectively on the facts of the individual
case, and with regard to ‘all the facts and circumstances’: Dunn v L M Ericsson (1980); NAB v Blacker
(2000)
2. The degree and purpose of annexation are not conclusive, but establish whether an item is
presumptively a chattel or fixture, and therefore also establishes the burden of proof: Holland v
Hodgson (1872)
3. Factors to be considered include:
o Palumberi v Palumberi (1986)
Venetian blinds – chattel – small degree of annexation, installed for basic purpose
TV antenna – chattel – installed for enjoyment of another chattel (has this changed now?)
Carpets – fixture – affixed, installed to improve premises
Stove – fixture – as above, also an essential and integral part of a kitchen
o National Dairies v Comr State Revenue (2001) – interconnected, evidence of intention to remove
o Standard Portland Cement v Good (1982) – contract may imply it was a chattel
o Webb v Frank Bevies (1940) – unique construction of the item
o Leigh v Taylor (1902) – affixed for better enjoyment
o Spyer v Phillipson (1931) – make good cost, standard practice of installation/construction
o Reid v Smith (1905) – common expectations (house case)
o D’Eyncourt v Gregory (1866) – architectural design
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Fixtures
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Waste a
Waste
Permissive Waste
Where the occupier allows the land to fall into disrepair
A person is not usually liable for permissive waste: Powys v Blagrave (1854) 43 ER 582
But note:
o s 80(1) Conveyancing Act 1919 (NSW) implies a covenant in every deed of mortgage which indicates
that the mortgagor will keep all buildings or other improvements erected and made upon the land
in as good and substantial repair as the same were in at the date of the mortgage
o s 84(1)(b) Conveyancing Act 1919 (NSW) implies a covenant in every lease which indicates that the
lessee (or his executors) will, at the end of the lease, yield up the demised premises in good and
tenantable repair, having regard to their condition at the commencement of the said lease,
Voluntary Waste
A positive act, where the occupier does something to intentionally damage the land
A tenant is liable for voluntary waste unless it is excused by the lease: s 32 Imperial Acts Application Act 1969
(NSW)
Equitable Waste
Waste by an occupier which is so serious that it will not be restrained in equity because it is an act of
‘wonton destruction’: Vane v Lord Barnard (1716) 23 ER 1082
s 9 Conveyancing Act 1919 (NSW):
An estate for life without impeachment of waste shall not confer, or be deemed to have conferred, upon
the tenant for life any legal right to commit waste of the description known as equitable waste, unless an
intention to confer such right expressly appears by the instrument creating such estate.
Ameliorating Waste
Waste that improves the land
Equity will only restrain acts of ameliorating waste if they are of a ‘substantially injurious character’ or the
waste inflicts ‘substantial and real damage’: Doherty v Allman (1878) 3 App Cas 709
Kane Kersaitis (11011386)
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Waste
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Trespass to Land a
Trespass to Land
The Common Law
Kelsen v Imperial Tobacco Co
Limited [1957]
2 QB 334
Bernstein of Leigh v Skyviews &
General Ltd [1978]
QB 479
Woollerton & Wilson v Richard
Costain [1970]
1 All ER 483
Graham v KD Morris & Sons
Limited [1974]
Qd R 1
LJP Investments Pty Ltd v Howard
Chia Investments Pty Ltd (1989)
24 NSWLR 490
Bendal Pty Limited v Mirvac Pty
Limited (1991)
23 NSWLR 464
Davies v Bennison (1927)
22 Tas LR 52
Applied Cuius est solum, eius est usque ad coelum – a person entitled to
possession has exclusive rights upwards to the sun and downwards to the
centre of the earth
D took photos of P’s land at a low altitude. Held no trespass:
“restricting the rights of an owner in the airspace above his land to such
height as is necessary for the ordinary use and enjoyment(from heaven
and hell) of his land and the structures upon it” (Griffiths J)
The jib of a crane passing over the owners land 15m above roof level was
trespass, but an injunction was delayed until the neighbour had finished
construction as D had offered P money and therefore had not acted in
flagrant disregard of the P’s rights. Also, as this was the first case on the
matter, the builder was not on notice (cf. below case)
Applied above but granted an immediate injunction as D had acted in
flagrant disregard of P’s rights. Also noted that the Woollerton decision had
placed the industry on notice.
Scaffolding built on D’s land protruded over P’s at 4.5 above the ground
Intrusion was “of a nature and at a height which may interfere with any
ordinary uses of the land which the occupier may see fit to undertake”
(Hodgson J)
D used protective mesh screens that encroached into P’s airspace from a
high-rise building.
Bryson J held it to be trespass, following LJP Investments v Chia. He held that
the very fact that D was using the land in that way indicated that P may do
so – the fact that P wasn’t undertaking corresponding activities is irrelevant
D also had other methods available which, though more expensive, would
have prevented the trespass
However, allowing a crane to ‘weather-vane’ (spin freely in the wind when
not in use) was allowed. It was held that it was a safety issue which meant
an injunction was inappropriate.
A bullet flying across P’s land at roof height (and killing P’s cat who was on
his garage roof) was trespass to land
The Common Law Establishes Trespass
1. An owner is entitled to exclusive possession up to heaven and down to hell according to cuius est solum, eius
est usque ad coelum: Kelson v Imperial Tobacco (1957). However, today this is not applied literally and an
owner’s rights are restricted to the height ‘necessary for the ordinary use and enjoyment of his land’:
Bernstein of Leigh v Skyviews (1978). For the purposes of trespass, this has been interpreted to include
intrusions which may interfere with ordinary uses the owner may see fit to undertake: LJP Investments v
Howard Chia (1989). Indeed, the fact the Defendant is using the land may imply the owner could also have
used the land in that way: Bendal v Mirvac (1991).
2. In construction:
o The jib of a crane passing over land is trespass: Woollerton v Richard Costain (1970); Graham v KD
Morris (1974). However, ‘weather-vaneing’ is a safety issue and is allowed: Bendal v Mirvac (1991)
o The availability of alternatives will be a factor: Bendal v Mirvac (1991).
o Whether the builder has acted in ‘flagrant disregard’ of the owners rights may affect the remedy:
Graham v KD Morris (1974)
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Relevant legislation
s 88K Conveyancing Act 1919 (NSW) – grants courts power to create easements provided there were
negotiations attempted between the builder and owner
Access to Neighbouring Land Act 2000 (NSW)
o s 7 – allows Local Court to grant neighbouring land access orders if an owner needs access to a
neighbouring property to work on his own
o s 8 – allows Local Court to grant utility service access orders to allow an owner to access a utility service
to which he is entitled
Encroachment of Building Act 1922 (NSW)
o Gives Land and Environment Court the power to settle disputes and make orders in respect of
‘encroachments’ by ‘substantial buildings’ of a ‘permanent nature’
‘substantial building’ of ‘permanent nature’ includes –
Concrete driveway: Ward v Griffiths (1987) 9 NSWLR 458
Concrete-block wall: Cuthbert v Hardie (1989) 17 NSWLR 321
Retaining wall: Boed Pty Limited v Seymour (1989) 15 NSWLR 715
Protruding floor beams: Droga v Proprietors, SP 51722 (1996) 93 LGERA 120
A weld-mesh fence set in concrete: Ex parte van Achterberg [1984] 1 Qd R 160
o Includes the power to allow encroachments to remain in place: Cuthbert v Hardie (1989) 17 NSWLR 321
at 323
o The encroachment may be intentional or unintentional: Droga v Proprietors, SP 51722 (1996) 93 LGERA
120
Damage by Aircraft Act 1952 (NSW)
o s 2(1) – no action lies in trespass or nuisance where an aircraft was flying at a reasonable height above
the ground (having regard to wind, weather, and all other circumstances) so long as the provisions of the
Air Navigation Regulations are satisfied
o s 2(2) – but where these requirements are not met, or damage is caused by something falling from an
aircraft, then damages are recoverable
Damage by Aircraft Act 1999 (Cth)
o s 9(4) – explains what aircraft are covered by the Federal act
o s 10
(1) provides a remedy for impact with an aircraft
(2) makes a number of parties jointly and severally liable
Legislation Assists the Trespasser
s 88K Conveyancing Act 1919 (NSW) easements prevent builders being held to ransom during construction,
provided they attempt to negotiate with the neighbouring owner
ss 7-8 Access to Neighbouring Land Act 2000 (NSW) land/utility service access orders allow owners to enter
neighbouring land to maintain their own land, or access utilities
Encroachment of Building Act 1922 (NSW) prevents owners from having to destroy their permanent property
to remedy a trespass on neighbouring land.
o Includes the power to allow encroachments to remain in place: Cuthbert v Hardie (1989)
o The encroachment may be intentional or unintentional: Droga v Proprietors, SP 51722 (1996)
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Torrens Title
How to work out Torrens disputes:
1. Resolve the registered interests
2. Result the unregistered persons purporting ownership in chronological order
3. Resolve unregistered tenants last (as you must know who owns the property first)
Two Systems of Land Ownership
Breskvar v Wall (1971) 126 CLR 376
Court said Torrens title is a system of "title by registration"
To be contrasted by old system title , which is a system where you can choose to register title
There are four important points in time in Conveyancing:
1. The vendor exchanges contracts with a purchaser - the parties are contractually bound and the
purchaser acquires an "Equitable interest" in the property
Tanwar Enterprises v Cauchi (2003) 217 CLR 315
o When a purchaser exchanges contracts they get an unregisterable, enforceable equitable
interest in the land. It is the right to go to a court of equity and get an order for specific
performance.
2. The purchaser settles/completes the contract with the vendor - the vendor hands over a signed
transfer, and the purchaser pays the outstanding balance on the contract for sale. A certificate of title
should also be given to the purchaser by the vendor.
3. Lodgement of the transfer and the certificate of title – note that you are not allowed to lodge anything
at the LPI without the certificate of title.
4. Registration - THIS is when the purchaser gets title
e.g. of indefeasibility
Indefeasibility of Title
Real Property Act 1900 (NSW)
o s 41: Dealings not effectual until recorded in Register
o s 42: Estate of registered proprietor paramount (i.e. title is indefeasible)
o s 43: Purchaser from registered proprietor not to be affected by notice (i.e. the purchaser does not
need to ascertain how previous owners got title, as with old system land)
Mayer v Coe (1968) 88 WN (NSW) (pt 1) 549
o Mayer’s solicitor forged a contract for mortgage with Coe. The mortgage was registered and placed
on the title for Mayer’s land.
o Held that Mayer and Coe were both innocent, and that Coe’s interest in the land was registered and
therefore indefeasible.
Perpetual Trustees Victoria v English [2010] NSWCA 32
o Similar facts to Mayer v Coe, except that the mortgage secured a forged loan agreement. As the loan
agreement was forged, the amount owing on the mortgage was $0 and the mortgage was therefore
discharged.
Title is immediately indefeasible: Commonwealth v NSW (1918) 25 CLR 325, Frazer v Walker [1967] 1 AC 569,
Black v Garnock [2007] HCA 31
o NB: Frazer v Walker [1967] 1 AC 569 overturned a previous concept of deferred indefeasibility,
where title was only indefeasible if another interest had been altered after it (see Clements v Ellis
(1937) 51 CLR 217, Gibbs v Messer [1891] AC 248)
1. Torrens title is a system of title by registration: Breskvar v Wall (1971)
2. Dealings are not effectual until recorded on the register: s 41 RP Act 1900 (NSW). Once registered, however,
that title immediately becomes indefeasible: s 42 RP Act 1900 (NSW); Commonwealth v NSW (1918); Frazer v
Walker (1967).
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The Centrality of the Register
e.g. of indefeasibility
Bursill Enterprises v Berger Bros (1971) 124 CLR 73
o An easement was owed by one neighbour to another on properties in George Street. The fine print
of the easement indicated that from twelve feet and up the airspace belonged to the neighbour (not
the owner).
o At the time the easement was created you could not convey airspace (strata title changed this) and
the easement should not have been registered. However, as it was on the title, it was indefeasible.
Fels v Knowles (1906) 26 NZLR 604
o A trustee leased a property to a tenant. The registered lease had a clause that gave the tenant to
purchase the property for an amount within a certain time, although the trustee did not have the
authority to sell the property.
o As the lease was registered, indefeasibility of title overrode the trustee’s lack of capacity.
Koteff v Bogdanovic (1988) 12 NSWLR 472
o Koteff Sr agreed with Ms Bogdanovic that if she took care of him for the rest of her life, he would
give her a life estate on his death. However, when Koteff Sr died, his property was left to his son,
Koteff Jr. Koteff Jr registered his interest before Ms Bogdanovic attempted to claim against Koteff
Sr’s estate.
o Held: Koteff Jr’s indefeasible title overrude Ms Bogdanovic’s unregistered equitable interest.
State Bank v Berowra Waters (1986) 4 NSWLR 398
o Berowra Waters mortgaged a property to the State Bank. After a period of time, Berowra asked
what the amount outstanding on the mortgage was and paid it. The mortgage was discharged. The
State Bank later realised this amount was too small and attempted to claim.
o Held: The discharged of mortgage was registered, and so they could not claim amounts
outstanding on the mortgage.
Exceptions to Indefeasibility
Rules of priority:
o 1. A person registered in the first schedule is subject to those registered in the second schedule.
o 2. Between two persons in the second schedule, the earlier registered interest prevails: s 36(9) Real
Property Act 1900 (NSW)
o 3. Registered interests prevail over unregistered interests unless there is an exception
THE EXCEPTIONS TO INDEFEASIBILITY ARE:
1.
2.
3.
4.
5.
6.
7.
8.
Prior Folios: s 42(1)(a)
Omitted Easements (provided the burden land was not Torrens when easement created): s 42(1)(a1)
Misdescribed/Omitted profits a prendre: s 42(1)(b)
Misdescribed parcels (to the extent of the incorrectly included land): s 42(1)(c)
Short tenancies (provided there is notice): s 42(1)(d)
Fraud: ss 42, 43 both list fraud as an exception
Personal equities: Barry v Heider (1914); Bahr v Nicolay (No 2) (1988)
Possessory title: ss 27, 38 Limitation Act 1969 (NSW); Part VIA Real Property Act 1900 (NSW)
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Prior Folios
s 42(1)(a) Real Property Act 1900 (NSW) – if two certificates of title are accidently issued, the earlier one prevails
Omitted Easements
s 42(1)(a1) Real Property Act 1900 (NSW) – if there is an omission or misdescription of an easement subsisting
immediately before the land was converted to Torrens title, then an unregistered interest may prevail
James v R-G (1967)
69 SR (NSW) 361
Australia Hi-Fi v Gehl [1979]
2 NSWLR 625
Delohery v Permanent Trustee
(1904)
1 CLR 283
The easement was recorded on the folio, but was later removed by
administrative error. It was an omitted easement and so fell under
s42(1)(a1)
If the easement is only created after the burden land is Torrens title, then
s42(1)(a1) does not apply as you can only create easements expressly and in
writing
An easement may be created by long use of twenty years or more. This kind
of easement may constitute an omitted easement.
Profits a Prendre
A profit à prendre is a right to take from the land owned by another person part of the natural produce grown on
that land or part of the soil, earth or rock comprising the land. (as described on LPI website)
s 42(1)(b) Real Property Act 1900 (NSW) – if there is an omission or misdescription of any profit à prendre created in
or existing upon any land, then an unregistered interest may prevail
Misdescribed Parcels
s 42(1)(c) Real Property Act 1900 (NSW) – there is no indefeasibility of title for any portion of land that may, by
wrong description of parcels or of boundaries, be included in the folio of the Register
Short Tenancies
s 42(1)(d) Real Property Act 1900 (NSW) – indefeasibility does not apply where the registered proprietor had notice
of an unregistered lease which “does not exceed three years” (including any option to renew the lease: s42(1)(d)(ii)).
Notice
o May be actual, constructive or imputed
o Marsden v Campbell (1897) 18 LR (NSW) (Eq) 33
The purchaser had actual notice that the mortgagee was grazing sheep on the land. The
purchaser was not aware the mortgagee was also the tenant.
The court held that the purchaser was required to make all the enquiries that a reasonable
person in his position would have made, such as asking the mortgagee the basis upon
which the property was being used for grazing animals. The purchaser had constructive
notice of the lease.
o Mills v Renwick (1901) 1 SR (NSW) (Eq) 173
A purchaser has constructive notice of any interests recorded on the register
o s 164 Conveyancing Act 1919 (NSW)
Codified Mills v Renwick
CONSTRUCTIVE NOTICE:
A person is required to make all the enquiries a reasonable person would have made prior to gaining an interest in
property. They are to have constructive knowledge of anything these enquiries would reveal: Marsden v Campbell
(1897). This includes constructive notice of any interests recorded on the register: Mills v Renwick (1901); s 164
Conveyancing Act 1919 (NSW).
