Entire Unit from Week 8 onwards (minue personal property)

What is a dealing Registerable?

• Narrow - there are requirements: Formally in order, must be on the approved form, completed attested, person receiving the dealing must have possession of CT or be in a position to compel its production, immediately registerable, must be immediately registerable (no immediate D that need to be R before it), the person claiming protection of section should have dealt with RP themselves, and the dealing must not be void.

What is a deemed legal estate?

IAC (Finance) Pty Ltd v Courtenay - [1963] HCA 64:

• Kitto: S43A provides same degree of protection against notice before registration, that S43 provides after registration. Does not need to worry about notice of trust or other earlier E interest.
• Taylor (narrower - adopted): If  S43A was intended to advance in point of time the unqualified protection given by S43 - it would have simply said that. Expression 'LE' was used advisedly, with a view of affording at most protection at CL to a person who has acquired a LE in land without notice of a prior equitable interest. Obtains not an ID estate, but a CL legal estate.

• Crucial differnece in views - effect of notice prior to settlement.
• Kitto - A person who otherwise fulfils their requirements of S43A, will be protected from notice whenever it is received. Either before or after settlement.
• Taylor - Protection against prior interest only where notice of earlier interest was received after settlement, and earlier than that they will not be protected until they register - where they get ID title.

Registered mortgagee has certificate of title.

Case: 29th Nov - company owned by DC (Son of C) - lent D another $33,000. Original broker who acted for his mother.

30th of Jan 2013 - D told Zhai that he would give her the property if she would discharge the debt to AMP and to her. She agreed - D and Z exchanged contracts for P of Prop for $460,000 - amount owed to discharge AMP mortgage.

Z lodged caveat as P for contract of sale.

15th of Feb - DC lodged caveats on the title in favour of his mother, but were drawn on the 22nd of Feb so that a second mortgage could be registered for the re-financing of the first two loans. No title search was undertaken, so the refinancing company was not aware of the contract of sale.

Z denied having any notice of I of C and Stone Leaf Capital. On the 13th of March, D told DC that he was selling the unit - DC instructed solicitors to lodge 2nd and 3rd mortgages, but this time sale to Z had already been completed, with a mortgage to Westpac - and took them in R form, but didn't lodge them in registration until the 19th/20th of March.

On 18th of March, plaintiff lodges caveat claiming an interest as E chargees - and preventing R of Z's transfer and Westpac's mortgage.

Miss Z denied any notice of prior registered mortgage.

Z claimed S43A protection, and if that didn't work then claimed priority under rules of competing equitable interests. 

Decide: Held that purchase was for value, even though consideration was $460,000, including the loans outstanding to Z, was below the market price for the land. Although she had constructive notice of the caveats when they were first lodge, the withdrawal of the caveats indicated that the caveators were no longer claiming an interest in the land. [38] There was no evidence that the usual practice of conveyances in such circumstances would be to make enquiries of the caveators to investigate why they had withdrawn their caveats, or to investigate whether the claimed debts had been repaid, or that the caveators still maintained an interest in the land notwithstanding the withdrawal of the caveats.

Mrs C’s loan was at 5% per month leading them to $260,000. SLF had lent $20k, at a rate of 7%/month and entitled them to $77,898 against Daly.

Court referred to P2P and Sharari - McLeland.

Plaintiffs withdrew their caveats to assist the refinancing, and knowingly took the risk that their interest could be defeated - and were experienced in this type of dealing.

Look at what dealings happened when.

Barlin Investments v Westpac [2012] NSWSC 699:

Who has priority?

It was held: the interest of Mr C was the one we needed to look at. Why? He was in the time frame, after completion of his matter but before registration. He couldn’t get R because of the B caveat. Was he entitled to the S43 protection, court said yes he was as he:

·       He had a dealing registerable

·       Dealt with RP (EC)

·       Had CT

·       Had attempted to promptly lodge his documents for R

He said that he didn’t have any notice of the outstanding interest to B. Court said that he’s entitled to S43 protection as if (at OS) if he was a Bona Fide purchaser for value of the legal estate without notice (E’s Darling).

How does this effect Mr and Mrs interest from him? They can’t satisfy the definition of being a BFP, because at the time they took their interest from Mr C, the B caveat was on the title. They were not a BFPFVWN. But, the successive effect of S43A (i.e. Wilkes and Spooner), if you have a BFPFVWN, then anyone who takes their interest through that person, is entitled to the same amount of protection even if the second person does have notice.

Held: C was entitled to the protection of s S43A because he took his interest from the RP for value and without notice of Barlin’s interest. Westpac and Mr and Mrs Mitchell were entitled to the same protection because they took their interests from him. Successive effect.

Jonray (Sydney) Pty Lltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW)

                                                     

Watch the time frame:

If you’re in the time frame after completion but before registration – you may assume something has been registered but they haven’t – don’t! Could be E v E.

ILAC – think ILAC but don’t write ILAC, use headings but don’t those headings. Pick issue, state law and application in the same breath.

Use headings for the topics covered – closely related to issue describing, it shows the reader that you’ve got all of these issues. Best way to structure these problem questions. Most important part of the entire paper is the introduction.

Common law forms of co-ownership:

In modern times the two main forms of concurrent ownership under the general law are the:

·       Joint tenancy

·       Tenancy in common

Older forms of co-ownership included:

·       Tenancy by entirety.

Interests can be held concurrently by two people.

Majority ruling: Natures of interests in joint tenants is differential.

The right of survivorship:

·       The distinctive feature of JT’s is the right of survivorship or the jus accrescendi.

·       The essence of this principle is that when one joint tenant dies the whole of his or her interest automatically passes to the surviving joint tenants until only one is left.

·       This is unaffected by any contrary provision in a will or any agreement between the JT’s, or any p in a will to leave the property to anyone else beside the JT.

Wright v Gibbons (1949) 78 CLR 313:

Latham CJ:

‘If one joint tenant dies his interest is extinguished. He falls out, and the interest of the surviving joint tenant or joint tenants is correspondingly enlarged’.

·       s 25 Conveyancing Act, 1919, NSW allows a corporation to hold as a joint tenant. On the dissolution of the corporation the property passes on to the other joint tenant.

Exception – the principle of forfeiture: (Rule of Law)

In Rasmanis v Jurewitsch (1969) 70 SR NSW – Helene Jurewitsch was killed by manslaughter by her husband. They were joint tenants of a property in NSW.

-          ‘It is a well settled principle of public policy that equity will not permit one joint tenant who feloniously slays his fellow joint tenant to gain from his own felonious act…Equity will intervene to deprive him of the benefit which he would otherwise have derived by becoming registered as the sole proprietor’

However, if the slaying was accidental, negligent or culpable i.e. car crash – this exception doesn’t apply.

The Forfeiture Act 1995 (NSW):

This was introduced to ameliorate the strict effect of the forfeiture rule when that rule applies.

·       The forfeiture rule may be avoided if ‘justice so requires’.

·       The Act applies to ‘an unlawful killing’ whether occurring within or outside the State.

·       Unser s 4 the Act does not apply, and hence the forfeiture rule cannot be ameliorated, where the unlawful killing constitutes murder.

Mrs Fitter’s sister – was able to have an amendment made to the forfeiture (see point 3).

Can arise in cases of domestic violence – court said she could not, as she had intended to kill the man.

Determining the Order of Death of Joint Tenants:

·       Conveyancing Act 1919 – Section 35:

Presumption of survivorship

In all cases where two or more persons have died under the circumstances rendering it uncertain which of them survived, the deaths shall for all purposes affecting the title to any property be presumed to have taken place in order of seniority, and the younger be deemed to have survived the elder.

i.e. if a room full of joint tenants died at the same time, the property would go to the youngest person (and passed on to his next of kin or equivalent to his will).

·       Hickman v Peacey [1945] AC 304.

·       Fraser v Thom [2010] VSC 626.

·       Common law presumption of death after 7 unexplained years’ absence: Re Application for Grant of Presumption of Death; Ex parte Jenkins [2008] WASC 49.

Tenancy in common

There are 2 major differences between a tenancy in common and a joint tenancy:

·       There is no right of survivorship between tenants in common, and

·       Only unity of possession is required

Note: If one tenant in common owns 99% of the land, and the other owns 1% of the land – they are both allowed to use all of the land equally.

