INTRODUCTION
DIVISION OF
PROPRIETARY
INTERESTS IN
LAND
Property
A bundle of rights (the proprietary interest) exercisable against others
4 main
interests
The PI in an object may be held by one person or a group of persons at any given
time. The elements of the interest may be divided up among a number of persons
in a variety of ways:
1. Doctrine of tenure: interests in land divided spatially
2. Doctrine of estates: fragmentation of interests on a temporal basis
3. Doctrine of trusts: fragmented according to jurisdiction
4. Native title: systemic division of proprietary interests in land
Roots of the doctrine lie in the economic and political interstices of the feudal
system.
Mode of holding land where one person (the ‘tenant’) holds lands from (or ‘of’)
another subject to the performance of certain obligations; different tenants have a
range of entitlements tied to particular parcels of land.
DOCTRINE OF
TENURE
Doctrine
Created system of proprietary rights: all those below the Crown had limited rights
to the land and owed obligations/services to the party immediately above them in
the pyramid. E.g. King > Tenant in Chief > Mesne Lord > Tenant in Demense
Spatial
fragmentation of
proprietary
interests
“Tenure connotes fragmentation in a spatial dimension [as] it allowed for a
number of overlapping rights to subsist over one particular parcel of land”
No practical significance in contemporary Aus land law, however:
Current
significance
•
•
•
Definition
Still formally part of Australian law: the idea that land is formally held by the
Crown; all land titles originate from a Crown grant (Mabo (2))
Modern landlord-tenant r’ships resemble earlier tenurial r’ships
Until Mabo (2), doctrine of tenure operated to obstruct recognition of NT
Allows multiple people to have an interest in land for different times (e.g.
leasehold: tenant has a present right to possession, landlord has future right)
The greatest interest in land recognised by CL.
Fee simple
Fee tail
DOCTRINE OF
ESTATES
Temporal
fragmentation of
proprietary
interests
“An estate in fee simple is for almost all practical purposes, the equivalent of full
ownership” (Gumana v NT). Estate continues indefinitely, can be passed
on/sold by owner
Similar to fee simple but can only be passed down to specific heirs; abolished in
NSW.
Interest in land granted to a person for life; terminates upon their death. Upon
estate holder’s death, interest is transferred to remainderman, who receives a fee
simple estate.
Life estate
A life tenant can alienate their rights, but only for the duration of their life (once
they die, their interest revers to the remainderman, regardless of whether someone
has bought it)
Fixed-term lease: lease for a fixed period; expires automatically
Leasehold
estates
(Personal
property)
Periodic tenancy: does not terminate until appropriate notice is given
Tenancy at will: no defined duration; either party may terminate
Tenancy at sufferance: tenant takes possession pursuant to a lease but
wrongfully remains in possession after lease is terminated
Easements
Interests in
land which
are not
estates
Profits à prendre
Restrictive covenants
Mortgages
1788
Capt. Phillip proclaimed colony of NSW; under English law, all ‘colony land’
became ‘crown land’ belonging to King George III.
• ‘Political assertion’, land legally/factually belonged to ATSI
• Non-Indigenous legal system did not recognise ATSI land rights until 1992:
Mabo (2)
Colonial and State govts made thousands of crown grants (urban areas: freehold
fee simple; rural areas: long-term leases) which are the original source of most legal
titles to land in NSW. Made on the assumption all land belongs to the crown.
CROWN
GRANTS
1788 – 1992
Once a crown grant is made, citizen with land title can deal with the land as they
please; land enters the open market and can be used for title holder’s
personal/economic benefit
Crown can only get title back via “compulsory acquisition” (formal legislative
process requiring Crown to compensate title holder on ‘just terms’: Constitution
s. 51(xxxi))
Now
NSW govt not subject to these constitutional constraints; no obligation to pay
compensation; but govt. still pays via Land Acquisition (Just Terms
Compensation) Act 1991 (NSW). Usually only for purpose of improving
infrastructure.
FUNDAMENTAL CONCEPTS
Entitlement to be in control of land, and use and occupy it.
Definition
Not common to rely on possession to prove ownership under the Torrens
system, however, remains theoretically and sometimes practically important.
Statutory time limit on the right to bring an action to enforce proprietary rights:
12 years, otherwise a plaintiff is ‘statute-barred’ under the Limitation Act (1969)
NSW.
POSSESSION
Limitation of
actions and
Limitation
Act (1969)
NSW
Ensures people do not ‘sleep on their rights’.
The possessory owner requires absolute title (Perry v Clissold) and must
demonstrate actual possession, intention to possess, and an unbroken chain for
possession for 12 years (s. 38 Limitation Act (1969) NSW)
Adverse possession: a person without title is in possession of land without title,
adversely or contrary to the rights of the plaintiff, who wants it back.
Numerus
clausus
principle
Fee simple
There are only a certain number of ‘types’ of property rights which are
recognised.
A person will have a PI if their right falls into one of the established categories.
Largest possible interest. Entitles the owners to possession of the land for an
indefinite period, subject only to govt acquisition and regulation by planning and
other laws.
Time-limited interested in land.
Lessee/tenant is entitled to possession, exclusive to everyone else, including the
landlord, who still owns the fee simple but has carved out a smaller interest in land
and given it to the lessee.
Lease
While the lease is running, the landlord’s interest is the reversion. They have a
reversionary interest (a right to land at a future date when the lease ends)
RECOGNISED
INTERESTS IN
LAND
The lease is an interest in land that belongs to the lessee, who can sell it, give it away,
or carve out a shorter interest: a sub-lease.
Only a small
number of
interests in land
are recognised as
‘property’
A small interest in land that the owner of a fee simple or lease (mortgagor) gives to
a bank etc. (mortgagee) in return for money.
Mortgage
A mortgagee has not immediate right to use and enjoy the land, but they have the
right to sell the land if they are not repaid, taking whatever they are owed from the
sale price and giving the rest to the mortgagor.
A mortgage is a contractual promise to repay all money borrowed, but it is better and
more secure than mere contractual promises to repay, because mortgagees can
access a specific piece of land to satisfy the land.
Easement
Restrictive/
freehold
covenants
A right to do something on another’s land (e.g. a right of way). The right is
annexed to the land, and survives changes in ownership.
A right to stop someone from doing something on their own land (e.g. covenant
preventing neighbours from building above 2 storeys and blocking a view).
Commonly used to plan residential subdivisions; affects multiple parcels of land
(e.g. covenant not to further subdivide)
Profit à
prendre
Right to gather naturally occurring things from another’s land (e.g. quarry, hunt,
gather timber)
A small proprietary interest which acts as security for payment.
Lien/charge
PROPERTY VS.
CONTRACT
In rem vs. in
personam
The person holding the lien/charge doesn’t have a right to possess/sell land, but
has a right to be paid directly out of the proceeds of the sale of the land
Not all rights in relation to property are proprietary, some are contractual (e.g. a
licence).
Property rights: in rem (enforceable against everyone)
Contractual rights: in personam (enforceable against other party to contract)
Licences
Contractual licences do not come within the class of recognised PIs to exclude
others (Georgeski), and are therefore not enforceable against third parties (King
v David Allen)
“Land” = actual land + everything permanently attached to it.
FIXTURES
The boundary
between
chattels and
land
Chattels, therefore, may change from personal to real property by virtue of their
annexation to the land.
A chattel affixed to the land becomes a fixture. Transfer of ownership of land will
include transfer of ownership of fixates.
Unless specified in the contract for the sale of land, look to the surrounding
circumstances and intentions of parties to determine whether something is a
fixture of chattel (Belgrave Nominees)
Writing:
s. 54A
Conveyancing
Act 1919
(NSW)
Requirements for a valid contract for sale of land:
1. Offer/acceptance
2. Consideration (usually deposit of 10% of purchase price)
3. Intention to conclude a formal contract (usually ‘exchange’ of contracts
between purchaser and vendor, exchanging signed contracts shows intent to
be bound)
4. Certainty (usually satisfied by use of standard form contracts)
5. Writing (all contracts in relation to the sale of land must be in writing,
unless the test for part performance is satisfied): s. 54A CA
• Entire contract need not be in one formal document. There must be
written documents containing all essential terms (property, parties,
purchase price, etc.) which can be linked to each other + signature
s. 54A applies not only to sale, but also to leases, mortgages, sales of equitable
interests in land, etc.
CONTRACTS
AND LAND
LAW
s. 54A applies
to all
contracts that
relate to land
Immediate assignment of an equitable interest in land still needs to be in writing:
CA s. 23(1)(c)
It is an offence to advertise a residential property for sale without a prepared
contract available for inspection: CA s. 66R
Look at what the parties have actually agreed, see whether the rights intended to
be granted fit in one of the numerus clausus PIs. If they do, it's a contract in relation
to land and writing will be needed under s. 54A.
Contracts do
not transfer
legal title
Contracts in relation to land are an agreement by one party to transfer legal title
to a PI, to the other party, in return for consideration (money), at some point in the
future.
Specific
performance
If requirements for a valid contract for the sale of land are satisfied, the
agreement will generally be specifically enforceable, and give the purchaser an equitable
interest in the land
Basically
Client’s rights
or remedies
are
inadequate
EQUITY AND
TRUSTS AND
LAND LAW
Client has not
acquired any
legal rights or
remedies
Client could
never acquire
any legal
rights or
remedies
•
•
•
•
Equity relates to some parts of contract law.
Equity relates to some parts of land law
Equity relates to all trusts.
Trusts always include property, either personal or real.
Equitable remedy of specific performance: The legal remedy of damages may be
inadequate, land is unique, client would want vendor to be ordered to transfer
legal title
Equity will be used to supplement the law
Common intention, or reliance and detriment.
• The party without any legal interest in the land has an equitable interest (e.g.
equitable life estate in Ogilvie, a co-owned equitable fee simple in
Baumgartner, an equitable charge or lien in Giumelli). Legal owner must
then respect this interest.
Part performance
• If a party has done acts that are “of their own nature referable to the kind
of contract that is alleged”, an equity is raised in that party’s favour and will
give them rights
E.g. beneficiaries under a trust, which are the concern of equity.
• Trusts only exist in relation to personal or real property, the subject matter
is held on trust by the trustee for benefit of beneficiary, e.g. fee simple is
vested in the trustee, equitable fee simple in the beneficiary
A legally complete contract for the sale of land + in writing = the purchaser gets
an equitable interest in land (applies to all interests, i.e. easements, mortgages,
restrictive covenants, leases, fee simple)
CONTRACT,
LAND LAW,
AND EQUITY
Contracts for
the sale of
land
E.g.:
• a specifically enforceable contract to sell someone the legal fee simple gives
them the equitable fee simple (Bunny Industries);
• a specifically enforceable agreement to grant someone a lease will give them
an equitable lease (Walsh v Lonsdale)
The equitable interest acquired is a proprietary right.
TORRENS TITLE
System of land registration used in all states. NSW: created/regulated by RPA,
introduced 1/1/1863, entirely replacing Old System conveyance by deeds.
The
Torrens
system
Scheme where state authoritatively sets up a register for land title, controls register,
guarantees person named as proprietor with perfect title subject only to
encumbrances specifically notified on the register (accessible by public)
The conclusiveness of the register = principle of indefeasibility.
•
•
Central
ideas
•
•
Title by registration (not registration of title)
Conclusiveness of the register: publicly accessible government register that
definitively records who owns that parcel of land and who else may have
rights to it
Indefeasibility of title by registration (with exceptions) – immediate, not
deferred
All parcels of land (‘lots’), have had their boundaries defined by a
professional, accurate survey
Old System: transfers of land occurred through deeds, the only way a person could
verify title was though tracing the history of the dealings (a big task). The
inadequacy of Old System title deeds system was the dependent nature of titles –
one weak link in the chain could destroy/impair title.
TORRENS
SYSTEM
Design
Torrens system designed to create certainty and security in relation to land title.
Addresses two main problems with Old System title:
1. Who owns the land? Look to the deposited plan (DP)
2. What is the land? Look to register
Benefits
•
•
•
•
Accuracy in relation to physical boundaries;
Certainty of land and registered owner;
Register always complete and up to date;
Save time – don't have to look beyond the register.
Provide a register from which persons who propose to deal with land can discover
all the facts relative to the title
Objectives
Ensure a person dealing with land is not adversely affected by any infirmities in
the vendor’s title which do not appear on the register, saving the time and expense
of going behind the register to investigate the title
Provide a guarantee by state that the picture of the register book is true and
complete
s. 42 RPA: Registration effects the transfer of interest in land + creates legal title.
Priority and s. 36(9) RPA: Dealings registered with respect to, or affecting the same estate or
interest shall, notwithstanding any notice (whether express, implied or constructive), be entitled in
priority the one over the other according to the order of registration thereof and not according to
the dates of the dealings.
REGISTRATION
Only bound by what is on the register: Perpetual Trustee v Westfield
Register records current owner of the fee simple + any encumbrances affecting the land (e.g.
mortgage, lease, easement).
If something is mentioned on the certificate of title and register, purchaser has been given
‘constructive notice’ of the burden, required to conduct their own searches about the burden:
Bursill Enterprises
INDEFEASIBILITY
RPA s. 42(1) gives a RP an ‘indefeasible’ (i.e. unbeatable/undefeatable) interest
in land. A central concept in the Torrens system, providing both security of title
and security of transaction
PRINCIPLE OF
IND.
Defined
Applies to any estate or legal interest in land (not just fee simple) recorded in a
folio of the Register
“a convenient description of the immunity from attack by adverse claims to the
land or interest in respect of which he is registered, which a registered proprietor
enjoys” (Frazer v Walker)
Introduction of Torrens system created new priority rules different to Old
System
s. 42 eradicated the nemo dat rule
• Then: nemo dat rule (you can’t give what you haven’t got) to adjudicate
between earlier and later legal interests
• Now: s. 42 creates a system of title by registration, not registration of title
TORRENS
PRIORITY
RULES
The new
priority rules
s. 40
s. 43 eradicated the BFP rule
• Then: BFPFV without notice to adjudicate between earlier equitable
interests and later equitable interests
• Now: s. 43 states no transferee will be affected by “notice direct or
constructive of any trust or unregistered interest, any rule of equity to the
contrary notwithstanding; and the knowledge that any such trust or
unregistered interest is in existence shall not of itself be imputed as fraud.”
• A new owner who knows about an unregistered (almost always equitable)
interest will not be bound by it
Manual folio is to be considered conclusive evidence of both title and the fact
that the land has been duly brought under the RPA.
Primarily an evidentiary provision designed to assist in relation to proof of title
IND.
PROVISIONS
(RPA)
s. 40(1B)
Where the folio refers to something else (e.g. another document), the thing that
is referred to is deemed to be part of the folio (Bursill v Berger Bros)
s. 41
Dealings not effective until recorded in register. Only instruments registered
under the RPA will be effective for an interest in land
s. 42(1)
The key
indefeasibility
provision
Registration
creates title
s. 43
Register not
impeded by
notice
Gives registered proprietors “indefeasible” (i.e. unbeatable) title to land.
Refers to “any estate or interest in land recorded in a folio of the Register”,
therefore, mortgage, easements and leases can be indefeasible, not just fee simple
interests.
s. 42(1) – Fraud
s. 42(a1) – Omission or misdescription of an easement
s. 42(1)(d) – short term tenancy (less than 3 years)
Purchaser from a registered proprietor is not to be affected by notice of any trust
or unregistered interest (except in the cause of fraud), also notice of unregistered
interest ≠ fraud
A BFP purchaser/mortgagee registered by a void instrument (via fraud or error)
nevertheless obtains indefeasible title immediately
s. 45
Protection of
purchasers
provision
•
•
Protects BFPFV where vendor’s title was registered fraudulently
The defrauded party (original owner) has an equitable interest and can
cancel the registered title of the fraudulent party before the title is
transferred to the BFP
Nothing in the RPA is to be interpreted so as to leave a BFP for value open to
an action for recovery of land/damages on the ground that the vendor may have
gained their title through fraud or error (immediate indefeasibility)
NB. Protection applies to volunteers who gained their title from someone who
gained theirs through error/something other than fraud (Bogdanovic v Koteff)
Immediate
and deferred
Immediate: Good indefeasible title is transferred to the BFP immediately on
registration of the forged instrument (protects purchasers) (Frazer v Walker)
• Promotes “dynamic security”/“ease of transaction”
• Protects reasonable expectations of purchasers that they will acquire good
title
• Facilitates easy and cheap transfers (no need to investigate) and ease of
transaction
• Encourages people to buy assets
Deferred: The title of a BFP who registers a forged instrument is ‘defeasible’ (so
can be set aside by a court), unless the purchaser has already passed the title along to a
subsequent purchaser, at which point, the title becomes defeasible
Applies where a person (‘the forger’) forges the signature of the real RP on a
transfer and sells the property to an innocent purchaser.
RPs have immediate indefeasibility. Therefore, RPs who acquire their interest
under a void/flawed transaction still have indefeasible title (RPA s. 45; Frazer v
Walker)
• “A registration which results from a void instrument is still effective
according to the terms of the registration” (Frazer v Walker)
• Not confined to instruments void for forgery (Story v Advance Australia
Bank)
DEFERRED VS
IMMEDIATE
IND.
Current
position
Volunteers
(NSW)
Frazer v Walker
• Reg creates title even if the vendor is fraudulent but the purchaser is BF.
Title of BFPFV = indefeasible
• Reg of a void instrument by a BFPFV = effective, creates infeasible title
• Reg of a title obtained by fraud by the fraudulent party = defeasible
• The title is subject to defeasible title of the defrauded vendor
• The fraud creates an equitable interest on the part of the defrauded
(original owner), legislation allows an exception for fraud allowing them to
cancel the registration of the fraud
• Nb. s. 43 RPA now settles the priorities dispute: protection as to notice of
person purchasing the land before registration
Volunteer gains indefeasible title upon registration of their interest
(Bogdanovic) (cf. position in Vic where volunteer gains same quality of title as a
donor: Rassmussen v Rassmussen)
However, a person deprived of title through fraud can bring action for recovery
against a volunteer who gets their title from the person who defrauded them
(RPA s. 118(1)(d)(ii))
INSTRUMENTS
VOID FOR
DEFECTS
OTHER THAN
FORGERY
Registration of
void
instruments
rendered
indefeasible
not confined
to forgery
(Story v
Advance
Australia
Bank)
Morton v Black: Unauthorised alteration by the mortgagor’s solicitor did not
affect the rights of the mortgagee
Spina: Registration of a mortgagee executed by an attorney acting beyond the
powers conferred by a power of attorney
Consolidated Development v Holt: Registration of an instrument invalid at
CL because of the rule against perpetuities
Horvath: Mortgage given by a minor was indefeasible
Co-op Property Developments v Comm Bank: Reg of an invalidly executed
mortgage gave mortgagee an indefeasible title in the absence of fraud
Covenants are an essential part of a registered lease (incorporated term)
The first in time takes priority/is indefeasible between a covenant/leasehold interest + a mortgage
interest
Indefeasible interests (e.g. option for renewal) will expire if the time for their exercise expires
IND. OF THE
TERMS IN A
REGISTERED
INSTRUMENT
Mercantile Credits v Shell
• Tenant’s lease agreement had a covenant with an option of renewal of their lease after 5 years.
Landlord defaulted on payment of their mortgage. Mortgagee [lender] wished to claim their
rights to sell the land.
• Held: Tenant’s right of renewal prevailed over mortgage as it was registered first in time.
• Right of renewal is so intimately connected with the lease that it should be regarded as part of
the lease and entitled to the same priority as the lease.
• Does not extend to a personal right created by a covenant.
Karacomiakis v Big Country affirmed Mercantile Credits: A covenant to pay rent is an essential
and intimate part of the interest created upon registration
Is the borrower’s covenant to pay enforceable on registration of a void/forged mortgage? (they
didn’t take out the mortgage, but their property is secured as security)
Approach 1 – Full indefeasibility: Lender can hold the RP personally liable for the debt. The
indefeasibility of a registered mortgage “plainly” extends to the borrower’s covenant to pay:
Scorpion Hotels
IND. IN A VOID
MORTGAGE
Approach 2 – No indefeasibility: While the mortgagor’s security interest is indefeasible, the
covenant to pay is not (Grgic v ANZ). The HCA indirectly supported this approach in Gumland v
Duffy, when they said that the mortgagor’s covenant to pay does not touch and concern the land
Approach 3 – Limited indefeasibility: The personal covenant to pay is made enforceable by
registration only to the extent necessary to make the mortgagee’s security interest effective: Duncan
(not endorsed in NSW)
EXCEPTIONS TO INDEFEASIBILITY
Definition of a
volunteer
A volunteer is one who does not give valuable consideration for their title. E.g.
gift done, devisee under a will.
In NSW, being a volunteer is not an exception to indefeasibility.
Not an
exception
(NOT)
VOLUNTEERS
Application
Immediate indefeasibility (s. 42) will extend to protect volunteers;
registration creates title (Boganovic)
Registration creates title. A volunteer who registers title (received under gift)
will be protected from those claiming prior unregistered equitable interests
(Boganovic)
Obiter dicta in Farrah Constructions: volunteers obtain indefeasibility; no
distinction is made between volunteers and purchasers
RPA ss. 42 –
43
Requirements
for setting
aside an
interest due to
fraud
Indefeasibility does not apply where the RP gained their title through fraud.
The title of a fraudulent RP will not prevail against the interest of the former
RP who was defrauded
1.
2.
Fraud must be by the current RP and against the former RP
Must be brought home to the current RP or their agent through acts or
knowledge (Assets Co v Mere Roihi)
Fraud must include actual dishonesty which can be attached to the RP’s title;
must involve an element of personal dishonesty or moral turpitude on the
part of the RP or their agent (Grgic)
Constructive/equitable fraud (where a reasonable person would have realised
the transaction was fraudulent) is generally not sufficient in the absence of
dishonesty/moral turpitude (Assets Co v Mere Roihi)
FRAUD
The title of a
fraudulent RP is
defeasible
The level or
standard of
fraud required
‘Fraud’ is not used in its most restricted sense as incl. merely deceit, nor is in its
widest sense as incl. constructive/equitable fraud → requires wilful and
conscious disregard and violation of the rights of other persons
(Waimiha, Salmond J)
Fraud to be distinguished from carelessness (narrow scope)
• Carelessness, failure to make inquiries, reckless indifference, negligent
errors ≠ fraud (does not have the requisite element of dishonesty)
(Pyramid Building v Scorpion Hotels)
• Wilful blindness = not fraud. Constructive knowledge ≠ fraud. Actual
knowledge necessary (Assets v Mere Roihi)
RP must have gained their interest as a result of the fraud + fraud must be
operative (i.e. operated on the mind of the person said to be defrauded,
induced them to act to their detriment) (State Bank of SA v Ferguson)
The effect of
the fraud
Must have an intention to either deprive someone of an interest in land, or
induce someone to act in a materially different way (Davis v Williams) (and
must achieve one of these things)
The fraud must have caused the RP to gain their title → but for fraud, RP
would not have title.