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e.g. of constructive notice
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Clyne v Lowe (1968) 69 SR (NSW) 433
United Starr-Bowkett v Clyne (1967) 68 SR 331
o From the 1940s until the 1970s, NSW had ‘protected tenants’ where the rent could not be raised
o Clyne attempted to purchase properties with protected tenants and evict them, as properties
without protected tenants were worth more
o Clyne v Lowe (1968)
Clyne did not know the name of the occupant or the details of the lease. However, the court
held he had constructive notice ‘because of his failure to inquire from the period in fact in
possession as to her title or rights’
o United Starr-Bowkett v Clyne (1967)
Clyne defaulted on the mortgage, and so the mortgagee took possession. Held that the
mortgagee had constructive notice as they were aware the building was not occupied by Clyne
Fraud
s 42 (indefeasibility of title) and s 43 (purchaser need not enquire how vendor got title) both have fraud listed as an
exception
Wicks v Bennett (1921)
30 CLR 80
Stuart v Kingston (1929)
33 CLR 309
Loke Yew v Port Swettenham
[1913]
AC 492
A fraudulent misrepresentation is
fraud
Breskvar v Wall (1971)
126 CLR 376
Fraud against a second party will
not protect you against an
innocent third party
Schultz v Corwill Properties Pty
Limited (1969)
90 WN (NSW) (Pt 1) 529
There is no imputed knowledge or
fraud if your agent is on a ‘frolic’
Assets Co Limited v Mere Roihi
[1905]
AC 176
Fraud cannot be constructive, but
this has now changed (see Bahr v
Nicolay)
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A landlord was subject to an unregistered lease, who sold the property to
another with actual notice of the lease.
Held that notice of itself is not fraud.
To constitute fraud there must be ‘some personal dishonesty’ or ‘some
moral turpitude’
Eusope sold some of his land to Loke Yew (LY), but the transfer was not
registered. Port Swettenham (PS) then purchased land, and persuaded
Eusope to sign a transfer of his entire estate, assuring they would recognise
LY’s interest. This was registered, and then PS tried to evict LY.
Held that PS acted fraudulently in making an assurance it never intended
to keep, and were subject to LY’s unregistered interest
The Breskvars borrowed money from Mr Petrie who persuaded them to sign
a blank transfer as ‘security’ for the loan. Petrie then enters his grandson’s
name, Mr Wall, on the transfer and lodges the document with LPI. Wall then
decides to sell the property to Alban Pty Limited, and lodges that transfer.
Held that Petrie acted for Wall, and so Wall had imputed knowledge as
Petrie was his agent. However, the Breskvars could not succeed against the
more innocent Alban (who had no notice of the fraud).
(NB: This was a Queensland matter, which has no equivalent to s43A)
Mr Galea was a fraudulent solicitor who misappropriated the company seal,
and registered a mortgage in favour of the innocent Ms Schultz. Ms Schultz
passed away, and Mr Schultz was convinced by Galea to sign a discharge of
mortgage on the basis that Corwill was going to sell the property. The
discharge was registered without the loan being repaid.
Held that Galea was on a ‘frolic’ of his own and therefore his knowledge
could not be imputed against Corwill. The mortgage was unenforceable.
Mauri people had native title in NZ, and legislation indicated that you could
not purchase land without approvals from a board. Assets purchased land
without these approvals. The Mauri people argued Assets were
‘constructively fraudulent’ as they should have known about the board.
Held that fraud cannot be constructive – there is a necessary mental
element of a knowledge of dishonesty
But now see Bahr v Nicolay... (over page)
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Bahr v Nicolay (No 2) (1988)
164 CLR 604
In real property, fraud extends to
constructive fraud (also known as
equitable fraud)
Leros v Terara (1992)
174 CLR 407
Cf. with Bahr v Nicolay – notice of
itself of an unregistered lease is
not fraud
(NB: length of lease fell outside short
tenancy exception)
National Commercial Banking
Corporation of Australia Limited v
Hedley [1984]
NSW ConvR 55-211
Fraud includes bank passing off
un-witnessed document as
witnessed
Bank of South Australia v Ferguson
(1998)
192 CLR 248
Fraud requires causation
Bahr transferred to Nicolay for $32K. Bahr then leases the property with an
option to repurchase the land for $45K within three years. Nicolay then
transfers the land to Thompson for $40K, who ‘acknowledged’ the lease and
option to repurchase. Suddenly the property increased substantially in
value, and Thompson no longer wished to honour the option to repurchase.
Held that Thompson was bound by the option to repurchase.
Mason & Dawson JJ –
Thompson was fraudulent
In real property, fraud extends to equitable fraud (Wilson, Brennan
& Toohey JJ agreeing)
Having procured the transfer with the condition that he was
subject to Bahr, Thompson could not renege on that promise
(Wilson, Brennan & Toohey JJ disagreeing, indicating that Thompson
could renege after being registered)
Wilson, Brennand & Toohey JJ –
Found there was personal equity – see below.
A landlord was subject to a lease for five years with a seven year option to
renew. In WA, only leases greater than five years need be registered, and so
the lease was unregistered. In the final year of the lease, the tenant
exercised their seven year option and the landlord also advertised the
property for sale. Leros agreed to purchase the property, but only if it was
not subject to the lease. After settlement, the ex-landlord and tenant argued
that Leros had notice of the lease and would be fraudulent to deny it.
Held that Leros was not fraudulent as they had never agreed to be subject
to the lease. Re-affirmed Wicks v Bennett – notice of itself is not fraud.
Mr Hedley forged Ms Hedley’s signature on mortgage documents. The bank
manager purported to witness Ms Hedley’s signature to save her coming
into the bank (being unaware of Mr Hedley’s fraud).
Held that it would be fraudulent for the bank to rely on a document they
had passed off as properly registered, when they knew it hadn’t been.
Ferguson honestly applied for a mortgage. The bank manager altered the
figures in order for the loan to be approved. The mortgage is registered.
Held that the bank was internally fraudulent, but there was no causal link
between this and the mortgage – Ferguson had been lent the funds he had
requested and no more.
The Law of the Fraud Exception
1. ss 42 and 43 of the RP Act 1900 (NSW) list fraud as an exception to indefeasibility of title. To constitute
fraud, it must be shown there was ‘some personal dishonestly’ or ‘some moral turpitude’: Stuart v Kingston
(1929). Notice of itself is not fraud: Wicks v Bennett (1921).
2. There must be a causal link between the fraud and the registered interest: Bank of SA v Ferguson (1998).
3. Fraud includes:
o Fraudulent misrepresentations prior to registration: Loke Yew v Port Swettenham (1913).
o Fraudulent actions of an agent: Breskvar v Wall (1971). Fraudulent acts of an agent who is acting on
a ‘frolic’ of their own, however, will not be held against the principal: Schultz v Corwill (1969)
o The fraud may be constructive fraud: Bahr v Nicolay (1988); cf Assets Co v Mere Roihi (1905)
o A misrepresentation as to the formal requirements of a document, such as whether it was correctly
witnessed: National Commercial Bank v Hedley (1984)
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Personal Equities
This is not covered by the Real Property Act 1900 (NSW) – it has been defined and said to exist by the common law.
It exists where it would be against conscience to allow a registered person to prevail over an unregistered person.
There are many names for it:
Right in personam
Right in person
Personal right
Equitable right
Equitable obligation
Fiduciary obligation
Personal equities
etc.
They all mean the same thing and may be used interchangeably in cases and textbooks.
Barry v Heider (1914)
19 CLR 197
Frazer v Walker [1967]
1 AC 569
Bahr v Nicolay (No 2) (1988)
164 CLR 604
Barry was persuaded to sign a transfer when he was mortgaging a property
to Schmidt. Schmidt then represented that he had purchased the property
and obtained a mortgage from Heider. All interests were lodged, but
unregistered at the time of litigation.
Held that Heider had a personal equitable right which was enforceable
against Barry. A ‘personal equity’ exception to indefeasibility arises where:
a registered person creates an unregistered interest; and/or
a registered person engages in conduct which contributes to the
creation of an unregistered interest
The Privy Council recognised the personal equity exception in Barry v Heider.
Facts copied from above:
Bahr transferred to Nicolay for $32K. Bahr then leases the property with an
option to repurchase the land for $45K within three years. Nicolay then
transfers the land to Thompson for $40K, who ‘acknowledged’ the lease and
option to repurchase. Suddenly the property increased substantially in
value, and Thompson no longer wished to honour the option to repurchase.
Held that Thompson was bound by the option to repurchase.
Wilson, Brennan & Toohey JJ –
Thompson was bound to a personal equity in favour of Bahr – the
definition under Barry v Heider was expanded to include the
situation where a person agrees with a second person to be subject
to a third person, the third person gains an equitable interest in the
property
The Law of the Personal Equity Exception
1. A ‘personal equity’ exception to indefeasibility of title arises under the common law where a registered
person creates, or engages in conduct which contributes to the creation of, an unregistered interest: Barry v
Heider (1914); Frazer v Walker (1967).
2. It includes where a party agrees to be bound by a pre-existing unregistered interest: Bahr v Nicolay (1988).
Whether that interest should have been registered, such as a long-term lease, is irrelevant if the purchaser
agreed to be bound: Snowlong v Choe (1991)
3. Some personal equities include:
o A bank must ensure they use a certificate of title with the genuine authority of the owner, or a
personal equity will arise to defeat their interest: MML v Gosper (1991). However, this only applies
where there was a prior relationship between mortgagee and owner: Grgic v ANZ (1994).
o There is also no obligation on a bank to be aware that a director did not have authority to deal with
a certificate of title: Story v Advance Bank (1993).
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MML v Gosper (1991)
25 NSWLR 32
Bank must ensure they use the CT
with the genuine authority of the
owner or a personal equity will
arise to defeat them
Ms Gosper was the registered owner of a NSW property with a mortgage in
favour of MML. At a later time, Mr Gosper wished to increase the mortgage
and forged documents in his wife’s name. As MML was already the
mortgagee, they already had the certificate of title and simply registered the
alteration.
Meagher J (dissenting) held that Mayer v Coe should apply.
Mahoney J developed a personal equity exception. He reasoned that
because MML have the certificate of title as first mortgagee, they were
under an equitable obligation to only use the title deeds with the authority
of Ms Gosper. As they did not have her authority, a personal equity arose to
defeat them. They were only entitled to the original mortgage.
Kirby P held that there was an obligation to check the true identity of a
person who is signing a mortgage. This judgment has been heavily criticised
as being inconsistent with Mayer v Coe.
Although this seems to fly in the face of Mayer v Coe, it has not be
overruled as of yet. It therefore seems that there is a new exception to
indefeasibility in these factual circumstances.
Tanzone v Westpac [1999]
Windeyer J criticised MML v Gosper:
NSWSC 478
“[As a judge,] it is reasonable for one who has acted on hundreds of
variations to say that never in his experience in acting for a mortgagor has
he been asked for or required to produce an authority for the use of the
certificate of title to register the variation, nor when acting for a mortgagee,
has he ever asked for any such authority which is obviously registered.”
Windeyer J was overturned on appeal, but on a different point.
s 56C Real Property Act 1900 (NSW) – requires a mortgagee to be satisfied of the true identity of a person signing
a variation or mortgage, as per Kirby P's judgment in MML v Gosper.
NB: This is not yet proclaimed, but is drafted and due to come into effect in November 2011.
Grgic v ANZ Banking (1994)
Grgic’s wife and son wished to forge a mortgage on Grgic’s property, and
33 NSWLR 202
hired an imposter to enter ANZ and sign the papers so the bank manager
could witness it. The mortgage was registered.
Held that unlike MML v Gosper, there was no pre-existing relationship
MML v Gosper only arises where
between mortgagor and mortgagee, and Mayer v Coe therefore applied.
there was a pre-existing
relationship
Story v Advance Bank (1993)
A company entered into a mortgage in favour of the Advance Bank, but the
31 NSWLR 722
company had never authorised the company seal being affixed to the
mortgage. One of the directors, Mr Story, had caused the seal to be affixed
No obligation on bank to ensure
to the mortgage without the authority of the board.
Director has authority (cf to
The court held that there is no obligation on the bank to be aware of the
individuals in MML v Gosper)
director’s lack of authority. As the bank was registered, they had
indefeasible title and Mayer v Coe applied in favour of the bank.
A landlord was subject to an unregistered lease. The landlord then sold the
Snowlong v Choe (1991)
subject property and the contract provided that the purchaser was subject
23 NSWLR 198
to the lease. However, the lease was for more than three years and so
s42(1)(d) did not apply.
Personal equity may arise even if
Wood J held that, when the purchaser attempted to evict the tenant, he
the interest should have been
was estopped from denying the lease even though it was not registered as
registered
required. It was held that Bahr v Nicolay applied and bound the purchaser.
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Overriding Statutes
State legislation
o Later state legislation prevails over the Real Property Act 1900 unless it states the contrary
o e.g. Local Government Act, Conveyancing Act, Environmental Planning and Assessment Act
o Pratten v Warringah Shire Council (1969) 90 WN (pt 1) 134
1964 amendments to the Local Government Act overrode indefeasibility of title under RP Act
o Hillpalm v Heaven’s Door [2004] HCA 59
The Environment Planning and Assessment Act in 1979 overrode the 1900 Real Property Act.
Commonwealth legislation
o Commonwealth legislation prevails to the extent of inconsistency, providing the Commonwealth
legislation is constitutionally valid: s 109 Commonwealth of Australia Constitution Act
o e.g. Family Law Act 1975 can override indefeasibility of title – the Family Court may apportion
property as it sees fit, etc.
o e.g. Bankruptcy Act 1966 can override indefeasibility of title - the trustee may become the owner
when a person is declared bankrupt
Possessory Title
ss 27, 38 Limitation Act 1969 (NSW) – a person has twelve years to assert an interest in property
Part VIA Real Property Act 1900 (NSW) creates an administrative regime whereby a person who is in adverse
possession for twelve years can apply to the Registrar General for possessory title (i.e. become the reg owner)
s 45D Real Property Act 1900 (NSW): you can only make a possessory title claim for an entire block of land.
Mulcahy v Curramore [1974]
2 NSWLR 464
Sir Nigel Bowen enunciated a series of principles in this area of law. He
explained that if you want to show possessory title you had to show that 1. Your possession was open and not in secret
2. Peaceful and not by force
3. Adverse and not with consent
4. The twelve years may be made up by one person, or may be
made up by a number of people possessing the property for a
total of twelve consecutive years.
i. Dependent adverse possession - A to B to C to D is all with
consent, that is, they all agreed to pass the property to
each person down the chain. In this case, the person there
on the twelfth anniversary gets title.
ii. Independent adverse possession - A to B to C to D is
without consent, that is, that B dispossessed A without A's
consent etc. In this case, the person who was in
possession originally has title provided they have been out
of possession for less than twelve years (i.e. If B
dispossessed A more than twelve years ago, A cannot
claim. But if A was dispossessed less than twelve years
ago, then A will get possessory title).
They key characteristic is that a person was asserting possession
Kirby v Cowderoy [1912]
The regular paying of rates was seen as an act asserting possession and
AC 599
allowing a person to claim possessory title.
Note that you cannot make a claim for possessory title with respect to Crown land.
The Law of the Possessory Title Exception
A person has twelve years in which to assert an interest in property: ss 27, 38 Limitation Act 1969 (NSW). Thereafter
they are statute barred from bringing an action, and a person who is in adverse possession may apply to the
Registrar General for possessory title: Part VIA RP Act. A claim must be in respect of an entire lot (s 45D RP Act) and
meet the criteria set out in Mulcahy v Curramore (1974)
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Torrens Title
Co-Ownership a
Co-Ownership
Types of Co-Ownership
Joint tenancy – the two parties are perfectly equal
o The four unities must exist:
Unity of possession: both parties must have possession of the whole
Unity of interest: interest of each co-owner must be identical in nature/extent/duration
Unity of title: interest must be acquired by virtue of the same instrument
Often linked, but not always
Unity of time: interest must vest in each party at the same time
o Each tenant possesses ‘potential’ or ‘aliquot’ shares – we do not specify fractions as they must be equal
o Right to survivorship (jus accrescendi) exists
Each co-owner’s potential shares are enlarged to the extent of the deceased co-owner.
i.e. You cannot leave your share of the estate in your will.
o Presumption of survivorship
Conveyancing Act 1919 (NSW)
35 Presumption of survivorship
In all cases where two or more persons have died under circumstances rendering it uncertain
which of them survived, the deaths shall for all purposes affecting the title to any property be
presumed to have taken place in order of seniority, and the younger be deemed to have
survived the elder.