Law and equity

Possibility of separating E and L interests of co-owners.

It is quite possible for a single person (A) to hold 100% legal title (RP). But in E, they may hold it on behalf of other people e.g. on trust for B & C.

Creation of co-ownership:

Introductory statements about trusts

·       A resulting trust will generally arise where there has been an unequal contribution to the purchase price, even over TT land.

·       A constructive trust will rise where there is conduct on the part of the holder of the legal estate such that it would be unconscionable for them to strictly rely on their legal title to deny the existence of an equitable interest.

Common law:

At CL, a transfer or disposition to two or more persons where it was not absolutely certain how they were to take was presumed to create a joint tenancy unless:

·       Express or implied words of severance indicated the parties were intended to take distinct or identifiable shares in the land.

·       One of the four unities was absent;

·       Other circumstances of the transaction indicated that a tenancy in common was intended. One of the most common of these circumstances was an unequal contribution to purchase money. In this case equity would presume that the parties intended to take their interest according to their contributions. Where the parties had contributed equally to the purchase monies equity would treat them as joint tenants.

 Equity:

·       Equity always preferred the tenancy in common because it represented certainty and fairness.

·       The parties would be treated in equity as if they were tenants in common in 3 situations:

-       Where co-owners contributed different amounts to the purchase price

-       Where co-owners advance money on mortgage;

-       In the case of partnership assets.

The Trustees of the Property of John Daniel Cummins, A Bankrupt v Cummins [2006] HCA 6 (7 March 2006)

·       Mr Cummins was declared bankrupt in 2000 after the Tax Office discovered that he had not made a tax return in 45 years.

·       Under bankruptcy legislation, a transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if the main purpose of the transfer was to prevent the property becoming available to creditors. Mr Cummins had made a transfer of jointly owned property to his wife.

·       Evidence was that Mrs Cummins had provided about 75% of the purchase price.

Cummins presumption: Where there is property purchased by the partners to a marriage, as joint tenants, and that property is the matrimonial home, then the normal E rules of resulting trust don’t apply. Instead, it is presumed that the partners did intend to share equally (50/50) and that the principle of survivorship. Only applies to first marriages, and property purchased as the matrimonial home.

‘There is no occasion for equity to fasten upon the registered interest held by the joint tenants a trust obligation representing differently proportionate interests as tenants in common. The subsistence of the matrimonial relationship as Mason and Brennan JJ emphasised in Caverley v Green, supports the choice of joint tenancy with the prospect of survivorship’

s 26(1) Conveyancing Act 1919 NSW and s 100(1) Real Property Act, 1900 NSW:

s26(1) Conveyancing Act:

·       Construction of conveyance etc of any property beneficially to two or more persons together

(1)    In the construction of any instrument coming into operation after the commencement of this Act a disposition of the beneficial interest in any property whether with or without the legal estate to or for two or more persons together beneficially shall be deemed to be made to or for them as tenants in common, and not as joint tenants.

S100(1) Real Property Act

·       ‘Two or more persons who may be registered as joint proprietors of an estate or interest in land under the provisions of this Act, shall be deemed to be entitled to the same as joint tenants.’

Delehunt v Carmody (1986) 161 CLR:

·       Mr Carmody was the sole registered proprietor of property. Miss Delahunt had lived with C for some 31 years, and she had contributed equally in the payment of the deposit and instalment payments on the basis of an oral agreement between herself and Mr Carmody and the property would eventually be put into joint names.

·       E historically preferred a tenancy in common but, where the parties had contributed equally there was no reason why E should not follow the law and presume a joint tenancy.

·       But now after s26 a disposition ‘to A and B’ will result in them taking as tenants in common. The High Court held that even though s 26 had no direct application to the facts of this case that E must follow the law and the law in its present state says that a beneficial tenancy in common will come into.

·       The result was that Miss Delahunt took under the intestacy rules as joint tenant with Mr C’s estranged wife.

Severance or termination of co-ownership:

Tenancy in common:

There are 2 ways in which a TC will come to an end. These are:

1.       When all the tenants in common transfer their interest to one of the tenants.

2.       Where the land is sold or partitioned under s 66G Conveyancing Act.

Mortgages:

Security interest:

·       Mortgage over land or personal property

·       Pawn or pledge

·       Lien

·       Equitable charge

A mortgage is an attractive position to both lenders and borrowers.

Santley v Wilde [1899] 2 Ch 474

‘A mortgage is a conveyance of land or an assignment of chattels as security for the payment for a debt or the discharge of some other obligation for which it is given. This is the idea of a mortgage: and that security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law.’

Waldron v Bird [1974] VR 497

·       First, there must be a promise by the alleged mortgagor to repay money to the alleged mortgagee or to perform some other obligation;

·       Secondly, as security for repayment of such moneys or performance of such obligation, the alleged mortgagor must transfer or assign his estate and interest in property, real or personal, to the mortgagee absolutely;

·       Thirdly, to distinguish between an absolute transfer of title and a mortgage, the transfer or assignment must, in order to constitute a mortgage, be subject to a proviso that if and when the alleged mortgagor makes repayment or performs the obligation imposed upon him, the alleged mortgagee with retransfer or reassign the property to the alleged mortgagor.

^ Form of the mortgage at common law.

Freedom of contract v Equity

Lord Henley LC in Vernon v Bethell (1762):

-          Necessitous men are not, truly speaking, free man, but to answer a present exigency, will submit to any terms that the crafty may impose on them.’

Mortgage time line at common law

Terminology:

·       The contractual right to redeem (on the due date, a common law right).

·       The equitable right to redeem recognises the substance of a mortgage as a transaction by way of security only. It arises after the contractual date for redemption has passed.

·       The equity of redemption is the ‘sum total’ of the mortgagor’s rights in the property (the mortgagor’s estate in the land).

Intervention:

·       Equity’s intervention via the creation of the ‘equity of redemption’ and the refusal to enforce provisions which would amount to a penalty or a ‘clog’ on the equity of redemption;

·       Legislation such as the National Credit Code.

·       The rise of the doctrine of unconscionability in equity.

·       The introduction of statutory actions for unconscionable conduct, for example s 20 and 21 Competition and Consumer Act, 2010 (former Trade Practices Act).

·       The Code of Banking Practice:

-          Clause 2.2: we will act fairly and reasonably towards you in a consistent and ethical manner. In doing so we will consider your conduct, our conduct and the contract before us.

The elements of a mortgage:

·       A charge over ‘security’ usually in the form of property owned either by the mortgagor or some other person.

·       A personal covenant, or promise to pay; this will usually take the form of some sort of loan agreement.

Old system and Torrens mortgages:

·       For a first mortgage of old system title land the mortgagee (that is the lender) takes a transfer of the entire legal estate to the property subject for an obligation to retransfer the title once the loan is repaid.

·       Torrens title mortgage: Title to the property remains at all times with the mortgagor and the mortgage is registered as a statutory charge. The mortgage will appear as an encumbrance in the second schedule to the folio of the register.

Primary sections: S41 and S42 (ID), and S56 and S57 of RPA.

First mortgagee – is entitle to CT à security or safety measure.

Form v Substance: Once a mortgage always a mortgage

·       Since equity always looks to the substance of a transaction rather than to the form, these doctrines will be applied whenever equity determines that the true nature of the transaction is a loan on security.

·       The onus of proof is on the person alleging that a mortgage was intended and not some other type of transaction. Some examples from the cases are Breskvar v Wall (1971) 126 CLR 376 and Abigail v Lapin [1934] AC 491.

When is a transaction a mortgage?

Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98.

·       The plaintiff transferred property, of which he was the registered proprietor (in TT land) subject to two mortgages, to the defendant.

·       The sale included a provision giving the plaintiff the right to repurchase the property within 12 months at a purchase price of 5,500 pounds. The purchase price paid by the defendant was 3,760 pounds, which was approximately the amount required to discharge the two mortgages. Evidence showed that property was probably worth more than 5,000 pounds.

·       The plaintiff remained in possession of the properties after the transfer. He later alleged that the transaction was meant to be by the way of security only and that the price at which he was to repurchase the properties was calculated to allow a 10% interest rate.

·       He said that he was ‘a person who could not read, of little education, without independent legal advice, in financial distress and thereby not in a position to properly bargain with the defendant and the defendant thereby took unfair advantage of the plaintiff’.