Must have effect of violating someone’s rights (J Wright v Port Ballidu)
Whose fraud is
relevant?
False
attestation of
instruments
“The fraud which must be proved in order to invalidate the title of a RP for
value … must be brought home to the person whose registered title is
impeached, or to his agents” (through action or knowledge) (Assets Co v
Mere Roihi)
If employee of mortgagee (lender) falsely attests to signature of transferor
(mortgagor) on a transfer/mortgage = fraud
If mortgagee honestly believed imposter to be who they were impersonating ≠
fraud (Grgic v ANZ Bank)
Schultz v Corwill – 2 ways agent’s fraud can render RP’s title defeasible:
Agent themselves acts fraudulently (If A was acting within the scope of
actual/apparent authority = fraud attributable to the principal)
• Does A’s conduct fall within the scope of the task the agent was asked
to perform?
• Requires personal dishonesty/moral turpitude on the part of A
(Russo v Bendigo Bank)
• Fraudulent act may still be within the scope of agency even if done by
the A purely for their own benefit
Agent had actual knowledge of fraud committed by another (if A has
actual knowledge of fraud committed by another
Fraud and
agency
NB. Who is an agent?
In cases where lenders rely on intermediaries (introducers/mortgage brokers)
to pre-assess applications for loans and arrange execution of documents, these
intermediaries are generally not, without more, considered agents of the lender
(even if the lender pays commission) (Perpetual Trustees v Ford). However,
where mortgagees retain other persons/corporations to perform functions for
them in the origination of loans and mortgages = fixed with knowledge of
what the contractor knows (Perpetual Trustee Co v Khoshaba)
Agents and false attestation of instruments
A common example of fraud & agency is where an employee/agent falsely
attests the signature of a transferor/mortgagor –general rule is that if an agent
honestly believed the signature was not forged (or that the impersonator was
the right person) there will be no fraud (Grgic v ANZ Banking) (cf. Westpac
v Sansom: bank officer’s false attestation of instrument was held to be fraud
within the meaning of RPA s. 42)
In the case of an agent’s false attestation of an instrument, the title of the
principal will only be rendered defeasible if the agent’s behaviour had “an
element of dishonesty [or] conscious moral turpitude” (Russo v Bendigo
Bank) → “must be an intention [on the part of the agent] to affect adversely
the rights of another person, or at least recklessness as regards the affection of
such rights” (Russo v Bendigo Bank)
Fraud against the holder of an unregistered interest
• It is not fraud for a RP to merely acquire title with notice of an existing
unregistered interest, or to take a transfer knowing that its registration
will defeat such an interest (Bahr v Nicolay (No 2); RPA s. 43(1))
• However, being aware of an unregistered interest plus something else
may amount to fraud (Loke Yew v Port Swettenham Rubber UKPC:
purchaser’s false statement that he would honour the unregistered
interest was held to be fraudulent when the purchaser later sought to
repudiate that interest)
Ways in which
fraud can be
found
Fraud against a former RP
• Arises where a RP acquires their interest via a forged instrument
• If the person becoming registered or their agent committed the forgery,
the fraud exception is applicable and the RP’s title will not be indefeasible
• Fraud exception will also apply if the RP or their agent either had (a)
knowledge of the forgery; or (b) was wilfully blind as to the existence of
forgery.
• If fraud by third party: the fact that a proprietor has knowledge that
there has been fraud against an earlier registered owner will be enough to
impeach their title (Breskvar v Wall)
o Fraud will be ‘brought home’ to the RP through their knowledge
(actual or ‘wilful blindness’: Assets Co v Mere Roihi)
o No positive obligation to make inquiries as to whether someone
defrauded an earlier registered owner, no concept of ‘constructive
notice’ (Assets Co v Mere Roihi)
Fraud against the registrar
• Occurs where a person becomes RP of land pursuant to an instrument
and the person has actual knowledge of, or is recklessly indifferent to, the
fact that the instrument does not comply with the formalities for the
execution and attestation of the instrument
• The ‘fraud’ lies in the misrepresentation to the Registrar that the
instrument is a valid doc that may be properly acted upon (where the
person registering the instrument knows it is not)
• Most commonly occurs where agent falsely attests an instrument
• Proprietor knows it is forged or altered after execution: Beatty (Vic)
Timing of the
fraud
While the traditional position is that fraud must occur prior to obtaining
registration (Loke Yew v Port Swettenham Rubber UKPC), in Bahr v
Nicolay (No 2), HC was equally divided on the question of whether it was
fraudulent for a RP to dishonestly repudiate a prior interest that they had
agreed to honour for the purposes of obtaining title, even if at the time they
honestly intended to honour that interest ( statement only became
fraudulent after registration)
NB: post-registration conduct that would amount to fraud will be caught
under the in personam exception to indefeasibility
The ‘in personam exception’ refers to the established principle that a RP
cannot rely on indefeasibility of title to protect against the personal or
proprietary consequences of established legal or equitable claims
brought against them on the basis of their conduct
•
•
•
Definition
•
•
RIGHTS IN
PERSONAM
•
•
(The personal
equities exception,
in personam claims
fall outside the
scope of
indefeasibility)
Recognised by Lord Wilberforce in Frazer v Walker
o Principle of Ind. “in no way denies the right of a plaintiff to bring
against a registered proprietor a claim in personam, founded in law
or in equity, for such relief as a court acting in personam may grant”
(Lord Wilberforce)
o Affirmed Bahr v Nicolay, where Wilson and Toohey JJ held
that the Ind. provisions of the RPA “do not prevent a RP from
the consequences of his own actions where those actions give rise
to a personal equity in another”
Conduct giving rise to the in personam claim can occur either before or
after registration (Bahr v Nicolay)
Must be based on something more than the fact that they are the RP (i.e.
conduct must be something more than the mere act of registration)
The conduct giving rise to the claim can “include conduct not only of the
registered proprietor but also of those for whose conduct he is
responsible”, such as an agent (Grgic v ANZ Banking, Powell JA)
The use of the phrase ‘in personam’ does not mean the right is merely
personal – rather, “the action arises as against the person of the RP,
because of his or her identity, and not because of a property right that
binds the world at large” (Kelvin Low, 2009)
Claim can be a personal claim with a proprietary consequence; the
claim/right is enforceable against the RP
Claim can result in a proprietary remedy against RP provided its
proprietary nature arises from D’s conduct, not P’s prior title
Not an absolute proposition; note s. 43: Equitable fraud is not fraud.
• The indefeasibility provisions of the RPA “do not prevent a RP from the
consequences of [their] own actions where those actions give rise to a
personal equity in another” (Bahr v Nicolay (No 2))
Not an exception expressly stated in the RPA, rather, the RPA is understood
as not intending to override personal rights of action arising out of a RP’s
conduct (or the conduct of the RP’s agent sheeted home to the RP).
Elements
required
The claim must be based on the conduct of the RP or their
agent/employee: Grigic v ANZ
• The relevant conduct can occur either before or after registration (Bahr v
Nicolay (No 2))
• Conduct must be more than the mere act of registration (i.e. claim must
be based on something more than the fact the person is the RP)
Recognition and enforcement of the in personam claim must not be
inconsistent with the RPA: Bahr v Nicolay (No 2)
• Cannot be based on mere notice as this is inconsistent with RPA s. 43
P must show a known/recognised legal or equitable cause of action in
law or equity (and must establish the elements of that cause of action) (Grgic);
must be more than an innate sense of fairness (Conlan v Registrar of Titles)
Is unconscionability
required?
While it was traditionally said that a RP would only be vulnerable to an in
personam claim if they had acted unconscionably (Vassos), more recent NSW
authority has held that where unconscionability is not an element of the
relevant cause of action, there is no “superadded requirement to
establish unconscionability” (Harris v Smith, Brereton J)
Must be a cause of action capable of having a proprietary remedy (E.g.
negligence will not suffice to ground an in personam claim as the remedy for
negligence is damages: Scorpion Hotels)
Types of
causes of
action that can
be asserted
against a RP
1.
Proprietary estoppel/circumstances giving rise to a constructive
trust: Yes, per Bahr v Nicolay (No 2)
2.
Breach of fiduciary duty: Yes (Tataurangi v Mua Carr)
o RP who obtains registration in breach of a FD to the transferor
(purchaser) cannot rely on their registered title and claim
indefeasibility to escape liability: Tataurangi
3.
Special equity cases (e.g. if RP gains their title through undue
influence, duress, or unconscionable conduct towards the previous
proprietor, the in personam exception will operate to prevent the RP from
relying on Ind. to bar the previous proprietor’s claim)
o Can ground an in personam claim if P can est. the elements of the
relevant cause of action
o Vague assertions of unconscionable conduct on the part of the
RP will be insufficient (Gummow J, ‘Equity and the Torrens
System Register’)
4.
Third party unconscionability – Unclear
Scope of in personam exception has significantly narrowed recently. Although
HC in Bahr v Nicolay (No 2) envisaged personal equities as broader in scope
than the fraud exception, a person deprived of their land through forgery of a
transfer/mortgage now has little chance of successfully asserting a personal
equity against a careless transferee/mortgagee if there is no fraud: Pyramid
Building Society v Scorpion; Vassos v State Bank of SA
“Prescriptive easement” = implied easement through long and continuous
use + acquiescence of owner
Prescriptive
easements
UNREGISTERED
SHORT TERM
TENANCIES
s. 42(1)(d)
RPA s. 42: prescriptive easements cannot be created over Torrens land
(Williams v STA), and therefore, it is not possible to bring an in personam claim
to enforce a prescriptive easement
For indefeasibility not to apply to an unregistered interest of a short
term tenant, 4 elements in s. 42(1)(d) must be satisfied:
1. The tenant must be in possession (or entitled to immediate
possession)
2. Before becoming registered, the purchaser of the fee simple (reversion)
must have had “notice against which he or she was not protected”, but
note:
i.
“notice” incl. constructive notice (Clyne v Lowe) – accordingly,
s. 164 CA will apply.
ii. If tenant is in possession, purchaser is deemed to have
constructive notice of their interest: Luck v Hunt
iii. Purchaser to show absence of notice only up to completion
(protected from notice thereafter by s. 43A RPA): IAC
(Finance) Pty Ltd v Courtenay
3. The term of the tenancy does not exceed 3 years (antecedent leases
irrelevant: Alcova Holdings)
4. If there is an option to renew or extend, the total of the original term and
the option period does not exceed 3 years
Operates to deny the RP the ability to rely on their registered title to defeat the
interest of a short-term tenant in possession.
An RP cannot rely on registered title to defeat the interest of a shortterm tenant who is in possession.
Priority between the tenant and the registered proprietor is determined
according to general law priority rules relating to unregistered interests (i.e.
competing equitable interests): Perpetual Trustees v Smith
Operation
In a contest between an unregistered tenant in possession and a registered
mortgagee, priority is determined from the time the mortgage is created in
equity (not the time it is registered): Balanced Securities v Bianco
Test: earlier equitable vs. later equitable interest
• “in determining the competition between the tenant and the proprietor
of the registered interest, the latter must be regarded as having been
stripped of the benefit conferred by the fact of registration and as having
been remitted to the position of holding an unregistered interest”: Burke
v Dawes
o General rule for determining priority disputes between
unregistered interests: first in time will prevail unless postponing
conduct of the holder of the earlier interest: Abigail v Laplin
Indefeasibility granted by the RPA can be repealed, in whole or in part,
by a later statute
Ways statute
might override
Torrens
•
•
RPA s. 42(3)
Statute creates an interest in land, or imposes an obligation on the
landowner, which is not registered
Statute prohibits/makes void certain dealings, and a dealing falling
within the prohibition is subsequently registered
The Ind. provisions in ss. 42, 43 prevail over inconsistent provisions of any
other Act, unless the inconsistent provisions expressly provide they have the
effect of excepting Ind.
A court will not generally find that a later statute is inconsistent with the Ind.
provisions of the RPA (and therefore impliedly repeals them) unless the two
statutes absolutely cannot be reconciled: Horvath v CBA
OVERRIDING
STATUTES
Determining
whether there
is an implied
repeal of the
RPA ind.
provisions
E.g. if the later statute is about the enforceability of contracts or mortgages,
courts tend to find that the later statutes apply/refer to unregistered
contracts/mortgages, so as not to impinge on Breskvar v Wall principle that
registration resulting from a void instrument is effective according to the terms
of the registration (Horvath v CBA; Koompahtoo) (i.e. under the later
statute, the mortgage would be void for X – but as per Breskvar v Wall, a
void mortgage still attracts Ind. once registered, therefore later statute does not
deny the RP Ind. as their mortgage has been registered)
As a general rule, “there is a very strong presumption that the State legislature
did not intend to contradict itself, but intended that both Acts should operate”:
Butler v ACG), Fullagar J
Result of the
overriding
statutes
exception
CAVEATS AS
PREVENTING
REGISTRATION
OF CONTRARY
DEALING
Intro
Rights created by later legislation may prevail over the interest of a RP even
though the later interests created under statute cannot be discovered by search
of the Torrens register (South-Eastern Drainage v Savings Bank)
The system of caveats against dealings protects unregistered interests or
interests in land by a form of statutory injunction against registration of
inconsistent dealings (caveats do not create interests) which would defeat the
equitable interest (i.e. the caveated interest)
The caveat is generally lodged by the person with the equitable interest, and
acts as a statutory injunction preventing any future registering of interests
without their consent: Re Hitchcock
Any person claiming an estate or interest in land (whether under an
unregistered instrument or otherwise) may lodge a caveat with the Registrar
“prohibiting the recording of any dealing affecting the estate of interest to
which the person claims to be entitled”: RPA s. 74F
A memorandum of the caveat is entered on the relevant Crown grant,
certificate of title or folio of the register, and notice of the caveat is given to
the registered proprietor (who is entitled to commence proceedings to remove
the caveat): RPA s. 74H
General
procedure
Registrar not obliged to ensure caveator is entitled to the subsisting estate or
interest claimed in a caveat: RPA s. 74Q
If a transfer or other dealing of the land is lodged for registration, the Registrar
must notify the caveator, who then has 21 days in which to either consent to
registration or to take proceedings to show why the dealing should not be
registered: RPA ss. 74I – 74JA
If the caveator takes no action, the caveat lapses, and the Registrar must
register the dealing; a lapsed caveat cannot be renewed (RPA s 74O)
Once lodged, a caveat serves to give notice to anyone searching the register
that the RP’s interest is subject to a caveated interest: Re Hitchcock
Does a RP have a CI?
• NSW: an RP can lodge a caveat against dealings where they fear an
improper dealing because of the loss of certificate of title, or for some
other reason: RPA s. 74F(2)
• E.g. a mortgagor who has an equity to set aside a sale due to a
mortgagee’s fraudulent or illegal exercise of their power of sale will have
a CI: Capital Finances v Bayblu
Caveats can only be lodged in relation to interests or estates in land (Valerica v
Global Minerals) (i.e. cannot be mere contractual rights). The interest must be
one in which equity can gives specific relief against the land (Composite
Buyers v Soong)
•
•
Caveatable
interests (‘CI’)
•
•
•
•
•
•
•
•
•
•
•
•
•
Easements
Oral agreement for the extension of an easement supported by acts of
part performance: Deanshaw v Marshall
All equitable estates and interests: Butler v Fairclough
Interest of purchaser under a conditional sale, provided the court would
protect this interest by an injunction: Jessica Holdings
Interest arising under an enforceable option to purchase (i.e.
consideration has been given): Jacobs v Platt Nominees
Interest of a builder during construction on the land if the contract
provides for a charge: Hoskins
Unregistered profit à prendres: Shand
Equitable charges created to secure payment on a loan: Allen’s Asphalt
Delimitation plans: RPA s. 74F(4)
Mortgage by deeds
Interest of a transferee (purchaser) under an unregistered transfer
A vendor’s lien
A transaction set aside by fraud/misrepresentation
Interest of a lessor in a lessee’s covenant not to assign
Fear of an improper dealing: RPA s. 74F(2)
Noncaveatable
interests
•
•
•
•
•
•
•
Requirements
for caveats
Set out in RPA
s. 74F(5)
A mere personal right: Midland Brick v Welsh
Personal contractual rights: Woodberry v Gilbert
Interests in the proceeds of sale of land: Simons v David Benge
Claim for a property settlement under the Family Law Act 1975 (Cth):
Hayes v O’Sullivan or Property (Relationships) Act 1984 (NSW):
Ryan v Kalocsay, as not a legal or equitable interest in particular land
A claim to land that is statute-barred: Verebes
A claim to set aside a transfer on the basis of fraud, while being a claim in
personam that may result in a proprietary interest, is not caveatable until
such claim is successfully established: Valerica v Global Minerals
Non-express trusts: RPA s. 82
Caveat must be in the approved form, and specify:
• Name of caveator
•
esidential address of caveator (if caveator not a body corporate); or
address of the registered office of the body corporate, and RP
• Details 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 with
“a degree of particularity”: Beca Developments v Idameneo
• The current reference allocated to the folio of the property, or the lease,
mortgage or charge, to which the caveat relates
• If caveat only relates to part of the land described in a folio of the
Register or a current lease, a description of that part
• Quantum of the estate claimed and the facts on which the claim is
founded: Kerabee Park v Daly
Must be verified by statutory declaration (or, if lodged via Electronic
Lodgement Network, verified in a way approved by the Registrar General)
Must be signed by caveator (or solicitor or other agent of caveator)
Failure to comply with requirements as to form only will not invalidate a
caveat: RPA s. 74L
RP can apply to the court for the removal of a caveat (RPA s. 74MA)
• Important as a vendor’s obligation under contract for the sale of land to
make good title requires them to remove all caveats on the title: Zanee v
CG Maloney
• Court may remove a caveat because the prohibition on dealings is wider
than the caveator’s claim justifies: Kerabee Park v Daley
• Power of court to order removal of caveat not confined to cases where
the caveat is in bad form: Zanee v CG Maloney
• Registrar generally empowered to require caveator to show cause why
caveat should not be removed
Application for
removal of a
caveat
Application for removal is considered according to the principles
governing an application for an injunction (Letchumanan UKPC, Lord
Diplock)
• Is there a serious question to be tried? – caveator must show their
interest in the property raises a serious question to be tried
(Letchumanan). Applicant must show prima facie case enough to show
“a sufficient likelihood of success to justify in the circumstances the
preservation of the status quo pending trial”: ABC v O’Neill
• Does the balance of convenience favour the removal of the caveat?
– applicant must “show that on the balance of convenience it would be
better to maintain the status quo until the trial of the action, by
preventing the [registered proprietor] from disposing of his land to some
third party” (Letchumanan UKPC, Lord Diplock)
If a caveat is lodged without reasonable cause, caveator will be liable to
pay compensation to any person who suffers loss or damage as a
consequence (RPA s. 74P)
i.
Unlikely the maintenance of a caveat lodged reasonably will be
compensable (Hooke v Holland WA)
ii.
P bears the onus of proving the caveator acted without reasonable cause
(Bedford Properties v Surgo NSW)
Caveats
lodged without
reasonable
cause
Test: Caveator must have honestly believed on reasonable grounds they
had the interests claimed (Bedford Properties v Sugo, Wootten J)
• Caveator will not have ‘reasonable cause’ if they lodge a caveat “not for
the protection of [their] interest, but for an ulterior motive and without
regard to its effect on transactions to which the caveator had agreed”:
Bedford Properties
• Before lodging a caveat, “a person can reasonably be expected to get
proper advice, and be reasonably sure of [their] ground”, especially where
they know (and in some cases intend) that the “action will prevent an
important transaction involving a large sum of money”: Bedford
Properties
• However, the fact that a solicitor has negligently advised that the caveator
has an interest will not relieve them of the obligation to pay
compensation (Lee v Ross (No 2)) – while the caveator’s belief may be
honest, it is not held on objectively reasonable grounds
COMPETING EQUITABLE INTERESTS
GENERAL PRIORITY RULES
Competing interests
Old system rule
Torrens rule
Earlier legal vs. later legal
Nemo dat – earlier prevails
Registered interest
Earlier equitable vs. later legal
Later legal, provided BFPFVWN
Registered interest
Earlier legal vs. later equitable
Earlier legal, unless they have acted
recklessly, postponed conduct
Registered interest, unless there is an
exception to indefeasibility
Earlier equitable vs. later equitable
Earlier equitable, all else being equal
Earlier equitable, but different features
considered when determining “all else
being equal”
Earlier mere equity vs. later equity
Later equitable, provided BFPFVWN
Later equitable, provided BFPFVWN
Competing unregistered interests are treated as competing equitable interests (Barry v Heider)
Registered interests are treated as legal interests (s. 36(11) RPA)
GENERAL
RULES
Priority disputes between competing equitable unregistered interests determined by 2 rules in
Moffett v Dillon
• Notice rule: If later equitable had notice of earlier equitable, earlier equitable has priority
(deemed to have taken their interest subject to the earlier equitable interest)
• If the facts show the later equitable interest had no notice of the first, the rule that ‘where the
equities are equal, the first in time prevails’ applies (Heid v Reliance Finance), earlier
equitable takes priority unless this presumption can be displaced by the holder of the later
equitable interest showing ‘postponing conduct’ on the part of the earlier interest holder:
Abigail v Laplin
Start with presumption that time gives priority, unless earlier owner has done something to displace
priority – Abigail v Laplin: “prima facie priority of time will decide the matter unless [there is]
something tangible and distinct having a grave and strong effect”, e.g. postponing conduct
BETTER
EQUITY TEST
When a vendor passes an equitable interest to one person, then another, the earlier title succeeds if
the 2 equitable interests are equal in all respects. If one has better equity, time is immaterial. ‘Time’
should only be a last resort to determine priorities between equitable interests. Instead, court looks
to merits (Rice v Rice):
• Nature and condition of the equitable interest
• Special circs of the interest
• Entirety of party’s conduct (e.g. failure to make proper inquiries, not caveating an unregistered
interest)
If the holder of the later equitable interest had notice of the earlier equitable interest, the person
with the earlier equitable interest has priority as they are deemed to have taken their interest subject
to the earlier equitable interest: Moffett v Dillon
Notice includes both actual and constructive notice: Perpetual Trustees v Smith
NOTICE
Constructive notice may include where:
• A tenant is in actual possession: Perpetual Trustees v Smith
• Where the later interest holder should have known about the earlier interest, but did not make
inquiries: CBA v Platzer
• If notice can be inferred from surrounding circumstances, such as the company name, type of
business etc: Perpetual Trustees v Smith
May also be imputed notice (actual or constructive notice on the part of the purchaser’s agent)
In the absence of notice, there is a presumption that the first in time has priority unless there is
‘postponing conduct’ on the part of the earlier interest holder (Abigail v Laplin; J&H Just v Bank
of NSW)
POSTPONING
CONDUCT
Occurs where the earlier interest holder “has induced or contributed to a belief on the part of the
holder of the subsequent equity [that] at the time when he acquired it that the prior equity was not
in existence”: J&H Just v Bank of NSW
Examples
• Arming a third party with the means of representing themselves as the absolute legal and
equitable owner: Abigail v Laplin; Heid v Reliance Finance
• Misleading the later interest holder into believing the earlier interest did not exist
• Delay in asserting a better priority that causes the later interest to suffer loss
• In some cases, failure to caveat may = postponing conduct: Butler v Fairclough
Since Torrens provides a method for equitable interest holders to protect their interest by caveating,
not caveating is significant when determining “merits” of an equitable interest. It is good practice to
lodge a caveat where you have an interest in land yet to be registered
Two conflicting approaches:
• Abigail v Laplin – a caveat acts as notice to the world that a RP’S title is subject to an
equitable interest, therefore a failure to caveat can amount to postponing conduct
• J&H Just v Bank of NSW – the purpose of a caveat is protective, not to give notice;
therefore, failure to caveat does not in itself amount to postponing conduct
FAILURE TO
CAVEAT
Preferred position – failure to lodge a caveat is just one of the circs that should be
considered in determining whether it is inequitable a prior owner should retain priority (Heid)
• Effect of a failure to caveat may depend on the nature of the interest. If an interest one would
expect to be caveated (e.g. equitable mortgage) = more likely to be postponing conduct,
whereas failure to caveat contract for the sale of land (not commonly caveated) = less likely to
amount to postponing conduct: J&H Just v Bank of NSW)
• NB: having the duplicate Certificate of Ttitle is analogous to caveating, generally understood
that new interests cannot be registered without duplicate CoT; a person who has not caveated
but who has in their possession the CoT can be considered to have given sufficient notice
they have an interest in the land: J&H Just v Bank of NSW
LEASES
Leases
A lease is an estate in land carved out of a larger estate, whether the fee simple, or
a larger leasehold estate (sublease). They are formally categorised as “chattels real.”