Remember that s 35 is only a presumption and can be rebutted:
Halbert v Mynar [1981] 2 NSWLR 659
o At common law a person is presumed dead if they are missing for seven years.
A husband went missing, and his wife died within this seven year period. It
was contended that s 35 should apply so the older husband was presumed to
predecease the younger wife.
o The court held that s 35 had no application as the wife died before the
common law presumption came into effect.
Tenancy in common – the two parties may or may not be equal
o Only requires unity of possession
i.e. An absence of unity of interest / title / time means you create a tenancy in common rather
than a joint tenancy
o Specifies the shares which each owner possesses
o NO right to survivorship or presumption of survivorship (i.e. Shares may be bequeathed in wills)
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Co-Ownership a
Equity
Co-owners may hold interests separately at law and in equity
Maxims of equity:
o Equity follows the law
o Equity treats done that which ought to be done
o Equity will not assist a volunteer
Equity does not carve out of law, but rather it engrafts limits on to the legal rights of the owner
Equity will create the same interests as at law, unless: (rebuttable presumption)
o Unequal contribution to the purchase price
Co-owners are presumptively tenants in common in shares proportional to their contribution:
Robinson v Preston (1858) 4 K&J 505, 70 ER 211; Calverly v Green (1984) 155 CLR 242
Marriage is strong evidence to rebut this presumption: Veceljs v Public Trustee (Vic) [1985] VR
569 at 574-577; Smith v Smith (1984) 9 Fam LR 1014 (SASC)
o Advance money on a mortgage
In equity, mortgagees are presumptively tenants in common in shares proportional to the
amount lent: Rigden v Vallier (1751) 2 Ves Sen 252, 28 ER 1052
o Partnership assets
Business partners who are joint tenants at law will be tenants in common in equity (presuming
it can be proved that it was a partnership relationship): Lake v Craddock (1732) 3 PWMS 158,
24 ER 1011
Creation of Co-Ownership
At common law: Any co-ownership is presumed to be a joint tenancy unless (Campbell v Campbell (1792);
Morley v Bird (1798); Re Trust Will of Lysaght (1987) –
o All four unities are not present
o There are words of severance
Including any words indicating ‘equal shares’ or ‘dividing’: Rentoul v Rentoul [1944] VLR 205
o There is contrary intention evident in the facts and circumstances
Conveyancing Act 1919 (NSW)
o Construction of conveyance etc of any property beneficially to two or more persons together
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 by entireties.
Delehunt v Carmody (1986) 161 CLR 464
o Mr Carmody married Ms Carmody. They separated, and Mr Carmody went to rent a house with Ms
Delehunt. Later, Mr Carmody purchased the house and continued to live there with Ms Delehunt. Mr
Carmody was the only registered proprietor, but maintained that he held it on trust for himself and
Ms Delehunt.
o The High Court held that s 26 of the Conveyancing Act 1919 (NSW) applied equally at law and in
equity. Mr Carmody and Ms Delehunt were therefore tenants in common in equity, and Mr Carmody’s
share was disposed of as per his will (which indicated that Ms Carmody would inherit it)
e.g. Equity presumes equal payment = joint tenants. s 26 overturns this presumption.
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Real Property Act 1900 (Cth)
o Registered co-tenants
100 Registered co-tenants
(1) Two or more persons who may be registered as joint proprietors of an estate or interest in
land under the provisions of this Act, shall be deemed to be entitled to the same as joint
tenants.
o This has been ‘read down’ by the courts in light of s 26 Conveyancing Act 1919 (NSW) to simply mean
that the terminology ‘joint proprietors’ means the same as ‘joint tenants’: Hircock v Windsor Homes
(Development No 3) Pty Ltd [1979] 1 NSWLR 501, 506.
Severance
The process by which you convert a joint tenancy to a tenancy in common
Severance refers to the process of breaking one of the four unities
o e.g. A unilateral act may instigate the change from joint tenancy to a tenancy in common, but it is the
breaking of one of the unities which is the act of severance
Unilateral Act
Transfer
Potential shares are property and are therefore alienable
Wright v Gibbons (1949) 78 CLR 313
o Olinda, Ethel-Rose and Bessie-Melba were joint tenants. Ethel-Rose and Olinda cross transfer their
land by way of one instrument. Upon their deaths, Bessie-Melba asserts a right to survivorship.
o Held: a joint tenancy was severed between all three. One instrument may still constitute severance.
Corin v Patton (1990) 169 CLR 540
o Mr and Ms Patton were estranged joint tenants, when Ms Patton was diagnosed with a terminal
illness. She wished to sever the joint tenancy so that Mr Patton would not get her property. She was
advised to transfer to her brother (Mr Corin), but she forgot to provide the certificate of title. As such,
she died before the transfer was registered.
o It was held that:
A joint tenant can unilaterally sever a joint tenancy
In equity, where an enforceable contract for valuable consideration is entered
At law, where a transfer is both executed and registered
However...
There was no severance at law as the transfer was not registered
There was no severance in equity as
o Mr Corin did not do anything constituting part performance
o Equity will not complete an incomplete gift (i.e. if you have not done
everything you can to effect a gift you are not bound)
o A unilateral declaration of intention to sever the joint tenancy does not of
itself constitute severance in equity
s 97 Real Property Act 1900 (Cth) – allows you to transfer to yourself to sever joint tenancy
McCoy v Caelli [2010] NSWSC 1233
o Mother and son were joint tenants. The son was terminally ill and wished to sever the joint tenancy,
and so he signed a memorandum of transfer to himself under s 97. He died prior to registration.
o The court held that you cannot gift to yourself in equity, and so s 97 does not apply in equity. Equity
is based around conscience, and you cannot be bound by your conscience to gift to yourself.
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Co-Ownership a
Mortgage
Old system – a mortgage will sever a joint tenancy as it requires a transfer of title: Re Pollard’s Estate (1863)
46 ER 746
Torrens title – will not sever a joint tenancy as it is merely a statutory charge
o Hence a mortgagee who only has an interest in part of the property held by a joint tenant risks losing
their security if the joint tenant should die: Lyons v Lyons [1967] VR 169
Lease
A lease is based around possession, but it will not fracture unity of possession
Frieze v Ungar [1960] VR 230
o The lease “suspends” the joint tenancy
o i.e. If lessor dies during the lease, the right of survivorship is “suspended” until the end of the lease
Mutual Agreement
Takes place in equity, as there is no severance at law
Whether s54A Conveyancing Act 1919 (NSW) applies is unclear
o s 54A requires all interests in land to be in writing, but it is unclear whether this applies in equity
Court Order
e.g. A court order under the Family Law Act 1975 (Cth) for the distribution of property
Unlawful Killing
Equity does not allow a person to benefit from her or her own crime.
An unlawful killing of one joint tenant by the other will not sever the joint tenancy at law. Severance occurs in
equity (and so the surviving tenant holds the interest on trust for the deceased’s estate): Rasmanis v
Jurewitsch (1969) 70 SR (NSW) 407.
s 5 Forfeiture Act 1995 (NSW) allows the Supreme Court to modify the forfeiture rule
o But note that this has been criticised – “Indeed, there is something a trifle comic in the spectacle of
Equity judges sorting felonious killings into conscionable and unconscionable piles.”: Troja v Troja
(1994) 33 NSWLR 269 at 299 (Meagher JA)
Bankruptcy
s 58 Bankruptcy Act 1966 (Cth) – property of a bankrupt vests with the Official Trustee – involuntary alienation
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Co-Ownership a
Ending Co-Ownership
One party may acquire the shares of the other/s
The Crown may resume the land
Order of sale or partition by the court
o s 66G Conveyancing Act 1919 (NSW) allows a court to vest the property in a trustee for sale or partition
o Pannizotti v Trask (1987) 10 NSWLR 531 – the court’s discretion under s 66G is very limited. It will
make orders in accordance with the wishes of the majority of co-owners (by shares/potential shares)
unless satisfied it is just in all the circumstances to do otherwise.
o Part 4 Environmental Planning And Assessment Act 1979 (NSW) places notable restrictions on the of
partitioning land
Rights Between Co-Owners Inter Se
During co-ownership:
o Any enforceable contract between the owners
o s 560(3) Local Government Act 1993 (NSW) holds co-owners jointly and severally liable to pay council
rates. Each owner may recover their share against other co-owners.
o Each owner has a right to occupation
o NO right to claim for compensation for improvements to the property
o NO right to claim occupation rent from other co-owners
After co-ownership ends, co-owners may claim ‘equitable accounting’ for the following:
o Compensation for improvements to the property
The compensation awarded is the lesser of the cost incurred in making improvements, and
the value added by the improvements: Brickwood v Young (1905) 2 CLR 387
"He who seeks equity must do equity" –
The co-owner seeking an equitable remedy must ‘do equity’
i.e. Any compensation is to be set off against the value of any exclusive occupation,
whether it was gained through ouster or not: Teasdale v Sanderson (1864) 33 Beav
534; (1864) 55 ER 476.
As occupation rent is only a set-off, where a co-owner has enjoyed exclusive
occupation which is greater in value than the amount of any compensation, neither
co-owner is entitled to compensation: Forgeard v Shanahan (1995) 35 NSWLR 206.
The Law on Equitable Accounting
1. At the end of co-ownership, an accounting in equity takes place. This allows a co-owner to claim for the lesser of
the cost incurred in making improvements, and the value added by the improvements: Brickwood v Young (1905).
2. However, the claimant who seeks equity must ‘do equity’. That is, any compensation will be offset against the
value of any exclusive occupation, whether gained through ouster or not: Teasdale v Sanderson (1864). Occupation
rent will only act as an offset though, and a co-owner cannot owe occupant rent without a contractual agreement
indicating otherwise: Forgeard v Shanahan (1995).
3. Co-owners must account for rent collected during the co-ownership. Although the point is not settled, the balance
of authority indicates that equity sees the co-owner acting as an agent for the others and is therefore liable to
account for rent collected: Hutchins v Hutchins (1999) 47 NSWLR 35.
4. Co-owners may need to account for profits earned during the co-ownership. If the profits were earned on behalf of
the co-owners and were from the land per se, they must divide these profits: Squire v Rogers (1979). However, any
profits must be offset against the improvements which created those profits: Ibid, Deane J at 348.
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Co-Ownership a
Ryan v Dries [2002] NSWCA 3
Mr Ryan and Ms Dries bought a house as tenants in common in 6/7 and 1/7 shares in
1990, both paying $40K of the deposit. Both were jointly liable for the mortgage,
although it was agreed that Mr Ryan would make all payments as Ms Dries only stayed
there on the weekend. In 1997, Mr Ryan ousters Ms Dries.
The court used a resulting trust to redistribute the shares in the property to 57% for
Mr Ryan and 43% for Ms Dries, as they were jointly liable for the mortgage.
“[A] co-owner who has effected repairs and maintenance to a co-owned property, as
distinct from making improvements, cannot have any allowance. [However,] if the
value of a property is increased by repairs, a co-owner who paid for the repairs is
entitled... for an allowance in respect of that increase in value.”
Mortgage repayments were claimable as improvements by Mr Ryan as he was
discharging a debt owed by Ms Dries and increasing the financial equity in the
property. However, this was offset against:
o His exclusive possession after 1997 when ouster occurred
o His exclusive possession 90% of the time from 1990 to 1997, as Ms Dries only
occupied the property during the weekend
o Compensation for occupation rent for co-owners who exclusively possessed the property
See above – “He who seeks equity must do equity”
Entitlement to collect rent
o At common law there is no requirement for co-owners to share rent collected by other co-owners
o The 1705 Statute of Anne changed this position, but was repealed by the Imperial Acts Application Act
1969 (NSW) – does this put NSW back in the common law position of pre-1705?
o Forgeard v Shanahan (1995) 35 NSWLR 206 and Ryan v Dries [2002] NSWCA 3 both indicate that this
should not be the case:
It was said that equity sees one co-owner as acting as agent for the others, and is hence
liable to account for any rent collected: Hutchins v Hutchins (1999) 47 NSWLR 35
Obligation to pay profits
o Squire v Rogers (1979) 27 ALR 330
Land in Darwin was co-owned by Squire and Rogers. The land was a special type of Crown
lease where the value of the property had to be increased by $15K. After purchasing the
property, Rogers left Australia. Squires constructed flats on the property and carried on a
business letting the flats and running a caravan park. When Rogers returned, she started
proceedings for an order for sale.
The court remitted the case to the Supreme Court to ascertain facts, but indicated that the
tests would be:
Whether the business was personal (without authorisation of the co-owner/s) or
whether it was carried out on behalf of the co-owner/s (with authorisation)
Whether the profits were ‘from the common property per se’ or from services
rendered by the co-owner who conducted the business
Any profits shared must be offset against the improvements which created those
profits: “If she accepts the benefit of the profit, she accepted the benefit of the profit
earned, she must bare her share of the burden of earning it.” (Deane J at 348)
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Unregistered Interests under Torrens Title a
Unregistered Interests under Torrens Title
Unregistered Mortgages
See mortgages below.
Caveats
Allows a person to claim an unregistrable interest under Torrens Title
o Part 7A Real Property Act 1900 (NSW) allows for the creation of caveats
They operate by blocking later dealings from being registered: s 74H Real Property Act 1900 (NSW)
Note that Old System has no equivalent concept – caveats are a creation of the Real Property Act.
Lapsing Notices
s 74J Real Property Act 1900 (NSW) allows the registered proprietor of an estate or interest in the land to
serve a lapsing notice on the person who has registered a caveat
o The caveator must obtain an order from the Supreme Court to extend the operation of the caveat,
and lodge this with the Registrar-General, within 21 days of being served with the lapsing notice: s
74J(1) Real Property Act 1900 (NSW)
o If the caveator does not obtain an order or lodge the order within 21 days, the Registrar-General is
to record that the caveat has lapsed: s 74J(4) Real Property Act 1900 (NSW)
Withdrawal of Caveats
s 74M Real Property Act 1900 (NSW) allows the caveator to withdraw the caveat
s 74MA Real Property Act 1900 (NSW) allows any person with an interest in land subject to a caveat to apply
to the Supreme Court for an order that the caveat be withdrawn
Right to Caveat
s 74F Real Property Act 1900 (NSW) allows a person who claims to be entitled to a legal or equitable interest
in land may lodge a caveat with the Registrar-General
Sinclair v Hope Investments Pty Limited [1982] 2 NSWLR 870
o A registered proprietor was allowed to lodge a caveat over his own property claiming an estate as
the mortgagor, arising from an improper sale by the mortgagee
o Therefore a registered proprietor is entitled to lodge a caveat over their own property where the
interest claimed is other than the interest registered
Note that this view is not approved of by Victorian courts: Swanston Mortgage Pty Limited v Trepan Pty
Limited [1994] 1 VR 672
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Unregistered Interests under Torrens Title a
Formal Requirements
s 74F(5) Real Property Act 1900 (NSW)
A caveat lodged under this section must:
o (a) be in the approved form,
o (b) specify:
(i) the name of the caveator,
(ii) where the caveator is not a body corporate - the residential address of the caveator,
(iii) where the caveator is a body corporate - the address of the registered office of the body
corporate,
(iv) unless the Registrar-General dispenses with those particulars - the name and address of the
registered proprietor concerned,
(v) the prescribed particulars of the legal or equitable estate or interest, or the right arising out of a
restrictive covenant, to which the caveator claims to be entitled,
(vi) the current reference allocated by the Registrar-General to the folio of the Register, or, as the
case may be, the lease, mortgage or charge, to which the caveat relates,
(vii) where the caveat relates only to part of the land described in a folio of the Register or a current
lease-a description of that part in the form or manner prescribed, and
(viii) an address in New South Wales at which notices may be served on the caveator (and, if that
address is a box at a document exchange, an alternative address in New South Wales that is not such
a box),
o (c) be verified by statutory declaration, and
o (d) be signed by the caveator or by a solicitor or other agent of the caveator.
Kerabee Park Pty Limited v Daley [1978] 2 NSWLR 222 has interpreted s 74F(5)(b)(v) to mean:
(i.e. if a caveat does not include these things, then it is not effective)
o The precise nature of the interest (e.g. whether it is an interest as a purchaser, mortgagee, etc.)
o The precise date of the interest (e.g. 1 January 2003)
o The precise quantum of the interest
s 74L Real Property Act 1900 (NSW) allows the court to disregard any failure of the caveator to strictly
comply with the requirements of the Act with respect to the form of the caveat.
o However, note that s 74L will not cure a caveat which does not include the elements under Kerabee
Park v Daley.