Windeyer J:

‘As regards their legal incidents, there is all the difference in the world between a mortgage and a sale with a right of repurchase. But if the transaction is completed by redemption or repurchase as the case may require there is no difference in the actual result.’ But ‘A conditional sale is not a mortgage simply because both parties enter into the transaction in the confident expectation that the purchaser will take advantage of the condition, and that the final result will be the same as if they had agreed to reach that end by the road of mortgage.’

Court: neither plaintiff nor defendant were believable witnesses. Split 3-2, deciding evidence was not strong enough to hold that T was anything other than it appears, which was a sale with a right of repurchase. And because it wasn’t in substance a mortgage, this meant that G’s right of repurchase ended on the contractual date, and so he was unable to exercise to repurchase his prop. – and no mortgage was found.

Atia v Nusbaum [2011] QSC 44:

·       A son had executed a mortgage in favour of his mother in the amount of $1mil. This was a registered second mortgage.

Hudson v Arap (NSW) Pty Ltd [2015] NSWCA 126:

·       Financing arrangement under which title was transferred to Arap subject to a call option and leaseback in favour of Hudson.

·       Arap served eviction notice under the lease and Hudson disputed validity in the NSW Civil and Administrative Tribunal.

·       On appeal the NSWCA raised the issue of whether the transaction was, in substance, a mortgage.

·       Held: although RPA establishes that a TT mortgage will usually be created by registration (S58) it may also arise by T coupled with an agreement that the transfer is by way of security.

·       Here indications were that the transaction was intended to be a mortgage, e.g. clause 7 gave respondent a power of sale with an obligation to account to Hudson for any surplus over the purchase price.

The creation of mortgages:

Old System

Legal mortgage:

·       This takes the form of a conveyance ‘by way of mortgage’ with a proviso for reconveyance if the amount outstanding is paid on the stipulated date.

·       A deed is required to convey the legal estate – sec 23B Conveyancing Act and once a legal mortgage has been created only the equitable estate remains available for subsequent mortgages.

·       A failure to comply with the legal requirements may lead to the creation of an equitable mortgage.

Torrens title:

No conveyance of LE, and RP remains RP as mentioned on the first scheduled in the folio.

A mortgage under TT takes the form of a statutory charge.

RPA 1900:

56 Lands under this Act: mortgaged or encumbered

(1)    Whenever any land or estate or interest in land under the provision of this Act is intended to be charged with, or made security for, the payment of a debt, the proprietor shall execute a mortgage in the approved form.

57 Procedure on defaults:

(1)    A mortgage, charge or covenant charge under this Act has an effect as a security but does not operate as a transfer of the lanf mortgaged or charged.

Equitable mortgages:

1.       Mortgage of an equitable interest in the land.

2.       Agreement to grant a mortgage (the in Walsh v Lonsdale) ‘equity looks on that as done which ought to be done’.

3.       An informal written, but unregistered mortgage of TT land.

4.       Mortgage by way of deposit of title deeds and the application of the doctrine of part performance (S23E(d) Conveyancing Act).

-          Oral agreement may be accepted in equity if it is supported by part performance, then you will have an equitable mortgage.

5.       Mortgage created by the principles of promissory estoppel.

Mortgage by deposit of title deeds

Part performance:

-          ‘The usual test of PP is that there must be an act which by its very nature is unequivocally referable to some such contract as is alleged: Mcbride v Sandland (1918) 25 CLR 69 at 78 per Isaacs and Rich JJ. However, deposit of the title deeds does not seem to be any more unequivocal that, say, the payment of money and the latter has always been held insufficient as an act of part performance to take a contract for the creation or transfer of an interest in land out of the Statute of Fraud.’

-          Sykes & Walker The Law of Securities 5^th ed 1993

Theodore v Mistford Pty Ltd [2005] 221 CLR 612

·       S75 Land Titles Act 1994 (QLD) provides that “(1) An equitable mortgage of a lot may be created by leaving the certificate of title with the mortgagee.’

·       Theodore deposited title deeds belonging to his mother with solicitors as security for the purchase price of an air conditioning business.

·       Mr T had no money and no property of his own, he was described as unreliable and manipulative, and got his mother to give her house as security for a mortgage.

·       A draft mortgage in r form and draft form was prepared for Mrs Mistford, but T’s mother never signed them. The Mortgagee when Mr T defaulted on the loan, couldn’t point to a signed mortgaging guarantee. Argued that M came into existence came into action with son handing over CT belonging to his mother as in S75 of LT Act.

·       High Court held that an equitable mortgage was created. Even though Mr Theodore did not own the house, he was acting as agent for his mother, and that she had intended that the property be used as security for the advance.

(NB: impact of the National Consumer Code)

Not necessary for HCA to rely on general law for this case, as they had the statutory provisions. In NSW, we don’t have this provision – and we would have to rely on general law principles (quite old – Russell v Russell). Consistent line of authority is that handing over CT and TD, will form an equitable mortgage.

Shulz v Turner [2008] NSWDC 24

·       Dispute arose over the basis on which S had provided funds for the purchase of property in the joint names of her de facto partner and a company.

·       Nicholas J:

-          34: The mere deposit of the CT as security for a loan will create an equitable mortgage or charge over the property to which the document relates. (Bank of New South Wales v O’Conner (1889) 14 App Cas 273, p 282, UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349, p 351; Theodore, par 24.)

Facts: Dispute was about some land, and Ms S had basically provided funds of 450k, and used for purchase of property held by former de facto partner Mr T and a company (Upper Hunter Developments). She was never granted a formal mortgage, even that there was a discussion that the company and Mr T would grant her a mortgage over the property, but this never happened. Mr T wanted to, but company refused to do so. CT had been handed to Ms S, and had held onto it for some time. Did this action alone constitute an equitable mortgage? Nicholas J said that it did à pursuant to 2 bases:

-          Agreement to grant M on future.

-          Through the deposit of title deeds.

Held: E M had come into existence by way of agreement to grant the mortgage and also by deposit of title deeds.

Clogs on the E of Redemption:

-          The right of the mortgagor to have their property returned to them once they pay off their mortgage – this is very closely guarded by the E courts.

Rice v Noakes [1900] 2 CH, Rigby LJ:

‘The property which comes back to the mortgagor must not be worse than it was when it was mortgaged, and the mortgagee must not either expressly or by implication reserve to himself any hold upon the property after the time for redemption has arrived and the right of redemption has been put into force.’

-          Text: 14.16 – 14.30

Options to purchase the mortgaged property

Warnborough Ltd v Garmite [2003] All ER 52: Earl of Halsbury LC:

‘My lords, I regret that the state of the authorities leaves me no alternative other than to affirm the decisions of…the Court of Appeal. A perfectly fair bargain made between two parties to it, each of whom was quite sensible of what they were doing, is not to be performed because at the same time a mortgage arrangement was made between them. If a day had intervened between the two parts of the arrangement, the part of the bargain which the appellant claims to be performed would have been perfectly good and capable of being enforced:’

Westfield Holdings Ltd v Australian Capital Television (1992) 32 NSWLR 194:

Young J:

‘There does not appear to be any commercial reason why, in 1992, the court should invalidate any transaction merely because a mortgage obtains a collateral advantage or seeks to purchase a mortgage property. Quite obviously, equity must intervene if there is UC. Again, equity must intervene in a classic case where it can see that a necessitous borrower is not, truly speaking, a free borrower.’

There is no reason why they should be declared to be void.

NSW: Need UC to be void.

Lift Capital Partners Pty Ltd and Others v Merril Lynch, SCNSW, 3 Feb, 2009

Facts: LCP ran a margin lending business, LPC would make loans to clients, its clients would use this to purchase shares on stock market, and held as security for performance of the obligation that LPC’s clients had to it – in return, LPC borrowed its funds from Merril Lynch, and also used the shares for security for its obligation to its own lender. There was a whole pile of evidence of the agreement – and terms allowed LPC to take shares and replace it with other shares. When the stock market collapsed, the shares were not worth the loan and the whole thing fell apart. Issue was about the terminology in the contract between LPC and clients for LPC to take the shares.

There must be an element of unconscionability.