A lease creates an interest in land (whereas a licence does not)
A lease has a twofold character. It is both a (1) demise of/estate in land and (2) a
contract.
Landlord/
lessor
Person granting lease, has a reversionary interest
Tenant/
lessee
Person taking lease
Reversion
Landlord’s interest in the land during the period of the lease (usually a fee simple
which is subject to the lease)
Assigning
the reversion
Transfer of the reversion to a purchaser during the lease
(e.g. landlord sells fee simple while lease is ongoing)
Assigning
the lease
Tenant transfers the lease to another person (sells/disposes of); the assignee of the
lease steps into the shoes of the original tenant and becomes the new tenant for
the remainder of the lease
Tenant assigns the lease to another for less than the remaining lease period but
retains the leasehold interest, therefore creating a new leasehold estate in the land
for a lesser duration
DEFINITIONS
Subletting
A purported sublease for a period equal to/in excess of the original term = an
assignment (Milmo v Carreras)
A purported assignment for a period less than the remaining term of the lease =
sublease (Lonsdale v Carra)
Demised
property
Leased to tenant
Retained
property
Property remaining in landlord’s possession, not leased
Fixed-term
lease
Tenancy set by the parties to expire at the end of a certain period, unless
terminated earlier, automatically expires when period ends
Runs from one period to another, continuing indefinitely unless terminated by one
party
Periodic
lease
CATEGORIES
OF LEASES
Holding over clause: when this lease ends, it will convert to period-to-period
which can go on indefinitely; will be terminated by notice from either landlord or
tenant. It’s said to satisfy the rule because each new period brings a new lease
Classified by
term/
duration
•
•
•
•
•
Fixed-term lease
Periodic lease
Tenancy at will
Tenancy at sufferance (always implied)
Tenancy for life
Classified by
method of
formation
•
•
•
Express tenancy (at law)
Implied tenancy (at law)
Equitable tenancy
Residential
tenancies
Regulated by Residential Tenancies Act 2010 (NSW)
• Imposes obligations on landlords which cannot be ‘waived’ by agreement
with tenant
• Establishes procedures and agencies to assist tenants in enforcing statutory
rights
• Regulates matters such as payment/deposit of bonds, rent increases,
termination, eviction procedures, dispute resolution
Retail
tenancies
Regulated by Retail Leases Act 1994 (NSW), impacted by Consumer and
Competition Act 2010 (Cth)
• RLA protects retail tenants, particularly in relation to standard form
commercial leases of large shopping centre plazas (which are frequently
offered to a tenant on a ‘take it or leave it’ basis, i.e. no true negotiation over
terms)
• CCA has a significant impact on commercial leases as it prescribes
unconscionable conduct, misleading and deceptive conduct, and certain
types of false representations
Agricultural
tenancies
Regulated by the Agricultural Tenancies Act 1990 (NSW)
• Protects agricultural tenants re fixtures, gives them an entitlement to longer
notice periods than is the case under common law tenancies
Leases under
Crown Lands
Acts
Created in NSW by the Crown Lands Act 1989 (NSW)
• Substantially altered common law concept of leases, e.g. by introducing the
‘perpetual lease’ and leases which do not confer the right to exclusive
possession
Other leases
fall under
general law
Applicable general provisions of the CA and the RPA.
STATUTORY
REGIMES
Nb. Where
statutory
schemes do not
apply, the
common law
operates to
regulate landlordtenant relations
Statute regulation
operates to
restore the
balance of
bargaining power
between landlord
and tenants
The term of the lease must be fixed and discernible at commencement of the lease.
Exceptions: tenancy for life, tenancy at will
SUBSTANTIVE
REQUIREMENTS FOR
THE VALID
CREATION OF
A LEASE
1. Certainty
of duration
(Say v Smith
and Fuller)
Fixed term leases
• Test to est. certainty of duration: date of commencement + maximum
duration of the term (from the outset: Prudential v London Residuary
UK) must be certain when the lease takes effect (Lace v Chantler)
• Duration must be certain or capable or being rendered certain (Say v
Smith)
• Fixed-term lease will not have sufficient certainty of duration if it is
specified that a lease ends on the occurrence of a particular event
o Lace v Chantler: Lease for duration of war = invalid
o Bishop v Taylor: Lease until end of crop = invalid
o Mangiola v Costanza: Lease until new premises built = invalid
• Lease is valid as long as the maximum term is certain (even if it specifies
that it may end within that period on the occurrence of an event which has
uncertain time
Periodic tenancies
• Requirement for certainty is met as periodic tenancies are deemed to be a
fixed term lease with a superadded condition that it is to continue unless
terminated by reasonable notice
• Parties may combine the features of a lease for a term of years and a
periodic tenancy
• A fetter on the right to serve notice to determine a periodic tenancy is valid
only if for a specified period (Prudential)
Tenancy for life (exception)
• Leases for life are the exception to the rule that a lease must be fixed
(Borambil v O’Carrol)
Tenancy at will (exception)
•
•
•
•
A tenancy at will lasts until determined by notice of either party (or
death/attempt to assign lease)
May require period of reasonable notice to be given before it is effectively
determined (Landale v Menzies)
Usually created by implication of law (e.g. person takes possession of land
pursuant to an informal lease before rent is paid)
In the absence of agreement, tenant is liable to pay a reasonable sum for
his/her use of land (Zegir v Woop)
Tenancy at sufferance (exception)
• On expiry of lease, tenant holds over (remains in possession) without the
assent/dissent of landlord
For a lease to be valid, it must confer upon the tenant EP of the premises,
otherwise it will be a contractual licence and not a lease (Radaich v Smith)
Note, EP will not = lease unless there is also certainty of duration (Wilson v
Meudon)
EP will exist if they can exclude strangers and the landlord from the premises and
maintain an action of ejectment or trespass
If there is EP, there is a lease and not a licence (Radaich v Smith), therefore,
determine whether the parties intended the instrument to confer EP (based on
conduct and circumstances, not words or labels) (Radaich v Smith). A licence
may give you a right of occupation or access, but will not give you an estate in land
like a lease does
The true test of a supposed lease is whether EP is conferred upon the
putative lessee (Addiscombe Garden Estates)
Exception: landlord can reserve a limited right of entry (e.g. right to view or
repair) (Radaich v Smith)
2. Exclusive
possession
(EP)
(Radaich v
Smith)
The tenant has control of the premises: If tenant has the ability to lock up the
premises etc, this would indicate EP: Radaich v Smith
T has the right to exclude all others: `L will usually retain right to enter and
inspect the premises – not considered an infringement of the T’s right to EP. If
the grant was merely a licence, the L would not need to make an express grant for
inspection
There are covenants to give up possession at the end of the grant: suggests
lease because it contemplates EP during the use of the grant
There are covenants against assignment: shows the grantor contemplated an
estate in land and would favour the right of EP, since licenses cannot be assigned
(as they are purely personal rights)
The court looks to the substance, not the form of the grant
The fact that parties call the grant a “license” or a “lease” in the document is
irrelevant (Radaich v Smith)
The court looks at the nature of the premises and the business
If the business carried on by the grantee is one that would require exclusive
possession, the court may be more willing to find that they were granted it.
If the grant allows some parts of the land to be used exclusively and others to be
shared = licence rather than a lease: Lewis v Bell
If it is still not clear whether it is a lease or a license by this point, the courts can
look at the intention of the parties to determine whether they intended to grant
and receive exclusive possession: Lewis v Bell
If lease is more than 3 years (including options to renew): must be registered
(RPA s. 53(1); see also RPA s. 42(1)(d) – unregistered leases for less than three
years are an exception to indefeasibility)
Torrens
Unregistered lease agreements may still be specifically enforceable in equity, but
do not in themselves create a legal interest in the land: Leitz Leeholme
Lease for less than 3 years can be created orally if T has taken possession & lease
is at market rent (CA ss 23D(2); 23B(2)(d))
FORMAL
REQUIREMENTS
Old system
If lease is for 3 years or less (including options) can be created orally (i.e. w/o the
need for writing) provided the tenant has taken possession & the lease is “at the
best rent which can reasonably be obtained without taking a fine” (CA ss. 23D(2);
23B(2)(d))
NB: only applies to leases for 3 years or less – an agreement for a lease for three years
or less must still be in writing to be enforceable (or supported by acts of part
performance if it is to be enforceable in equity)
If lease is for more than 3 years (including options) then it must be created by
deed, in writing and signed by the lessor/landlord (CA ss. 23B(1); 23C(1)(a);
23D(1))
NB: requirement for writing still applies if the lease is for a maximum period of
more than 3 years but is determinable by notice before the 3 years are up:
Kushner v Law Society
EQUITABLE
LEASES
IMPLIED
TENANCY AT
LAW
Recognised
where
agreement
for lease
The agreement must be either:
• Evidenced in writing: CA s. 54A, or
• Supported by sufficient acts of part performance
Where person goes into possession and paid rent, but no formal executed lease
CL: Implied yearly lease (or for the period for which rent was paid, whether
monthly, weekly, etc.)
CA s. 127
COVENANTS
IMPLIED AT
COMMON LAW
Subject to
contrary or
modifying
express
covenants or
statutory
provisions
Recognised where agreement for lease: Walsh v Lonsdale
Now: CA s. 127 – where tenant in possession + rent, but no valid lease stipulating
duration, tenancy is an implied tenancy at will, determinable by either party on 1
month’s notice.
• May co-exist with an equitable lease (Leitz Leeholme)
• A s. 127 tenancy is actionable against a third party
Covenant: An agreement creating obligation under a deed (promise under seal),
any promise in a lease
Leasehold covenants may be positive or negative, express or implied (by law,
statute, or necessity)
Intro
Implied covenants cannot stand in the face of express covenants dealing with the
same subject matter (Malzy v Eichholz)
Covenants implied at CL are subject to any contrary or modifying (1)
express covenants or (2) statutory provisions
In all leases, L subject to an implied covenant not to interfere with T’s quiet
enjoyment of the demised premises (Markham v Paget) (unless modified by
agreement)
• Even where lease agreement purports to exclude L’s liability for certain
things (e.g. damage caused by accidental leakage), T may still have action for
negligence and/or breach of covenant for quiet enjoyment: Martins Camera
Corner
Requires L to ensure T can occupy and enjoy premises without disturbance or
interference from L or people for whom the lessor is responsible: Hudson v
Cripps
Breach: act of disturbance/interference must be more than trivial: David Jones v
Leventhal
Obligation to
give quiet
enjoyment
(landlord)
Examples of breach:
• Acts of trespass such as removal of windows and doors: Lavender v Betts
• Repeated threats to remove the tenant: Kenny v Preen
• Acts of nuisance such as erecting scaffolding in front of the tenant’s shop,
thereby affecting their business: JC Berndt v Walsh
• Acts of negligence which cause loss of enjoyment, such as repairs to a roof
involving negligently hosing asbestos-infected material off the roof and into
T’s premises: AF Textile Printers
Examples where no breach:
• Writing letters demanding T vacate: David Jones v Leventhal
• Building an external staircase which passed the tenant’s bedroom and
therefore interfered with their privacy: Browne v Flower
Remedies
• Where breach of also amounts to a separate tort (e.g. trespass, nuisance,
negligence or assault) – punitive damages: Lavender v Betts
• Mere breach of covenant – compensatory damages: Perra v Vandiyar
• NB: courts may award damages for mental distress caused by landlord’s
breach of covenant: Branchett v Beaney UK
Where a grant is made for a particular purpose, L is under obligation to ensure
land remains fit for this purpose > breached by ‘practical frustration’ of that
purpose: Aussie Traveller v Marklea
If L leases out part of their property to a T for a particular purpose, L cannot use
the remaining land, or permit the remaining land to be used, in a way that is
inconsistent with the original T carrying out their business in the usual manner:
Aldin v Latimer UK
Obligation
not to
derogate
from the
grant
(landlord)
Usually arises where the L leases out another portion of the property to a second
tenant (T2) who uses the land in a way that is inconsistent with T1 carrying out
their business in the usual manner
Examples of breach:
• L granting T1 a lease for the purpose of storing explosives, then granting T2
a lease over adjoining premises for a purpose which jeopardised T1’s
statutory licence: Harmer v Jumbil
• L uses retained premises in a way which blocks the flow of air to T’s
premises, and the ordinary conduct of T’s business requires flow of air:
Cable v Bryant
• Where L demolishes part of a warehouse and T has goods stolen because the
demolition renders T’s premises vulnerable to burglary: Lend Lease v
Zemlicka
Interference must be ‘material’ or ‘substantial’ (Carpet Fashion v Forma) i.e.
more than trivial/ interference must be such “as to render the demised premises
unfit for the purpose for which the leased premises are intended to be used”
(Hawkesbury v Battik)
Landlord will only be at fault for breach of this covenant if:
• They own the adjoining premises
• They have knowledge at the time of the lease that the T is using the leased
premises in this way (and must be contemplated in the grant)
Includes land that the landlord acquires later (not just land that the landlord
owned at the time the original lease was granted)
TEST FOR BREACH: Aussie Traveller v Marklea
• Is the extent of the disturbance/disruption suffered by the tenant sufficient
to amount to a breach of the implied obligation;
1. Must amount to a ‘practical frustration’ of the purpose of the lease
• Can the breach be brought home to the landlord? (see below)
L can neither disturb the tenant’s possession themselves, nor authorise its
disturbance by others: Aussie Traveller v Marklea
L will only be liable if they are in a position to take some remedial action against
the person committing the disturbing acts: Fanigun v Woolworths (i.e. no
liability if there was nothing L could do)
Liability for
acts of others
(quiet
enjoyment
and nonderogation
from grant)
(landlord)
Liability for acts of other tenants
• L may be liable for the acts of other Ts if at the time the lease was granted to
the other tenants it was reasonably foreseeable that the T was likely to do
those acts: Aussie Traveller
• Emphasised in Volley Investments v Coles Myer that the event(s)
constituting breach of covenant must be reasonably foreseeable before a L
will be liable
• L will always be liable if they authorise the lawful acts of Ts that cause
nuisance (as they are then directly involved in the act which breaches the
covenant): AF Textile Printers v Thalut
Liability for acts of strangers/natural events
• L may be liable for acts done on the land creating a nuisance (even if those
acts were done by third parties or were the result of natural causes) if the L
fails to take reasonable steps to prevent them: Aussie Traveller
Liability for nuisance caused to third parties
• General rule is that a L is not liable in nuisance to third parties for the acts of
unruly tenants (Smith v Scott) unless L leased the premises for a purpose
calculated to cause a nuisance or expressly authorised the nuisance: Peden v
Bortolazzo
Title paramount
• L will not be liable for acts committed by someone with a ‘title paramount’
(e.g. a better title to the property than them – e.g. in the case of a sublease,
the head landlord): Jones v Lavington
Fitness for
habitation
(landlord)
CL rule that a L must ensure a furnished dwelling is fit for habitation at the
commencement of the lease: Cruse v Mount
Largely obsolete as overridden by statute, currently only applies to very narrow
range of residential tenancies that escape reach of residential tenancies legislation
Court may imply an obligation on the L to keep the premises in ‘reasonable repair
and useability’ (e.g. lifts working): Liverpool CC v Irwin
At CL, L has no implied obligation to repair (Liverpool CC v Irwin) However, L
will be under a duty to take reasonable care for the safety of occupants and this
may involve effecting repairs: Northern Sandblasting v Harris; Jones v Bartlett
Obligation to
repair
(landlord)
Courts have been increasingly willing to imply an obligation to repair into the
contract for the lease where this is necessary to give business efficacy to the
agreement between the parties (Codelfa Construction v State Rail Authority of
NSW)
L may also be under an implied obligation to repair the common areas of the
building which have been reserved for the use of all tenants (e.g. common access
ways and stairs): Alcatel v Scarcella
L is under a duty to take reasonable care for the safety of occupants: Northern
Sandblasting v Harris
Duty extends to the T and members of the T’s household: Northern
Sandblasting v Harris
L can fulfil the duty by “putting and keeping the premises in a safe state of repair”:
Jones v Bartlett
Premises must be reasonably fit for the purposes for which they are let (e.g. for
use as a domestic residence): Jones v Bartlett
Duty to take
reasonable
care for the
safety of
occupants
(TORT)
L must both inspect the premises (to ascertain existence of any defects) and
remedy/take reasonable steps to remedy defects that give rise to a foreseeable risk
of injury (Northern Sandblasting v Harris). An object will be ‘defective’ if it is
dangerous when used in the ordinary way: Jones v Bartlett
What constitutes ‘reasonable steps’ will depend on circs of the case, incl. the
purpose for which the premises was let, the terms of the lease, the level at which
the rent was pitched and the terms of any applicable statutes An object will be
‘defective’ if it is dangerous when used in the ordinary way (Jones v Bartlett)
Need to look at the origin of the defect to determine who is responsible (Jones v
Bartlett)
• If negligent construction/design, person constructing/designing will usually
be liable
• If defect is due to disrepair, determine who was responsible for repairs
L’s duty is delegable – sufficient if they engage a competent contractor to deal
with the defects: Jones v Bartlett
Liability for injury to entrants: Liability suffered by entrant primarily rests with
the occupier (Australian Safeway v Zalzuna), however L will be liable for
dangerous defects (Jones v Bartlett)
T required to use premises in the manner of a reasonable T: Warren v Keen UK
Obligation to
use premises
in a tenantlike manner
(tenant)
Does not create general responsibility to repair, but involves taking care of
demised premises in an ordinary manner (e.g. clean, not damaging it): Warren v
Keen UK
Also implied by statute: CA s. 84(1)(b) – tenant must keep premises in ‘good and
tenantable condition’
See also: Obligation cultivate land in husband-like manner (agricultural tenancies)
Obligation to
yield
possession
when lease
expires
At the expiration of the term of the lease, T is required to deliver vacant
possession to the landlord
Obligation extends to subtenants and other occupiers > T must ensure that all
persons have vacated the premises: Grainger v Williams
(tenant)
Terms may be implied into a lease. Distinction between implication ad hoc (to give “business
efficacy”) and implication into particular class of contracts/lease (e.g. if LL is a local council,
implied duty to repair lifts: Liverpool City Council v Irwin), but the cases tend to shade into each
other
COVENANTS
IMPLIED AS
MATTER OF
NECESSITY
BP Refinery (Westernport) – the following conditions must be satisfied (may overlap):
• Term must be reasonable and equitable
• Must be necessary to give business efficacy to the contract so no term will be implied if the
contract is effective without it
• Must be so obvious it “goes without saying)
• Must be capable of clear expression
• Must not contradict express term of the contract
E.g.
• Dillon v Nash: Necessary to cross landlord’s premises to use amenities
• Telstra v Captean: Implied condition that commercial tenant could keep premises to current
Aus standards, but not such as in its subjective view it thought necessary for business
• Dogrow: Implied obligation on LL to consent to DA for extended trading hours when lessee
ran licensed hotel
EXPRESS
COVENANT AS
TO USER
EXPRESS
COVENANT
TO PAY RENT
Lease may contain an express covenant restricting use of premises by lessee (e.g. must be to operate
a restaurant)
If lease limits use of premises by lessee and provides that such use must not be altered without
lessor’s consent, no implied obligation on lessor not to withhold such consent unreasonably: CA s.