Effect of Lodging Caveat
A caveat will operate by blocking later dealings from being registered: s 74H Real Property Act 1900 (NSW)
A caveat that is found to be ineffective, and later relodged, will not act to prohibit any dealings prior to when
it was relodged: s 36(6), 36(6AA) Real Property Act 1900 (NSW)
Re Rush and the Real Property Act [1963] NSWR 78
o An initial caveat was bad in form. A mortgage was later lodged, and a lapsing notice was later served
on the caveator. Instead of correcting the form of the caveat under s 74L, the caveator then placed a
second caveat on the land in the correct form.
o It was held that the first caveat was undefended. Whether it was bad in form and good in substance
was irrelevant as it had lapsed. The second caveat did not act retrospectively. The mortgage was
registered.
Godfrey Constructions v Kanangra (1972) 128 CLR 529
o A vendor exchanged contracts with a first purchaser. However, there was a disagreement regarding
settlement and the vendor terminated the contract. The first purchaser maintained he had settled as
required, and placed a caveat on the land. The vendor attempted to sell to a second purchaser, who
refused to complete until the caveat was removed. The vendor terminated again.
o Held that the obligation is on the vendor to attend to a caveat before he can compel a purchaser
to settle.
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Unregistered Interests under Torrens Title a
Caveats by Registrar-General
s 82 Real Property Act 1900 (NSW) precludes trusts from being registered
However, s 82(1) indicates that the Registrar-General may register a caveat under s 12(1)(f) to protect the
interest of beneficiaries of a trust
Caveats Lodged without Reasonable Cause
s 74P(1)(a) Real Property Act 1900 (NSW) allows a person to claim compensation for a caveat lodged without
reasonable cause.
Beca Developments Pty Limited v Idameneo (No 92) Pty Limited (1990) 21 NSWLR 459
o To sustain a claim under s 74P it must be shown that:
The caveator did not have a caveatable interest
The caveator did not have an honest belief based on reasonable grounds that a caveatable
interest existed
The caveator lodged the caveat deliberately to infringe the interest of the registered
proprietor or other interested person
Hillpalm v Wilson [2009] NSWSC 362
o A man continually lodged false caveats on properties owned by his former partner. On one property,
he lodged a caveat immediately before an auction, meaning the auction had to be delayed. By the
time an auction was held, the market had contracted and the property devalued by some $100K.
o It was held that the caveator was liable for the legal costs as well as the amount lost on the property.
s 74P(1)(b) Real Property Act 1900 (NSW) allows a caveator to claim compensation when a person procures
the lapsing of a caveat without reasonable cause
o Note that a caveator cannot bring proceedings if, having the opportunity to do, failed to take all
reasonable steps necessary to prevent the caveat from lapsing: s 74P(3).
Injunctions to Restrain Further Caveats
There is no obligation on the Registrar- General to ensure that a caveator is entitled to the interest claimed
in a caveat: s 74Q Real Property Act 1900 (NSW)
However, s 74O indicates that:
o s 74O(1) – where a caveat lapses or is withdrawn, and another caveat is lodged against the same
estate and purporting to be based on the same facts as the first caveat
o s 74O(2) – that caveat is ineffective unless:
(a) The Supreme Court has made an order giving leave for the lodgement of the caveat, or
(b) The caveat is endorsed by the registered proprietor of the estate affected by the caveat
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Unregistered Interests under Torrens Title a
Priorities between Unregistered Interests
Where the equities are equal:
Earlier
Later
Legal
v
Legal
Legal
v
Equitable
Equitable
v
Legal
Equitable
v
Equitable
Priority
Earlier legal:
Nemo dat quod non habet
Earlier legal:
Northern Counties v Whipp (1884) 26 Ch D 482
Later legal:
Wilkes v Spooner [1911] 2 KB 473
Earlier equitable:
qui prior est tempore potior est jure:
Rice v Rice (1853) 2 Drew 73 at 78; 61 ER 646 at 648
However, if the equities are not equal:
Postponing conduct will cause an earlier interest to fail
Notice (actual / constructive / imputed) will cause a later interest to fail
Postponing Conduct
Failure to take Possession of Title Deeds
Walker v Linom [1907] 2 Ch 104
o Old System case which also applies to unregistered Torrens interests
o A man owns a series of properties, and wishes to establish a family trust for the benefit of his wife
and children. He conveys a number of his properties to his solicitor, who is acting as the trustee,
however he does not provide the title deeds for one property. He then sells this to a third party.
o Normally, the earlier legal interest of the trustee would prevail.
o However, it was held that the trustee had committed postponing conduct by failing to take
possession of the title deeds. The trustee was postponed, and the purchaser succeeded.
Failure to Retain Possession of Title Deeds
Northern Counties of England Fire Insurance v Whipp (1884) 26 Ch D 482
o Old System case which also applies to unregistered Torrens interests
o An employee borrowed money from his employer to purchase a property, and then gave his
employer a mortgage. The title deeds were stored in the employer’s safe. However, the employee
had access to this safe, stole the title deeds and sold the property to a third party.
o Normally, the earlier legal interest of the employer would succeed.
o However, it was held that you commit postponing conduct where you fail to retain possession of
title deeds by an act of gross negligence (not in the tortious sense, but in an equitable sense).
o On these facts, the employer merely had a rogue employee and was not grossly negligent.
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Unregistered Interests under Torrens Title a
Premature Release of Title Deeds / Receipt Clause where Money not Received
Reliance Finance v Heid [1982] 1 NSWLR 466
Heid v Reliance Finance (1983) 154 CLR 326
o Heid negotiated to sell a property to Connell Investments for:
A deposit of $15K
Vendor Finance (i.e. a mortgage) of $50K
A balance of $100K
Connell Investments had an employee which they held out to be a lawyer, and invited Heid to make
use of the lawyer for the transaction. Heid received the initial $15K and then, planning to go
overseas, signed a transfer and indicated that he had received the balance. Connell Investments
never paid the balance and got registered. They then:
Took a mortgage for $80K from Reliance
Took a mortgage for $12K from Stormar
Took a mortgage for $40K from Alexander
Took a mortgage for $20K from Reliance
Took a mortgage for $45K from Irving
Each party only knew about the first mortgage to Reliance, which was unregistered anyway. Upon
Heid’s return to Australia, a dispute arose between Reliance and Heid as to who had the better
interest in the property (remember Heid had a mortgage for $50K and $100K vendor’s lien).
o Court of Appeal:
Held that Heid chose to use the other side’s solicitor, and he was (objectively) handing the
transfer to the solicitor for the other side, rather than his own agent. As such, he had
committed an act of postponing conduct.
o High Court:
Upheld the Court of Appeal’s decision, but added to it.
Mason & Deane JJ
Held that Heid knew the lawyer was an employee of Connell Investments. When
Heid handed documents to the lawyer, he was handing it to an employee of the
other side (and thus giving it to the other side).
Gibbs & Murphy JJ
Held that Heid represented he had been paid by handing the documents to the
lawyer. Reliance Finance acted on that representation to its detriment, and Heid was
therefore estopped from asserting to Reliance Finance that he had not been fully
paid.
Lloyds Bank v Bullock [1896] 2 Ch 192
o H owned a property which he had mortgaged to a building society. On his death, his property was
left to his children, including Bullock. The family solicitor (C) indicated to the building society that the
children were going to sell the property and they therefore signed a deed of reconveyance in
escrow. Unknown to the building society, C then purchases the property from the children and
grants a deed of mortgage to Llouds Bank.
o The disputes were therefore as follows:
Building Society v Bullock – The building society has the legal estate, as the discharge of
mortgage was only signed in escrow. No postponing conduct as held to have been
committed by the building society.
Building Society v Lloyds Bank – The bank only had an equitable interest by reason of nemo
dat quod non habet. As such, the above applies.
Bollock v Lloyds Bank – Both parties had an equitable interest. The children were held to
have engaged in postponing conduct as they were aware C was the purchaser.
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Unregistered Interests under Torrens Title a
The Dealing does not Reflect the Transaction
See e.g. Breskvar v Wall (1971)
o As Breskvar had signed a transfer of property although he was not selling, Alban was entitled to
assume the dealing was correct and Alban therefore succeeded.
Failure to Caveat
Butler v Fairclough (1917) 23 CLR 78
o A registered proprietor created a first mortgage, which was registered. A second mortgage was
created in favour of Butler, but was not registered. The property was then sold to Fairclough on 2/7.
Butler lodged a caveat on 7/7, and Fairclough lodged a transfer on 12/7.
o The High Court held that Fairclough had no way of knowing of Butler’s mortgage prior to purchasing
the property as Butler did not register or avail himself of the mortgaging procedure the Real
Property Act had created.
o As such, a second or subsequent mortgagee who does not register or caveat will be postponed.
Lapin v Abigail (1930) 44 CLR 166, 204-205
o Dixon J criticised Butler v Fairclough as distorting the purpose of caveats which were created by
Parliament to protect unregistered interests rather than postpone them. However, He noted that it
has stood as good authority for years and is unlikely to be overturned.
J & H Just v Bank of NSW (1971) 125 CLR 546
o Registered proprietor created a mortgage in favour of Bank of NSW, and provided them with the
Certificate of Title. The mortgage was not registered. The registered proprietor then created a
mortgage in favour of J & H Just, and represented that the CT was with the Bank of NSW for “safe
keeping”. A dispute arose when J & H Just attempted to register the mortgage.
o The High Court held that the Bank of NSW should not be postponed as the bank was the first
mortgagee and had possession of the CT. J & H Just had constructive notice of the first mortgage as
they were aware that the Bank of NSW had the CT.
Person to Person v Sharari [1984] 1 NSWLR 745 – affirmed Butler v Fairclough – a second mortgagee will be
postponed if they fail to register their mortgage
Avco Financial v Fishman [1993] 1 VR 90; Osmanoski v Rose [1974] VR 523; Jacobs v Platt Nominees [1990]
VR 146
o All three cases dealt with whether a purchaser should caveat upon the exchange of contracts.
o Osmanoski seemed to indicate ‘yes’, but Avco and Jacobs appeared to retract that statement
Black v Garnock [2007] HCA 31
o Held:
Callinan J indicated that caveats do more than just protect interests – they also provide
notice to the world. A purchaser who does not caveat ought to be postponed.
Gleeson CJ agreed with Callinan J, but did not refer explicitly to postponing conduct.
Gummow and Hayne JJ agree that a purchaser can caveat after exchanging contracts, but do
not deal with postponing conduct at all.
Crennan J does not consider caveats in her judgment.
o It is therefore possible that a purchaser should caveat after the exchange of contracts or be
postponed (and it would certainly be advisable to do so as a matter of conveyancing practice).
A Beneficiary may be Postponed by the Trustee’s Conduct
A beneficiary is bound by the postponing conduct of a trustee except where:
o The trustee defrauds beneficiaries: Shropshire Union Railways v R (1857) LR 7 HL 496
o The trustee acts in breach of trust power: Cave v Cave (1880) 15 Ch D 639
e.g. In Lloyds Bank v Bullock, it did not matter that Bullock, but another child holding it on trust, signed the
transfer.
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Unregistered Interests under Torrens Title
Page 35 of 68
Unregistered Interests under Torrens Title a
What is an Unregistered Legal Interest?
Unregistered leases may be legal
o s 23D Conveyancing Act 1919 (NSW) indicates that an unregistered lease is legal if:
The period of the lease if three years or les (but that excludes options, unlike s 42)
Best rent reasonable obtainable (i.e. market rent)
There is an immediate right to possession
o The lease may be oral: s 23D Conveyancing Act 1919 (NSW)
o s 42(1)(d) – The short tenancy exception to indefeasibility creates an equitable interest
o s 53 – If a lease is more than three years and unregistered, it is an equitable interest (although a
right in personam against the landlord continues to exist)
See Chan v Cresdon (1989) 168 CLR 242; Leitz Leeholme Stud v Robinson NSWLR 544
o An agreement to grant a lease is equitable: Walsh v Lonsdale (1882) 21 Ch D 9
Dealing Registrable
o s 43A Real Property Act 1900 (NSW) indicates that a dealing registrable is a legal interest if:
Accompanied by the Certificate of Title or a direction to the Registrar-General to use the
Certificate of Title if they already possess it: s 36(6) Real Property Act 1900 (NSW)
The dealing must be a transfer or first mortgage as these are the only persons who may have
taken possession of the Certificate of Title
Must occur after settlement and before registration (as it is only after settlement the person
may take possession of the Certificate of Title)
The dealing must be stamped and stamp duty paid
Must not have a formal defect
Must not be void (as indefeasible title has not set in): Mayer v Coe (1968); Jonray (Sydney)
Pty Limited v Partridge Brothers Pty Limited (1969).
It is the next dealing to be registered
Only operates “for the purposes of protection against notice” (i.e. there was no notice
beforehand): IAC (Finance) Pty Limited v Courtenay (1963) 110 CLR 550; Meriton Apartments
Pty Limited v McLaurin & Tait (1076) 133 CLR 671.
o IAC (Finance) Pty Limited v Courtenay (1963) 110 CLR 550
Austin sold land to the Courtenays. The transfer was lodged, but not registered. Austin later
offered to buy the property back, and sold the land to Denton. Austin withdrew the transfer
to the Courtenays, but did not pay the agreed sum for the re-sale. Denton found out about
the re-sale, but proceeded to settle and then lodged for registration and also granted
mortgages in favour of IAC and Hermes.
Held that Denton did not have better title than the Courtenays as s43A offered no
protection when there was notice prior to settlement. IAC and Hermes did not have good
title as their instrument was not the next to be registered – it was held they were taking
through Denton, and so they could not have a dealing registrable if Denton’s interest was
not registered
o Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671
Appears to support the “successive effect” doctrine – that is, if A has s 43A protection and B
derives title from A, then B may also get s 43A protection
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Unregistered Interests under Torrens Title
Page 36 of 68
Mortgages a
Mortgages
Creation of Mortgages
Under old system title
o Legal mortgage – created by deed – s 23B Conveyancing Act 1919 (NSW)
o Equitable mortgage –
In writing which identifies all the essential terms: s 23C Conveyancing Act 1919 (NSW); or
Supported by acts of part performance: s 23E Conveyancing Act 1919 (NSW)
Unregistered mortgages can include:
A mortgage by deposit of title deeds, whether there was a written agreement or
not: Convey v Burns (1922) 30 CLR 216
An agreement to grant a mortgage (i.e. a signed loan agreement): ANZ Banking
Group v Widin (1990) 26 FCR 21
An ineffective attempt to create a legal mortgage because the document does not
comply with the formalities of a deed: Swiss Bank Corp v Lloyd Bank Limited [1982]
AC 584, 594-595
Under Torrens Title
o Registered mortgage –
Execution of the approved form of mortgage: s 56 Real Property Act 1900 (NSW)
Takes effect as a statutory charge: s 57 Real Property Act 1900 (NSW)
o Unregistered mortgage –
Are equitable mortgages only
Includes all the mortgages which constitute an equitable mortgage under old system title
Equity of Redemption
Equity of Redemption – the mortgagor’s right to have the property reconveyed in their favour upon
repayment of the debt in full: Santley v Wilde (1899) 2 Ch 474.
o The duration of the equity of redemption is a combined period of the contractual right to redeem
and the equitable right to redeem: Kreglinger v New Patagonia Meat [1914] AC 25
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 37 of 68
Mortgages a
Tacking
Old System title
o Tabula in naufragio – grabbing hold of the shipwreck
o Recognised in Taylor v Russell [1892] AC 244:
If the third mortgagee buys out the first mortgagee, they become the first mortgagee
If the third mortgagee had no notice of the second mortgagee at the time they granted their
mortgage, they can ‘tack’ their third mortgage onto the first mortgage and gain priority over
the second mortgagee for the entire sum
o A first mortgagee may also claim a second subsequent advance based on the above concept:
Hopkinson v Rolt (1861) 9 HL Cas 514; West v Williams [1899] 1 Ch 132
o A first mortgagee may also claim subsequent advances under the first mortgage (i.e. instalments of X
were loaned over time up to a maximum of Y), provided they had no actual notice of the second
mortgagee: Re O’Byrne’s Estate (1885) 15 LR Ir 189 at 373.
o If the first mortgagee’s mortgage does not provide for further specific advances, or the initial
advance and any further advances, then he will be subject to actual, constructive or imputed notice
of the second mortgagee: Credland v Potter (1874) LR 10 Ch App 8.
Torrens title
o The law for Old System title is also applicable to Torrens title, except in the case of further advances
by the first mortgagee: Matzner v Clyde Securities Limited [1975] 2 NSWLR 293.