Sun North Investments Pty Ltd v Dale [2013] QSC 44

·       A mortgagor agreed to a mortgage of some company shares worth about $5million and also granted a call option to the mortgagor which would allow the mortgagor to purchase the shares for $2million.

‘I keep asking myself that every night. Basically I – I really had myself into a corner and I just didn’t – I had – I was eyes wide open to the fact that I was truly a believer, that I would make good that debt, so whether it was a two million or one million, or whatever figure, I was going to make good that debt. I really believed that. I didn’t go in without – without the expectation of repaying David on the due date. It was always my intention, and it was a short-term fix.’

Was the option to purchase the shares by two businessmen, equal bargaining position and legal advice, going to be struck down. Henry J said that it WAS.

Arguments:

·       The option agreement was void from the outset because it was part of a lending facility.

·       The option constituted a penalty.

·       That there should be an order for relief against forfeiture of his interest as a mortgagor.

Henry J declined to follow the Westfield decision. Since the mortgage and the option were not, in truth, two separate transactions, the option was unenforceable. It was not necessary to find that the parties had acted unconscionably – it was sufficient that the transaction itself would lead to an unconscionable result. (QLD)

Donnelly v Australia and New Zealand Banking Group Ltd [2014] NSWCA 145

·       Mrs D was a borrower under a dual currency loan which was secured over a property in Sydney.

·       The bank could convert the currency in which the loan was drawn from $HK to $AUD if currency fluctuations meant that the amount outstanding was more than 85% of the value of the property.

·       On conversion, the original $600,000 outstanding became about $730,000.

·       Mrs D argued the bank had acted unconscionably by failing to inform her that a deterioration in value of the AUD against the HKD would adversely affect the Donnelly’s interests.

Argued that it was a bad deal and that the bank had acted U’ably.

Held: not the case, bank had explained situation to her, and their alleged failure to recommend Mrs D obtain legal advice was not U’ably. Primary judge argued that she was a smart and intelligent woman, and it was her choice to not seek advice from lawyers in her own family, or another solicitor. Not in a position of special disadvantage.

Re Funds in Court; Application of Mango Credit Pty Ltd [2016] NSWSC 199

·       Lindsay J refers to this as a caveat mortgage.

·       Issue: Whether a contractual term giving the applicant the right to interest and other charges for a period following expiry of the term of its 6-month loan was void, or unenforceable, as a penalty or a clog on the equity of redemption.

·       The interest rate was 4% per month if paid at the beginning of the loan for six months in advance, defaulting to 12.5% per month if not paid on time.

·       The loan agreement specified that interest was to continue to accrue even after a judgement debt was handed down in favour of the appellant.

·       The end result was that for a loan under which the borrower received an amount of approximately $35,000, by the time the property was sold by the mortgagee the amount outstanding was close to $180,000.

·       Lindsay J questioned whether this term created a clog on the M, or a penalty on the E of redemption.

·       Wasn’t required to decide this, but:

May be alluding to the QLD view being correct.

Didn’t strike it down in this case, but sent them away. It may have to answer whether to default ir was a penalty, and that it was a clog on the E of R, and thirdly they may need to answer to an argument made under the Contract Review Act.

Krelinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25

Lord Parker: a collateral advantage will be valid, unless:

·       It is unfair and U’able; or

·       It is in the nature of a penalty clogging the E of R; or

·       It is inconsistent with the contractual and E right to redeem.

-          See Competition and Consumer Act 2010 (Cth): cartel agreements, boycotts and third line forcing.

Other limits on redemption:

-          Postponing the right to redeem (14.18 of textbook)

-          Penalty clauses (14.25 of textbook)

Foreclosure:

In s100 of the Conveyancing Act.

i.e. Bank has exercised its power of sale, but not the same thing.

Virtually never happens in Australia.

The power of sale:

3 steps:

1)      The M’or must be in default under the M, usually through non-payment of interest or principal.

2)      There are strict rules about formalities such as the giving of notice. If these are not complied with then the M’ee will not be able to exercise the power of sale.

3)      The duty or standard of care that must be attained in the sale of the property.

Whether you can advertise something as a ‘mortgagee sale’:

Held: Perfectly proper – statement won’t necessarily depress the price, in fact it might in fact attract a larger number of potential buyers.

Mortgages and priorities:

·       OS: normal priority rules apply.

·       TT: priority is in order of registration.

Leases and residential tenancies

-          Leasehold interests are almost always held by contract.

CL has extensively been modified by statutes.

Legislative inroads into the general law of landlord and tenant:

·       Residential Tenancies Act 2010 (NSW). Applies to ‘any premises or part of premises (including any land occupied with the premises) used or intended to be used as a residence (s 3)’

·       Exceptions include hospitals, hospices and aged care facilities, backpackers’ hostels, motels and serviced apartments.

·       Cannot be contracted out of an it has its own dispute resolution regime.

Legislative inroads:

·       Residential Parks Act 1998.

·       Holiday Parks (Long-term Casual Occupation) Act 2002.

·       Retirement Villages Act 1999.

·       Retail Leases Act NSW 1994:

-          Applies to certain premises used as shops or for other retail services.

-          Competition and Consumer Act, 2010 Cth may also have an impact in this area. It prohibits unconscionable or misleading and deceptive conduct.

-          Applies mainly to leases of premises of less than 1000 square metres and for terms of less than 25 years.

-          Provides for pre-contract disclosure.

-          Minimum term of 5 years.

·       Pastoral leases.

·      
Agricultural Tenancies Act 1990 (NSW)

·       The Landlord and Tenant (Amendment) Act 1948

Limited application now.

Great deal of legislative inroad into the CL.

Non-retail commercial leasing – Common Law.

The definition of a leasehold interest:

A lease is an interest in land granted by one person, the ‘landlord’ or ‘lessor’, to another, the ‘tenant’, or ‘lessee’, which confers a right to exclusive possession of land for a fixed period of certain duration. Can be granted:

·       Holder of the fee simple.

·       Holder of a life estate (no longer than 10 years).

·       Holder of a leasehold estate (a sublease)

Leases are also sometimes termed as ‘demises’. Interest retained by the lessor is called the ‘reversion’.

Substantive requirements:

There are 2 substantive requirements:

·       Certainty of duration, and

·       A grant of exclusive possession.

Must be able to be located within the rights granted – and if it cannot be located, then it IS NOT a lease. (must be important to note that payment of rent is not a substantive requirement – i.e. can issue a rent-free lease through a deed of lease, as consideration is not required for the execution of a deed).

Certainty of duration:

There are 2 parts to this requirement. You must be able to say with certainty:

·       When the lease will start, and

·       How long it will last – You just need to be able to tell - does not have to have a dated end e.g. commence on receipt of a satisfactory environmental impact statement, when a building is completed, or to commence when you finish a law degree (with one limitation).

Limitation: date of commencement must take effect no more than 21 years after the execution of the instrument.

Commencement of the lease – Skorpos v United Petroleum [2013] SASCFC 117

·       A Heads of Agreement for the lease of three service station sites was conditional on a satisfactory tank and line test of the underground fuel system and an environmental site assessment for each of the sites.

·       In August 2009 leases were signed over all three sites before the testing had been done. In December 2009, United terminated 2 of the leases on the basis of contamination.

·       In January 2010, the appellants re-entered one of the sites and distrained petrol and gas for unpaid rent.

Issue: Had the lease commenced?

·       The primary judge dismissed the claim for rent and also for an occupation fee based on a tenancy at will. It was held that:

-       The fact that the parties did not agree any provision for the payment of rent by the plaintiff in an interim period prior to the commencement of the lease term, evidences their intention that, pursuant to the bargain they struck, there was no obligation on the plaintiff to pay rent or outgoings until such time as the conditions precedent prescribed by clauses 16 and 18 had been satisfied.

Certainty of term:

·       Lance v Chantler [1944] KB 368: Lease term was ‘for the duration’. Held not to be a certain duration since there was no way of telling how long the war would last.

·       Smallwood v Sheppards [1895] 2 QB 627: it was held that a lease for three successive public holidays were validly created.

Lease of 10 million years is valid.

You can also have a lease for non-consecutive periods. i.e. 6 days a week, only on public holidays.

Exclusive possession:

Radaich v Smith (1959) 101 CLR 209:

-          Facts: occupation of a milk bar premises. Entitled a license to occupy, and throughout the deed of license, all references to lease, lessee and lease covenants had been replaced by similar references to license contracts etc.