133B(3); Barina Properties v Bernard Hastie
Lease may (and almost always does) contain an express covenant for the payment of a specified
amount of rent. May provide for rent to be reviewed during currency of the lease, either according
to specific formula or market rent by a 3rd party valuer. Rent review clause will be construed so as to
avoid absurdity: Westpac v Tanzone
Absent an express term, there is a statutorily implied obligation to pay rent reserved: CA s. 84(1)(a)
A landlord may recover rent only from someone who has POC or POE with LL, will not be able to
recover rent from an occupier merely by virtue of occupation
Conditions for the exercise of the option by the lessee must be strictly complied with
COVERNANT
CONFERRING
OPTION TO
RENEW
However, if a lease provides that breaches by a lessee of the lease covenants will preclude the lessee
from exercising the option to renew, a LL cannot rly on such a breach unless LL has served notice
under CA s. 133E, stating the LL proposed to rely on the breach, but giving the lessee opportunity
to seek relief from the court under s. 133F. (Do not apply if lessee has repudiated)
Subject to an express covenant, fixed term or periodic leases may be transferred by
the lessee or lessor:
• A lessee may
o Transfer the whole interest (assignment) or
o Part of the interest (sublease)
• A lessor is said to assign the reversion
EXPRESS
COVENANTS
AGAINST
ASSIGNMENT
OR
SUBLETTING
Background
Covenants containing absolute prohibition against assignment or
subletting by tenant
• Such covenants are effective according to their terms, except covenants
against subletting simpliciter are construed as being limited to parting with
possession of the entity of the premises (unless there is a prohibition on
subletting any part of the premises)
• A covenant against parting with possession prohibits assignment
Covenants containing qualified prohibitions against assignment or
subletting by tenant
• Where assignment or subletting is permitted subject to the lessor’s prior
consent, CA s. 133B(1)applies (and mandates that consent is not to be
unreasonably withheld) and the parties cannot contract out of this provision
All express covenants will be binding where there is original POC (whether
covenants ‘touch and concern’ the land or not)
Important
rules
After assignment (of lease or reversion) only those covenants which ‘touch and
concern’ the land will bind parties between whom there is POE and not POC
No covenants are binding between parties with neither POC nor POE (e.g. as
between headlessor and sublessee)
ENFORCEABILITY OF
EXPRESS
COVENANTS
AFTER
ASSIGNMENT
Determining
whether a
covenant
touches and
concerns the
land
General
4 part test in P & A Swift Investments v Combined English Stores Group,
cited in Gumland Property v Duffy Bros
1. Covenant benefits only reversioner for the time being, and if separated from
the revesion, ceases to be of benefit to covenantee
2. Covenant affects the nature, quality, mode of user, or value of the land of
the reversioner
3. The covenant is not expressed to be personal
4. If the covenant is to pay a sum of money, that will not prevent it touching
and concerning the land if 1 – 3 are satisfied and the covenant is connected
with something to be done on, to, or in relation to the land
Privity of contract exists between original L and original T and express covenants
are enforceable simply as a matter of contract law and (unless released), remain
so even after assignment of the lease or reversion (not so for implied covenants
because they arise from an actual relationship of L and T). T1 will still be liable to
L by virtue of the contractual relationship even if the lease has been assigned
Privity of estate (CL, not equitable doctrine) exists between parties who have a
relationship of L and T, even if POC between them. Where there is an assignment,
POE ceases between the original parties and POE then exists between those who
now stand in the relationship of L and T
CA s. 70 – covenant relating to land deemed to be made by the covenantor (i.e.
original tenant/T1) on behalf of themselves and their successors in title, unless a
contrary intention appears in the instrument
• T1 will be contractually liable for breach of their successors in title if they
assign the lease (however T1 will be entitled to be indemnified by their
successors: Moule v Garrett) E.g. T1 will be liable to pay L rent if their
successors default in payment of rent: Estates Gazette
• This liability is not effected by further assignment by T2, and T1 continues
to be liable no matter how many times lease is assigned
• CA s. 70 can be excluded by clear words in the lease (i.e. a covenant that
releases T1 from any obligations after assignment)
Privity of
contract
Applies even where the term of the lease has been extended by T1’s successors via
an option to renew the lease (Baker v Merckel)
If the rent is increased pursuant to a rent review provision during the
assignee/T2’s term, T1 is liable to pay the increased rent: Picton & Warlow
Squatter who bars the title of a T by a period of adverse possession is not an
assignee of the T, and therefore not liable for breach of the terms of the original
lease (Tichborne v Weir), however, in certain cases squatter may be estopped
from denying the terms of the original lease (Ashe v Hogan)
Indemnity principle: if two are technically liable, but one is primarily liable, the
other may recover from the party primarily responsible: Moule v Garrett
Only legal leases, i.e. must comply with CA s. 23B (assurances of land must be
made by deed) or registered
Legal assignment of old system land
• CL principle is that upon assignment of the land, the benefit and burden of
covenants which ‘touch and concern’ the land pass to the assignee (T2):
Spencer’s Case
• Test – whether the covenant affects the landlord ‘qua landlord’ (in
their capacity as landlord) or the tenant ‘qua tenant’ (in their capacity
as tenant): Breams Property Investment
• Examples of covenants that touch and benefit the land:
o Covenant to renew the lease: Weg Motors
o Covenant to repair: Williams v Earle
o Covenant to insure against fire: Vernon v Smith
o Covenant to use as a dwelling house: Wilkinson v Rogers
o Covenant not to assign without consent: Cohen v Popular
Restaurants
• Examples of covenants that do not touch and benefit the land:
o Covenant requiring the landlord to compensate the tenant for nonrenewal: Re Hunter’s Lease
o Covenant to repair chattels on the land: Williams v Earle
o Option to purchase the reversion: Woodall v Clifton However, an
assignee can obtain the benefit of an option to purchase the reversion
by separately assigning the option as a chose in action
Legal
assignment
of legal lease
Registered assignment of Torrens land
• Where there is a legal assignment of a legal lease over Torrens land, no
requirement that covenants ‘touch and concern the land’ > all obligations in
the original contract are enforceable by and against the registered assignee
(i.e. T2) for as long as there is POE between T2 and the LL (CA s. 51;
Karacominakis)
• “The effect of CA s. 51 is that the transfer of a lease creates POE and POC
between the lessor and the transferee of the lease: a statutory replication of
the POC co-existent between the lessor and the original lessee ... s. 51
subjects the transferee of a lease to the lessee’s obligations only while the
transferee is registered as proprietor of the lease, so that following further
transfer the transferee is no longer liable under the lease”: Karacominakis
• CA s. 51 applies equally to landlords and tenants (meaning it applies to
registered assignments of both leases and reversions): Measures v
McFayen
• Once a transfer of a lease is registered, the estate or interest passes to the
transferee (T2) who will then be liable for all requirements and liabilities
under the instrument (CA s. 51; Karacominakis)
Unregistered assignments of Torrens land
• If lease is for three years or less (and therefore not required to be registered)
the principles governing assignment of Old System leases apply > only
covenants that ‘touch and concern the land are enforceable
• In cases where a lease of Torrens land for more than 3 years is assigned via
deed but not yet registered, the unregistered lease would be equitable only >
as no POE or POC, the assignee will not generally be able to personally
enforce the covenants
Sublease
Distinction between assignment and sublease
• Assignment occurs where T1 transfers complete residue of the term of the
lease to a third party (assignee/T2) – T2 steps into T1’s shoes to become
tenant
o Destroys POE between L & T1, creates POE between L & T2
• A sublease occurs where T1 grants a lease to a third party (ST) for a period
of time less than the remaining term of the lease
o POE between LL & T1 not affected
o No POE between LL & ST
Enforceability of covenants after sublease
• L can only enforce covenants against ST indirectly (e.g. by forfeiture of the
head lease, or by seeking damages against T1)
• However, ST may be able to get relief against forfeiture of the head
lease under CA s. 129(2) and CA s. 130(1)
• ST can only enforce against LL indirectly, through T1
Legal
assignment
of equitable
lease/
Equitable
assignment
of legal lease
If the assignment of a lease is only effective in equity, there will be no POE and
POC > the registered assignor will remain liable because there will still be POE
between them and the L (Karacominakis)
• Therefore, L will sue T1 (legal tenant) for breach of covenant, and T1 has a
right to indemnity/recoupment from T2 (equitable tenant): Moule v Garrett
CA s. 23B (assurances in land must be by deed) applies to unregistered
assignments in land under the Torrens system – assignment of an oral lease that is
not registered or made by deed will be ineffective at law: Chronopoulos v Caltex
Assignment of the reversion occurs where the original lessor/landlord sells and
transfers their interest in the fee simple to the assignee (new landlord), subject to
the lease
• LL1 and LL2 have POC, but no POE
• LL1 and T1 have privity of contract, but no privity of estate
• LL2 and T1 have privity of estate, but no privity of contract
Under the CA, the benefit (s. 117) and burden (s. 118) of every covenant in the
lease which ‘has reference to the subject matter of the lease’ runs with the
reversion
‘Having reference to the subject matter of the lease’ = same as ‘touching and
concerning the land’ (Davis v Town Properties)
Assignment
of reversion
Examples of covenants that touch and benefit the land:
• Renew the lease (Weg Motors v Hale), repair (Williams v Earle), insure
against fire (Vernon v Smith), use as a dwelling house (Wilkinson v
Rogers), not to assign without consent (Cohen v Popular Restaurants)
Examples of covenants that do not touch and benefit the land:
• Covenant requiring the landlord to compensate tenant for non-renewal (Re
Hunter’s Lease), to repair chattels on the land (Williams v Earle)
Liability of T1 to LL1
• LL1 can only sue T1 for breaches of covenants that do not touch and
concern the land, and only or breaches which occur prior to assignment:
Ashmore v Eaton
Liability of LL1 to T1
• There is still POC between LL1 and T1, but T1 can only enforce personal
covenants that do not touch and concern the land (because any covenants
that touch and concern the land are annexed to it and therefore go with the
reversion to LL2)
Liability of T1 to LL2:
• LL2 has the right to enforce covenants which touch and concern the land
•
•
(CA s. 117) even if LL2 is not yet an RP (or is only the LL in equity), as CA
s. 117(2) provides that any person entitled to the income of the leased land
can enforce the benefit of such covenants: Dalegrove v Isles Parking
CA s. 117 allows covenants of re-entry (forfeiture) to pass with the
reversion, thus making them enforceable by LL2
Right to sue for pre-assignment breaches of covenants that touch and
concern the land passes to LL2 by assignment of reversion (and therefore
LL1 can no longer sue for them): CA s. 117; Measures v McFayden)
Liability of LL2 to T1
1. T1 has the right to enforce any covenants which touch and concern the land
against LL2 (CA s. 118)
Primary remedy available to a landlord is their capacity to bring the lease to an
end before the expiry of the term –known as forfeiture of the lease
A lease is ‘forfeited’ when the landlord lawfully takes possession of the premises
or lawfully demands possession of the premises
Forfeiture of
lease by
landlord
REMEDIES
Because of the severe consequences of this remedy, a number of procedural
requirements are placed on landlords, which give the tenant the opportunity to
rectify any breaches before the right to forfeiture of the lease can be exercised
The steps that must be taken by landlords are:
1. The lease must contain an express right to forfeit, or a right to forfeit must
be implied by statute
2. T must have breached the lease
3. LL must give T notice (unless the breach comes within an exception to the
notice requirement)
4. Breach must still be current at the expiry of the notice period
5. LL must effectively forfeit the lease
6. T must not have been granted relief against forfeiture
No implied CL right to re-entry/termination
A lease will typically confer on the LL an express power to terminate in event of
a breach by the T > gives LL right to re-enter and terminate the lease for breach
of covenant (known as the ‘proviso for re-entry’)
Source of the
right to
forfeit
Where T1 assigns the lease and takes covenants from T2, they may reserve a right
of re-entry for breach of those covenants; the right of re-entry so reserved is
enforceable even against subsequent tenants or subtenants (against whom the
covenants are not directly enforceable by the original tenant/T1) (Shiloh
Spinners)
CA s. 85(1)(d): implied statutory right to forfeit for non-payment of rent
Where T breaches a non-rent covenant, CA s. 129(1) provides some protection to
T by requiring the service of notice as a condition to the exercise of the LL’s right
to re-entry
• Applies even where the lease agreement contains stipulations that notice is
not required: CA s. 129(10)
LL must serve on T a notice:
• Specifying particular breach complained of: CA s. 129(1)(a)
• If breach is capable of remedy, requiring T to remedy: CA s. 129(1)(b)
• If the LL claims compensation in money for the breach, requiring T to pay
this compensation: CA s. 129(1)(c)
The primary purpose of providing notice is to allow T to remedy the breach before
the matter reaches court (if it is possible to remedy it) (Fox v Jolly)
The breach must be specified – e.g. a notice which merely identifies a breach of
the repair covenant without detailing the damage will be ineffective (Gerrarty v
McGavin)
The notice procedure must be followed even where the the breach cannot be
remedied, although in such a case the notice need not require the breach to be
remedied (Horsey Estate v Steiger) – E.g. assigning the lease/subleasing without
consent (Scala House v Forbes)
The requirement of demanding compensation is not mandatory, as LL is not
obliged to claim compensation if they don’t want it: Rugby School v Tannahill
Notice
Notice must specify what the LL requires T to do to avoid forfeiture (i.e. must
remedy breach or pay compensation): Macquarie v Area Health Authority
LL can only exercise the right of re-entry if T fails to remedy the breach/pay
compensation within a “reasonable time” after being served notice (CA s 129(1))
• ‘Reasonable time’ is usually 3 months (Penton v Barnett ), however
reasonableness will depend on circs (Billson v Residential Apartments: 14
days reasonable as T’s disregarded all prior warnings and showed no
intention to remedy)
• Shorter period also permissible in the case of irremediable breaches
(McGrigor: 14 days reasonable)
Courts look to substance, not form, to determine whether notice is required –
attempts to circumvent the requirement of CA s. 129 generally unsuccessful
(Holden v Blaiklock)
No right to
forfeit if
breach
waived
Exceptions to notice requirement
1. Bankruptcy: CA s. 129(6)(e)
2. Leases less than one year in duration (CA s. 129(6)(a))
3. Breach of rent covenant
At CL, a right of re-entry for breach of a rent covenant cannot be
exercised unless LL first makes a formal demand for the rent
Most LLs include a clause in the lease expressly excluding the
requirement of a formal demand
Even where the lease does not dispense with this requirement, statute
provides that:
Re-entry may be effected without formal demand where 6 months’
rent is in arrears (Landlord and Tenant Act 1899 s. 8)
Where rent is more than one month in arrears no demand is necessary
for the implied right to forfeit (CA s. 85(1)(d))
The right to forfeit the lease will be lost if the lessor waives the breach
which rendered the lease susceptible to forfeiture
Waiver occurs where LL has knowledge of the breach and performs an
unequivocal act recognising the continued existence of the lease (e.g. accepting
rent) (Lidsdale Nominees v Elkharadly)
An unequivocal act is required, so if the LL demands possession but also
does another act inconsistent with the election to forfeit there will be no
waiver (Moore v Ullcoats)
Failure of LL to take any action where they are aware of the breach will not
amount to a waiver (Perry v Davis)
Once the landlord has finally and unequivocally elected to treat the lease as
forfeited no subsequent act will amount to a waiver (NGL v Harlington)
The waiver of a covenant or condition does not operate as a general waiver of all
breaches, extends only to the particular breach in question: CA s. 120
To not waive breach, LL must unequivocally treat lease as forfeited
In some cases, a court will decide to give T relief against forfeiture, meaning the
lease is revived after it has been forfeited by the LL
Court may grant relief under CA s. 129(2), also has an inherent equitable
jurisdiction to grant relief against forfeiture: Stieper v Deviot
Generally granted for breach of a covenant to pay rent where all arrears are paid:
Stieper v Deviot
Relief
against
forfeiture
Relief against forfeiture where T has paid all arrears is not automatically granted;
the court may refuse relief where it would be inequitable to do so: Stieper v
Deviot, taking into account:
• Conduct of applicant T (e.g. whether breach was wilful; other past breaches)
• Gravity of breaches
• Disparity between damage caused by breaches and value of property
Court may also grant relief against forfeiture where:
• T would suffer disproportionate penalty if relief were not granted: Di Palma
v Victorian Square
• A CA s. 129 notice is required and is defective: Dalla Costa v Beydoun
Third parties: the general rule is that relief against forfeiture will not be granted
so as to prejudice the rights of innocent third parties who have acquired an
interest in the demised premises after forfeiture
Subleases: in general, when a head lease falls the sub-leases also fall, leading to
the rule that subtenants have a specific right to relief from forfeiture (CA s.
130(1)) – if claim for relief is successful the subtenant will get a new lease for the
same area and for the same term
General principles of contract law, including termination for repudiation,
fundamental breach and breach of an essential term apply to leases (Progressive
Mailing House v Tabali)
Mere presence of an express power to terminate within the lease agreement does
not exclude the exercise of CL rights to terminate (Tabali)
REMEDIES OF
LANDLORD
AND TENANT
IN CONTRACT
General
NB: requirement of notice before forfeiture does not apply to termination for
repudiation or fundamental breach (Marshall v Council of the Shire), but may
apply in cases for termination for breach of an essential term that is designated as
such in the contract (Macquarie v Area Health Authority)
When a lease is terminated prior to the expiry of the term, the covenant to pay
rent for the unexpired portion of the term ceases to bind the lessee (however a LL
who serves the T with process for recovery of possession an obtain mesne profits
for the period during which T remains in possession after service) (Tabali)
LL can recover damages for the loss of the benefit of the lease, but only where the
T has repudiated the lease before the expiration of the term (v Tabali)
Occurs where the party evidences an intention to no longer be bound by the
contract or an intention to only fulfil the contract in a manner substantially
inconsistent with their obligations under the lease: Shevill
“In general, repudiation is constituted by communications or conduct manifesting
unwillingness or inability to render substantial performance of the contract”
(Macquarie v Area Health Authority)
If T’s breaches of covenants in the lease are in all circs repudiatory, LL will be
entitled to damages for the loss of the lease: Wood Factory v Kiritos
Requires nexus between breach and loss; breach must have deprived LL of the
whole or a substantial part of the benefit of performance: Shevill
Repudiation
T’s conduct will only amount to repudiation if it would be sufficient to make them
liable for forfeiture: Tabali
LL’s acceptance of T surrendering possession is both an acceptance of the
repudiation and a termination of the T’s interest in the land: Tabali
Where the lease is liable to forfeiture, enforcing the forfeiture both terminates the
T’s interest in the land and constitutes the LL’s election to accept the repudiation;
similarly, a waiver of the forfeiture constitutes the LL’s election to keep the lease
on foot: Tabali. The mere continuance of a lease pending forfeiture is not an
election either way: Tabali
LL can recover damages once the T’s interest is terminated
Breach of an
essential
term
Where T breaches a ‘fundamental’ term of the agreement (i.e. a term that is so
serious that it goes to the root of the contract: Tabali
It is open to the parties to agree that a term of the agreement is ‘essential’, in
which case breach of that term will be treated as a fundamental breach entitling
the other party to terminate: Macquarie v Area Health Authority
Where a T has repudiated the obligations under the lease, the LL may either:
Loss of
bargain
damages
•
Accept the repudiation as discharging both parties from further
performance and terminate the lease: Progressive Mailing House v
Tabali
o Applies to both executed leases and agreements for leases: Tabali
o Two ways to terminate (Marshall): (1) Re-entry for breach of covenant
(requires notice: CA s. 129), (2) Termination on ordinary principles of
contract – allows LL to recover loss of bargain damages for loss of the
lease if T repudiated: Tabali
•
Elect to keep the lease on foot and commence proceedings for the
recovery of rent as it falls due
o In this case there is no duty to attempt to mitigate losses
If LL terminates for T’s breach at common law (e.g. for repudiation or for
fundamental breach), LL will be entitled to loss of bargain damages: Sunbird
Plaza v Maloney
If LL terminates under a term of the lease agreement and would also have been
entitled to terminate at CL for the same breach, LL will be entitled to loss of
bargain damages: Tabali
If LL terminates for breach pursuant to a term in the lease agreement but the
breach in question would not give rise to the right to terminate at CL, P will not
be entitled to loss of bargain damages: Shevill v Builders Licensing Board
• Parties can avoid this restriction on loss of bargain damages through the use
of clear words; leases now commonly contain ‘anti-Shevill clauses’ providing
that certain terms are “essential” and that the LL retains the right to damages
•
following termination for breach of one of these clauses
HC confirmed the effectiveness of such clauses in Gumland v Duffy Bros
Ability of T to get loss of bargain damages from LL
• Possible for a T to terminate lease and obtain loss of bargain damages where
the LL repudiates their obligations under the lease (and T accepts this
repudiation): Laurinda v Capalaba Park
• Withholding consent by LL does not constitute repudiation: Scarella v
Linknarf
• Breach of implied term that LL must keep premises reasonably inhabitable
(by failing to remedy in reasonable time) may constitute repudiation:
Douglas v Cicirello
General rule: where a lease has been terminated, no relief against forfeiture
(Batiste v Lenin)
While usually breaches of covenants for which no notice was served cannot be
considered by the court in deciding whether to grant relief against forfeiture, court
can consider those breaches where there has been a repudiation of the lease:
Batiste v Lenin
Relief
against
forfeiture for
repudiation
In some cases, relief against forfeiture will be granted for repudiation – e.g.
Liristis Holdings: sublessor granted relief on condition that unpaid rent be paid
in full
Considerations to take into account in determining whether relief against
forfeiture should be granted for termination (Liristis Holdings v Walville):
• Did LL’s conduct contribute to T’s breach?
• Was T’s breach trivial or slight, and inadvertent and not wilful?
• What damage or other adverse consequences did the LL suffer by reason of
T’s breach?
• What is the magnitude of the T’s loss and the LL’s gain if the forfeiture is to
stand?
• Is specific performance, with or without compensation, an adequate
safeguard for the LL?
CO-OWNERSHIP
Elements
Where 2 or more people simultaneously hold an interest/equal shares in the same
parcel of land
Must be noted on CoT (Real Property Regulation 2008, Reg 6)
1.
JOINT
TENANCY
A right
shared with
another to
the whole of
the property,
distinguished
by right of
survivorship
2.
3.
4.
5.
Jus accrescendi = when one tenant dies, the estate remains with the surviving
joint tenants (right of survivorship)
The effect of the death is simply to free the property from the control of
one of its owners, thus the interest of the deceased cannot be bequeathed or
disposed of by will.
A joint tenant can sever the joint tenancy in their lifetime, creating a tenancy
in common which can then be passed on through a will.
s. 35 CA: If there is uncertainty as to who died first, the older person is
deemed to have died first; the property flows to the younger and hence to
their estate.
s. 25 CA: Corp can hold property as if it was an individual, the dissolution
of the company is equal to death with respect to determining survivorship.
Unity of possession: Each owner is entitled to possession of the whole property,
not exclusively for themselves but to be enjoyed together with the other tenants.
The four
unities must
be present
for a JT to
exist
Unity of interest: The interest of each joint tenant must be the same in nature,
extent and duration.
Unity of title: All joint tenants must derive their interests from the same
document or act
Unity of time: All of the joint tenants’ interests must vest at the same point in
time.
To sever JT, destroy one of the unities
1.
Elements
2.
3.
4.
TENANCY IN
COMMON
At law:
Presumption
is tenants in
common
(s. 26 CA)
Each tenant has a distinct yet undivided aliquot/fractional share in the
property (no distinct boundaries drawn), which can be dealt with at their
liberty.
A TIC is seised only of its share (notional division, not geographical)
Thus, no right of survivorship, interest passes through his/her will. Can be
gifted or sold
Only unity of possession must exist for a tenancy in common
s. 26 – Construction of conveyance of any property beneficially to two or
more persons together (Presumption in favour of TIC)
(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.