The rule against tacking with notice of the second mortgagee has no application where the
first mortgagee is bound to make, and the mortgagor is bound to accept, advances made
after the date of the second mortgage, nor will it apply in a case such as the present, if for
no other reason, because the advances under the first mortgage had the effect of
increasing, not decreasing, the value of the mortgaged property.
o Note, however, Westpac Banking Corporation v Adelaide Bank Limited [2005] NSWSC 517:
“It is therefore unnecessary to consider whether the rule in Hopkinson v Rolt would cease to
apply, merely if it were shown that the subsequent advance was applied towards the
improvement of the secured property. Such a finding would go beyond what was decided
in Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 303.” White J at [60]
The Law of Tacking
1. OST:
o The doctrine of tabula in naufragio allows a third mortgagee to purchase the first mortgage and tack the
amount of their third mortgage onto it, provided they had no actual, constructive or imputed notice of the
second mortgage when they lent money: Taylor v Russell (1892).
o The same concept applies to a first mortgagee making subsequent advances: Hopkinson v Rolt (1861).
o However, if the first mortgage specifies specific further advances, the first mortgagee will only be subject to
actual notice of the second mortgagee: Re O’Byrne’s Estate (1885).
2. Torrens:
o The Old System law applies to Torrens Title, except in the case of further advances by the first mortgagee:
Matzner v Clyde (1975). Under Torrens, a first mortgagee may only tack further advances where:
They are bound to make, and the mortgagor bound to accept, advances
The advances had the effect of increasing, not decreasing, the value of the property
o However, it has been suggested that a first mortgagee could not tack a subsequent advance which merely
improved the value of the property and was not required under the mortgage: Westpac v Adelaide Bank
(2005).
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 38 of 68
Mortgages a
Penalty Provisions
Penalty provisions in contracts are void ab initio: Dunlop v New Garage and Motor Co (1915); AMEV Finance
v Austin (1986), etc.
There are two classes of clauses in which there can be no question of penalty: O’Dea v All States Finance
(1983) 152 CLR 359
o Strode v Parker clause
A clause that has the effect of reducing the amount of interest due in the event the
mortgagor pays on time is not a penalty clause, as it rewards a mortgagor who pays on time:
Strode v Parker (1694) 32 ER 804.
o Wanner v Caruana [1974] 2 NSWLR 301
Equity regards a provision which retrospectively imposes a higher rate of interest (or preemptively imposes it under an acceleration clause) as a penalty unless the mortgagee can
show that the compensation provided by such a clause is a genuine pre-estimate of the
mortgagee’s anticipated loss caused by the default of the mortgagor
s 93(1) Conveyancing Act 1919 (NSW) allows a mortgagor to exit a mortgage early, provided that they pay
interest for the unexpired term of the loan. However, a mortgagee CANNOT invoke s 93 when demanding
early payment (e.g. upon default).
o Steindlberger v Mistroni (1992) 29 NSWLR 351 involved a contractual term allowing the mortgagor to
redeem the mortgage early, provided they pay three months interest after repaying the outstanding
principal (i.e. instead of paying interest for the life of the loan). It was held to be enforceable: it
effectively brought the date of redemption forward and 93(1) therefore had no application.
i.e. a contractual term allowing the mortgagor to redeem the mortgage early, and requiring they
pay interest less than that owing on the term of the loan, will be enforceable.
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 39 of 68
Mortgages a
Powers of Mortgagee
Foreclosure
Operates by extinguishing the equity of redemption
May only take place after an attempted mortgagee sale
o This is governed by ss 99A & 100 Conveyancing Act 1919 (NSW) for Torrens Title mortgages, and ss
61 & 62 Real Property Act 1900 (NSW) for all unregistered and old system mortgages.
Steps:
1. Default – this is all that is required for the mortgagee to take possession:
s 60 Real Property Act 1900 (NSW)
2. A notice to remedy the default within one month is served on the mortgagor:
s 57 Real Property Act 1900 (NSW) (s 57(2)(b) notice)
s 111 Conveyancing Act 1919 (NSW) (s 111(2)(b) notice)
3. Non-compliance with the notice – the right to a mortgagee sale now arises – see below
4. A properly conducted auction was held:
s 61(2)(b) Real Property Act 1900 (NSW)
s 99A(1)(b) Conveyancing Act 1919 (NSW)
5. At the auction, the highest bid was less than the debt owed:
s 61(2)(c) Real Property Act 1900 (NSW)
s 99A(1)(c) Conveyancing Act 1919 (NSW)
6. A Notice of Intention for Foreclosure (or decree nisi for OST) must be made and served on the
mortgagor:
s 61(2)(d) Real Property Act 1900 (NSW)
s 99A(1)(d) Conveyancing Act 1919 (NSW)
7. After the notice has been served, the default is not remedied for six months
s 61(2)(a) Real Property Act 1900 (NSW)
s 99A(1)(a) Conveyancing Act 1919 (NSW)
8. An Application for Foreclosure Order is made:
To the Registrar-General: s 61 Real Property Act 1900 (NSW)
To the Supreme Court: s 99A Conveyancing Act 1919 (NSW)
9. After the order absolute is made in favour of the mortgagee by the Registrar-General or the
Supreme Court, the mortgagee becomes the registered proprietor of the land.
s 62 Real Property Act 1900 (NSW)
s 100 Conveyancing Act 1919 (NSW)
The foreclosure will also extinguish any right of the mortgagee to bring an action against the
mortgagor for the debt – they exchange the debt for title to the land.
Fink v Robertson (1907) 4 CLR 864
s 100(1) Conveyancing Act 1919 (NSW)
Personal Covenant
A mortgagee may sue “on the personal covenant”
o i.e. may sue the mortgagor for any default under the mortgage contract
The mortgage may also pursue the mortgagor for any shortfalls after a mortgagee sale: s 100 Conveyancing
Act 1919 (NSW)
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 40 of 68
Mortgages a
Possession
Under Old System mortgages the mortgagee had a right to possess the land regardless of whether there was
a default or not, as they owned the legal estate: Four Maids Limited v Dudley Marshall (Properties) Limited
[1957] 1 Ch 317.
o However the mortgagee’s right to possession was impliedly excluded so long as the mortgagor was
not in breach: Esso Petroleum Co Limited v Alstonville Properties Limited [1957] 1 WLR 1474
Under Torrens Title the mortgagor is entitled to retain possession until there is a default, at which point the
mortgagee has a right to possession: s 60 Conveyancing Act 1919 (NSW)
Receiver to Collect Rents
Under both Old System and Torrens title, the mortgagee is entitled to appoint a receiver once there is a
default: ss 115A, 109(1)(c), 109(5) Conveyancing Act 1919 (NSW)
The receiver may:
o Manage the mortgaged property
o Receive income n the name of the mortgagor or mortgagee
o Exercise any powers delegated by the mortgagee
Improvement of Property
If the mortgagee is in possession they are entitled to spend money preparing and improve the property to
ensure it is in a saleable condition, and is entitled to be reimbursed for this expenditure: Matzner v Clyde
Securities Limited (1975) 1 NSWLR 293
Any improvements must not change the character of the property, and any expenditure must be justifiable
at the time: Southwell v Roberts (1940) 63 CLR 581
Sale
Right TO
exercise
sale –
not HOW
to
exercise
Governed by:
o ss 57 & 58A Real Property Act 1900 (NSW) for registered Torrens mortgages
o s 111 Conveyancing Act 1919 (NSW) for all unregistered and Old System mortgages
Steps to constitute a valid basis for the exercise of power of sale:
1. Default – this is all that is required for the mortgagee to take possession:
s 60 Real Property Act 1900 (NSW)
2. A notice to remedy the default within one month is served on the mortgagor:
s 57 Real Property Act 1900 (NSW) (s 57(2)(b) notice)
s 111 Conveyancing Act 1919 (NSW) (s 111(2)(b) notice)
3. Non-compliance with the notice – the right to a mortgagee sale now arises
Failure to comply with these requirements may result in the mortgagor being restrained from carrying out a
sale of having a sale already effected set aside
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 41 of 68
Mortgages a
Duties of Mortgagee when Exercising Right to Sell
Sale Necessary
The requirement for a ‘sale’ has been interpreted as meaning a ‘genuine sale’
The law in this area is unclear. There are currently two tests:
o Mortgagee must take reasonable care to obtain the best possible price
Cuckmere Brick v Mutual Finance [1971] 1 Ch 949
o Mortgagee must act bona fide and not recklessly (good faith test)
Kennedy v De Trafford [1897] AC 180
Summary of Current Preferences:
Reasonable Care
Bona Fide (Good Faith Test)
Mason J (Forsyth v Blundell)
Griffith CJ (Pendlebury v Colonial)
Barton J (Pendlebury v Colonial)
Jacobs J (ANZ v Bangadilly)
Einstein J (State Bank NSW v Chia)
Federal Court (Gomez v State Bank NSW)
The case law:
Pendlebury v Colonial Mutual Life
Assurance Society Ltd (1912)
13 CLR 676
Note that the decision here was
ratio, rather than obiter, and is
probably the best authority.
Forsyth v Blundell (1973)
129 CLR 477
Kane Kersaitis (11011386)
The property was in North-West
Victoria. The mortgagee
advertised in two Melbourne
newspapers, but the ad failed to
refer to the better features of the
property. The land was valued at
£2,000 but only sold for £720. The
purchaser also colluded with an
employee of the mortgagee.
It was held the sale was not
exercised correctly.
The property was valued at $150K.
One purchaser offered $150K and
spoke with the mortgagor, which
is brought to the mortgagor’s real
estate agent’s attention. However,
the agent does not speak with this
purchaser, and the property sells
for $120K to a different purchaser.
70317 - Real Property - Notes
Mortgages
Good Faith includes Reasonable Care
Isaacs J (Pendlebury v Colonial)
Menzies J (Forsyth v Blundell)
Aickin J (ANZ v Bangadilly)
Griffith CJ
The mortgagee has a duty to act in
good faith. This means not recklessly or
wilfully sacrificing the interest of the
mortgagor
Barton J
Approved Kennedy – the good faith test
applies.
Isaacs J
The duty to act in good faith includes
the duty to take reasonable care to
obtain the best price.
Menzies J
The duty to act in good faith includes
the duty to take steps to obtain the best
price.
Walsh J
The two tests did not need to be
resolved, as in this case it was clear that
the mortgagee has acted with
calculated indifference.
Mason J
A mortgagee must take reasonable
precautions to obtain a reasonable
price, but in this case they have
breached both tests.
Page 42 of 68
Mortgages a
ANZ v Bangadilly Pastoral (1978)
139 CLR 195
Commercial & General Acceptance
Ltd v Nixon (1981)
152 CLR 491
IN NSW?
State Bank of NSW v Chia (2000)
50 NSWLR 587
Gomez v State Bank of NSW
[2002]
FCA FC 442
Hall investments purchase a
property called Bangadilly for
$470K. Contracts are exchanged
and a deposit of $200K is paid to
the vendor, Talga Pastoral.
However, the Halls realise that
two mortgagees of the property
are ready to exercise their power
of sale. The Halls have another
company of theirs, Halco Products,
purchase the first mortgage and
exercise the power of sale. The
auction is advertised once and
held on 23 December. The Halls
rename yet another of their
companies to Bangadilly Pastoral,
and purchase the property for
$265K. The second mortgagee,
ANZ, therefore received no money
from the sale.
Under relevant Qld statute, a
mortgagee must exercise
reasonable care to obtain market
value. The property sold for less
than market value.
All justices held that selling to yourself
cannot possibly be a true sale as there
is a conflict of interest.
Stephen J
Does not distinguish between the two
tests, but indicates the sale was
improperly conducted
Jacobs J
Applies the good faith test.
Aickin J
The duty to act in good faith
incorporates a duty to obtain the best
price.
Gibbs CJ
The mortgagee is not a trustee – there
is no fiduciary duty. However, they
cannot wilfully sacrifice the mortgagor’s
position. The two lines of authority are
irreconcilable, but do not need to be
dealt with here.
Aickin J
The duty to act in good faith
incorporates a duty to obtain the best
price.
Mason, Wilson & Brennan JJ
Note that there are two lines of
authority which do not need to be
resolved in this case.
per Einstein J: the reasonable care to obtain best possible price test has no
application in NSW
The full Federal Court approved Einstein J in Chia
Also indicated that the approach of Menzies J in Forsyth v Blundell may be
correct – i.e. the 2 lines of authority are not irreconcilable and that duty to
act in good faith includes duty to take reasonable care
NOTE THAT STATUTE WILL SOON OVERRIDE THE CASE LAW IN NSW:
s 111A Conveyancing Act 1919 (NSW) – not yet commenced
(contained in Schedule 2 of the Real Property and Conveyancing Amendment Act 2009)
(1) A mortgagee or chargee, in exercising a power of sale in respect of mortgaged or charged land, must take
reasonable care to ensure that the land is sold for:
o (a) if the land has an ascertainable market value when it is sold - not less than its market value, or
o (b) in any other case - the best price that may reasonably be obtained in the circumstances.
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 43 of 68
Mortgages a
Remedies Available to Mortgagor
Types of damages:
o Injunction to restrain sale
Generally not granted unless the amount of the mortgagee’s claim is paid into court: Inglis v
Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164.
Sometimes the courts may only require a lesser amount if there is a dispute as to whether
the mortgagee has breached the duty owed to the mortgagor: Harvey v McWatters (1949)
49 SR (NSW) 173 at 178
o Damages
Allfox Building Pty Ltd v Bank of Melbourne Limited (1992) NSW ConvR 55-634 set out the principles:
o The remedy of a mortgagor lies in equity and nowhere else
o An injunction will not be granted merely because the amount due is in dispute or the mortgagor
objects to the manner in which a sale is being arranged. The mortgagee will only be restrained if the
mortgagor pays the amount into Court, or the claim is clearly excessive.
o The exceptions to this rule are when:
The validity of the mortgage is in issue
The availability of power of sale is in issue because
The breach of covenant which the mortgagee relies upon is challenged
The power of sale is being improperly exercised (e.g. s 57(2)(b) notice not issued)
o The first point to be established in an action is whether the challenge is based upon the nonexistence or lack of a power of sale, or upon some other ground.
If the challenge is based upon non-existence of lack of a power of sale, the auxiliary
jurisdiction in Equity is invoked and does not require the mortgagor to do equity – i.e. they
do not need to bring money into court: see Mayfair Trading Co v Dreyer (1958) 101 CLR 428
If the challenge is based upon another ground, the exclusive jurisdiction in Equity is invoked
and requires the mortgagor to do equity – i.e. they do need to bring money into court.
i.e:
No injunction unless:
o Mortgagor pays amount into court
o The claim is clearly excessive
o The validity of the mortgage is at issue
o The power of sale is at issue because:
the mortgagee was not in default, or
the power is being improperly exercised (e.g. s 57(2)(b) notice not issued)
The first point to establish is the basis of the challenge:
o If the challenge is the non-existence of power of sale, the mortgagee need not do equity: Mayfair
Trading v Dreyer (1958)
o If the challenge is on other grounds, the mortgagee must do equity (bring money into court)
Note that a purchaser of a bad mortgagee sale is in a competing equities situation, where the later equitable
interest of the purchaser under contract for sale competes against the earlier equitable interest of the
mortgagor to have the sale set aside.
o The mortgagor’s equitable interest may lapse by the effluxion of time: Latec Investments v Hotel
Terrigal Pty Ltd (in liq) (1965) 113 CLR 265
However, if the sale has been completed, then indefeasibility of title sets in –
o If the purchaser is innocent, the mortgagor is limited to damages: Forsyth v Blundell (1973) 129 CLR 477
o If the purchaser is tainted, the court may still set aside the sale: ANZ v Bangadilly Pastoral (1978) 139
CLR 195
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 44 of 68
Old System, Qualified and Possessory Title a
Old System, Qualified and Possessory Title
Priorities under OST
See above discussion of priorities of unregistered Torrens Title interests – the law on postponing conduct and notice
is the same.
Legal interests under OST are:
A purchaser who has a deed of conveyance at settlement
A mortgagee who has a first mortgage by deed at settlement
A lessee who has a deed of lease
A lessee who has a deed complying with s 23D Conveyancing Act 1919 (NSW)
o 3 years or less
o Best rent reasonably obtainable (i.e. market rent)
o Immediate right to possession
A person with the benefit of a deed of easement
Equitable interests under OST are:
A purchaser who has exchanged contracts
A mortgage which is not the first mortgage by deed (e.g. second mortgage, mortgage by deposit of title
deeds)
Leases which do not satisfy the requirements of s 23D Conveyancing Act 1919 (NSW)
Beneficiaries under a trust
The mortgagor’s equity of redemption
Restrictive covenants (see below)
Deeds
s 38 Conveyancing Act 1919 (NSW) changes the common law requirements of a deed. It requires:
1. Signed
2. Attested by at least one witness not being a party to the deed (no popular form of words shall be
requisite for the attestation)
3. Expressed to be a deed
NB: The deed is deemed sealed if the above three conditions apply
Kane Kersaitis (11011386)
70317 - Real Property - Notes
Mortgages
Page 45 of 68
Old System, Qualified and Possessory Title a
The Register of Deeds
The Registrar-General is required to maintain a General Register Deeds: s 184C Conveyancing Act 1919 (NSW)
It is not possible to register instruments that solely affect Torrens Land and are in a registrable form: s 184B(1).
s 184G(1) provides a registered instrument will prevail if:
There are two competing interests created by instruments
The registered interest is taken from an effective instrument
o Registration does not fix a void document: re Cooper: Cooper v Vesey (1882) 20 Ch D 611
In Cooper, a forged document was registered. It was nonetheless found to be void.