-          When the rights were added and balanced under this agreement called a license – it was clear the occupier was given exclusive possession.

McTiernan J:

‘the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label they chose to put on it.’

High Court:

‘The true test of a supposed lease is whether exclusive possession is conferred upon the putative lessee.’

To determine that is was a lease:

·       The nature of the business – a milk bar: this kind of business could only be carried in ‘reasonable convenience’ by someone who had exclusive possession.

·       The nature of the premises – a lock up shop.

·       The tenant was responsible for the cost of door and window keys and locks.

·       The occupier had control of the premises during business hours and at all other times as well.

·       The court will also look at what the parties have called the agreement but this is not decisive.

KJRR Pty Ltd v Commissioner of State Revenue (Vic) [1999] 2 VR 174

·       Franchise agreement included a license agreement whereby the franchisor granted the f’ee a license to conduct a retail business from premises leased to the franchisor.

·       License agreement stated that the franchisee did not have exclusive possession of the premises.

·       F’or was also entitled to use the premises except to the extent that this would prevent the f’ee from enjoying its rights under the agreement.

·       Held a license was created because there was no right of exclusive possession of the premises.

Addiscombe Garden Estates Ltd v Crabbe [1968] 1 QB 58

·       License of a tennis court for 2 years on consideration of payment of monthly ‘court fees’ was a lease.

·       Exclusive possession was conferred.

·       Transaction was an attempt to disguise the leasehold interest.

Banjima People v Western Australia (No 2) (2013) 305 ALR 1

·       Native title claim by the Banjima people over an area around the Hemersley Ranges.

·       Native title found to exist because strangers to the land needed permission of the Banjima people before carrying out any activity on the land.

Barker J: Banjima country is redolent with spiritual dangers for those who are not Banjima. Those who do not seek and obtain permission risk serious harm from the spirits in the country. That evidence would justify the court in making a finding, subject to the issues of extinguishment, that the Banjima people have a native title right of exclusive possession.

No lease (even if they are exclusive):

·       Where one family member allows another to exclusively occupy a particular premises or part of premises;

·       Where an employer allows an employee to occupy premises so that they can carry out their duties;

·       Where legislation such as that relating to the grant of licences over crown land specifically states that a grant of exclusive possession will not amount to the grant of a leasehold estate.

Substantive requirements:

-          Antoniades v Villiers [1988] 2 All ER 309: ‘[a] cat does not become a dog because the parties have agreed to call it a dog.’

-          i.e. a Lease cannot be agreed to be a ‘licence’.

Lease or licence?

·       What is the agreement called? (not determinative)

·       Does the landlord provide some sort of service to the occupant; or

·       What is the measure of control retained by the landlord over which part of the building is occupied;

·       How and in what circumstances the landlord is entitled to use their key to enter the premises.

·       What covenants are included in the agreement – terms like ‘quiet enjoyment’ tend to indicate a lease.

·       Whether the interest is assignable (lease) or merely personal (licence).

Residential Tenancies Act 2010, NSW

Formal requirements:

OS:

Under s 23B Conveyancing Act a legal leasehold interest over ODL requires a deed. Exception – sec 23D(2) under which a legal leasehold interest can be created by parol (i.e. without writing) if it is:

-          At the best rent that can reasonable be obtained without taking a fine

-          Taking effect in possession

-          Form a term (including any option to renew) not exceeding three years

Torren title:

-          S53 RPA requires leases of more than 3 years to be registered.

-          Can lodge a caveat.

-          The exception for short term tenancies under TT is contained in s42(1)(d) RPA under which:

Ø  The term of the tenancy together with any options to renew must not exceed 3 years,

Ø  The tenant must be in possession or entitled to immediate possession,

Ø  The RP before becoming R must have had notice against which he was not protected (s43A of the RPA).

In order to be bound by an oral lease, the RP must have had notice of it at the date of completion or settlement, if tenant is in possession, then the RP will have notice (Even if it is constructive), as one the prudent inspections is an inspection of the property.

The effect of registration

‘Voidness’ of instruments is cured e.g. Quest Rose Hill Pty Ltd v Owners Corporation of Strata Plan 64025 [2012] NSWSC 1548: a lease agreement apparently signed ultra vires gained indefeasibility upon registration.

Sackar J:

Effect of R continued:

Types of tenancies:

-          Fixed Term

-          Tenancy at sufferance

-          Tenancy at will

-          Periodic tenancy

-          Implied tenancy from year to year (now see section 127 Conveyancing Act)

-          Tenancy by Estoppel

Equitable leases:

1.       Estoppel – e.g. Waltons Stores

2.       Where the instrument was prepared as a legal lease by the formal requirements have not been fulfilled.

3.       Concluded oral agreement plus sufficient acts of part performance.

4.       Where the parties have ‘merely’ executed an agreement to grant a lease then the rule in Walsh v Lonsdale will apply: equity regards as done that which ought to be done

Covenants in leases:

These are the terms of an agreement in a lease.

They may be:

·       Expressly agreed by the parties – express covenants

·       Implied at common law

·       Implied by statute

·       Judicially implied from construction of the lease

Express covenants:

·       A properly drafted lease usually at the very least cover things such as the obligation to pay rent, to maintain the property in good repair, the proper use to which the premises may be put and whether the lease can be assigned.

·       The presence of an express covenant in a lease precludes the operation of an implied covenant on the same topic.

Covenants implied at common law:

If a lease is silent on a matter the CL may imply a covenant into a lease.

Landlord:

1)      Quiet enjoyment:

-          Hudson v Cripss [1896] 1 Ch 265: landlord removed doors and windows from property in an attempt to remove the tenant.

-          Residential Tenancies Act 2010 NSW

2)      Not to derogate from the grant of the lease.

-          Karraggianis v Malltown Pty Ltd (1979) 21 SASR eased premises were on the 6^th floor of a building and the landlord ceased operating a lift.

-          Retail Leases Act 1994 – Sect 33

3)      Fitness for habitation of furnished premises.

Tenant:

1)      To use the premises in a tenant like manner.

-          Lord Denning in Warren v Keen [1954] 1 QB 15

-          Residential Tenancies Act

-         

-          Covenants implied by statute:

S84 and 85 Conveyancing Act 1919 NSW will also imply covenants into leases.

-          Assignments and subleases

Ø  An assignment is the transfer of the whole of the tenant’s interest.

Ø  A sublease is the transfer of less than the whole of the tenant’s interest in the lease – a shorter term.

Ø  133B(1)(a) Conveyancing Act imposes a test of reasonableness on the landlord’s consent.

2)      To yield up possession to the landlord at the end of the tenancy.

3)      In the case of agricultural land, to cultivate in a ‘husband-like’ manner.

Privity of Estate:

  

L = landlord, T = tenant

Privity of estate – CL institution (only at CL), enforces covenants between any two persons who stand between LL and T, and only between the covenants that touch and concern the land. i.e. about the land, and about the r’ship between LL and T.

‘Touch and concern’

·       Breams Property Investment Co v Strougler [1948] 2 KB 1 (CA): a covenant touches and concerns the land where it affects the landlord or the tenant in that capacity.

·       P & A Swift Investments v Combined English Stores Group plc [1089] AC 632: covenant must be about the land, that is the nature, quality or mode of use of the land, and not about the personal preferences of the tenant from time to time.

Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10

High Court: Duffy Bros was liable on the doctrine of Privity of estate, as obligation to pay rent is something that runs with the land, and guarantee to pay rent will also run with the land. Secondly, somewhat unusual double dipping clause, also ran with the reversion. Benefit of this of s117 of Conveyancing Act was able to be enforced on basis on privity of estate.

Specialist Diagnotstic Services Pty Ltd (CAN 007 190 043) v Healthscope Ltd (CAN 006405152) [2012] VSCA 175

·       Restraint of trade covenants in leases between hospital managers and the providers of pathology services.

·       Held that the restraints were valid and they touched and concerned the land, and so ran with the reversion.

McDonald’s Australia Limited v Bendigo and Adelaide Bank Limited

·       Lease and agreement for lease between Maccas and owner of land in VIC.

·       Contained a right of set-off for rent against the cost of construction of a McDonald’s restaurant – contained in agreement for lease, but not in lease itself.