At law: presumption is that tenants are TIC (not JTs). Registration as JTs
conclusively determines the nature of the interest. However, this does not prevent
JTs establishing they are TIC in equity (Re Foley; Calverley v Green)
3 situations of presumed TIC at equity (even if JT/co-ownership at law)
•
•
•
In equity:
presumption
of TIC,
whatever the
position at
law
(Delehunt v
Carmody)
Right of
occupation
Business partners (Lake v Craddock)
o TIC presumed, otherwise person who died first would lose all
investment
Money advanced on a mortgage (Re Jackson)
o TIC presumed where 2+ people advance money on a mortgage (in
equal shares or not), otherwise people would forgo their money if
they could die before it was repaid
Unequal contributions to the purchase price (Robinson v Preston)
o TIC presumed, equity will hold the contributors as TIC in proportion
to their respective contributions for ownership
o Extended to joint liability under a mortgage (Ingram v Ingram)
o Equal contributions to mortgage = JT presumed
o If conveyance expressly declares beneficial interest = JT presumed
(Goodman v Gallant)
Malayan Credit v Jack Chia
Facts:
• Leased property together off the landlord. They allocated floor space,
apportioned rent, separately invoiced. JT at law.
Held:
• TIC presumed in equity.
• The 3 est categories [above] presuming a TIC are not closed; it is
circumstantial.
• Features pointed towards the arrangement being one of TIC:
o The lease was taken to serve the separate interests of both parties
o Prior to lease, parties determined who would occupy which area
o The parties divided rent and charges in proportions corresponding to
their sections
o They paid stamp duty and survey fees in unequal shares
corresponding to their part
o The rent and service charges were paid in unequal shares
Each co-owner has the right to possess and enjoy the whole of the land.
Consequently, one co-owner can’t sue another for trespass, except where a coowner excluded another from possession: Stedman v Smith.
The right to possess and enjoy includes the right to invite someone to live on the
premises: Thrift v Thrif
A co-owner who elects not to exercise their right of possession is not entitled to
claim compensation from occupying co-owners: Luke v Luke
A co-owner who is in sole occupation is (usually) not liable for occupation rent
RIGHTS OF
ENJOYMENT
OF COOWNERS
Occupation
rent
Exceptions
• Ouster by another co-owner.
• If the parties agree on payment of occupation rent: Leigh v Dickeson
• A defensive equity: Rent may be payable if the occupying co-owner seeks to
charge the non-occupying co-owner compensation for improvements the
occupying co-owner has made.
Calculating occupation rent
• If occupation rent is payable by the occupying party, allowances should be
made for the cost of improvements to the property
• Foregard v Shanahan: R’ship broke down, S stayed in property with
children, made mortgage repayments, paid rates, insurance, pest control
expenses. S granted 50% of the mortgage repayments and rates (paid
towards a debt jointly-owned). S NOT granted the costs of insurance or pest
control, as they were not improvements. CL equitable principles regulating
the rights of co-owners should be applied to a court exercising its statutory
powers to order the sale and division of proceeds. A claim for occupation
rent should not exceed the value of improvements.
Callow v Rupchev: JTs, r’ship fell apart, R to pay 50% of rental revenue
raised when not living in the house. Occupation rent should accrue during
the period of R’s sole occupancy
If one co-owner prevents another from exercising their right to possess the entire
property, or expressly denies their right to the title, the ousted party may sue for
occupation rent (as mesne profits, calculated wrt market rent).
•
Exception to the principle that a TiC is not liable to pay occupation fees.
Ouster
Not ouster:
• Merely telling a co-owner to ‘get out’: Cardineals-Hooper v Tierney
• Nor does inconvenience caused by renovations to a driveway: Ferguson v
Miller.
Biviano v Natoli
• B + N’s relationship broke down, N subject to an AVO, not allowed near
the house. N sought occupation rent.
• Occupation rent granted. There was constructive ouster by denial of title.
• Obtaining an AVO not an ouster, no legal wrong. BUT B’s filing of a
defence denying N’s interest in the property was
Accounting
for profits
and rents
Statute of Anne 1705 allowed co-owner to bring an action of account against
another co-owner for ‘receiving more than [their] share or proportion’ of rent
• Repealed in NSW by s. 8 Imperial Acts Application Act 1969
• However, Ryan v Dries preserved the principle as an equitable rule in
NSW; the non-occupying co-owner is able to claim their share of rent +
profits collected by another.
TiC can keep all profits where: they work the land, do all the labour, sell produce
and pay all expenses: Henderson v Eason; Rees v Rees
A right to recover a share of the rent and profits does not create a lien over the
land: Brickwood v Young
Liability for
waste
A co-owner can bring an action against another co-owner for voluntary waste.
Ferguson v Miller: co-owner successfully secured injunction against another coowner to prevent other co-owner from removing ornamental trees, would ruin the
character of the driveway, but not to prevent the re-sealing and widening of the
driveway, which were acts of repair.
Disposition
of interests
by co-owners
JT or TIC may sell or give his interest to another, provided this does not interfere
with the right of the other co-owner to possession of the land.
• Frieze v Unger: JT can grant a lease which would bind their share, but the
lessee cannot exclude other joint tenants.
• Hedley v Roberts: JT or TIC can encumber his interest in the land so as to
compel co-owner to submit to the encumbrance if the encumbrance does
not interfere with the right of that co-owner to possession if the land and his
other rights with respect to the land.
• Elton v Cavill: deed made bw co-owners with clause prohibiting sale,
transfer, lease or license of the whole/part of each co-owner’s interest in the
property w/ the written consent of the other co-owner = invalid restriction.
Did not serve the legit purpose of giving the co-owners the right to control
who should own other shares in the same property (Approved in Bondi
Beach Astra Retirement Village v Gora)
•
•
•
By alienation to a third-party: transfer to a stranger.
By alienation to self: s. 97 RPA: register a transfer to oneself, no
accompanying CT required.
By declaration of trust: s. 23C(1)(b) CA: Someone can declare a trust if
the declaration is in writing + owner of the property signs it.
Grant of a Torrens mortgage (Guthrie v ANZ) or lease given by one JT of the
fee simple (Frieze v Unger) does not sever joint tenancy:
Corin v Patton
§ Unilateral severance of tenancy only occurs when legal or equitable estate is
transferred. Only effective if she did all that was necessary for her to do in
order to effect a transfer.
§ A statement of intention, without more, does not affect the unity of title –
not sufficient
Severance by
unilateral
action
SEVERANCE
OF JOINT
TENANCY
A JT may be
severed inter
vivos (while
parties alive), and
thus become a
TIC by
destruction of at
least one of the 4
unities
McNab v Earle
• JT unilaterally executed a memorandum of transfer purporting to transfer
her interest to herself as a TIC to sever the tenancy.
• No severance. Memo was not registered, so no effect in law or equity.
Costin v Costin
• Father and one son were JTs. Father wished to transfer his share to other
son. Executed a transfer of interest, signed an authority to his lawyers but
they refused to register the CT without the authority of the other son.
• Gift not perfect as donee required authority of other JT to register
Wright v Gibbons
• 3 sisters were JTs. In an attempt to sever the JT, 2 sisters executed a
document where each transferred their share to the other. Document was
registered with each sister thereafter registered as TIC.
• The registration of the transfer was effective to bring about a severance
• “Where JT alienates interest to a stranger, the joint tenancy is severed and
the alienee becomes a TIC as to an undivided share of the land.”
• A, B, C are joint tenants and A alienates to D > D owns 1/3 TIC and B and
C still own 2/3 as JTS
Lyons v Lyons A mortgage of Torrens system land by one joint tenant did not
sever JT
Guthrie v ANZ An equitable mortgage will not sever JT.
JT will be severed if co-owners agree: Williams v Hensman
Statutory formalities will not apply (Abela v Public Trustee): Agreement to
sever so co-owners TIC in equity, will be JT at law until requisite formalities met
(Lyons v Lyons)
Severance by
agreement
Re Pozzi
• Separated couple made an agreement (registered under the Family Law Act)
that the wife could live in the house until certain events occured, at which
point they will sell and divide the proceeds. The husband died before the
events happened.
• JT was severed from the moment of the agreement. Severance occurred
regardless of the conditions satisfied, half the share passed to the husband’s
estate.
Calabrese v Miucco
• An oral agreement to split proceeds of a joint bank account held to sever JT
by mutual agreement (writing not reqd, not involving land).
Abela v Public Trustee
•
•
Couple separated and sought to sell the house, dividing the proceeds.
Decided that first the house would be sold, and later the parties would reach
an agreement wrt their proportionate shares in property /proceeds. The
husband died before this happened.
Agreement severed the JT. In the absence of agreement as to shares in the
tenancy, parties take equally. Subsequent repudiation of agreement to sever
does not affect severance, still exists
Slater v Slater
• Correspondence by solicitors proposing a property order which would sever
JT did not indicate an intention to sever prior to obtaining the court order.
Public Trustee v Pfeiffle
• An agreement that provided if one of the couple remarried, the property
would be sold and equally divided, severed the JT.
Severance will occur when a course of dealing bw the parties evinces intention to
treat themselves as TIC rather than JT: Williams v Hensman
Severance
inferred by
course of
dealing
If agreement to sever not concluded because certain preconditions not met, will
not constitute sufficient course of dealing to sever: Abela v Public Trustee
Abela v Public Trustee: payments of proceeds into separate bank accounts =
sufficient
Magill v Magill: Negotiations by JTs exploring termination of JT by one brother
buying another interest = not sufficient
If one joint tenant is killed by the other, equity intervenes to sever the tenancy (=
TiC). Equity will prevent the wrongdoer from profiting through survivorship
At law, the principle of survivorship remains
In equity, a constructive trust will be imposed where legal owner holds half the
interest on trust for deceased joint tenant; the ‘forfeiture rule’.
s. 5(2) Forfeiture Act 1995 (NSW) confers discretion on court to vary forfeiture
rule isatisfied that justice requires the effect of the rule to be modified. However,
the court has no discretion where the offender has been convicted of murder.
Severance in
case of
homicide
Rasmanis v Jurewitsch
• If only JTs, the murderer holds the whole estate at law, but half the estate on
trust for the deceased’s estate in equity.
• E.g. A, B, C are joint-tenants. A kills B. From a legal perspective, A and C
are still JTs, but in equity, A severs himself and holds 1/3, and C owns 2/3
(can still benefit).
Courts have sought to restrict the operation of the rule in cases of reduced moral
culpability on the part of the person responsible for the death
• Permanent Trustee Co v Freedom from Hunger Campaign: rule will
not apply where JTs have died after suicide pact: no intention to benefit
• Public Trustee v Evans: rule will not apply in cases of self-defence or
extreme provocation
• Gardener v Moore: rule does not apply to negligent driving of other JT
• Public Trustee v Fraser: Where offender mentally ill, although not to
extent they cannot be held guilty of manslaughter, rule applies
• Troja v Troja: forfeiture rule applies where conviction of murder on
grounds of diminished responsibility
•
Severance by
order of the
court
•
Family Law Act 1975 (Cth), court has power to make orders in relation to
property and hence include an order for severance of a JT.
By making an order for interest in the property to be transferred to a
creditor for the purposes of enforcing a debt/mortgage.
Mitrovic v Koren: Taking the joint tenant’s interest in execution under the
judgment severs the joint tenancy.
An order of court declaring a JT bankrupt will sever the joint tenancy, vesting the
joint tenant’s interest in the land in the Official Trustee in Bankruptcy
Severance by
bankruptcy
s. 58(2) Bankruptcy Act 1966 (Cth): the property does not vest in the trustee
until the statutory registration requirements have been met
In equity, severance occurs on the declaration of bankruptcy
•
Can be
terminated
where
TERMINATION
OF COOWNERSHIP
Partition and
sale of land
(Either TIC or
JT)
•
•
•
All but one JTs has died, then survivorship operates, enabling survivor to be
the sole owner of property previously jointly owned (Jus accrendi operates to
grant the last JT the sole ownership: ss. 100, 101 RPA)
One tenant purchases the interest of all other co-owners.
Co-owners agree to divide the property in accordance with respective shares.
All co-owners assign their interest to another person.
The court compels unwilling co-owners to sale and partition the property (CA s.
66G). Note:
• Applicant “co-owner” does not incl. mortgagee of JT co-owners (ANZ v
Scott) but does include mortgagee if mortgage given by one JT only
• Applicant must be a “co-owner” when application is made, therefore,
executors must get probate first: Darrington v Caldbeck
• Court has discretion (“may” in s. 66G): Ngatoa v Ford, but cannot refuse
application on broad grounds of “unfairness”: Re McNamara
• Application may be refused if it would cause breach of a contractual or
fiduciary obligation or unconscionable: Williams v Legg
• If some contractual obligation purports to impose a complete restriction on
alienation, this may be ignored: Nullagine Investments
CA Pt IV, Div 6 enables court, on application of any one or more co-owners of
the property, to appoint trustees of the property to hold the property on statutory
trust for sale, or the statutory trust for partition: s. 66G(1)
Statutory
trusts (NSW)
CA s. 66F: Co-ownership defined to include ‘ownership whether at law or in
equity in possession by two or more persons as joint tenants or as tenants in
common’, and co-owner includes ‘an incumbrancer of the interest of a joint
tenant or tenant in common’.
• ANZ v Scott: Bank which had a mortgage granted by the JTs of a property
was not a co-owner, but would be if only one JT granted the mortgage.
• CBA v McDonald: An equitable charge is within the definition of an
incumberance.
NATIVE TITLE
Landholding
3 different types of Indigenous landholding (in addition to registered claims):
• Exclusive possession native title;
• Non-exclusive possession native title;
• Land rights and reserves
Legislation passed by some (but not all) Aus parliaments (e.g. Aboriginal
Land Rights Act 1983 (NSW))
• Created statutory land rights for Indigenous groups
• Such schemes are the creation of the mainstream Australian legal system
Recognition
HC’s recognition of native title in Mabo (No 2) (1992)
• Response to Qld govt’s refusal to introduce a land rights scheme
• Resulted in Native Title Act 1993 (Cth) (‘NTA’)
• Source of NT: ATSI law and custom, not CL
• Mabo (2): HC included limitations on the recognition of NT → only
recognised and protected in certain circumstances; can be extinguished
Sometimes Indigenous land rights (i.e. NT) can co-exist with CL proprietary
rights in relation to the same piece of land
Native title and
Australian
property law
NT has been described as “the recognition space between the common law and
Aboriginal law which is now afforded recognition in particular circumstances”
(Pearson, S&N: 206)
Defining feature of NT: the source of the legal rights it describes differs from
the source of law for CL rights
NATIVE
TITLE
Mabo (No 2)
(1992)
Issues:
• Whether Crown acquired full beneficial ownership or radical title to land
in the Murray Islands
• Whether Indigenous people have NT rights recognised by the CL
Held:
1. NT exists, and is recognised by the CL of Australia (6:1)
2. Grants of land inconsistent with NT will extinguish NT (7:0)
3. Extinguishment of NT does not entitle NT holders to compensation at
CL (4:3)
Ratio:
• NT is recognised under CL
• Source of NT: traditional connection to, or occupation of, the land
• Nature & content of NT: determined by character of the connection with,
or occupation of, the land under traditional L&C
• NT can be extinguished by valid exercise of govt. powers (e.g. by granting
an inconsistent interest)
Significance:
• Overturned doctrine of terra nullius and recognised NT
• The court’s determination that NT was an enforceable interest over land
meant all acts of extinguishment of NT after enactment of the Racial
Discrimination Act 1975 (Cth) were unlawful if traditional owners were
treated less favourably than non-indigenous interest holders (e.g. if
traditional owners not compensated where their rights were extinguished,
or if not afforded same procedural rights as non-NT holders in similar
circumstances)
• Modified the application of the doctrine of tenure in Australia
o NT is allodial (rather than tenurial) title independent of any
superior landlord (doctrine of tenure still applies to all lands not
occupied by Indigenous people at time of colonisation)
s. 10 – recognises the concept of NT
s. 11 – provides that NT cannot be extinguished contrary to the NTA
s. 233(1) – defines NT as “(1) the communal, group or individual rights and
interests of [ATSI peoples] in relation to land or waters where: (a) the rights
and interest are possessed under the traditional laws acknowledged, and the
traditional customs observed by, the [ATSI peoples]; and (b) the [ATSI
peoples], 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”
s. 233(2) – “for the purposes of [s 233(1)], “rights and interests in that
subsection includes hunting, gathering or fishing rights and interests”. This
definition of NT closely follows that given by Brennan J in Mabo (2)
Key provisions
Pt 2 Div 3 – limitations on extent to which future legislation or grants can affect
NT. Generally, NT holders cannot be treated less favourably than holders of
PIs – they must agree to extinguishment, or their property must be acquired
under compulsory acquisition legislation (which requires compensation) (s. 20)
Machinery for determining NT claims:
s. 61 – Aboriginal claimants, Cth & State ministers, and other affected parties
may apply to the FCA for a determination of NT
Pt 4 Div 1C – where a claim is unopposed or parties reach agreement, the FCA
may make orders as per the agreement
s. 81 – contested claims will be determined by the FCA, may also be referred to
the National Native Title Tribunal for mediation (s. 86B)
s. 169 – can appeal from the National Native Title Tribunal to the FCA on
certain matters of law
Pt 8 – determinations of NT are registered on the National Native Title Register
THE NATIVE
TITLE ACT
1993 (CTH)
Created in response to Mabo (2)
Justification
Wootten (S&N, 217) a legislative response was necessary for 3 main reasons:
• To validate titles issued after the commencement of the RDA which may
otherwise have been invalidated;
• To provide for the future development of land affected by NT; and
• To provide a regime for the quick and efficient determination of NT
issues, including whether or not NT existed over a parcel of land
•
•
•
Objectives
•
•
•
•
Recognise NT and provide mechanisms to identify it;
Validate past grants which may have been invalidated as a result of Mabo
(2) and the RDA;
Provide that NT cannot be extinguished except by state or Cth acquisition
in the same way freehold title may be extinguished;
Set up a National Native Title Tribunal to determine existence of NT in
particular cases;
Provide for a register of NT determinations and claims;
Determine claims for compensation where NT has been extinguished by
validation of past acts or by compulsory acquisition;
Provide grants of interests in land subject to NT cannot be made in the
absence of agreement or determination by the Native Title Tribunal
•
•
•
•
•
PROVING
NATIVE
TITLE
1. Connection
with the land
(through
continued
observance of
traditional laws
and customs)
•
Can the
claimants show
they continue to
hold rights and
interests under
traditional ATSI
laws and
customs?
•
Evidence of continued (and substantially uninterrupted) observance of
traditional (i.e. pre-sovereignty) L&Cs (Yorta Yorta) + existence of the
society + consistent pattern of observance and acknowledgement of
traditional L&Cs by members of that society (Jango v NT)
Question of “whether the community or group has acknowledged the
traditional L&Cs on which it relies to establish possession of NT R&I”
will “always be a matter of fact and degree” (De Rose v SA (No 2))
L&Cs must have “continued existence and vitality” (Yorta Yorta)
“acknowledgement and observance of those L&Cs must have continued
substantially uninterrupted since sovereignty”; cannot be a break in the
chain of practice (Yorta Yorta)
NT “rights and interests may be communal, group or individual rights and
interests” (WA v Ward)
Group claiming NT rights and interests held communally: relevant
connection is that between the community as a whole and the land that is
the subject of the claim (NT v Alyawarr)
NB: onus on claimants to prove continued connection with the land, and
claimants often face evidentiary difficulties in establishing continued
observance of traditional laws & customs
There is no requirement of physical occupation with, or occupation of,
the land
• ‘Connection’ with land or waters does not necessarily require continued
use: WA v Ward
• De Rose v SA (No 2): “it would read too much into [NTA] s. 223(1)(a)
to require the claimants to show a continuing physical connection to the
land” (however, “length of time during which the Aboriginal peoples have
not used or occupied the land may have an important bearing on whether
traditional laws and customs have been acknowledged”
• Connection not limited to physical presence (NT v Alayawarr)
• Worimi v Worimi: “Connection may be mainly spiritual rather than
physical … may not involve physical access to each and every part of the
land”
• Interruptions which affect the presence of claimants in an area may sever
the requisite ‘connection to land’ if the interruption subsequently affects
continued observance and acknowledgement of traditional L&C (Risk v
NT)
The nature & content of native title must be ascertained as a matter of fact by
reference to the traditional laws and customs observed by the Indig. inhabitants
of that territory (Mabo (2), Brennan J)
The only legislative limitation on the scope of NT rights and interests is that the
rights must be capable of being recognised by the CL (NTA s. 223(1)(c); De
Rose v SA (No 1)) → NT may be so expansive as to amount to a right to EP
and full beneficial ownership of land (e.g. in Mabo (2)), however, relatively
uncommon
Nature and
content of NT
“The content of NT, its nature and incidents, will vary from one case to
another. It may comprise what are classified as personal or communal
usufractuary rights involving access to the land in question to hunt for or gather
food, or to perform traditional ceremonies … At the opposite extreme, the
degree of attachment to the land may be such as to approximate that which
would flow from a legal or equitable interest therein” (Wik, Gummow J)
WA v Ward
• NT “rights and interests may be communal, group or individual”
• Rights must be held “in relation to land or waters”
• Rights and interests must have 3 characteristics:
o R&I “possessed under the traditional laws acknowledged, and the
traditional customs observed” by the relevant peoples;
o Claimants must have a connection with the land/waters by virtue of
those traditional laws & customs; and
o R&I must be recognised by the CL of Australia
• Need to (a) identify the laws and customs which observed &
acknowledged, then (b) identify the rights and interests in relation to land
or waters which are possessed under those laws & customs (i.e. show a
connection with the land or waters by virtue of those L&Cs)
PROVING
NATIVE
TITLE
2. Nature and
content of NT
What is the nature
and content of the
rights and
interests held by
the claimants
under traditional
Indigenous laws
and customs?
Territorial sea and sea bed
• Possible to have non-exclusive NT rights (Cth v Yarmirr)
• Not possible to have exclusive NT rights here – general Cth laws create
rights inconsistent with exclusivity (Akiba v Cth)
Content of NT
rights
Inland waters
• Yanner v Eaton: hunting of crocodiles with harpoons held to be a valid
exercise of NT
• Gumana v NT: held that claimants hadnon-exclusive NT right to fish and
navigate, however any rights to exclude others were extinguished by the
CL public right to fish
Cultural knowledge
• WA v Ward: “the right to maintain, protect and prevent the misuse of
cultural knowledge is [not] a right in relation to land of the kind that can
be the subject of a determination of NT”
Minerals and petroleum
WA v Ward: not possible to have NT rights over minerals & petroleum:
• Legislation has extinguished any possible NT rights to minerals (possible
exception of ochre); and
• No traditional custom appears to indicate rights over these commodities.