The registered person has paid valuable consideration
o ‘Valuable’ means ‘substantial and not nominal’: Bullen v A’Beckett (1863) 15 ER 684
The registered person was bona fide
o An instrument is not executed bona fide if the person had notice (actual, constructive or imputed) of
the interest over which priority is sought: Marsden v Campbell (1897) 18 LR (NSW) (Eq) 33
The purchaser had actual notice that the mortgagee was grazing sheep on the land. The purchaser
was not aware the mortgagee was also the tenant.
The court held that the purchaser was required to make all the enquiries that a reasonable person
in his position would have made, such as asking the mortgagee the basis upon which the property
was being used for grazing animals. The purchaser had constructive notice of the lease.
o
o
o
Scholes v Blunt (1917) 17 SR (NSW) 36
A purchaser exchanged contracts. He then received notice of an earlier conflicting interest,
but proceeded to settlement anyway and registered the instrument.
Held the purchaser was not bona fide. The instrument was registered at settlement and they
had settled with notice of the earlier interest.
Burrows v Crimp (1887) 8 LR (NSW) 36
A purchaser received notice of an earlier conflicting interest after settlement. He registered
the instrument.
Held that the purchaser was bona fide as they took their interest without notice. Later
registration to preserve that interest does not negate their bona fides.
Moonking Gee v Tahos (1960) 80 WN (NSW) 1612
A purchaser exchanged contracts. He then received notice of an earlier conflicting interest.
He did not proceed to settlement, but registered the contract for sale of land.
Held that the purchaser was bona fide as they took the contract for sale of land with bona
fides.
s 184G means that an registered equitable interest will prevail over an inconsistent interest, and will allow the
holder of the interest to acquire the legal estate: Darbyshire v Darbyshire (1905) 2 CLR 787; Moonking Gee v Tahos
(1960) 80 WN (NSW) 1612.
Primary Applications
Takes effect under Pt IV Real Property Act 1900 (NSW)
An application under this section must be accompanied by evidence and documents as the Registrar-General
may require: s 14(4) RP Act. The land is brought under the RP Act by creating an ordinary folio for it.
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Old System, Qualified and Possessory Title a
Qualified Title
Takes effect under Pt IV Real Property Act 1900 (NSW) (ss 28A – 28R)
Allows previously created OST interests to subsist, but later ones to be defeated by indefeasibility
Qualified title land is subject to a ‘caution’ which indicates that it is subject to subsisting OST interests: s 28J
s 28M indicates when the caution will lapse:
o If a person for value and without fraud becomes the registered proprietor within six years of the
creation of the qualified title, the caution lapses on the sixth year
o If a person for value and without fraud becomes the registered proprietor between six and twelve of
the creation of the qualified title, the caution lapses when the person becomes registered
o If no person becomes a registered proprietor of an estate for twelve years after the creation of the
qualified title, the caution lapses on the twelfth year.
A person may caveat to prevent the Registrar-General from cancelling the caution: s 74H(2), (5)(k).
Possessory Title (copied from above)
Possessory Title
ss 27, 38 Limitation Act 1969 (NSW) – a person has twelve years to assert an interest in property
Part VIA Real Property Act 1900 (NSW) creates an administrative regime whereby a person who is in adverse
possession for twelve years can apply to the Registrar General for possessory title (i.e. become the reg owner)
s 45D Real Property Act 1900 (NSW): you can only make a possessory title claim for an entire block of land.
Mulcahy v Curramore [1974]
2 NSWLR 464
Sir Nigel Bowen enunciated a series of principles in this area of law. He
explained that if you want to show possessory title you had to show that 5. Your possession was open and not in secret
6. Peaceful and not by force
7. Adverse and not with consent
8. The twelve years may be made up by one person, or may be
made up by a number of people possessing the property for a
total of twelve consecutive years.
i. Dependent adverse possession - A to B to C to D is all with
consent, that is, they all agreed to pass the property to
each person down the chain. In this case, the person there
on the twelfth anniversary gets title.
ii. Independent adverse possession - A to B to C to D is
without consent, that is, that B dispossessed A without A's
consent etc. In this case, the person who was in
possession originally has title provided they have been out
of possession for less than twelve years (i.e. If B
dispossessed A more than twelve years ago, A cannot
claim. But if A was dispossessed less than twelve years
ago, then A will get possessory title).
They key characteristic is that a person was asserting possession
Kirby v Cowderoy [1912]
The regular paying of rates was seen as an act asserting possession and
AC 599
allowing a person to claim possessory title.
Note that you cannot make a claim for possessory title with respect to Crown land.
The Law of the Possessory Title Exception
A person has twelve years in which to assert an interest in property: ss 27, 38 Limitation Act 1969 (NSW). Thereafter
they are statute barred from bringing an action, and a person who is in adverse possession may apply to the
Registrar General for possessory title: Part VIA RP Act. A claim must be in respect of an entire lot (s 45D RP Act) and
meet the criteria set out in Mulcahy v Curramore (1974)
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Easements a
Easements
An easement is “A right, of definite and limited character, annexed to the enjoyment of a corporeal hereditament
(‘dominant tenement’) by reason whereof the occupier of another corporeal hereditament (‘servient tenement’) is
bound to permit the person in whom the right is for the time being vested to do something on, in or over the
servient tenement, other than taking corporeal substance, or whereby the owner or occupier of the servient
tenement is bound to abstain from exercising one or more of the ordinary rights of ownership or occupation, or in
rare cases, to do something, for the benefit of the occupier of the dominant tenement.” (Jenks, English Civil Law, 4th
edn)
Incorporeal hereditament
Non-exclusive right
‘Appurtenant’ to the dominant tenement – i.e. attaches to the dominant tenement and continues with it as
a property right
Two types:
Positive easements
o Allows the owner of the dominant tenement to do something upon the servient tenement
Negative easements
o Prevents the owner of the servient tenement from utilising his land in a way otherwise allowed by
the law
Elements of an Easement
Re Ellenborough Park [1956]
1 Ch 131
Clos Farming Estates Pty Ltd v
Easton (2002)
11 BPR 20, 605
Bursill Enterprises Pty Limited v
Berger Bros Trading Co Pty Limited
(1971) 124 CLR 73
City Developments Pty Ltd v R-G
(NT) [2001] NTCA 7
Kane Kersaitis (11011386)
Houses surrounded a gated park which was designated for the private use of
those homeowners only. An issue arose after the WWII about maintenance
fees paid when the land was requisitioned during the war.
Held that easements must have four characteristics:
Dominant and servient tenement
Easement must accommodate the dominant tenement (the land,
not the owner)
The dominant and servient tenement must not be held and
occupied by the same person
The right must be capable of forming the subject matter of a grant
On these facts, it was held that the park clearly benefited the surrounding
houses which only had small (or no) gardens. It was also held that, in these
individual circumstances, the documents creating the park conveyed rights
which were capable of forming the subject matter of a grant.
Involved a vineyard estate where Clos Farms retained Lot 86 and sold the
other lots. The other lots were effectively servient tenements subject to a
wide range of restrictions which allowed Clos Farms to use part of their land
as a vineyard. A dispute arose between the Eastons (Lot 27) and Clos Farms.
Held that the interest was not an easement:
The easement did not accommodate the dominant tenement. The
dominant tenement only had a shed and a small office, so the
easement did not improve the land.
The right was not capable of forming the subject matter of a grant as
they were too extensive and inconsistent with the ‘shared rights’
concept of an easement.
See above for facts.
The transfer of unrestricted rights to a piece of airspace effectively created a
transfer of proprietary interests and therefore did not create an easement at
common law.
“Private recreational use” can be a grant
Noted that a right of recreation may be the subject of a valid easement
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Easements a
Certain basic rights have been recognised as easements and do not need to be proved on the Re Ellenborough Park
formula:
Drewell v Towler (1832)
Right of way
3 B & Ad 735
See p 247 – 249 of textbook for full list
An easement without a dominant tenement is an easement in gross. They may be created in favour of the Crown, a
public or local authority constituted by an Act or a corporation prescribed by the regulations under the Conveyancing
Act: 88A(1A) Conveyancing Act 1919 (NSW). They are void at common law.
If the dominant tenement is subdivided, it is presumed that all sub divisions have the same rights to the easement.
The third requirement (that the dominant and servient tenement must not be held and occupied by the same
person) has been overridden by statute:
s 88B Conveyancing Act 1919 (NSW) allows for land to be subdivided with easements in place
o Applies to OST as well as Torrens land
s 46A(1) Real Property Act 1900 (NSW) allows for easements to be created even though the same person is
the proprietor of those separate parcels of land, notwithstanding any rule of law or equity in that behalf
s 47(7) Real Property Act 1900 (NSW) provides that an easement already recorded in the register will not be
extinguished solely by reason of the same person becoming proprietor of both the land burdened and the
land benefited by the easement, notwithstanding any rule of law or equity in that behalf
Creation of an Easement
Express Grant
Express grant
o Old system – a deed complying with s 23B Conveyancing Act 1919 (NSW)
o Torrens – registration of a dealing in the approved form: s 46 Real Property Act 1900 (NSW)
o If the instrument comes into effect after 1 January 1931, it must comply with s 88(1) Conveyancing
Act 1919 (NSW)
Must indicate the land to which the benefit is appurtenant
Must indicate the land subject to the burden of the easement
Must indicate the persons having rights to release/vary/modify the easement except for
those with a right by law to do so
Must indicate the persons whose consent is required to release/vary/modify the easement
o The Registrar-General records the particulars of the dealing under both the dominant tenement and
servient tenement’s folios: s 47(1) Real Property Act 1900 (NSW)
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Easements a
Express Reservation
e.g. Attorney-General v Brown (1847) 1 Legge 312 (Supreme Court of NSW)
Express reservation
On transfer of land, the grantee does not need to execute the conveyance in order to reserve an easement
for the benefit of the land retained: s 45A Conveyancing Act 1919 (NSW)
If the instrument comes into effect after 1 January 1931, it must comply with s 88(1) Conveyancing Act 1919
(NSW) (see above)
Implied Easements
No such thing as an “implied grant” – this would either be an implied reservation, or a prescriptive easement
Wheeldon v Burrows (1879) 12 Ch D 31 (“Wheeldon v Burrows” easement is an implied reserved easement)
o Involved two pieces of land sold to different purchasers where the windows on one received light
from the other piece of land.
o Held that the reservation of an easement would be implied when:
There is severance (i.e. the block is subdivided)
The owner sells to a grantee or simultaneously to new people
When severance occurred, there was an easement that was both continuous and apparent
Continuous – not emphasised as much now, but refers to a permanent (as opposed
to temporary) right: Suffield v Brown (1864)
Apparent – capable of discovery from reasonable inspection
The easement is necessary for the reasonable enjoyment of the land
At the time of severance, the easement was used for the benefit of the land to which it was
granted
If both lots are sold, it must be imputed from the facts that the purchasers of both lots
intended to buy the land subject to the easement
s 67 Conveyancing Act 1919 (NSW) implies existing easements into every transfer or conveyance of land. See
s 51 Real Property Act 1900 (NSW) for Torrens land.
Necessity – essentially requires land-locked land: see Gibson v M’George (1866) 5 SCR (NSW) 44
o There must be a severance
o Must show that the easement is not just convenient, but essential, for the land to be useful
o Cannot be implied on Torrens land: North Sydney Printing Pty Limited v Sabemo Investment
Corporation Pty Limited [1971] 2 NSWLR 150. s 88K easements must be used for Torrens land (PTO).
It is unclear whether implied reservations would survive indefeasibility, but see s 42(1)(a1) Real Property Act
1900 (NSW) which specifies omitted or misdescribed easements as an exception to indefeasibility.
o But an easement by implication cannot be created over a servient tenement which is Torrens Title
land at the time of creation of the easement: Australian Hi-Fi Publications Pty Limited v Gehl [1979] 2
NSWLR 618.
o The s 42(1)(a1) exception applies only to easements created by implication before the land was
Torrens Title, and to implied easements where the land was transferred by reference to a plan
indicating an easement and the Certificate of Title also shows this easement in place: Dabbs v
Seaman (1925) 36 CLR 538.
Easements which are necessary to carry out a common intention will be implied, but depend on the
common intention of the parties: Perth Corporation v Halle (1911) 13 CLR 393
Subject to those easements of necessity/common intention, easements will not be implied in favour of a
vendor who retains the ‘quasi-dominant’ tenement as they are in a position to expressly reserve such rights:
Wheeldon v Burrows (1879) 12 Ch D 31; Corporation of London v Riggs (1880) 13 Ch D 798.
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Easements a
Prescription or long use
Delohery v Permanent Trustee Co Limited (1904) 1 CLR 283 indicated that the ‘lost modern grant’ doctrine,
allowing a court to find an easement after 20 years of unexplained use, applied in Australia
It must be proved that the servient owner had:
o A knowledge of the acts done: Lloyds Bank Limited v Dalton [1942] Ch 466
o A power to stop the acts or sue in respect of them; and
o A failure to exercise such a power: Dalton v Angus (1881) AC 229; Sturgess v Bridgman (1879) 11 Ch
D 852.
An easement by prescription or long use falls under the s 42(1)(a1) exception, but does not fall under the
exception if the servient tenement is Torrens Title when the easement is created: Australian Hi-Fi
Publications Limited v Gehl [1979] 2 NSWLR 618.
Approved plan of subdivision under s 88B Conveyancing Act 1919 (NSW)
Essentially allows the subdivision of land with easements in place (even between the subdivided lots)
The Registrar-General is obliged to record easements created under this section: s 88B(3A). If he fails to do
so:
o The easement is created in the manner prescribed by the Real Property Act and comes under s
42(1)(a1): James v Registrar-General (1967) 69 SR (NSW) 361; or
o Is created under a supervening statute and enforceable under Pratten v Warringah Shire Council
(1969) 90 WN (Pt 1) (NSW) 134; or
o Is implied as a folio of the Register properly depicts the easement: Dabbs v Seaman (1925) 36 CLR
538.
An easement under s 88K Conveyancing Act 1919 (NSW)
Allows the Supreme Court to make an order imposing an easement over the land if it is ‘reasonable
necessary for the effective use or development of other land that will have the benefit of the easement’: s
88K(1).
The court must be satisfied that:
o The benefit is ‘not inconsistent with the public interest’: s 88K(2)(a)
o The owner of the burdened land can be adequately compensated for loss or disadvantage: s
88K(2)(b)
o The applicant has done all reasonable things to obtain the easement but has been unsuccessful: s
88K(2)(c)
In equity
A sufficient act of part performance under 23E(d) Conveyancing Act 1919 (NSW)
Agreement to create an easement where specifically enforceable (i.e. consideration + writing complying with
s 54A Conveyancing Act 1919 (NSW))
o s 54A – in writing and signed by the party to be charged
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Easements a
Indefeasibility and Easements
See s 42(1)(a1) Real Property Act 1990 (NSW):
o Allows for an exception to indefeasibility for misdescribed or omitted easements created prior to the
land being Torrens
o Also allows for those validly created under the Real Property Act to exist (see above discussions)
Williams v State Transport Authority of New South Wales (2004) 60 NSWLR 286 indicates that you cannot
use the personal equities exception for a prescriptive easement
McGrath v Campbell (2006) NSW ConvR 56-159
o Indicated that a Wheeldon v Burrows easement could be saved by the personal equities exception
(although it wasn’t on the facts of that case)
Dabbs v Seaman (1925) 36 CLR 538
o A road owner sells land which adjoins it, but omits to create an easement in favour of the sold lot.
The easement was depicted on the folio recorded in the Register.
o Held that the easement was implied.
Changing / Modifying / Extending the Easement
Construe the words of the grant/reservation creating the easement, if possible
o The court will not cut down an easement granted ‘for all purposes’: White v Grand Hotel,
Eastbourne, Limited [1913] 1 Ch 133 (where an easement was created in favour of a house ‘for all
purposes’ which was later developed into a hotel – the easement was upheld).
o However, the proposed use will be excessive if it falls outside of the reasonable contemplation of the
parties, or causes a substantial interference with the servient tenement: Jelbert v Davis [1968] 1
WLR 589 (where the conversion of an agricultural plot to a caravan park with 200 spots was said to
extend the easement).