·       Was the right of set-off something that ran with the land?

·       Court: held that it was not a set-off – and referred to P&A Swift Investments case.

Determination of Leases:

-          Expiry of term

-          Termination by notice

-          Forfeiture by re-entry

-          Abandonment or surrender

-          Merger

See text 11.57 – 11.78

Easements:

Allow private parties to impose limitations or indicate particular uses for pieces of land that are privately owned.

Halsbury defines an easement as:

A right annexed to land to utilise other land of different ownership in a particular (not involving ownership in a particular manner (not involving the taking of any part of the natural produce of that land or any part of its soil) or to prevent the owner of the other and from utilising his land in a particular manner.

Terminology:

·       Easements are a type of incorporeal hereditament (simply means that it does not include possession and that it can be inherited).

·       The dominant tenement is the land to which the benefit of the easement is attached (and typically this will increase its value).

·       The servient tenement is the land over which the right is exercised (and typically its value is decreased by this obligation.

Positive and negative easements:

·       Positive easement: allows the owner of the dominant tenement to enter onto another person’s land to do some act on the servient tenement. The classic example is a right of way.

·       Negative easement: gives no right of entry but prevents the owner of the servient tenement from using their land in a particular way. An example is an easement for light and sunshine, under which the holder of the servient tenement will be prevented from building on his or her land in such a way that the light to the dominant tenement is blocked.

Examples of easements:

·       The right to run pipes or connections for services,

·       Right to use land periodically to load and unload vehicles.

·       The right to receive light or air. Under general law a land owner has no natural right to either natural or artificial light.

·       An easement to create noise over adjoining land. Re State Electricity Commission of Victoria and Joshua’s Contract [1940] VLR 121.

·       An easement to create a nuisance by polluting water and casting noxious matter onto adjoining land: Kirkcaldie v Wellington Corporation [1933] NZLR 1101.

·       The right to use a toilet on the servient tenement: Miller v Emcer Products [1956] Ch 304.

Rights not protected by easements:

·       A right to privacy,

·       A right to peace and quiet,

·       A right to a view,

·       A right to protection from the weather.

Plan showing easement:

The essential characteristics of an Easement:

Re Ellenborough Park [1956] 1 Ch:

·       There must be a dominant and servient tenement;

·       An easement must ‘accommodate’ the dominant tenement;

·       Dominant and servient owners must be different people;

·       A right over land cannot amount to an easement, unless it is capable of forming the subject matter of a grant.

(Australian case is Riley v Penttila [1974] VR 547).

In Australia, issues may arise in 2^nd and 4^th characteristic.

There must be a dominant and a servient tenement:

·       Barba v Gas & Fuel Corp of Victoria (1977) 136 CLR 120

Facts: There had been a sale of land, subject and in CoF there had been an instrument that the seller had granted an easement to GFCV. Purchaser objected to this, and when the workers from the GFCV came to lay pipeline, Mr B got out his shotgun and took some shots at the workers, and the workers decided to leave. Northern boundary of Mr B’s end, and recommenced at the Southern end of Mr B’s land. Mr B’s argument was that the GFCV did not have a dominant tenement – held that FGCV did have interest in land to which they could attach their easement, which was the incorporeal rights (intangible) that they already held to the surrounding land. dominant tenement does not have to be a fee simple, can be an I right.

·       In R. v The Registrar of Titles: Ex parte Waddington [1917]

Facts: Conveyancing device being used, as piece of land being argued to be dominant tenement, as it was 8 square links (size of A4 piece of paper) – what they were trying to do, was to attach easement (right of way) – said that this was possible. Does not matter how big tenement is, as long as there is one and there is a real benefit.

The Easement must accommodate the dominant tenement:

·       Enhancement in value is a significant factor but it will not be decisive – Re Ellenborough Park.

·       The two pieces of land should be close to each other but it is not essential that they be contiguous.

·       An easement may accommodate a business carried out on and connected with the dominant tenement rather than the dominant tenement itself. Moody v Steggles (1879) 12 Ch D 261, Copeland v Greenhalf [1952] 1 Ch 488.

·       The fact that people other than the dominant owner may also derive benefit from an alleged easement is not fatal. Re Ellenborough Park.

·       Easements are usually divisible but cannot normally be consolidated – Gallagher v Rainbow (1994) 179 CLR 624. – Re Eddowes [1991] 2 Qd 381.

Separate ownership or occupation:

(Not common in Australia any more – can be both)

·       S88B Conveyancing Act -  both OS and TT land.

·       Ss46A and s47(7) Real Property Act.

The right claimed must be capable of forming the subject matter of a grant:

·       There must be a capable grantee and a capable grantor (capable in the sense that they can form a valid contract);

·       The right must be sufficiently definite. Rights which are broadly expressed, for example, a right ‘to a view’ or for ‘protection from the weather’ or ‘to receive a television signal’ are all too vague (Hunter v Canary Wharf [1997] AC 655). A ‘right to climb trees’ or a right to ‘watch videos’ would probably fail on this ground.

·       The rights granted must be capable of being granted as an easement. They should not, for example, amount to exclusive use of the servient tenement or to a right unknown at law. Copeland v Greenhalf [1952] 1 Ch 488, Grigsby v Melville [1973] 1 All ER 385, Clos Farming Estates v Easton (2002) 11 BPR, 20, 605.

Easements pretty much last forever – they are very hard to get rid of.

Cannot be too intrusive as to amount to joint occupation.

Clos Farming Estates v Graham Rush Eaton (2002) 11 BPR, 20, 605.

·       Sale of home site and farming site to be used to grow grapes.

·       Lots within the vineyard part of the estate were subject, among other things to an ‘Easement for Vineyard’ created by registration of S88B plan. The alleged easement for vineyard which was in favour of Lot 86 was very broad.

·       From 1994 to 1999 the vineyard was run as a single enterprise by Clos Farming who managed the farm but made a loss.

·       Eaton, who purchased lot 27 sought a declaration that the easement did not create any interest in land and this was given by Bryson J at first instance.

Bryson J at first instance:

The Court of Appeal:

Look not at the label of something – it is up to you to apply essential and substantive characteristics.

-          Mortgage: because it is a grant for interest for security.

-          Lease: grant of exclusive possession for a fixed term.

-          Easement: substantive characteristics.

A sui generis interest?

·       There is no mechanism in the Torrens system for the creation of novel interests in land, as opposed to novel types of rights which already exist, such as easements. They would fall outside the established categories of interests in land. Court of Appeal: ‘They are like some supposed distant star hypothesised and satisfying no known physical laws, nor clearly observable as such’.

Could it be something else? Two types of interest:

1)      Profit a prendre (to take)

2)      Profit a rendre (to put on)

New forms of easements:

Samantha Hepburn, Australian Property Law, Cases Material and Analysis 2^nd ed Lexis Nexis Butterworths, 2-12:

·       Bass v Gregory (1890) 25 QBD 481 – ventilator shaft

·       Coble v Bryant [1908] 1 Ch 259 – an opening in a stable

·       Registrar-General of New South Wales v Jea Holdings (Aust) Pty Ltd [2015] NSWCA 74: the entire durface of the servient land (a parking area) was found to be the subject of an easement.

The creation of easements:

·       Express grants and reservations.

·       Statutory easements.

·       Implied grant or reservation

·       Prescription

·       Acquiescence or estoppel

Legal easements – old system:

Express Grants and Reservations – a deed is required under s23B Conveyancing Act or for a reservation of an easement see 45A Conveyancing Act.

Torrens Title:

·       S46 and 47 Real Property Act 1900 NSW provide for the creation and registration of the approved form on the folios of both the dominant and the servient tenements.

·       As far as equitable easements are concerned, it is generally accepted that they are created in the same way as over old system land.

Equitable easements:

An equitable easement will arise when:

·       There is writing complying with sec 23C Conveyancing Act and s54A Conveyancing Act (using the four P’s – Parties, Price, Property and Promises);

·       By a verbal contract supported by acts of part performance under s 23E(d) Conveyancing Act (only a positive easement);

·       By the application of the rule in Walsh v Lonsdale (which requires the parties to have reached agreement on the terms of the easement to be granted);

·       By the application of the principles of equitable estoppel.

Both old system and Torrens:

·       88B plan Conveyancing Act.