2 broad categories of NT – exclusive and non-exclusive possession NT
• When a court makes a determination of NT, must specify the nature and
extent of NT R&Is in relation to the determination area, including
whether the rights include EP or not (NTA s. 225)
• There is no presumption that NT rights are either exclusive or nonexclusive → must be proved by evidence
Types of NT
rights: EP and
non-EP
Exclusive possession NT
Two elements must be shown in order to establish EP NT:
• That the traditional laws and customs included a right to exclude others;
and
• That the right of exclusivity has not been extinguished by other rights
(e.g. by inconsistent Crown grant such as a pastoral lease: WA v Ward
(2002) HC)
Examples of non-exclusive NT rights:
• Access to the land in question to hunt or gather food, or to perform
traditional ceremonies: Mabo (2), Gummow J
• Right to fish and navigate in territorial waters: Cth v Yarmirr
• Right to camp and erect temporary structures: Qld v Congoo
• Right to take natural flora, fauna, fish, water and other traditional resources
from the land: WA v Brown
• Right to engage in ritual & ceremony on the land: WA v Brown
• Right to care, maintain and protect particular sites and areas that are of
significance to NT holders: WA v Brown
NT can only be extinguished by acts of the Crown (exec. or leg. at
Cth/State/Territory level)
Mabo 2: NT could be extinguished at CL without consent of Indig. via Crown
Act evidencing “clear and plain intention” to extinguish NT by:
• Legislation regulating the land, or conduct entered into on that land
• By the grant of an interest in land inconsistent with NT rights;
• By acquisition or reservation of NT land by Crown (e.g. use as a road)
EXTINGUISHMENT
Introduction:
Once
extinguished,
NT cannot be
revived (Fejo v
NT)
Legislative
provision
ALRC, ‘Connection to Country’ (2015): shift from ‘clear and plain
intention’ test to an ‘inconsistency of rights’ test
• “The test for extinguishment is whether the leg. or exec. acts are
inconsistent with the claimed NT R&I” (ALRC; WA v Ward)
o Preamble to NTA: “NT is extinguished by valid govt. acts that are
inconsistent with the continued existence of NT R&I, such as the
grant of freehold or leasehold estates”
• However, HC held in Qld v Congoo that “the clear and plain intention
standard for extinguishment formulated in Mabo is an important
normative principle informing the selection of the criterion for
determining whether a leg. or exec. act should be taken by the CL to have
extinguished NT. That standard has not been displaced by any subsequent
decision of this Court”
• Apply both: use inconsistency of rights test (ask: is there a clear and
plain intention?) but also use ‘clear and plain intention’ test to colour
your approach
General rule: a legislative provision will extinguish NT if it demonstrates a clear
and plain intention to do so; however, a statute that merely regulates an activity
does not necessarily demonstrate requisite intention to extinguish NT: Akiba v
Cth; Qld v Congoo)
“a statute ought not to be construed as extinguishing [NT] unless no other
construction is reasonably open” (Akiba v Cth)
Grant of an
inconsistent
interest in land
Basic test for determining whether a grant of rights to a third party extinguishes
NT:
• Where the Crown has granted an interest in land to a third party, ask
whether the NT right was extinguished, or merely regulated (WA v
Ward)
• “where... there has been a grant of rights to third parties, the question is
whether the rights are inconsistent with the alleged NT R&Is” (WA v
Ward)
• “Inconsistency refers to the state of affairs where ... the existence of one
right necessarily implies the non-existence of the other” (WA v Brown)
• There are no ‘levels’ of inconsistency; either the third party rights are
inconsistent or they are not (WA v Brown)
• “an objective inquiry which involves identification of and comparison
between the two sets of rights” (WA v Ward)
• As a general rule, “the grant of rights to use land for particular purposes”
that do not confer a right to EP do not necessarily extinguish NT rights
(e.g. to camp, hunt and gather, conduct ceremonies on the land, and care
for the land) (WA v Brown)
NB: it is only the grant of an interest in land that can extinguish NT – the exercise
of rights under a grant cannot extinguish NT (WA v Brown: “the submission
that there could be ... extinguishment of NT by the exercise of rights granted by
or under statute should be rejected”)
Freehold estate
“NT is extinguished by a grant in fee simple … because the rights that are
given by a grant in fee simple are rights that are inconsistent with the NT
holders continuing to hold any of the rights or interests which make up NT”
(Fejo v NT)
Common law
leases
A CL lease will extinguish NT as it confers on the tenant a right to EP, which is
inconsistent with continued NT rights
Pastoral and
other non-EP
leases
Acquisition or
reservation of
land by the
crown
Wik v Qld
• HC held pastoral leases do not necessarily extinguish NT (unless they
grant a right to EP) → key question: whether the “statutory interests [i.e.
the pastoral lease] could be enjoyed only with the full abrogation of any...
NT”
• “Wik decided that, having regard to the legislation under which they were
granted, and the terms and conditions of the instruments of lease, certain
pastoral leases did not confer upon the lessees a right of EP” (Wilson v
Anderson, Gleeson CJ) → where pastoral leases do not grant a right of
EP, it is possible for NT to exist
• When determining whether pastoral lease extinguishes NT, look at specific
lease & jurisdiction’s legislation to determine whether it conferred a right
of EP
• Improvements or other developments on lease sites will not necessarily
extinguish NT (WA v Brown)
WA v Brown
• Statutory grant of mining lease: did not extinguish NT, rights granted under
lease not inconsistent with claimed NT R&I, did not confer a right to EP
• Exercise of those rights: did not extinguish NT, extinguishment can only be
based on the creation or existence of a private right, cannot depend on
the exercise of a private right by the lessee
• Test of whether rights are inconsistent
o Look at the position of the NT holders the day after the grant of the
right to the third party – can the NT holders exercise all the rights
that are now claimed anywhere on the land without breaching any
right which had been granted to the third party?
o Subsequent developments etc by the lessee are irrelevant (De Rose
v SA (No 2))
o If subsequent use of the land by the lessee means NT holders
cannot use the land, their NT rights are suspended (not extinguished)
Will extinguish NT.
E.g public works, roads, etc.
It is possible for previous non-EP Acts of the Crown to suspend or partially
extinguish NT rights and interests (NTA ss. 23A, 23G; Akiba v Cth)
Partial extinguishment: previous inconsistent grants can partially extinguish
NT rights to the extent of any inconsistency (NTA s 23A)
Suspension and
partial
extinguishment
Suspension: NT R&I may be suspended for the duration of a non-EP lease
(NTA s 23G)
o Qld v Congoo: temporary use of land by Cth for military use in WWII
preventing claimants from exercising NT rights in relation to the land was
held not to extinguish NT, but merely suspend it
WA v Brown: in the case of a mining lease, HC preferred the notion that NT
would be temporarily suspended, rather than extinguished, for the duration of
the lease if the acts of the tenants prevented the claimants exercising NT rights
MORTGAGES
At general
law
Borrower’s estate conveyed to mortgagee subject to the provision for reconveyance when loan is repaid
Mortgage conveys the borrower’s land (lender given possession of fee simple).
Mortgagee owns the land.
Mortgage only effective at law if by deed
However, if mortgage not compliant with legal formalities, equitable mortgage can
be created: Walsh v Lonsdale
OLD SYSTEM
(GENERAL
LAW)
MORTGAGES
Where a lender advances money and the borrower deposits the title deeds with
the lender as security, this conduct is evidence of an oral agreement to grant a
mortgage and constitutes part performance, creating an equitable mortgage
Influence of
equity
Influence of equity: lender could only treat the property as no more than security
for a debt owed
Typical remedy: foreclosure, Ct order declaring borrower’s equitable right to
redeem has ended, leaving mortgagee with unhampered fee simple (debt owed is
taken from sale)
The equitable right to redeem does not arise until the contractual date has passed.
Mortgagee has an interest in the land, which incl. a right to deem (by conveying,
devising, settling, leasing, etc.)
RPA s. 57(1): A mortgage, when registered, takes effect as a security but does not
operate as a transfer of the land mortgaged or encumbered.
A mortgage or charge, when registered, has the effect of security, but shall not
operate as a transfer of the land thereby mortgaged or charged: Re Forrest
Trust; Trustees, Executors and Agency v Anson, s. 146 Transfer of Land
Act 1928.
RPA
A Torrens system mortgage is a hypothecation: Gives creditor power over the
encumbered property only in the event of default; security interest in the land:
Sykes v Walker.
Under the Torrens system, the nature of the mortgage is a 'charge' (not a
traditional mortgage that acquires proprietary interest), only has residual right to
sell.
TORRENS
SYSTEM
MORTGAGES
RPA ss. 56 – 60 (esp s. 58): confers statutory rights on mortgagees [lenders]
enabling them to sell a property even though they don't own it.
Torrens remedies more ample than old system: rights live on after; sue on the
personal covenant if the proprietary remedy is unsatisfactory; get an order against
borrower’s other assets (garnishee order etc).
RPA s. 36(9): Priority bw registered dealings is determined according to order
registered
RPA s. 56A: The priority of registered mortgages is varied by registration of a doc
in the prescribed form (based on notions of equity)
Priorities
In the case of unregistered equitable mortgages (created under CA s. 54A),
priority in time is relevant, as is whether or not the unregistered mortgagee has
taken possession of the CT or has lodged a caveat: Kerabee Park v Daley
Priority doctrine of ‘tacking’ applies.
The 1st mortgagee has a right to tack further advances onto the mortgage, as long
as there is no notice of a subsequent mortgage.
TACKING
RULE
Rule
Right to tack depends on absence of notice. If a mortgagee [lender] makes
further advances without notice of a subsequent mortgage, his security will prevail
over the subsequent mortgage.
If the lender makes further advances after receiving notice of a subsequent
mortgage, his priority is limited to the amount owing under the mortgage at the
date of receiving the notice: Hopkinson v Rolt.
This rule provides incentive for subsequent mortgagees [lenders] to give notice to
the 1st mortgagee, as it jeopardises the status of the 2nd mortgagee who may be
‘squeezed out’ by the enlarging of the 1st mortgage.
• Notice given to the 1st mortgagee is a condition of the 2nd mortgagee, as it
allows the 1st mortgagee to determine whether to ‘tack’ further advances on
• Priority: 1st bank (for 1st advance) > 2nd bank (if they have given notice) > 1st
bank (tacked amount)
This is a general rule of equity based on fairness, intended to do justice bw
mortgagees: Hopkinson v Rolt.
General law rule requiring actual notice to 2nd mortgagee applies to mortgages
registered under the RPA, unless it is inconsistent w the RPA: Mercantile
Credits v ANZ
• Knowledge of a later mortgage relieves the 1st mortgagee [lender] of the duty
to make further advances: West v Williams
Details
Tacking between Torrens system mortgages applies where a 3rd mortgagee obtains
priority over a 2nd mortgagee by acquiring the legal estate of the 1st mortgagee w/
notice of the 2nd mortgage.
If 1st mortgagee retains the CT, subsequent mortgagees should create a caveat
protecting their interest, which prevents the borrower from creating more
interests. Any attempt to register subsequent mortgages will result in earlier
mortgagees being notified.
Registrar General has a duty to notify those affected by a lodgement of a caveat:
RPA s. 74N
Mercantile Credits v ANZ Bank
• MC [lender] was secured for all future advances to borrower. Hw, borrower
executed 2nd mortgage w ANZ. MC had notice of and consented to 2nd
mortgage. Borrower defaulted. MC exercised power of sale.
• Notice is required.
• CL rule: If a mortgagee [lender] makes further advances after he has had
notice of a subsequent mortgage, his priority is limited to the amount owing
under the mortgage at the date of the receipt of such notice.
• This rule applies to mortgages registered under the RPA.
Notice is not required if the further advances go towards increasing the value of
the mortgaged property asset, as it benefits all subsequent mortgagees: Matzner v
Clyde Securities.
Exception to
general rule
Matzner v Clyde Securities
• Builder borrowed money to build the premises as needed. 1st mortgagee did
not notify 2nd mortgagee of further advances for property improvements.
• Notice is not necessary if the further advances contribute to the value of the
security property.
• Exception to Mercantile, because the further advances after notice were not
made to diminish the value of the security, but rather to complete the
buildings and the security on which the mortgage was for.
• The advances served the interest of all parties.
•
his does not contradict Mercantile, as the principle rests on notions of
equity, good conscience and fair dealing bw parties
Bofinger v Kingsway Group
A guarantor has priority over a 2nd mortgagee, as the 2nd mortgagee would only
recover if there was money left over.
Covenants in mortgages must specify the essential terms of the agreement, incl
the amount of the loan, rate of interest, date of repayment, & framework to
preserve the lender’s security.
Requirements
COVENANTS
IN
MORTGAGES
Since the borrower retains the fee simple under a Torrens system mortgage, they
retain the right of possession during the term of the mortgage (which the
borrower under general law does not have).
Mortgage will typically include covenants obliging the borrow to repair, maintain
and insure the property.
CA
CA s. 80: covenants to keep the premises in repair and permit the mortgagee to
enter and view are implied.
CA s. 81: short forms in mortgages implies covenants.
Remedies
If borrower defaults and cannot pay money back, lender has remedies including:
• Right to sue on a personal covenant (NSW)
• Foreclosure: lender will acquire the rights of the borrower (get the secured
property).
• Right to appoint a receiver: CA s. 109(1)(c) Receiver will manage the estate
such that mortgagor’s debt can be repaid. Receiver must act in good faith,
and can’t sacrifice the interests of the mortgagor.
• Mortgagee can lease the property (not very extensive under Torrens title, as
mortgagee only has a charge over the property, not legal fee simple).
• Mortgagee can spend money to ‘do the property up’ so it can be sold:
Metzner v Clyde.
RPA s. 58: Confers power of sale (most popular remedy, intends to convey fee
simple estate to purchaser free of mortgagor’s right of redemption)
CA s. 109(1)(a): Implied power of sale in all mortgage contracts (old system +
Torrens: CA s. 109(5)
REMEDIES OF
THE
MORTGAGEE:
Power of sale
CA s. 111: For Torrens, mortgagee must also follow RPA ss. 57, 57, 58A setting
out procedure on default, incl. notice, power, and provisions to dispense
Purchaser, after exercise of the power of sale, will take the property free of all
interest over which the mortgagee had priority, power, and provisions to dispense
POWER OF
SALE
s. 57(2) A registered mortgagee may exercise power of sale if they establish:
RPA s. 57
Procedure on
default
(a) A default in payment of the principal or the interest, or default of another
covenant, the payment of which is secured by the mortgage property
• Examples of breach of covenants specifying:
o Not to borrow any more money, or not to borrow any more without
permission
o Insurance must be taken out over the property;
o House to be kept in a reasonable state.
(b) Where a written notice that complies with s. 57(3) has been served on the
mortgagor [borrower]
(b1) Copies of the notice served on each mortgagee and caveator
(c) The mortgagor has failed to remedy the breach within the time specified in s.
27(3)(d)
• Notice gives mortgagor an opportunity to remedy breach: Bevham v Belgot
• Notice is required as the effect of exercising the power of sale is so severe.
s. 57(4): Where notice is served under subsection (2)(b) and the requirements of
the notice are complied with within the time applicable to the notice under
subsection (3)(d), the default to which the notice relates shall be deemed not to
have occurred.
s. 58(1) RPA: Mortgagee may sell the land mortgaged (or any part of it)
RPA s. 58
REMEDIES OF
THE
MORTGAGEE:
s. 58(3) RPA: Money arising from the sale shall be applied:
• 1st to pay the expenses of the sale (auctioneer, advertising);
• 2nd to pay the amount owing to the mortgagee;
• 3rd to pay subsequent mortgagees;
• 4th to pay any surplus to the mortgagor.
RPA s. 60
Power of mortgagee to take possession of secured property in cases of default.
Remedies
available
Upon default of mortgagor, mortgagee may:
1. exercise the power of sale (most common)
2. sue on the personal covenant to pay
3. foreclose (old system remedy under RPA ss. 61, 62, 63(3)
4. exercise a right to go into possession
5. appoint a receiver
Mortgagee
must give
valid notice.
Essential
prerequisite,
not merely
procedural
RPA s. 57(3): A notice referred to in s. 57(2) complies with this
subsection if:
(a) It specifies that it is a notice pursuant to RPA s. 57(2)(b)
(b) It requires the mortgagor [borrower] on whom it is served:
(i) to observe the covenant wrt which the borrower made the default,
or
(ii) to pay the principal or interest wrt they defaulted,
(c) If the cost of serving the notice is demanded, payment of a R amount and
specifies the amount) and
(d) It notifies the mortgagor that, unless the requirements of the notice are
complied with within one month after service of the notice, it is proposed to
exercise a power of sale wrt the land mortgaged.
Must serve notice on mortgagor specifically saying “it is pursuant to s. 57
RPA, and that they intend to exercise the power of sale”
STATUTORY
DUTY OF
NOTICE TO BE
GIVEN TO
MORTGAGOR
Usually 4 weeks, but variations dependent on if the default is monetary or not.
Monetary default: mortgagor cannot exercise unless there is written notice given,
giving borrower a month to remedy the default.
How much
notice?
Mon-monetary default: mortgagor can exercise without first serving written
notice requiring a remedy of the covenant within one month. You dispense with
notice for non monetary pursuant to CA s. 109(2)
• If mortgage instrument dispenses with this, it must be clearly stated in the
contract pursuant to RPA s. 57 and CA s. 111
• MUST be clearly stated in the contract, otherwise the parties have not agreed
to dispense with the notice
Acceleration clause: when mortgagor defaults on a covenant, everything else
will become payable immediately. These clauses only come into play after the
power of sale becomes exercisable, which is necessarily only after correct notice
has been given
When the power of sale has become exercisable, it is an implied term of the
mortgage that the borrower facilitate the mortgagee’s entry on the
property: NRMA v Individual Homes
The notice to the borrower incorrectly stated the full amount of the principal was
due and payable, when it was actually only the interest that was due and payable.
Websdale v
S&JD
Investments
Separate
equitable
duty to
ensure fair
sale
Held: Notice is defective as it requires the mortgagor [borrower] to remedy a nonexistent default.
• The principal is only payable (pursuant to s. 58) once 3 requirements occur:
s. 57(2): 1 – Default of the interest, 2 – Notice pursuant to s. 57(3), 3 –
Failure to remedy the breach
• The only thing that could be demanded at the time of default was the
amount of interest that had been defaulted.
• Notice will be defective if it names a non-existent default, or unequivocally
insists the borrower pay a specified sum that has been erroneously calculated
and exceeds the true amount (Wongala v Mulingelbar) or merely notes the
mortgagor’s defaults but fails to require them to remedy them (Nemeth v
Reachcord)
• Notice is not defective if it merely misstates the amount of principal or
interest due.
When notice period has expired (and notice meets the statutory requirements),
mortgage becomes subject to the separate equitable duty to ensure that the sale
is conducted in a way that fairly balances the interests of mortgagors and
mortgagees
Mortgagee exercising a power of sale is obliged to ensure mortgagor’s interest is a
paramount factor in the conduct of the sale
Most obvious rule: mortgagee cannot sell the property to themselves or to
someone actin on their behalf (Farrar v Farrars) – however there is judicial
disagreement as to the conduct of the duty beyond this
While there is a prohibition against a mortgagee selling property to themselves,
there is no absolute prohibition on sale to a related body (e.g. sale to a corp.
owned by, or related to, the mortgagee), however the court is against it
EQUITABLE
DUTY:
CONDUCT OF
SALE
Sale to an
associate
Test per ANZ v Bangadilly Pastoral Co: “where there is a possible conflict [of
interest] the facts must show that the desire to obtain the best price was given
absolute preference over any desire that an associate should obtain a good
bargain”
• Look at conduct of mortgagee to determine whether sale was valid – e.g. did
they advertise and give the property the best possible chance of selling for a
good price on the open market?
• Sale must represent a genuinely independent bargain and closer scrutiny
must be given to sales to associates to ensure fairness
Effect of inequitable sale to associate (in BOFD to mortgagor) is that the
associate is held not to be a purchaser of the fee simple, but rather assignee of the
mortgage: Mijac Investments v Graham
• Associate effectively becomes the mortgagee, gets the same rights the prior
mortgagee had (incl. priority over subsequent mortgagees); essentially
preserves 2nd mortgage as they still have ranked rights, but merely replaces
who 1st mortgagee is
Obligation of a mortgagee exercising a power of sale is to be BF/act in good
faith: Pendlebury v CMLA
Mortgageein breach of their equitable duty if they wilfully or recklessly sacrifice
the interests of the mortgagor: Southern Goldfields v General Credits
Mortgagee will be regarded as reckless if they fail to take reasonable precautions
to ensure a fair price and facts show they were careless as to whether a fair price
was obtained or not: Pendlebury v CMLA
Test is one of BF/good faith, no duty to take reasonable care to get the
best price. Whether the mortgagee acted in the sale of the property as to
bona fide endeavour to obtain the best price reasonably available: Southern
Goldfields v General Credits
If the mortgagee acted BF and took reasonable precautions to obtain a proper
price, they will have fulfilled their equitable duty, even if, by waiting or spending
more money on the property, a better price could have been obtained: Potter v
Associated Securities
Auction sales
Southern Goldfields v General Credits
• Unlikely to be reckless if property sold at the highest price bid at a properly
conducted and advertised auction
• In the absence of fraud or collision, setting a low reserve price in itself will
lead to an inference that a higher price could have been obtained if the
reserve was higher
• Mortgagee not under duty to act as one would expect owner vendor to act
• Failure to reject a bid at auction and to endeavour to sell the property at a
higher price by private treaty is not an act in complete disregard of the
mortgagor’s interests if there is no evidence to show that a higher price could
have reasonably been expected
Failure to obtain a valuation is merely a lack of prudence which can be remedied
if the sale is well advertised: Nilrem Nominees v Karaley
Mortgagee who deliberately keeps interested purchasers away from the auction
will be guilty of wilful disregard for the interests of the mortgagor and subsequent
mortgagees: Artistic Builders v Elliot & Tuthill
Mortgagee can accept the best bid at an auction where it is badly attended and the
bidding is exceptionally low provided that none of these adverse factors is the
fault of the mortgagee: Cuckmere v Mutual Finance
No CL duty in negligence on a mortgagee that would make them liable in CL
damages if they fail to get a good price for the mortgaged property: Ultimate
Property Group v Lord
Duty is to act BF (not to cheat the borrower) and take R care to achieve the best
price/true market value of the mortgaged property: Cuckmere Brick
The duty is EQUITABLE, not tortious.
The UK negligence-type principle requiring a relationship of proximity bw
mortgagee and the mortgagor, so the mortgagee must act R, has not been adopted
in Australia
Does the
equitable
duty
constitute a
negligence
test?