It is not possible to extend an easement by implication: Corporation of London v Riggs (1880) 13 Ch D 798.
It is not possible to extend a right of way by prescription: Wimbledon and Putney Commons Conservators v
Dixon (1875) 1 Ch D 362 (where an agricultural plot benefited by a right of way was proposed to be changed
into a large-scale residential development)
o However, the mere intensification of use is allowable provided there is no substantial increase in the
burden imposed on the servient tenement: British Railways Board v Glass [1965] Ch 538 at 562
(where a pre-existing camping ground became more popular)
s 89 Conveyancing Act 1919 (NSW) grants the Supreme Court the power to modify or extinguish an
easement if satisfied that:
o (1)(a) There are facts (such as a change of neighbourhood character) which make the easement
obsolete, would impede the reasonable use of the servient tenement or the easement no longer
benefits the dominant tenement; or
o (1)(b) The owner of the dominant tenement can be said to have abandoned the easement or waived
the benefit of the restriction
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Easements a
Remedies
Abatement (self help) – you are permitted to move an obstruction to an easement
o Can’t use more than reasonable force
o Can’t breach the peace
o Can’t injure innocent third parties
Action for nuisance (Not trespass as there is no exclusive possession)
Extinguishment
Express release
o The dominant tenement may surrender the easement by registering the approved form under s 46
Real Property Act 1900 (NSW)
Abandonment – see s 89 Conveyancing Act 1919 (NSW) above
o Treweeke v 36 Wolsely Rd (1973) 128 CLR 274
An easement which allowed a street block to obtain access to the beach was not used, as
rocks at the bottom prevented direct access to the water. The servient tenement
subsequently constructed a swimming pool, bamboo fencing and gates. Nearly 40 years
later, a question arose as to whether there was an easement in place.
Held that it was not abandoned – you do not need to constantly assert your property rights.
See s 89 Conveyancing Act 1919 (NSW) generally.
Profits a Prendre
See above – same regulations as for easements.
Exception to indefeasibility is under s 42(1)(b) Real Property Act 1900 (NSW).
s 89 Conveyancing Act 1919 (NSW) applies equally to profits a prendre.
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Leases a
Leases
Leases are a proprietary interest which grant exclusive possession.
Cf with licences:
Bare licence - A privilege granted by one to another to do something which would otherwise be unlawful.
Purely personal interests and create no interest in land (bare licence/contractual licence).
Contractual licences – Require consideration. e.g. Hiring a hotel room, going to the pictures, parking spaces
near your leased offices
Different regimes:
General law of leasing – common law + equity + Conveyancing Act + Real Property Act
o NB: We will only cover this in this subject.
Retail – Retail Leases Act
Residential – Residential Tenancies Act
Leases of Crown land – Crown Lands Act
Essential Characteristics
Leases must contain:
o Right of exclusive possession of the premises
o The term must be for a definite period (certain commencement, certain ending)
o Be created in the appropriate form
Exclusive Possession
Radaich v Smith (1959) 101 CLR 209
o The question of exclusive possession is one of substance and not form or intention.
o This case involved a small shop with limitations on what foods may be served and hours of service.
o Held that:
The substance and effect of the instrument created a leasehold interest
The test to determine whether a lease has been granted is whether or not a right of
exclusive possession has been granted
The test is to apply to the substance rather than the form of the relationship
The lessee has a right to exclude all others from the land, including the lessor
Definite Period
Where the date of commencement cannot be ascertained from the provisions of the lease, the lease is void:
Caboolture Park Shopping Centre v Edelsten (1987) Q Conv R 54-266.
o The commencement date may be implied, however, e.g. by paying rent from a particular date:
Jopling v Jopling (1909) 8 CLR 33
o Lace v Chandler [1944] 1 All ER 305 – a lease in 1939 in London ‘until the end of the war’ on the basis
that the term of the lease would become clear. Held that the lease was void as the term was not
ascertainable now.
If not a definite period then:
o A contractual licence
o Periodic tenancy – if the lease ends and rent continues to be paid, a periodic tenancy arises by
reference to the period of rent (i.e. monthly rent = monthly tenancy). The notice period is also the
period of rent.
o Tenancy at sufferance – if the lease ends and the tenant does not leave, the right to exclusive
possession continues until the lessor ejects the lessee. They may be liable for a fee for ‘use and
occupation’ (as distinct from rent).
o Tenancy at will – if the tenant occupies land on the basis that either party may terminate the
tenancy at any time
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Leases a
The Appropriate Form
Torrens Title
o Registration:
Leases of three years or more must be executed in the approved form and registered: s 53
RP Act
Leases of less than three years may be registered for indefeasibility: s 42 RP Act
Unregistered leases of less than three years have an exception to indefeasibility: s 42(1)(d)
RP Act
o Unregistered:
s 23D(2) Conveyancing Act 1919 (NSW) creates a legal lease if:
Created by parol (speech)
Best rent reasonably obtainable without taking a fine (i.e. market rent)
Less than three years
Immediate right to possession
Equitable interest:
An agreement to create a lease which complies with s 54A CA (writing & signed) and
consideration: Walsh v Lonsdale (1882) 21 Ch D 9
Sufficient acts of part performance
A lease which complies with s 23C(1) (writing & signed) and consideration
Equitable estoppel
Old System Title
o s 23B Conveyancing Act 1919 (NSW) – by deed
o s 23D(2) Conveyancing Act 1919 (NSW) – creation by parol (as above)
o The rule in Walsh v Lonsdale (as above)
Leasehold Covenants
Express Clauses in the Lease
Identification of the lessor and lesee
Identification of the premises to be leased
The commencement and duration of the term
The rent or other consideration
Repair – often specified as an obligation ‘to keep and deliver up in a good state of repair’
Implied by Common Law
Two rights implied by common law are: Budd Scott v Daniel (1902)
o The covenant to quiet enjoyment
o The covenant not to derogate from the grant
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Leases a
Landlord: Quiet enjoyment
Protects rights to exclusive possession
Martins Camera Corner v Hotel Mayfair [1976] 2 NSWLR 15
o Landlord did not take care to keep downpipes unblocked. Consequently, Camera Corner was flooded.
Held to be a breach of the right to quiet enjoyment as it interfered with their exclusive possession.
Southwark London Council v Mills (1999) 3 WLR 939
o A building had thin walls, and as such the neighbours were noisy (not because they were acting
unusually, but because of the building construction).
o Held that the covenant for quiet enjoyment is prospective in operation. Furthermore, the law
doesn’t imply a warranty about the fitness of premises – you take them as you find them. Therefore
no breach of the right to quiet enjoyment.
Landlord: Non-Derogation from the Grant
Protects the purpose for which you took the lease
Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9
o A coffee shop took out a lease whilst the premises were under construction. A wall was later built
which partially hid the shop, making it less profitable (but still viable).
o Held that the lessor had not committed a breach of its obligation not to derogate from the grant of
the leasehold. The maxim that the lessor must not derogate from the grant means that the lessor
may not so act as to render the premises unfit or materially less fit for the particular purpose for
which the grant or demise was made.
Norden v Blueport Enterprises [1996] 3 NZLR 450
o Panda Computer Personnel leased premises on the third floor of a building. Later, the fourth floor
tenant wished to leave and the landlord allowed them to assign their lease to an escort agency.
Assorted issued arose such as the agency’s noise, the fact the lobby could not be locked, the
agency’s patrons disturbing customers and staff etc.
o Held that for non-derogation from the grant to be proven it must be substantial interference with
the use for which the premises were let so as to make them materially less fit for use, not mere
inconvenience. On these facts, there was a breach.
o The landlord also allowed the assignment of the lease and therefore authorised, consented, allowed
or participated in the actions and were liable for the actions of the agency.
Aussie Traveller Pty Limited v Marklea Pty Limited [1998] 1 Qd R 1
o Top Flight and Aussie Traveller had units in an industrial complex owned by Marklea. Top Flight
created large amounts of sawdust and noise which damaged Aussie Traveller’s goods and disturbed
their customers. Both leases contained a clause that the lessee would not disturb other tenants.
o Held that the premises were materially less fit for purpose and were not suitable for the reason for
which they were let. The landlord could have enforced the covenant regarding disturbing other
tenants against Top Flight but chose not to do so, and were therefore liable for breaching the
covenant of non-derogation from the grant.
Peden Pty Ltd v Bortolazzo [2006] 2 Qd R 574
o A pub is neighboured by a rented property. The tenants are loud, have burn-offs and are generally
disruptive. The pub sued the landlord for the nuisance of the tenant.
o Held that a lessor is not responsible for nuisance created by a tenant unless the lessor let the
premises calculated to cause nuisance or where the nuisance was certain to result from the
purposes for which property let.
o The court held that by asking the original tenants to leave, the landlord indicated the behaviour was
intolerable and there was no reason to expect the new tenants should act the same. No liability in
nuisance.
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Leases a
Landlord: A Duty of Care
Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313
Jones v Bartlett (2000) 205 CLR 166
A landlord of residential premises owes a duty of care to tenants and members of the tenants' household.
The extent of the landlord's duty is to take reasonable care to avoid foreseeable injury to prospective
tenants and members of their household.
Sakoua v Williams (2005) 64 NSWLR 588
Steps entering a property were of uneven height, had no hand-rail and went directly into the door without a
landing. They did not breach construction standards when the property was built. The tenant tripped and
sued the landlord.
Mason P and Brownie AJ:
o The question to be decided was not whether the steps were reasonably safe for the purposes for
which they were to be put, but whether there was an unreasonable want of care with respect to
defects at the beginning of the tenancy (i.e. requires awareness of the defect)
Beazley J:
o In my opinion, it is apparent from Jones v Bartlett that a landlord is under an obligation at the time
of the commencement of the tenancy to ensure that premises are reasonably safe for the purposes
for which they are let. In this case, that required that the steps be reasonably safe... The question, as
properly recognised by the trial judge, was whether the steps were reasonably safe for the purposes
for which they were to be put. (i.e. should not require awareness of the defect)
Tenant: Use in a Tenant-Like Manner
e.g. Must change light-bulbs, unblock sinks, etc.
Fair wear and tear is acceptable.
Tenant: Obligation to Yield Possession
Must offer up vacant possession at the end of the lease.
Tenant: To Cultivate Agricultural Land in a Husband-Like Manner
Tenant: Obligation not to Commit Waste
See earlier notes on fixtures.
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Leases a
Implied by Statute
s 84 Conveyancing Act 1919 (NSW) (applies to Torrens)
o (1)(a) requires the tenant to pay rent, unless there is some event so as to render the property unfit
for occupation and use, in which case the rent is reserved until the premises are made fit again
o (1)(b) requires the tenant to yield up the premises in good and tenantable repair, having regard to
their condition at the commencement of the lease. Reasonable wear and tear is excepted.
s 85 Conveyancing Act 1919 (NSW) (applies to Torrens)
o (1)(a) twice a year, at a reasonable time of day and having given the lessee two days notice, the
lessor may enter and inspect the premises to view its state of repair
o (1)(b) the lessor may enter the premises to repair if the lessee does not
o (1)(c) the lessor may enter the premises to comply with legislation, such as the destruction of
noxious weeds, provided such activities can be carried out without undue interference with the
lessee’s occupation
o (1)(d) if the rent is in arrear for one month or there is a breach of a covenant of the lease for two
months, the lessor may re-enter the premises
NB: Damages may not exceed the value to which the reversion has been reduced: s 133A Conveyancing Act 1919
(NSW).
Also consider mesne profits – damages for rent the lessor would have obtained had they been able to re-let the
premises.
By Necessary Implication
Terms may be implied for business efficacy: Liverpool City Council v Irwin [1977] AC 23
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Leases
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Leases a
Assignment of Leases & Sub-Leasing
Assignment of Leases
An assignment occurs when a lessee/assignor transfers his entire interest to the assignee. When the lessor assigns
his interest, it is the reversion which is being assigned.
An assignment is different to a sublease, where you are temporarily transferring the right to exclusive possession.
The assignor continues to be liable to the lessor for the performance of all obligations under the contractual lease,
and the assignee is required to indemnify the assignor for any continuing liability to the lessor under the lease.
NB: Naturally if a new lease is entered into with the assignee, and the old lease surrendered, this rule does
not apply.
Sub-Leasing
A sublease occurs when the lessee retains some part of the leasehold interest, whether in time or space.
e.g. Part of a property is leased to another OR All of the property is leased for less than the head lease
Covenants against Assignment
If the lease is silent, the lessee may assign or sublease freely: American Dairy Queen (Qld) Pty Limited v Blue Rio Pty
Limited (1981) 56 ALJR 47, 49.
Absolute:
Frequently there is a covenant against assignment/sub-leasing, but the lessor may override this and
provide consent: ss 120, 123 Conveyaning Act 1919 (NSW).
Qualified:
Frequently there is a covenant requiring the landlord’s consent prior to assignment/sub-leasing. In
this circumstance, consent cannot be unreasonably withheld: s 133B(1)(a) Conveyancing Act 1919 (NSW). However,
the lessee must still seek consent even if it could not be reasonably withheld: Barrow v Isaacs [1891] 1 QB 417.
The lessor must also not require a fee for consenting: s 132 Conveyancing Act 1919 (NSW). A surrender
clause (requiring the lessee to surrender the lease instead of sub-leasing) is acceptable under s 133B: Creer v
P&O Lines of Australia Pty Limited (1971) 125 CLR 84.
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Leases a
Privity of Estate and Privity of Contract
A lease is often two separate interests which co-exist – one as a contractual interest and one as a proprietary
interest.
The parties are bound by the covenants of the contractual lease, despite having disposed of their proprietary
interest, as a matter of contract law: Ahern v L A Wilkinson (Northern) Limited [1929] St R Qd 66, 79.
As such, if the lessee assigns the lease and the assignee is in default, the lessor may sue the lessee: 195
Crown Street Pty Limited v Hoare [1969] 1 NSWR 193. Similarly, if the lessor assigns their interest, the lessee
may sue the lessor for any breach by the assignee.
Privity of estate exists between parties who stand in the relationship of lessor and lessee.
Sublease – privity of estate exists between the sub-lessor and sub-lessee
There is NO natural relationship between the lead-lessor and the sub-lessee.
Assignment – privity of estate exists between the head lessor and the assignee
When an assignment occurs:
If a covenant "touches and concerns" land, the ordinary rules of privity of contract do not apply and the
covenant can be enforced by a person who was not a party to the contract of which the covenant is part,
simply because that person has become the owner of an interest in land previously owned by the original
contracting party: Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548; see 70A(1) CA for
landlord’s right to sue assignee for covenants which touch and concern.
If the reversion is assigned, then the new landlord has both the benefit (s 117 CA) and burden (s 118 CA) of
the covenants in the lease which “touch and concern” the land.
NB: The original landlord/tenant may still be sued due to privity of contract.
NB: ss 51, 52 Real Property Act 1900 (NSW) may override the rule relating to ‘touch and concern’ as they
indicate that “all rights” and “all... liabilities” are transferred when an assignment is registered. It is
unclear which way this would go if contested in court. (s 51 – the reversion; s 52 – the lease/mortgage)
After the assignment of the reversion the original lessor cannot sue for breaches which occurred before or after the
assignment. The assignee alone has the right to sue for breaches which occurred both before and after the
assignment: Re King [1963] 1 Ch D 459.
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Leases a
Termination and Forfeiture
If a lessee is in breach, the lessor cannot re enter a property and terminate the lease without first giving the lessee a
notice specifying the breach and requiring the lessee to remedy the breach within a reasonable time: s 129
Conveyancing Act 1919 (NSW). This does not apply where the breach is the non-payment of rent: s 129(8).
Also see 85(1)(d) Conveyancing Act 1919 (NSW):
o Rent = one month in arrears
o Non-rental = two months in breach, a notice to repair served and no repair within a reasonable time
You cannot contract out of the requirement for notice under s 129: see s 129(10) Conveyancing Act 1919 (NSW)
NB: There is an unresolved question as to whether a fundamental breach requires a s 129 notice or not. Arguably,
it does not as it is relying on principles of contract law rather than a statutory regime.
Fundamental Breach / Essential Term
If the lessee is in breach of an essential term, the lessor will be entitled to claim unpaid rent for the balance of the
term of the lease, subject to any rent which was or should have been collected from a new lessee during this period
(i.e. there is an obligation to mitigate loss): Progressive Mailing House Pty Limited v Tabali Pty Limited (1985) 157 CLR
17.
If the lessee is in beach of a non-essential term, the lessor will be liable for unpaid rent up until the date of re-entry:
Shevill v Builders Licensing Board (1982) 149 CLR 620.