·       Order of the Court under s88K Conveyancing Act or s40 Land and Environment Court Act 1979.

·       Access to Neighbouring Land Act NSW (2000).

In hypothetical – look to see if it is registered before implied easements etc.

S 88(1) Conveyancing Act

Have substantive requirements, and formalities (registration or equity)

Grants and reservations:

Reservation: If Single owner (A) on left hand side wanted to walk across their property, they could do so without any need for any formalities. If they were to sell half of their land to another person (B), and they wanted to keep the walkway to get to the other side of their land, they would have needed to reserve to themselves in their sale of lot B, the right granted by easement.

Grant: If they the owner from lot B needed to get to the other side across lot A, in the sale of lot B there would needed to have included an express grant to walk across lot A.

Implied grant or reservation:

You can create an easement by G or R, or can they be implied?

Implied reservation of an easement will be implied only for:

·       Easement of necessity

·       Intended easements

Implied Grant – Old System:

Tenement: block of land

The rule in Wheeldon v Burrows (1879) 12 Ch D 31

Where land was under single ownership, and is subsequently subdivided and sold:

[O]n the grant, by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course I mean quasi easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted.

(12.16) Requirements for rule of Wheeldon and Burrows to apply (created over OST):

1.       There is a severance of the grantor’s land;

2.       At the time of the severance, the exercise of the quasi-easement is ‘continuous and apparent’. This requirement is for some physical mark on the land which can be discovered by inspection. It will normally be a path or a pipe or something in this nature;

3.       The quasi-easement is necessary for the reasonable enjoyment of the land grant, and

4.       At the time of the severance, the grantor must have used the quasi-easement for the benefit of the land granted.

This will be a legal easement.

Is there a place for these types of easements in Torrens Title Land?

Omitted or Misdescribed Easements:

S42(1)(a1) Real Property Act NSW – Paramountcy provision

The registered proprietor…holds subject to such other estates and interests and such entries, if any, as are recorded in that folio, but are absolutely free from all other estates and interests that are not so recorded except:

…….

(a1) in the case of the omission of misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act,

2 parts to s42(1)(a1)

-          If the land was at one time held under OST but has been brought under the provisions of the RPA. If an easement was ‘subsisting immediately before the land was brought under the Act’, but the easement does not now appear ono the folio of the register, then the easement will be enforceable as a specific exception to indefeasibility.

-          If land has always been under the provisions of the RPA. An easement that was initially recorded on the register by that is now ‘omitted’ falls within the section. But the use of the words ‘validly created…under this or any Act’ probably means that easements which would have been created, for example under rule in Wheeldon v Burrows cannot be said to be validly created under the RPA or any other Act.

Williams v State Transit Authority [2005] NSWSC 496

McGrath v Campbell

Court: no implied easement as it had never been created as pursuant to s42(1)(a1) – but only way they would enforce it, is if there was an in personam exception. This doesn’t prevent the Campbell’s to bring an action in personam for an exception of indefeasibility. E.g. A contract (there was no specific contract). C of purchase, did not contain term that C’s would grant C’s an easement.

If you are going to consider the matter in regards of implied terms, it has to be so obvious as it goes without saying – and here, this wasn’t the case. Must be so strong, that a contrary intention could not be found.

Tobias J:

Castle Constructions Pty Limited v Sahab Holdings Pty Ltd [2013] HCA 11 (10 April 2013)

·       Land that had originally been part of one large lot was subdivided initially into two lots and then one of these lots were further subdivided. At the time of the original subdivision, in 1921 an easement was created allowing one of the lots, located on Strathallan Avenue a right of way over the other, located on Sailors Bay Road to reach the rear of its property.

·       In 2001, the owner of the servient tenement requested the RG to remove the easement from its folio. After notifying and receiving no objection from the owner of the dominant tenement, the RG removed the easement from the folios of both servient and dominant tenements.

·       In 2007 the respondent became the RP of the dominant tenement and in 2008 they requested that the RG restore the easement arguing that it had been omitted within the meaning of s 42(1)(a1).

Removal by RG was not an omission.

Second action – was also denied.

Registrar-General of New South Wales v Jea Holdings (Aust) Pty Ltd [2015] NSWCA 74

DO NOT be misled by the label (Covenant)

Issue: is this a valid easement?

Yes, it was – according to NSWCA

Questions asked in the case:

Implied easements and the Torrens System: Summary (s41(1)(a1) RPA)

·       If the land has always been held under Torrens title then it is unlikely that an implied easement will operate as an exception to ID to a RP with a clean unless it was at one time ‘validly created’ through registration but has since disappeared from the register, for example, through error.

·       If the land was originally under OS, and while it was, an implied easement was ‘validly created’ but then left off the title when the land was brought under the TS, then it may qualify as an exception to indefeasibility under s42(a)(a1) RPA.

·       An easement which does not appear on the title may be an exception to ID if it can be the subject of an in personam claim or if the RP has achieved a clean title through fraud relating to the easement.

Modification and extinguishment of easements and covenants:

-          Express release;

-          Abandonment and application under s89 Conveyancing Act;

-          Alteration of Dominant Land;

-          Operation of Law:

-          Statute or Court Order.

Restrictive Covenants:

Freehold covenants over land.

Covenant:

·       A promise contained in a deed (or other agreement)

·       May be positive (requiring some action to be taken) or negative (restricting action)

·       ‘Covenantor’ bears the burden of the promise; ‘covenantee’ has the benefit.

Making covenants binding:

·       Privity of contract – will bind parties to the contract.

·       Privity of estate – applies to those who stand in the position of landlord and tenant. Applies to leasehold estates.

·       The equitable doctrine of restrictive or freehold covenants apply to freehold (ie not leasehold) land.

·       Equitable doctrine: Schemes of development

·       Legislation: Strata plans

·       Public planning instruments

Property is in proprietary right.

Restrictive covenants:

‘The limitations of purely contractual regulation were quickly recognised in the burgeoning industrial and residential development which occurred in mid-19^th century England. Th courts’ response was the initiation of a doctrine which rested the enforcement of covenants between freeholders, not on privity of contract or even privity of estate but rather on the equitable principle of ‘privity of conscience’ (Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998)).’

Leases stand at nexus point at law of contract and law of property.

Common restrictive covenants:

·       A RC that prohibits the construction of more than one house to the burdened land or requires a minimum amount to be expended in the building of a house on that land;

·       A C requiring that buildings only be constructed of particular materials such as red brick with a tile roof.

·       A RC that prohibits the building of a structure on the burdened land above a certain height;

·       A RC limiting the sort of business that may be carried out on the land; and

·       A RC ‘in gross’ in favour of a local government which prevents the landowner from clearing the burdened land.

i.e. can keep residential housing for residential purposes only.

Meant to create a homogenous look to a particular area.

You can still use covenants to enforce personal taste (must affect the land itself).

Covenants are notoriously difficult to remove from the land.

Anyone benefitting the covenant has an interest in the land, and the courts should not lightly take that interest away from somebody.

i.e. covenant to only build to 9 metres, where council specifies 11 metres.

Restrictive covenants and Torrens title:

·       Prior to 1930, RC could not appear on TT R – as it is a creature of E.

·       No provision in the original RPA for registration of restrictive covenants.

·       S88(3) introduced in 1930 to allow the R-G to note restrictive covenants on the register.

·       Confirmation that the doctrine of restrictive covenants applied in Australian law confirmed in Forestview Nominees v Perpetual Trustees (1998) 193 CLR 154.

·       Notation of a restrictive covenant on the TT register does not grant indefeasibility

·       Enforced by equitable remedies.

Two important consequences:

1)      RC is enforced by E remedies – not recognised at CL.

2)      It is not enforceable against a BFPFVWN (aka TTRP with ID title)

The relationship between easements and restrictive covenants:

Quite difference juristically – RC is always E, but Easements are recognised legislatively.

Chiu v Healey (2003) NSWSC 857

Young CJ in equity:

The law of restrictive covenants:

·       A blundering conceptualist jungle full of semantic swamps – Beuscher, 2011.

The substantive requirements – 4 situations:

Situation 1:

Between the original covenantor (the land subject to the obligation) and the original covenantee (the owner of the benefited land) the RC may be enforced on the basis of privity of contract. Enforcement will depend on the contract being valid on contractual grounds such as agreement, consideration and capacity.