Cuckmere Brick v Mutual Finance
• The mortgagee was in breach of the duty they owed to the mortgagors by
failing to advertise the planning permission for flats and refusing to
postpone the sale when this omission was discovered
• Duty is to act bona fide and take reasonable precautions to achieve the best
price. (ie, as long as no adverse factors, like a badly attended action, is due to
the fault of the mortgagee, he has discharged his duty.
• Appropriates the language of torts
Pendlebury v Colonial Mutual Life Assurance Society
• Duty is to take reasonable precautions to achieve a fair price.
• “Pendlebury test of bona fides”
• The sale will be invalid if a fair price was achieved, but no precautions were
taken (ie, ‘the facts show that he was absolutely careless whether a fair price was obtained
or not’)
Standard Chartered Bank v Walker
• Likened to the tort of negligence: owes a duty to the mortgagor to reduce
the balance owing; the mortgagee who conducts the sale owes a DoC to the
mortgagor + guarantor, who are in v close ‘proximity’ to him.
• A mortgagee owed a DoC to a guarantor to obtain a R price in exercise of
the power of sale.
• NOT upheld by UKCA: no DoC, not party of negligence: ParkerTweedale v Dunbar.
There can be no liability on a mortgagee for failing to exercise the power of sale at
any particular point in time: Westpac v Kingsland
A mortgagee is entitled to sell at the time of their choice, do not need to wait for a
time which a selling owner might consider more favourable: Vasiliou v Westpac
Timing of
sale
No duty owed by mortgagee to exercise power of sale at any point in time –
mortgagee may exercise power of sale if and when it so chooses: Westpac v
Kingsland
• If guarantor/surety believes they are suffering damage as a result of
mortgagee’s failure to exercise power of sale (guarantor/surety believes the
value of the mortgaged property may decline), their entitlement is to pay out
the mortgage, obtain the security and sell it: Westpac v Kingsland
• If a mortgagee in possession refuses to sell, the mortgagor can apply to the
court for a court-ordered sale
Failure to assess offers before decision to sell is not a breach of duty: Westpac v
Kingsland
Taking reasonable precautions to ensure a fair market price refers to the market at
the time of sale
• However, if mortgagee sells to a purchaser who cannot complete the sale
and as a result resells at a later date when the market has fallen they may be
in breach of the duty owed to the mortgagor and be liable for loss of
opportunity: Higton Enterprises v BFC Finance
• Liability based on breach of statutory duty to take reasonable care to sell at
market value; can obtain damages under CA s. 111A(4)
Reasonable
care test
CA s. 111A imposes a reasonable care test – mortgagee exercising a power
of sale must take reasonable care to ensure the land is sold for not less than
its market value (or if the land does not have an ascertainable market value when
sold, to obtain best price that may reasonably be obtained in the circumstances)
• NB: breach of this duty entitles mortgagor to compensation (difference
between market price and price actually sold for) (CA s. 111A(4)), whereas
breach of mortgagee’s equitable duty allows sale to be set aside, however, in
most cases mortgagor will be satisfied with compensation
• “Market value”: ‘a price which a willing but not anxious vendor would obtain
from a person wishing to buy and not a price which a vendor would obtain
only on a forced sale’: Emerson v Custom Credit
• Market price can be determined by reference to evidence from valuers
(specifically valuers upon whose opinion the mortgagee reasonably relied:
Vasiliou v Westpac
•
STATUTORY
DUTIES IN
THE
EXERCISE OF
THE POWER
OF SALE
•
Mortgagee
ought to
•
•
If mortgagor
is a
corporation
Advertise the sale of the property (in the case of a public auction): Vasiliou
v Westpac
Take reasonable steps to ascertain the value of the property before selling:
Vasiliou v Westpac
Engage an appropriate real estate agent (preferably local): McKean v
Maloney
If sale at auction, must put the property on the open market and bring it to
the attention of potential purchasers by advertising and responding to all
inquiries and expressions of interest: Commercial and General
Acceptance v Nixon
Corporations Act s. 420A: A ‘controller’ (incl. a mortgagee) exercising a power
of sale over the corporation’s property must ‘take all R care’ to sell the
property for not less than its market value. If it has no value, then it must be
sold for the ‘best price R obtainable’.
• The enquiry is whether in the course of that process the controller has taken
all R care to sell the property for not less than its market value: Artistic
Builders
• A ‘controller’ is a person who has control of the property for the purpose of
enforcing a charge, e.g., a receiver or mortgagee
• Obligation requires adequate advertising (Jeogla v ANZ) and ensuring
genuine competition for the property (Jovanovic v CBA)
• NSW: Obligations do not extend to guarantors of the mortgage: Ultimate
Property Group v Lord
s. 103 CA: Court has power to order sale of property in lieu of foreclosure or
redemption
COURT
ORDERED
SALE
Court has unfettered discretion to make order for sale (can be exercised any time):
Palk
Old system
land
In exercising this power, the court will have due regard to the interests of all
concern, and will not decline to exercise the power if the consequences of such a
refusal would be manifest unfairness: Palk
Mortgagees owe no duty to sell the security at a particular time: Westpac v
Kingsland
Appears CA s. 203 does not apply to Torrens, no equivalent in RPA
Torrens land
However, Yarrangah v NAB held that Cts of Equity probably have an inherent
jurisdiction to order a sale rather than foreclosure where it is beneficial to the
parties (applies to both old + Torrens system land): Supported in Guardian
Mortgages v Miller
Court will not exercise its discretion to order a sale where the mortgagee is
actively proceeding to exercise the power of sale: Yarrangah v NAB
Court more likely to exercise its discretion and order sale where value of property
likely to diminish if sale postponed: Sandgate v Ionnou Nominees
EASEMENTS
Burn &
Cartwright
“A right attached to one particular piece of land that allows the owner of that
land (the dominant owner) to either use the land of another person (servient
owner) in a particular manner, such as walking over it or depositing rubbish
on it, or to restrict its use by that other person to a particular extent”
An easement only gives the owner of the dominant tenement limited
rights in relation to the servient tenement, in accordance with the terms
of the easement
•
Features
EASEMENTS
•
•
•
•
Property interests which confer limited rights over land in the
possession of another
Rights over land, not rights to the land
Historically known as “incorporeal hereditaments”
Rights in rem, therefore, run with the land (regardless of whether
ownership of the land changes)
If the land burdened by an E (‘servient land’) is transferred, the obligation
imposed on the easement continues and binds each new owner
Positive easements
• Give the owner of the dominant tenement the right to do something on
the servient tenement (i.e. their neighbour’s land) such as walking over it
or running a drainage pipe across it
Positive or
negative
Negative easements
• Allows owner of the dominant tenement to restrain certain activities
from being carried out on servient tenement (e.g. easement of light –
gives the owner of the dominant tenement the right to receive natural
light without interference from the servient tenement)
If an easement is registered under CA s. 88B no need to apply
Ellenborough Park.
Important
4 SUBSTANTIVE
REQUIREMENTS
FOR THE
CREATION OF
AN EASEMENT
Re Ellenborough
Park UK
CA s. 88B
Creation and
release of
easements,
profits à
prendre and
restrictions on
use of land by
plans
Clos Farming considered whether valid under s. 88B for conferring a
proprietary right (looking to construction of the instrument: Perpetual
Trustee v Westfield), after found invalid, Re Ellenborough Park was
turned to.
(2) A plan shall not be lodged with the Registrar-General for registration or
recording under Division 3 of Part 23 unless it indicates in the manner
prescribed in respect of the plan by regulations made under this Act or the
RPA or in the manner required by the lodgment rules under the RPA:
(a) what easements, if any, are intended to be created:
(i) burdening land comprised in the plan and appurtenant to any
existing roads shown on the plan, and
(ii) appurtenant to any roads to be vested upon registration of the
plan,
(b) what easements, if any, referred to in section 88A are intended to be
created burdening land comprised in the plan and in whose favour those
easements are intended to be created,
(c) what other easements or profits à prendre, if any, are intended to be
created appurtenant to or burdening land comprised in the plan, and
(c1) what easements or profits à prendre, if any, appurtenant to or
burdening land comprised in the plan are intended to be released or
partially released, and
(d) what restrictions on the use of land or positive covenants, if any, are
intended to be created benefiting or burdening land comprised in the plan.
(3) On registration or recording under Division 3 of Part 23 of a plan upon
which any easement, profit à prendre, restriction or positive covenant is
indicated in accordance with paragraph (a), (b), (c) or (d) of subsection (2)
then, subject to compliance with the provisions of this Division:
(a) any easement so indicated as intended to be created as appurtenant to
any existing public roads shown in the plan or any roads to be vested in the
council upon registration of the plan shall be created and shall without any
further assurance vest in the council by virtue of such registration and of
this Act,
(b) any easement so indicated as intended to be created pursuant to s. 88A
shall be created and shall without any further assurance vest in the relevant
prescribed authority referred to in that section by virtue of such
registration and of this Act,
(c) any other easement, profit à prendre or any restriction on the use
of land (not being a restriction as to user of the type that may be imposed
under s. 88D or 88E) so indicated as intended to be created shall:
(i) be created,
(ii) without any further assurance and by virtue of such registration or
recording and of this Act, vest in the owner of the land benefited by the
easement or profit à prendre or be annexed to the land benefited by the
restriction, as the case may be, notwithstanding that the land benefited
and the land burdened may be in the same ownership at the time when
the plan is registered or recorded and notwithstanding any rule of law
or equity in that behalf, and
(iii) not be extinguished by reason of the owner of a parcel
of land benefited by such easement, profit à prendre or restriction
holding or acquiring a greater interest in a separate parcel of
land burdened thereby, and
(d) any restriction on the use of land or positive covenant that is of the
type that may be imposed under s. 88BA, 88D or 88E and is so indicated
as intended to be created takes effect as if it had been so imposed.
(3AA) On registration or recording under Division 3 of Part 23 of a plan on
which a release of an easement or profit à prendre is indicated in accordance
with subsection (2) (c1), the easement or profit à prendre is released.
(3A) When creating a folio of the Register kept under
the RPA for land benefited by any easement, or for land burdened by any
easement, restriction on the use of land or positive covenant, created by this
section, the Registrar-General shall record in that folio, in such manner as the
Registrar-General considers appropriate, the easement, restriction on the use
of land or positive covenant, as the case may be.
(4) Any restriction on the use of land or positive covenant created by this
section shall for the purposes of this Act and the RPA , have effect as if it
was contained in a deed.
Appurtenant easement: easement over ST intended to benefit a particular
piece of land (the DT). Easement is ‘appurtenant’ as it attaches to the DT
Easement in gross: Easement over the ST intended to benefit a particular
individual, no DT
Does the easement affect 2 parcels of land and belong to the DT?
1. Must be a
dominant and
servient
tenement
Identify DT (land benefitted by the easement) and ST (land burdened by
the easement): Gas & Fuel v Barba
• If burdened lot only (i.e. a ST) and no identifiable DT = easement in
gross (not allowed unless created for the benefit of the Crown or a
local/public authority: CA s. 88A
• An easement in gross, with no reference to the DT, gives rise to no
more than a personal licence (Gapes v Fish) easement does not run
with the land (i.e. in personam right)
DT may consist of corporeal (e.g. land) or incorporeal (i.e. right to lay
pipes; existing easement) property, or both (Gas & Fuel v Barba)
• E.g. of DT comprising of both corporeal & incorporeal property –
where a water authority’s easement to lay pipes is appurtenant to the
authority’s land and existing easements (Re Salvin’s Indenture UK)
If DT not expressly identified in doc creating the easement, may use extrinsic
evidence (e.g. surrounding circumstances; terms of doc generally) to prove
intentions of the parties, identify DT (so as to establish appurtenancy) and
determine whether easement validly created (Gas & Fuel v Barba; Re
Maiorana)
Grantor of the easement (i.e. owner of the ST) must own the land before
granting an easement, there can be no easement if there is no land for it to
attach to (Ladbroke Retail Parks UK)
The DT must be identified before the grant or contract to grant (Ladbroke
Retail Parks UK)
• A grant of the right to nominate additional land capable of being
benefitted by easement cannot bind successors in title to the ST
EXCEPTION: CA s. 88A, easements in gross can be created for benefit of
a prescribed authority (i.e. Crown or a local/public authority) if it is for the
purpose of, or incidental to, supply of a utility service to the public (including
the supply of gas, water, electricity, drainage or sewerage services)
• Short forms of words (e.g. ‘easement of way’; ‘easement for drainage of
water and sewerage’) effective to create easement in gross in favour of
Crown/local/public authority: CA s. 88A(2)-(2A)
• An easement in gross permitted by CA s. 88A can also be created by
registering a plan of subdivision with the RgG: CA s. 88B(3)(a)-(b)
Must be a sufficient connection between the subject matter of the
easement and the normal enjoyment of the DT (Re Ellenborough Park)
Due to the numerus clausus principle, a grant will only constitute an ‘easement’
if the “right [has] the character and quality of an easement as understood by,
and known to, our law”: Re Ellenborough Park UK). For a proprietary
right to arise, the rights must be in the form of a recognised easement which
accommodates and benefits the DT (Hill v Tupper UK)
Easement must be connected with use and enjoyment of the DT: Hill v
Tupper UK
• Rights conferred by the E cannot be “wholly unconnected with the
beneficial use of the land in question, [so] that it is in no way connected
with the enjoyment of the DT” (R v Registrar; Ex parte Waddington)
• If the grant is not sufficiently connected to use & enjoyment = operates
as a licence, not easement (does not run with the land, not enforceable
against third parties) (Hill v Tupper UK; Georgeski)
2. Easement
must
‘accommodate’
the dominant
tenement
An easement may accommodate a DT even where DT and ST are not
contiguous (i.e. connected), provided they are sufficiently close (i.e.
some physical proximity required): Todrick v Western National
Omnibus Co UK)
• Easement if the distance between the tenements is so great that no
benefit to the DT is present
• Must provide a real benefit to the land itself (Todrick v Western
National Omnibus Co UK), e.g. by making the DT “better and more
convenient” (Clos Farming Estates)
The rights conferred by the easement must have a sufficient
connection to the normal enjoyment of the DT: Clos Farming Estates v
Easton
• If rights constitute mere rights of recreation and amusement, possessing
no quality of utility or benefit, the grant will not qualify as an easement
(Re Ellenborough Park UK)
• Where the E relates not to the land but to the business of the occupant
of the land, easement will not be tied to the land, but will rather be an in
personam right. However, an E benefiting a trade/commercial activity
carried out on the DT may, in appropriate circumstances, be sufficient,
provided the conduct of the trade is a necessary incident to the normal
enjoyment of the land (not merely an independent business exercise)
•
•
•
(Clos Farming Estates v Easton) (i.e. pure commercial interests are
generally not in themselves sufficient, unless DT is the natural place to
carry out the business or linked to commercial necessity (Clos Farming
Estates v Easton)
Question of whether there is the requisite connection between E and the
normal enjoyment of the DT property is one of fact, and “depends
largely on the nature of the alleged DT and the nature of the right
granted”: Re Ellenborough Park UK
As the benefit must be connected with the enjoyment of the land a mere
personal benefit (e.g. increase in value of property; commercial benefit)
is not enough (Re Ellenborough Park UK)
e.g. a right granted to the purchaser of a house to use a nearby cricket
ground will not have the requisite connection, however, grant of a right
to use a nearby garden may be sufficiently connected with normal use of
the land to constitute an E as “the use of a garden undoubtedly
enhances, and is connected with, normal enjoyment of the house to
which it belongs [meaning that] the right granted [would be] closely
connected with the use and enjoyment of the part of the premises sold”
(Re Ellenborough Park UK: E re: private garden valid as a private
garden is an attribute of the ordinary enjoyment of an attached
residence)
Where DT is later subdivided, raising the question of whether each of
the subdivided parts gain the benefit of the existing easement
• Starting point: presumption that an E attaches to each part of the land of
the DT; therefore, if the E prima facie benefits each of the subdivided
parts it will attach to those parts unless, as a matter of construction, it
benefits DT in its original form only: Gallagher v Rainbow
CL rule was that DT and ST cannot be owned & occupied by the same
person; illustration of the general principle that a person cannot acquire rights
against themselves. However, this requirement has been largely
abrogated by statute
CA s 88B(3)(c)(ii) – an E may be created by registration of a plan of
subdivision to the RgG, even where at the time of registration the ST and DT
are owned by the same person (applies to Old System land)
3. Dominant
and servient
must not be
owned and
occupied by
the same
person
CA s. 69 – the above section applies to Torrens land under the RPA
RPA s 46A – a person may create an E despite owning both the ST and DT
if both parcels are Torrens title
RPA s. 47(1) – an E will continue to exist if the ST and DT come to be held
by the same person
At CL, a tenant may acquire an E over neighbouring land owned by their
landlord, despite the fact that the landlord has the fee simple estate in both
the ST and DT (Borman v Griffith UK); once granted, E will continue to
bind the landlord and the landlord’s successors in title for the duration of the
lease. Will be extinguished once ST and DT fall into the ownership and
occupation of a single person (Cardwell v Walker UK)
The right conferred cannot be too wide or too vague; must be
sufficiently defined (Re Ellenborough Park UK)
• Right cannot be “so indeterminate as to defy precise definition” (Riley
v Pettila)
Cannot be a mere right of recreation with no utility or benefit (Re
Ellenborough Park UK)
• Not too strictly defined – e.g. enjoyment of a defined area for
recreation not given to the public, but to limited number of lot holders
held to be an E appurtenant to and for enjoyment of the DT lots:Riley
v Pettila
• If no true utility/benefit = mere contractual right: Clos Farming
Estates v Easton
• If mere right of recreation = too insignificant to give rise to a PI: Re
Ellenborough Park UK
4. Easement
must be
capable of
forming the
subject matter
of a grant
Right cannot be inconsistent with ST owner’s exclusive proprietorship
or possession of their property (Re Ellenborough Park UK). Two tests
(can use both):
• Do the rights asserted (i.e. the E) impede the reasonable use of
the ST as a whole? (Ryan v Sutherland)
• Does the ST owner retain possession and, subject to the
reasonable exercise of the right in question (i.e. the E),
reasonable control of the ST and the land in question? (Moncrieff
v Jameson) i.e. are the rights given so extensive as to extinguish the ST
owner’s right to possession (i.e. exclude other people)
NB: right to possess includes right to exclude the rest of the world; the
right to occupy does not - Cannot amount to joint occupation/cooccupation/exclusive use of the ST, and cannot deprive owner of the
ST of the right to EP (Re Ellenborough Park)
• Rights conferred on the DT must not interfere with the ST owner’s EP
such as to deprive them of the predominant use of their land: Clos
Farming Estates
• E cannot result in “the servient owner either being effectively excluded
from the whole of the land in question or being left without any
reasonable use of that land” (Moncrieff v Jameson)
• An E can validly give the dominant owner sole use for a limited
purpose, as this is not inconsistent with the servient owner’s retention
of possession or control over their land (Moncrieff v Jameson)
Key questions:
1. Are the acts of the owner of the DT authorised by the terms of the E in
question?
2. Do the acts of the owner of the ST constitute interference with the DT
owner’s rights?
•
TYPES OF
EASEMENTS
Temporal
fragmentation of
proprietary
interests
Rights of way
Nature and extent of use permitted by the grant of an E is a matter of
construction (Perpetual v Westfield). Look at the express terms of the
grant “construed in light of the [objective] circumstances” (Gallagher v
Rainbow)
• Subjective intentions of the parties at the time E was created are
irrelevant; an “investigation into the use contemplated by the parties is
[neither] relevant [nor] permissible” however, negotiations between the
parties which indicated rights and obligations in addition to the E may
be enforceable as in personam rights: Westfield v Perpetual
• Extrinsic evidence not admissible to establish intention, purposes or
contemplations of parties to the grant of the E (e.g. communications
between the parties prior to the grant not admissible: Westfield v
Perpetual
Admissibility of evidence/extrinsic material to determine what the
grant authorises:
• Regard may be had to (objective) surrounding circs (e.g. physical
features of DT and ST &, use actually being made at time of grant:
•
•
Perpetual v Westfield
Relevant: physical characteristics of land, information in the folio of the
register (e.g. DP and registered instrument): Setari
Extrinsic evidence can only be used to “make sense of that which the
Register identifies by the terms or expressions found [in the grant]”
(e.g. evidence such as surveying terms and abbreviations which appear
on the DP): Westfield v Perpetual
Principles used to determine if use of the ST is authorised by the E
(Perpetual v Westfield):
• Authorised use must benefit the DT: Right must be used for the
purposes of the DT only; e.g. use of right of way by people merely
using the ST & DT to get to a more remote area will not generally fulfil
this requirement
• Unreasonable use of land causing unreasonable damage actionable as
nuisance
• If ambiguity in an instrument granting an E, the instrument will be
construed against the grantor (this rule is to be used as a last resort
only);
• Relatively narrow construction – e.g.:
o Presumption that an E was not intended to provide access to
more remote properties unless the wording of the instrument
suggests so (e.g. Perpetual v Westfield – E granting right of
way ‘to and from [the DT] or any such part thereof ’ held not to
include the right to use the ST to get to more remote properties
via the DT as the grant did not include the words ‘and across’)
o Grant of right to ‘pass and repass’ does not include the right to
park, unless implied from the circs existing at the date of the
grant (S&M Ceramics v Kin; see also Butler v Muddle:
“unless parking is a necessary part of [an E for] passing and
repassing, one does not normally conclude that the parties
intended to confer a right of parking”)
• Nature of the E may change with the nature of the DT provided the
terms of the grant are sufficiently broad (Westfield v Perpetual)
• If circs change, can apply for a modification or extinguishment of the
easement under CA s. 89, however modification of a right of way will
not be allowed if it goes “far beyond anything contemplated at the time
of the grant” (Jelbert v Davis)
NB: if the precise path of the easement over the ST is not identified this will
not make the right of way void for uncertainty, however the grantee must
choose the most direct way: Maurice Tolt v Macy’s
Negative easement; ST prevented from obstructing passage of light and/or
air to the DT: Cth v Registrar of Titles
Right to light
and air
Right of
support
Party walls
Right to uninterrupted access of air/light cannot be acquired by prescription
due to the impossibility on the part of the ST holder interrupting it (Harris v
De Pinna)
At CL, rights of support of one’s own land from a neighbour’s land are not
Es, but rather natural rights issuing from the land (Dalton v Angus)
However, may have an express E to provide support for a building on land
(Dalton v Angus)
Mutual cross-easements of support arise where a wall is described as a ‘party
wall’ in transfer documents (CA s. 181B(1)) or where a plan including party
walls is registered (CA s.88BB)
This easement was also implied at CL (Richards v Rose UK)
Generally created in the same way as other interests in land, i.e. by the
execution of formal documents
Easements over Old System Land – created at law by deed; can also be
created in equity (e.g. through proprietary estoppel)
Formal
requirements
Easements over Torrens title land – may be expressly granted by
registration of an instrument in the appropriate form, and expressly reserved
in the instrument through which the land is transferred (RPA ss. 46 & 47(1)(6A)), or may be created by the registration of a plan which sets out the
details of Es (CA s. 88B)
• E will be recorded on the folio/CoT of both the DT and ST (RPA s.