Determining essential term:
Shevill v Builders Licensing Board (1982) 149 CLR 620
o A tenant failed to pay rent on time, but would eventually pay up to date before falling into arrears
once more. Cl 9(a) of the lease allowed the lessor to re enter the premises if the rent was 14 days in
arrears.
o Held that the failure to pay rent on time was not a fundamental breach. The lessee also showed no
indicates of having repudiated the lease. The working of Cl 9(a) was not clear enough to make the
payment of rent an essential term – “it would require very clear words to bring about the result...
that whenever a lessor could exercise the right given by the clause to re-enter, he could also recover
damages for the less resulting from the failure of the lessee to carry out all the covenants of the
lease”.
Progressive Mailing House Pty Limited v Tabali Pty Limited (1985) 157 CLR 17
o There was a disagreement about work the lessor did on the property, and there was therefore
confusion about when the lease commenced. The lessee paid rent for four months, before falling
into arrears for five months. There was also some minor negligence relating to damage, a breach of
council by-laws (in breach of the lease) and a failure to abide by a covenant against subleasing.
o Held that the combination of these factors constituted a fundamental breach. The court also
indicated that abandoning possession would be highly persuasive, considering that exclusive
possession is the core of any lease.
The court also noted that one breach does not cancel another. Regardless of whether the
lessor had completed work correctly as agreed or not, the lessee was still obliged to meet his
obligations under the contract.
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Leases a
Waiver
The lessor may waive a breach or elect not to terminate the lease because of the breach. There must be an
appreciation of the lessor of the breach, and an unequivocal act of waiver or election: London & County (A&D)
Limited v Wilfred Sportsman Limited [1971] Ch 764. Awareness of the breach will not amount per se to waiver –
there must be some positive act: David Blackstone Limited v Barnett’s (West End) Limited [1973] 1 WLR 148.
Forfeiture of a Lease
The lessor’s right to forfeit a lease may be exercised by:
Physical re-entry – they will not be liable for trespass or assault (if reasonable force if used): Hemming v
Stoke Popes Golf Club [1920] 1 KB 720.
A writ claiming possession – forfeiture occurs on service of the notice: Canas Property Co Limited v KL
Television Services Limited [1970] 2 QB 433.
Relief against Forfeiture
Typically equity provides relief to lessees: Shiloh Spinners Limited v Harding [1973] AC 691
Efforts by the lessee to remedy the breach will be considered: Belgravia Insurance Co v Meah [1964] 1 QB
436
The court must be satisfied the lessee can fulfil their obligations in the future: Hayes v Gunbola [1988] NSW
ConvR 55-375.
o e.g. If forfeiture for non-payment of rent, the rent and costs must be paid up to date: Ibid.
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Freehold Covenants a
Freehold Covenants
NB: Do not confuse these with leasehold covenants. They are different beasts!
Terminology
Covenant
Covenantor
Covenantee
Positive covenant
Negative covenant
An obligation contained within an instrument
The grantor – typically the burdened person
The grantee – typically the benefited person
Requires the covenantor to make a positive act
Stops the covenantor from acting in some manner
If the dispute is between the original two parties, enforce it by way of contract.
If the dispute is between subsequent parties, then: (Austerberry v Corporation of Oldham (1885) 29 Ch D 750)
The benefit of a covenant relating to land runs with the land, whether the covenant is positive or negative
The burden of a covenant does not run with the land is the covenant is positive (not enforceable at law as
there is no privity of contract, not enforceable in equity as it does not run with the land)
Under Torrens Title they are equitable interests only. They are RECORDED and not REGISTERED, and do not gain the
benefit of indefeasibility: s 88(3)(b) Conveyancing Act 1919 (NSW). They must also comply with s 88(1) (see
easements).
Positive Covenants
As Part of an Easement
Frater v Finlay (1968)
91 WN (NSW) 730
Halsall v Brizell [1957] Ch 169
An easement to take water from a neighbour’s well also indicated the
maintenance of pipes, etc. should be shared.
Held that the covenant was an ‘integral part’ of the easement.
It was later emphasised that the burden must be ‘relevant to’ the exercise of
the benefit: Rhone v Stephens [1994] 2 AC 310 at 322.
Purchasers of lots entered covenants to pay for road maintenance, and were
not allowed to use the roads unless they paid this.
Held that parties named in a deed who accept its benefits must be bound to
observe its burdens, even if that person has not executed the deed
Benefit at Law
See above –
Enforceable as a matter of contract law
Enforceable in equity
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Freehold Covenants
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Freehold Covenants a
Restrictive Covenants
Seven Requirements for a Valid Covenant under Torrens Title
1. The covenant must be restrictive in substance: Tulk v Moxhay (1848) 2 Ph 744; 41 ER 1143.
2. The purchaser (of the land of the covenantor) must have taken with notice of the covenant: Tulk v Moxhay
(1848) 2 Ph 744; 41 ER 1143.
o Includes actual, constructive and imputed notice. Therefore, if the covenant is recorded under s
88(3) CA then this requirement will be met: Mills v Renwick (1901) 1 SR (NSW) (Eq) 173
3. The covenant must ‘touch and concern’ the land benefited: Re Ballard’s Conveyance [1937] Ch 473; Tulk v
Moxhay (1848) 2 Ph 744; 41 ER 1143. If it preserves the amenities and character of the neighbourhood if
may ‘touch and concern’: Rogers v Hosegood [1900] 2 Ch 388
4. If the land to be benefited is to include subdivisions, then the instrument creating the covenant must include
words to the effect “for the benefit of Blackacre and every part into which Blackacre may be lawfully
subdivided”: Tulk v Moxhay (1848) 2 Ph 744; 41 ER 1143, Ellison v O’Neill (1968) 88 WN (NSW) 213.
o NB: This may become an issue when determining whether the easement benefited the land
o NB: If this is an issue – discuss building scheme here.
5. The covenant must not have otherwise used words which rebut the presumptions in either s70 or s70A
Conveyancing Act 1919 (NSW) (i.e. there must be an intention that the covenant runs with the land of the
covenantor for the benefit of the covenantee and its successors in title)
o NB: A rebuttal of s70 or s70A does not mean the covenant is invalid as such. Rather it means that it
cannot be recorded on the register, and can only be sued on under contract law.
6. The covenantee must own the land benefited at the time the covenant is created: Kerridge v Foley (1964) 82
WN (NSW) 293
o UNLESS the land is a building scheme (see elements below): Elliston v Reacher [1902] 2 Ch 374.
o A cheat to Kerridge v Foley (not an exam answer) is:
CAN NEVER ENFORCE: Kerridge v Foley problem
less
recent
LOT A
BURDEN/BENEFIT
Traded 2008
LOT B
BURDEN/BENEFIT
Traded 2010
more
recent
CAN ALWAYS ENFORCE: no Kerridge v Foley problem
i.e. If Lot A was the burden, and Lot B was the benefit, then there would be no issue. If Lot B
was the burden, and Lot A was the benefit, then Lot A could not enforce against Lot B.
o NB: If this is an issue – discuss building scheme here.
7. There must be compliance with the formal requirements of s 88(1) Conveyancing Act 1919 (NSW) AND must
be registered (or indefeasibility will override it). i.e.:
o Must indicate the land to which the benefit is appurtenant
o Must indicate the land subject to the burden of the covenant
o Must indicate the persons having rights to release/vary/modify the covenant except for those with a
right by law to do so
o Must indicate the persons whose consent is required to release/vary/modify the covenant
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Freehold Covenants a
Enforcing Covenants
At Law
All covenants can be enforced at law as a matter of contract, but remember that privity of contract will apply.
Only successors in title of restrictive covenants may be enforced in equity.
See also Austerberry v Corporation of Oldham (1885) 29 Ch D 750
The benefit of a covenant relating to land runs with the land, whether the covenant is positive or negative
o i.e. The covenantee’s successors in title can always enforce against the original covenantor
The burden of a covenant does not run with the land is the covenant is positive (not enforceable at law as
there is no privity of contract, not enforceable in equity as it does not run with the land)
Successors in Title
Successors in title will be entitled to the benefit of a covenant if:
It has not been expressly excluded: s 70 Conveyancing Act 1919 (NSW)
The covenant ‘touches and concerns’ the land of the covenantee: Rogers v Hosegood [1900] 2 Ch 388
The covenantee owns the land when the covenant was created: Kerridge v Foley (1964) 82 WN (Pt 1) (NSW)
293.
s 70 Conveyancing Act 1919 (NSW)
The covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and
the covenantee’s successors in title …and shall have effect as if such successors and other persons were
expressed.
i.e. Creates a presumption that the benefit of a covenant runs with the covenantee’s land
s 70A Conveyancing Act 1919 (NSW)
A covenant relating to any land of a covenantor or capable of being bound by the covenantor by covenant
shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of
himself or herself and the covenantor’s successors in title … and … shall have effect as if such successors …
were expressed.
i.e. Creates a presumption that the burden of a covenant runs with the covenantor’s land
But note that this does not override the rule in Austerberry v Corporation of Oldham: Rhone v
Stephens [1994] 2 AC 310. Professor Butt at [1708] explains that if a positive covenant which
expressly claims to bind successors in title cannot do so at law, then those covenants which are
deemed to claim to bind successors in title also cannot do so at law.
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Freehold Covenants
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Freehold Covenants a
Tulk v Moxhay (1848) 41 ER 1143 established four rules (which are incorporated into the seven featured above):
1. The covenant must be restrictive in substance
o A common test is whether the covenant requires the expenditure of money: Haywood v Brunswick
Permanent Benefit Building Society (1881) 8 QBD 403.
o Where a covenant has positive and negative aspects, the negative element will bind the land even
though the positive element cannot: Shepherd Homes Limited v Sandham (No 2) [1971] 1 WLR 1062.
o e.g. Keep buildings below height x = positive in form, but restrictive in substance = enforceable
Not let building fall into disrepair = negative in form, but positive in substance = unenforceable
2. The covenant must benefit the covenantee’s land – i.e. it must ‘touch and concern’ the land
o Can the land be “reasonably regarded as capable of being affected by the performance or breach” of
the covenant?: Re Ballard’s Conveyance [1937] Ch 473
In Re Ballard a covenant was in favour of a 1700 acre block. It was held that a breach of the
covenant may affect part of that block, but the largest part of the block could not possibly be
affected by any breach of the covenant. While the covenant may concern or touch some
comparatively small portion of the land to which it has been sought to annex it, it failed to
concern or touch far the largest part of the land.
o In the case of a subdivision: is the covenant “aimed in general at preserving the amenities and
character of the neighbourhood” for the convenience of existing residents and for the benefit of lots
yet to be sold?: Ellison v O’Neill (1968) 88 WN (NSW) 213; Rogers v Hosegood [1900] 2 Ch 388,
Kerridge v Foley (1968) 82 WN (NSW) 293.
In Rogers v Hosegood there was a covenant between many subdivisions that houses could
only be built on every parcel of land and each dwelling must be private. It was held that the
covenants touched and concerned the land as it preserved the amenities and character of
the neighbourhood.
In Ellison v O’Neill established the presumption that a covenant is entered into for the
benefit of the entire parcel of land and not individual parts into which it may be later
subdivided.
An owner subdivided his harbour-side property and sold the part closest to the
harbour to Ellison with a covenant not to build above a certain height. The original
owner passed away and the executor subdivided the lot.
It was held that the subdivided land could not benefit, as the covenant only
benefited the entire lot which had been materially altered.
NB: If Ellison had subdivided, and the executor hadn’t, both lots would still carry the
burden of the covenant.
In Kerridge v Foley a developer placed covenants on land as each lot was sold. The issue was
whether the last sold lots could have enforceable covenants in favour of lots sold earlier. It
was established that the benefit of the restriction in the covenant can only be annexed to
land owned by the covenantee at the time at which the covenant is made OR if a building
scheme exists and can be proved, to land which had previously been owned by the
covenantee (see below)
3. At the time the covenant was created there must have been an intention that the burden of the covenant
should ‘run with’ the covenantor’s land so as to bind successors in title of the covenantor
o See ss 70(1), 70A(1) Conveyancing Act 1919 (NSW).
4. The assignee (successor in title to the covenantor) must have taken with notice of the covenant
o Includes actual, constructive and imputed notice
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Freehold Covenants a
Building Schemes
The presumption that a restrictive covenant does not run with subdivided land does not apply where a “Scheme of
Development” exists. Where a “Scheme of Development” exists covenants are mutually enforceable irrespective of
the date of sale of particular lots by the original covenantee.
Elliston v Reacher [1908] 2 Ch 374 established four requirements for a scheme of development:
1. Both the person seeking to enforce the covenant (covenantee) and the person against whom the covenant is
sought to be enforced (covenantor) derive their respective titles through a common vendor
o There is no requirement for time, just so long as there was a common vendor at some point in the
history
2. Before selling the land, the common vendor laid out the Estate, or a defined portion of it, that included the
land which the parties now own in lots subject to restrictions intended to be imposed on all the lots AND the
restrictions are consistent only with some general Scheme of Development of the land
o i.e. All the lots in the scheme have covenants AND the only reason for the covenants was the scheme
3. The common vendor intended the restrictions to benefit all the lots to be sold
o This is gathered from all the facts and circumstances
o In Elliston v Reacher information such as advertising the original development was used
4. Both the parties, or their predecessors in title, purchased their lots from the common vendor on the basis
that the restrictions were to ensure for the benefit of the other lots in the scheme
o i.e. You intended to benefit as well as burden
There is some dispute as to whether building schemes may be registered under Torrens Title.
In Pirie v Registrar-General (1962) 109 CLR 619:
Kitto J with whom Owen J agreed indicated that s 88(1) only applies to those covenants created by an
instrument which indicates the benefit is annexed to the land.
Windeyer and Taylor JJ agreed that s 88(1) has a broader application and may include covenants created by
a building scheme.
Menzies J did not take the view that covenants had to satisfy s 88(1) and his comments are therefore obiter.
The view of Windeyer and Taylor JJ would appear to prevail in NSW: Re Louis [1971] 1 NSWLR 164, cf. Re Martyn
(1965) 65 SR (NSW) 387. Therefore, covenants created by building schemes may also be registered under s 88(3)
Conveyancing Act 1919 (NSW) like any other covenant (i.e. they must comply with s 88(1)).
s 88B Instruments
Since 1964, a restrictive covenant can be created as part of a subdivision under s 88B Conveyancing Act 1919 (NSW).
The covenant must:
Be created as part of a subdivision pursuant to s 196 Conveyancing Act 1919 (NSW)
Comply with the formal requirements of s 88 CA.
It will be enforceable whether or not any of the seven requirements discussed above are met.
e.g. The owner may own the benefited and burdened land: s 88B(3)(c)(ii)
NB: s 88B does not validate an invalid covenant like indefeasibility, so the covenant must still touch and
concern the land
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Freehold Covenants a
Extinguishment of Covenants
Expressly
OST – must be by deed: s 23B(1) Conveyancing Act 1919 (NSW).
Torrens – must be executed in the correct form and lodged with the Registrar-General.
Implication
Maybe realised impliedly where:
A long course of usage wholly inconsistent with the covenant: Hepworth v Pickles [1900] 1 Ch 108; or
The owner of the benefitted land has shown a disregard for breaches such that a reasonable person would
believe future breaches would be ignored: Chatsworth Estates Co v Fewell [1931] 1 Ch 224 at 231-2; or
A change in the character of the neighbourhood to such a degree that there is no longer any value left in the
covenant: Application of Fox (1981) 2 BPR 9310 at 9320.
Mere inactivity in the face of a breach will not amount to an implied release of the covenant: Application of Fox
(1981) 2 BPR 9310 at 9320.
Statute
s 89 Conveyancing Act 1919 (NSW) grants the Supreme Court the power to modify or extinguish an covenant if
satisfied that:
(1)(a) There are facts (such as a change of neighbourhood character) which make the covenant obsolete,
would impede the reasonable use of the burdened land or the covenant no longer benefits the benefitted
land; or
(1)(b) The owner of the benefitted land can be said to have abandoned the covenant or waived the benefit
of the restriction
s 28(2) Environmental Planning and Assessment Act 1979 (NSW) allows a person to breach a regulatory instrument in
order to carry out development work in accordance with an environmental planning instrument (e.g. DA). A
‘regulatory instrument’ may include a restrictive covenant: Coshott v Ludwig [1997] NSW ConvR 55-810.
Part 8A Real Property Act 1900 (NSW) empowers the Registrar-General to remove covenants on application if they
are:
A ‘building materials covenant’, ‘fencing covenant’ or ‘value of structures covenant’; and
The covenant is at least 12 years old; and
The covenant is ‘of a type likely to lose any practical value after 12 years of operation’.
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Freehold Covenants
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