Situation 2:

Between a successor in title to the covenantee and the original covenantor, the contractual nexus has been broken and the court must determine if the benefit of the covenant has passed to the covenantee’s successor. In other words, does the present owner of the benefited land have the right to enforce the benefit. Court has to determine whether the benefit has been passed with the land to the current owner of the benefitted land. No privity of contract – doctrine of freehold covenants.

Situation 3:

Between the original covenantee and a successor in title to the covenantor the court must determine if the burden of the covenant has passed. In other words, is the present owner of the burdened land subject to the obligation.

Situation 4:

Where there are successors in title to both the covenantor and the covenantee there are two separate issues to be determined:

-          Has the benefit run with the land so that the present owner can enforce it?

-          Has the burden run so that there is someone against whom it can be enforced?

These 2 questions must be answered separately.

The burden at CL:

·       As a general rule the burden of a covenant does not run at common law except where there is privity of estate (that is, the parties are in a landlord/tenant relationship).

·       Austerberry v Corporation of Oldham (1885) 29 Ch D 750.

Privity of contract prevails – blanket rule of the Common Law.

S70A Conveyancing Act

(1)    A covenant relating to any land of a c’or or capable of being bound by the c’or by C shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself or herself and the c’or’s successors in title, and the persons deriving title under the covenantor or the c’or’s successors in title, and, u=subject as aforesaid, shall have effect as if such successors and other persons were expressed.

Hasn’t been interpreted to overrule blanket rule – held to be a presumptive section, that where people do make agreements about land, i.e. height or building restrictions, they do intend to run with the land, but will only run with land if they fulfil these other substantive requirements. Essentially a presumption about intention,

Other devices:

(To help C’s run with land)

The Burden in Equity:

Tulk v Moxhay (1848) 2 Ph 774

The burden in equity:

3 requirements must be met:

-          The C must be restrictive or negative in substance.

-          The C must benefit the land or in other words it must touch and concern the land;

-          The burden of the C must be intended to run with the land.

In addition to these, the purchaser must have notice of the covenant.

Examples:

1.       A C requiring a property owner to maintain his garden plants at a height of one metre or less – is positive in form. Is it negative in substance? (Can the land owner comply by doing nothing? No, so it is negative).

2.       A C prohibiting a property owner from building a house with a value of less than $500,000. It is negative in form (it prohibits some activity). Is it positive in substance? No

3.       A C not to allow a building to fall into disrepair – is negative in form (because it prohibits some activity) but is it positive in substance? Yes.

4.       A C that the property owner must build a house on the land within 5 years? Positive in form and in substance.

5.       A C that the property owner must not build a house on the land within 5 years? Negative in form and in substance.

6.       A C to submit plans before building.

The Covenant must benefit the land:

·       The other way of saying this is that the C must ‘touch and concern the land’ (which is the term used at CL to decide whether a C benefits a land).

·       Rogers v Hodegood [1900] 2 Ch 388:

-          ‘the C must either affect the land as regards mode of occupation or it must be such as per se and not merely from collateral circumstances affects the value of the land.’

Intention:

·       The third requirement is that there must be an intention that the burden of the covenant will run with the land. S 70A(1) Conveyancing Act 1919 (NSW) supplies this.

Notice:

·       Lastly, the burden of the covenant runs in E only if a purchaser acquires the land with notice.

·       Notice is usually provided by notation on the register.

·       Rule in Wilkes v Spooner applies.

The benefit of the covenant:

Common Law (and in Equity):

·       The benefit of covenants whether positive or negative will run with the land if it can be said that the covenant is annexed to the land.

3 requirements for annexation:

1.       There must be the required intention. S70(1) Conveyancing Act. (See also s 36C Conveyancing Act); Federated Homes Ltd v Mill Lodge Properties [1980] 1 All ER 371.

2.       The C must touch and concern the land benefited. This is simply another way of saying that it must benefit the land rather than simply the occupant from time to time of the land. Re Ballards Conveyance [1937] 4 Ch 473.

3.       The land which is to be benefited must be ascertainable or identifiable. This requirement is also now contained in s88(1) Conveyancing Act.

Pollard v Registrar of Titles [2013] VSC 286:

‘The said Herbert Harry Burton doth herby for himself his executors administrators and transferees covenant with the said Frank Edward Godden and his transferees that he or they will not erect more than one dwelling house on the land hereby transferred without the previous consent or waiver in writing of the said Frank Edward Godden and that such house shall be of brick or stone and it is intended that this covenant shall be set out as an encumbrance on the Certificate of Title to be issued herein and shall run with the land.’

-          Argument is that there is no benefitting land to this covenant.

Godden has benefit – and only until he was on the land.

Court: in absence of clear words of annexation of benefit of covenant – here, all the surrounding evidence suggested that the benefit was personal only – could be disregarded.

Equity:

·       The benefit of a covenant may run in equity where it is expressly annexed.

·       Common Law will not enforce burden.

The formal requirements:

OS:

·       Because a RC is always equitable it need not be created by deed.

·       Writing is necessary under s 23C Conveyancing Act 1919 (NSW)

TT:

·       In NSW, under s 88(3) Conveyancing Act, the RG has the power to record a restriction in the folio in such manner as the RG considers appropriate. But cannot be registered.

·       Approved form: http://www.lpi.nsw.gov.au/__data/assets/pdf_file/0010/25579/13RU.pdf

·       But form does not need to be used, as you can also have it recorded through the registration of a S88(B) plan, or the other way is through sending copy of restriction to RG and request that they record it on the register.

S 88(3) Conveyancing Act NSW

Important subsections to 88(3):

-          88 (3)(b) a recording in the R kept under the Act of any such restriction shall not give the restriction any greater operation than it has under the dealing creating it, and

-          88 (3)(c) a restriction so recorded is an interest within the meaning of section 42 of that Act.

Similar to Caveats – claiming that it exists, but must go back to dealing to show that it was enforceable – for it to be put onto R.

Consequences of s 88(3)

·       88(3)(b) – defects in the original agreement creating a RC are not ‘cured’ by notation on the R. Since it is recorded, not registered, it does not attract the ID provisions of the RPA.

·       A restrictive covenant, like an easement, is a caveatable interest.

First mechanism of RC being in R – E doctrine of freehold or R C’s.

Now we have another one.

Re:

 

Creation by statute:

·       Under s 88D Conveyancing Act a prescribed authority may impose restrictions on the use of or impose public positive covenants on any prescribed land vested in it.

·       Under s 88E a prescribed authority may impose restrictive or positive covenants on land which is not owned by its.

Sale in a subdivision:

Running the benefit of the C with the land.

Hosking v Haas [2009] NSWSC 624 and (No.2) [2009] NSWSC 1328

·       Residential subdivision near Murray River.

·       The Estate Covenant:

A comprehensive range of protective covenants are in place for this subdivision. They incorporate the broad areas of residential status (i.e. single dwelling only, non-commercial use) building quality, environmental protection and normal aesthetic features covering visual, sound standards to help maintain community harmony.

·       Plaintiffs purchased first, defendant some years later.

Issues:

The questions for determination were:

·       Whether the benefit of the defendants’ covenant was annexed to the plaintiffs’ Lot entitling the plaintiffs to bring the proceedings and if not;

·       Whether a common building scheme exists entitling the plaintiffs to bring the proceedings.

Benefit not annexed:

Not enforceable on normal rules of covenant.

Elliston v Reacher [1908] 2 Ch 374

Modification and extinguishment of easements and RCs:

·       Express release;

·       Abandonment and application under s 89 Conveyancing Act;

·       Alteration of Dominant Land;

·       Statute or Court Order

-          S 89 Conveyancing Act

-          S 28 Environmental Planning and Assessment Act

-          Part 8A Real Property Act – s 81A – applies to building material covenants.

Application under s 89:

Treweeke v 36 Wolsely Road 1973 128 CLR

No abandonment of an easement for right of way despite the fact that it was impassable in a number of places because of sheer rock faces; that an impenetrable bamboo clump had been allowed to grow across it, that the owner of the dominant land co-operated in putting a fence across it, that a swimming pool had been built over part of it and that it had not been used in its entirety for 40 years. The court said that what must be shown is an intention never to use it again.

Court refused to remove the covenant.