47(1))
• E will become indefeasible upon registration (RPA s. 42(1)), however,
the RPA contains exceptions to indefeasibility for certain easements
• CA s. 88(1): an E is not enforceable against a person interested in the
ST (not being a party to the creation of the E) unless the instrument
clearly indicates: (a) the land to which the benefit of the E is attached
(i.e. the DT); (b) the land which is subject to the burden of the E (i.e.
the ST); and (c) the persons (if any) whose consent is required for the
release, variation or modification of the E.
• The land (including the site of the E) will be ‘clearly indicated’ if it is
shown in the manner prescribed by regulations under the CA or RPA
(CA s. 88(1A)(a)), or “in any other manner satisfactory to the Rg-G in
the particular case or class of cases concerned” (CA s. 88(1A)(b))
• Papadopolous: ‘clearly indicate’ means ‘point to’, rather than ‘state’; as
long as the DT and ST can be clearly identified, this will be sufficient
EXCEPTION: CA s. 88(1) does not apply to Es in favour of the Crown,
public/local authority, or corp. prescribed by regulations: CA ss. 88(4) &
88A(1)
CA s. 88K: court has the power to create easements in favour of private
parties, provided that:
Compensation is paid to the ST owner (s. 88K(4))
• A precondition of the grant of an E is that the ST owner can be
adequately compensated for any loss or disadvantage that will arise
from imposition of the E (s. 88K(2)(b))
• Amount of compensation determined by ST owner’s loss, not DT
owner’s gain (177 York Street v Proprietors SP)
• ST owner usually entitled to recover costs of defending the matter (s.
88K(5)) unless they have behaved unreasonably (and made the
proceedings more costly) Katakaouzinos
CREATION OF
EASEMENTS
By court order
The E is reasonably necessary for the effective use or development of
the DT (s. 88K(1))
• ‘reasonably necessary’ to be determined objectively: Re Seaforth
• Requirement of ‘reasonable necessity’ not as strict as ‘absolute
necessity’ > E may be granted even if other parcels of land over which
the E may be created: Tipler v Fraser
The applicant has made all reasonable attempts to obtain the E by
consent (s. 88K(2)(c))
• Court must specify the nature and terms of the E, and identify its site
by reference to a plan that can be registered (s. 88K(3))
• s. 88K does not confer power on court to create E in gross: Bonvale v
Halfpenny
CA s 89(1)(b): NSW SCrt has the discretion to order extinguishment of an E
upon application by a person with an interest in the ST if the court is satisfied
the person entitled to the benefit of the E (i.e. DT owner of full age &
capacity) can reasonably be considered to have abandoned the easement
Important statutory qualification to the principle that Torrens register is
conclusive, court can order extinguishment for abandonment based on
acts/omissions of DT owner’s predecessors in title regardless of the fact that
the E was on the register when land was purchased by DT owner. However,
if the DT owner purchased on the faith of the register and actively pursued
their rights, court will likely use their discretion not to grant extinguishment
(Proprietors Strata Plan No 9 v Proprietors Strata Plan No 11)
“The power to modify or extinguish an easement conferred by s. 89(1)
requires proof of [abandonment] to the satisfaction of the Court
coupled with the favourable exercise of judicial discretion” (Re
Rosedale)
1.
Abandonment
Deemed abandonment under CA s. 89(1A)
• CA s. 89(1A): an E may be considered abandoned if court is satisfied it
has not been used for at least 20 years before application for
extinguishment
• Evidence of even slight use of part of the E is enough to overcome this
deeming provision: Effeny
Common law test of abandonment
• Abandonment occurs both at CLcand under the CA when the DT
owner has made it clear neither they nor their successors in title will
make use of the E: Re Rosedale - strict test
• As Es are perpetual in nature and intended to last for an indefinite
term, acquiescence on the part of the DT owner is necessary to give
effect to any act of abandonment > need knowledge of the E +
intention to abandon: Treweeke
• An E cannot be abandoned by a DT owner who does not know the E
exists: Obadia v Morris UK
• Intention to abandon will not be lightly inferred, courts are reluctant to
interfere with proprietary rights: Grill v Hockey
•
Long period of non-use will be relevant, but not determinative
(Treweeke); only relevant insofar as it indicates intention on the part
of the DT owner to abandon
• Obstruction/interference with a right of way not sufficient unless
substantial, and the obstruction cannot be due to acts of the ST owner
(and if the acts of the ST do obstruct a right of way, DT owner is
entitled to pass over other ground in the ST to get through –
Treweeke)
Exercise of discretion
Even if abandonment has been made out, court still has discretion as to
whether or not to order extinguishment: Effeny; Re Rosedale. May look at:
• Whether DT owner has relied on the register (indicates existence of the
E) (Proprietors SP No 9 v Proprietors SP No 11);
• Purpose and social utility of the E (e.g. unlikely to grant extinguishment
if it is intended “for the purpose of maintenance and repairs or for
emergency access”: Effeny)
o Whether DT owner would suffer any injury or disadvantage by
reason of its extinguishment: CA s. 89(1)(c)
Where DT owner expressly releases ST owner from the E
2. Express
release
By dominant
tenement: RPA
s. 49, CA s.
47(6), (6A) or
registration of
plan: CA s.
88B(2)(c1),(3A),
195D
3. Extensive
alteration to the
DT leading to
excessive use
EXTINGUISHMENT
4. Unity of DT
and ST
ABOLISHED
IN NSW: CA s.
47(7)
CL: deed required to affect a valid release (CA s. 23B(1))
Equity will generally give effect to informal release in cases where ST owner
acts to their prejudice in reliance on DT owner’s informal release (Waterlow
v Bacon UK)
Torrens: E recorded in the Register can be released wholly or partly via
registered dealing in the approved form (RPA s. 47(6)-(6A)), or by
registration of a plan for the land indicating that an E is intended to be
released (CA s. 88B(2)(c1)). Generally required to have written consent from
both the DT owner and the ST owner (RPA s. 47(5B))
E may be extinguished if the DT comes to assume a very different character,
resulting in excessive use of the E (Jelbert v Davis – conversion of
agricultural land to a amping site resulted in excessive use of the E)
However, alteration must be significant (e.g. Graham v Philcox [1984] UK –
enlargement of a flat by the incorporation of downstairs premises was held
not to be significant enough to amount to excessive use)
CL: If one person acquires a fee simple estate in both DT and ST and is in
possession of both, E is extinguished. However, qualifications to this rule:
1. Does not extinguish a right of way (or other E) necessary to use of the
DT (Margil v Stegul Pastoral )
2. If holder has a fee simple estate in one tenement and a limited estate in
the other, E is merely suspended during the period of unity of title
3. If only unity of possession (but not unity of title) E will be suspended,
will revive upon that unity of possession terminating
Statute: an E will not be extinguished merely because the DT and ST are
owned and occupied by the same person (RPA s. 47(7))
5. Statutory
extinguishment
CA s. 89(1) – NSW SC can make an order extinguishing an E if:
• It has become obsolete (s. 89(1)(a)) (usually due to a change in the use
of the DT or in character of the neighbourhood); Proof that an E has
become ‘obsolete’ is difficult to est. (Long v Michie)
• It has been abandoned (s. 89(1)(b)) (see above); or
• If the continued existence of the E would impede the ST owner
without securing any practical benefit to the DT owner (s. 89(1)(a);
Re Rosedale)
“The power to modify or extinguish an E conferred by s. 89(1) requires
proof of one or more [of the above] circumstances to the satisfaction of
the Court coupled with the favourable exercise of judicial discretion”
(Re Rosedale)
RPA s. 42(1)(a1): an exception to indefeasibility “in the case of the omission
or misdescription of an E subsisting immediately before the land was brought
under the provisions of the [RPA] or validly created at or after that time
under the [RPA] or any other Act or a Cth Act”
EASEMENTS
AND THE
TORRENS
SYSTEM
Partial
exemption to
indefeasibility
in favour of
“omitted or
misdescribed”
easements
Two parts to this provision:
• Applies to all Es in existence before land in question was brought
under Torrens system and omitted/misdescribed on the register:
Beck v Auerbach
o Implied Es, Es by necessity, prescriptive Es which existed before
land was brought under Torrens system will be binding on new
proprietor, even if no fault can be established on the part of the
Registrar-General: Dobbie v Davidson
• If E was created after the land was already under the Torrens
system, only applies to those which were ‘validly created’ and
subsequently omitted or misdescribed
o ‘Validly created’: express Es created by instruments executed and
registered in accordance with RPA s. 46
o Does not cover an instrument executed and lodged for
registration, but not registered
o Test: E must be registered and then omitted/misdescribed on
register: James v Registrar-General
o Does not apply to implied or prescriptive Es, as they cannot be
‘validly created’ – therefore, can never be binding on RPs who
take without fraud
Does not apply where the Registrar-General has removed the E from the
register at the request of the ST and has followed the processes required by
the RPA (Castle Constructions v Sahab)
FREEHOLD COVENANTS
As owners and occupiers of land are affected by what others do on the land around them,
landowners (especially initial developers) may seek to control future use of neighbouring land
through freehold covenants (also known as ‘restrictive covenants’)
Freehold covenants are at the intersection of contract and property law:
• If the covenant in question were merely a contractual right, then it would only be enforceable
between the parties to the agreement (i.e. would not bind future purchasers)
• A covenant turns this contractual agreement into a property right enforceable against current
and future owners of the properties
INTRO
Covenants run with the land → the burden of the C runs with the burdened land, and the
benefit of the C runs with the benefited land
In practice, freehold Cs almost always come into existence at the point where someone is
subdividing a large parcel of land and selling the new, smaller parcels
In large-scale residential developments, freehold Cs often burden and benefit all lots, e.g:
• Covenant to only build with high quality materials
• Residential-only covenants (preventing commercial land use)
• Minimum size covenants (preventing further subdivision)
Negative/restrictive covenant: covenant preventing covenantor from doing something (e.g.
building over a certain height)
Positive covenant: covenant requiring something to be done
TERMINOLOGY
Covenantor: person who agrees to be bound by the covenant
Covenantee: person who gets the benefit of the covenant
Benefit of covenant: whether the covenantee’s successors in title can enforce the covenant
Burden of covenant: whether the covenantor’s successors in title will be bound by the covenant
CL had a particular aversion to freehold Cs, which resulted in inconsistent application as they
were rarely enforced beyond the original covenantor (person promising their land would be
burdened)
However, CL would generally allow the benefit of the covenant to be enforced by the
covenantee’s successors in title, provided that covenantor remained the same; meant the covenant
was not useful if the burdened land was transferred
COMMON LAW
Can have a positive covenant at CL, but the burden won’t run with the land – only the original
covenantor affected by it
CL allows the covenant to run with the benefited land where:
• Covenant annexed to that land; or
• There was an assignment of the covenant (CA s 12 – in writing with notice)
Now, covenants are generally enforced in equity
STATUTORY
REQUIREMENTS
FOR CREATION
OF FREEHOLD
COVENANTS
1.
2.
3.
4.
5.
Restrictive covenant, being equitable, must be in writing but need not be by deed: CA s. 23C
R-G must record covenant in folio for burdened land only: RPA s. 47(1) (a weakness in the
register)
Covenant can be created even if same person owes both burdened and benefitted land: RPA
s. 46A (operational 1 January 2006)
Note CA s. 88(1) formal requirements for creation of covenants and easements
Note CA s. 88B instruments (creation of restrictive covenants on registration plan of
subdivision)
Four
conditions,
deriving from
Tulk v
Moxhay
Four conditions must be satisfied before equity will enforce the burden of a
freehold covenant:
• Purchaser of burdened land must have actual, constructive, or imputed
notice (note this CL requirement is affectd by Torrens system)
• Covenant must be negative (“restrictive”) determined as a matter of
substance, not form (Pirie v R-G)
• Covenant must benefit the covenantee’s land (Clem Smith
Nominees), analogous to “touch and concern”
• Original parties to covenant must have intended the burden of the
covenant to run with the covenantor’s land (NB: a covenant
created after 1 January 1931 is subject to a rebuttable presumption
under s. 70A CA)
A covenant will only bind the covenantor’s successors in title if they take their
interest with notice of the covenant: Tulk v Moxhay UK
Purchaser of
burdened land
must have
notice
Registrar can record on folio (CA s. 88(3); RPA s.47(1)) – this constitutes
constructive notice
Freehold covenant over Torrens land will only be enforceable if it is on the
register (principle of indefeasibility)
A negative covenant is a restrictive covenant that restraints the covenantor and
their successors in title from doing something (e.g. building above a certain
height)
1. cf. a positive covenant – requires some act to be done, usually involving
expenditure of money (e.g. to repair and maintain a fence)
EQUITY:
BURDEN
The Registrar-General only has the power to record negative/restrictive
covenants (CA s. 88(3); Pirie
2. Positive covenants will still generally be effective as contracts, but will not
bind successors in title
Covenant
must be
negative/
restrictive in
nature
Exception: Statutory exceptions to the rule against public positive covenants
(CA ss. 88D & 88E)
CA s. 88D: “A prescribed authority may... impose restrictions on the use of or
impose public positive covenants on any prescribed land vested in it”
CA s. 88E(2): “A prescribed authority may... impose restrictions on the use of
or impose public positive covenants on any land not vested in the authority, so
that the restriction or public positive covenant is enforceable by the authority
whether or not the benefit of the restriction or public positive covenant is
annexed to other land”
CA s. 88BA(1): “A covenant may be imposed requiring the maintenance or
repair, or the maintenance and repair, of land that is the site of an easement of
other land that is the subject to the burden of the easement (or both) by any
one or more of the persons from time to time having the benefit or burden of
the easement”
Covenant
must benefit
the
covenantee’s
land
Covenant
must be
intended to
run with the
land
There must be a quasi-dominant tenement & the covenant must touch
and concern the land (not merely the business conducted on the land):
Clem Smith Nominees v Farrelly)
• Covenant must benefit, or ‘touch and concern’ the land of the covenantee
• Must be a “quasi-dominant tenement to which the burden of the
covenant is attached”
• Quasi-dominant tenement and quasi-servient tenement do not have to be
strictly contiguous, but need to be close enough that it can be said that
the covenant benefits/touches and concerns the land
• Must benefit the land, not merely the business or activities conducted on
it
• Under the Torrens system the burden of a restrictive C will only be held
to run with the land if “the land entitled to the benefit of the covenant is
capable of identification in some way from the registered document
containing the covenant or, at least, from other documents which can be
discovered by a search at the Lands Titles Office”
The covenantor’s successors in title will only be bound by the covenant if it
was intended to run with the land (and therefore intended to be binding upon
subsequent owners of the land)
CA s. 70A: covenants burdening land are deemed to be made on behalf of the
covenantor and their successors in title, unless a contrary intention is
expressed. Therefore, intention deemed unless expressly excluded by the grant
(in which case it is not a covenant but merely a personal agreement)
Intro
The original covenantee’s successors in title will only be able to enforce the
covenant if the benefit of the covenant is annexed to the land itself or,
alternatively, directly assigned to the successor in title
Benefit of
covenant
annexed to
land itself
Requirements:
• Intention to annex (implied by CA s. 70(1))
• Benefit must ‘touch and concern’ the land (Clem Smith Nominees v
Farrelly)
• Must be identified in accordance with CA s. 88(1) – covenant not
enforceable against a third party unless the instrument clearly indicates:
o The land to which the benefit of the covenant is attached;
o The land which is subject to the burden of the covenant;
o The persons whose consent is required for release, variation or
modification of the covenant
• The original covenantee must have owned the benefitted land at the time
the covenant was given
• However, in the case of a subdivision, a developer can attach a CA s. 88B
‘instrument’ to a plan of subdivision when lodged for registration, setting
out any easements and covenants intended to affect the various lots in the
subdivision > covenants and easements then simultaneously created by
registration of plan of subdivision with the CA s. 88B instrument
attached
EQUITY:
BENEFIT
Can expressly assign the benefit of a covenant to a successor in title (Benefit of
the covenant is a chose in action)
Express
assignment of
the benefit to
the successor
in title
Must comply with formalities set out in CA s. 23C(1)(c) i.e. must be in writing
and signed by the assignee of the benefit/the covenantor
NB: benefit of the covenant can be enforced by the holders of the same estate
as the covenantee and lesser estate holders/occupiers. Unlike law, equity
allows lesser estate holders to enforce the covenant (Forestview Nominees)
but in any event such an outcome also flows from CA s. 70
CA s. 88(3) (effective 1 January 1931); RPA s. 47(1) permits notification of
restrictive covenants on the Register (provided hey comply with CA s. 88(1))
RESTRICTIVE
COVENANTS
AND TORRENS
SYSTEM
ENFORCEABILITY OF
FREEHOLD
COVENANTS
Restrictive
covenants not
indefeasible or
typically
enforceable
against third
parties
Despite their appearance on the register, restrictive covenants are equitable
interests and therefore cannot be indefeasible
• In the absence of fraud or formal notice, the restrictive covenant will not
be enforceable (Christie v Dalco Holdings)
• Covenants are allowed to appear on the register for the purposes of
convenient notification, but if one wants to discover whether the benefit
of the covenant has passed they must make external investigation
CA s. 88(1) provides that a covenant is not enforceable against a third
party unless the instrument clearly indicates:
• The land to which the benefit of the covenant is attached;
• The land which is subject to the burden of the covenant;
• The persons whose consent is required for release, variation or
modification of the covenant
Freehold covenants are private property rights that depend on private
enforcement – if a breach of covenant is threatened, it can only be restrained
by someone who has the benefit of the covenant (i.e. original covenantee
and/or their successors in title)
Equitable
remedies only
As freehold covenants are equitable interests, can only be enforced in the
equitable jurisdiction of a court (usually the Supreme Court)
Only remedies are equitable: injunction to restrain a breach of the covenant
or equitable damages in lieu. As equitable remedies are discretionary, court
may decline to grant a remedy if the damage sustained is negligible
VARIATION AND
REMOVAL OF
COVENANTS
Ways
covenants can
be varied or
removed
•
•
•
•
•
Express
release
Express release (or an expiry clause in the grant);
Court ordered under CA s. 89
Public planning: EPA Act (allows planning authorities to effectively
override private covenants – see below)
Can be extinguished by common ownership and possession but
does not apply to Torrens land if created after 1 September 2006
(RPA s. 47)
Common ownership or possession does not extinguish a covenant
created under a CA s. 88B instrument
Old System land: covenant can be released by deed
Torrens title: covenant can be released by deed & request to the RC
Where the covenant is deemed obsolete due to a change in the nature of
the neighbourhood or use of the benefited land (CA s. 89(1)(a))
• ‘Neighbourhood’ determined at date of the hearing, not date of
covenant, question of fact: Vrakas v Registrar of Titles
• Covenant will be ‘obsolete’ if it “can no longer achieve or fulfil any of its
original purposes and has become futile or useless ... not obsolete if it is
capable of fulfilling any of its original purposes, even if only to a
diminished extent”: Vrakas
• “The test is whether, as a result of changes in the character of the
property or the neighbourhood, or other material circumstances, the
restriction is no longer enforceable or has become of no value”: Vrakas
Grounds
under which a
court can vary
or extinguish a
covenant
under CA s. 89
Where continued existence of the covenant would impede the
reasonable use of the servient land without securing any practical
benefit to the covenantee (CA s. 89(1)(a))
• Must show continued existence of the covenant hinders land being
reasonably used to a real and sensible degree, having regard to
surrounding property and purpose of the covenant, question of fact:
Vrakas
• Must show covenant impedes all reasonable uses of the land: Vrakas
• Practical benefit can be economic, physical or intangible: Levi v Spicer
Where the covenant has been waived (i.e. acquiescence/where there is a
breach of the covenant and covenantee doesn’t do anything about it)
(CA s. 89(1)(b))
• A restrictive covenant may become unenforceable by long inactivity on
the part of the covenantee or other person entitled to the benefit of the
covenant or of a course of conduct which would give rise to a reasonable
belief by the owner of the land burdened that future breaches of the
covenant would be disregarded: Lloyds Bank v Jones
Where extinguishment of the covenant would cause no substantial
injury to the covenantee (CA s 189(1)(c); Levi v Spicer)
• Relevant ‘injury’ can be:
o Economic (e.g. reduction in the value of the benefitted land)
o Physical (e.g. subjection to noise and traffic)
o Intangible (e.g. impairment of view; intrusion of privacy;
unsightliness; alteration to the character or ambience of the
neighbourhood
• Injury is to the person and their enjoyment of the land, not injury to the
land itself
• Objection to the modification must be sincere and reasonable. Particular
sensitivities can be taken into account provided reasonable
• Practical application – court looks at statements made by the people
affected by the covenant and the prospective modification/removal
• If the person objecting to modification/removal has themselves breached
the covenant little weight will be given to their statements
EPAA s. 28(2): “For the purpose of enabling development to be carried out
in accordance with an environmental planning instrument or in accordance
with a consent granted under [the EPAA], an environmental planning
instrument may provide that, to the extent necessary to serve that purpose, a
regulatory instrument [including a freehold covenant] specified in that
environmental planning instrument shall not apply to any such development or
shall apply subject to the modifications specified in that environmental
planning instrument”
Effect is that the terms of a restrictive covenant are ‘suspended’ by the
operation of EPAA s. 28 – proceedings cannot be taken for enforcement of
the covenant or on account of a breach of covenant: Owens v Longhurst
INTERSECTION
OF FREEHOLD
COVENANTS
WITH PUBLIC
PLANNING
REGIMES
EPAA =
Environmental
Planning and
Assessment
Act 1979
(NSW)
The only terms of the covenant that are ‘suspended’ are the ones that would
prohibit development (as EPAA s. 28 only applies to the extent necessary to
enable development to be carried out): Re Thompson
An environmental planning instrument can only override a restrictive covenant
if the Governor has given prior approval (EPAA s 28(3)); if this formality is
not complied with, the environmental planning instrument will not override
the covenant: Cumerlong Holdings v Dalcross
A restrictive covenant is a ‘regulatory instrument’ within the meaning of
EPAA s. 28(2): Cumerlong Holdings v Dalcross
Private planning regimes must yield to the planning regimes devised by elected
representatives – however, manner and form requirements of planning
instruments aim to mitigate the derogation of private property rights by state
planning legislation: Cumerlong Holdings v Dalcross
If freehold covenants are successful in maintaining the character of an area for
some time, that area may eventually be protected by council or state heritage
provisions
Many of the technical limitations of freehold covenants have been overcome
by strata and community title legislation (which allow both positive and
negative obligations)