10 - Torrens Title• By Student at Law Published 14/05/2007 Sydney Uni 2006 Unrated

Torrens Title

•    Governed by Real Property Act 1900•    Fundamental principal is conclusiveness of the register•    Title by registration•    Does not alter common law, merely simplifies land transactions

Priority RulesPriority of Competing registered interests Governed by Order of registration, not by date of execution•    Section 36(9)

Registered interest prevails over unregistered interest except when fraud or other exceptions

Competing unregistered interests generally regarded as equitable interests, and treated as under old system title rules•    BUT, some unregistered interests are legal interestso    Accepted by real property act through reference to ‘legal or equitable interest’ in s74F(1)o    Eg: Unregistered lease complying with s23D(2) of Conveyancing Act •    Tenancy at will under s127 of Conveyancing Act•    Easement implied under Wheeldon v Burrows•    Give regard to caveat provisions

Assurance Fund•    Section 133A Real Property Act•    Established to compensate those who lose out due to failings of system:o    Register General sometimes makes mistakeso    Easy to defraud people under Torrens system

Trusts•    In old system, problems as purchaser or mortgagee who deals with trustee has obligations to beneficiaries of trust•    For Torrens systemo    Trusts do not affect the register•    Registered owner is owner•    Trusts not recorded on register – s82•    Exceptions in s12(1)(f)

Mortgagees•    Check this•    Under old system, mortgage required conveyance of property•    Whenever Torrens land intended to be made security for debt, owner is to execute approved form of mortgage (s56)o    Registered mortgage of Torrens title is statutory charge or security only, not as conveyance (s57)Unregistered Interests

No dealing, until registered in the manner provided by the act, shall be effectual to pass any estate or interest in any land under this act…o    Dealing must be registered for the interest to pass•    Section 41(1) Real Property Acto    Note:    -    When read with caveat provisions, there is some scope for unregistered interests

Although the instrument itself is ineffective under 41(1), the agreement itself remains effective in accordance with the general principles of equity•    Barry v Heider (1914) o    FACTS    -    B was registered proprietor of land•    Certificate with R-G, as land being sub-divided•    Signed transfer to S, who failed to pay purchase price agreed too    Gave B right to have transfer set aside•    S granted mortgage to H before B acted on that righto    H possessed all necessary evidence and information about mortgage – had done everything possible to protect interest    -    At this point, H and S have equitable interests    -    B argued that under s 41(1), he is only registered title holder, and thus only he could confer interest to H, not So    HELD - Bs registered interest set aside to equitable interests. H and S have equitable interests•    S41 denies the instrument conveying the transfer, but not the contractual and equitable interests in the land    -    B’s conduct of handing over a signed transfer to S empowered S to act as owner•    Bs conduct led to the mortgage, and thus he is responsible for it

Unregistered interest is a valid equitable interest, but not a legal interest•    Chan v Cresdon Pty Ltd (1989) o    FACTS

    -    Sarcourt signed agreement for lease with owner.    -    Unregistered lease provided that Chan would guarantee performance of S•    No registered guarantee of performance    S defaulted in payments, respondents proceeded against Chano    HELD - Sarcourt ought to succeed as guarantee operated only in respect of obligations ‘under the lease’•    Only a lease at law would satisfy that description•    Agreement to lease treated as equitable lease    -    Provisions of indemnity and guarantee strictly construed in favour of party giving guarantee    -    No justification to extend obligations to an equitable lease that is not a lease at law

Indefeasibility of Title

The register is conclusiveo    The register confers on the registered proprietor:    -    An interest in land    -    Indefeasible title to that land•    Meaning that title cannot be set aside on the ground of a defect existing in the title before it was registered•    Section 40 Real Property Act

Person with registered interest holds that interest free of any other unregistered interests•    Section 42 Real Property Acto    Exceptions discussed later

Registered person can ignore the notice of an unregistered interest (unlike Old System)•    Section 43 Real Property Act

A registered proprietor of Torrens title land may not be ejected from the land: title is conclusive•    Section 124 Real Property Act

Person who purchases Torrens title interest (purchaser or mortgagee) and becomes registered is not affected by irregularities in the preceding title•    Section 135 Real Property Acto    Prohibits recovery from the present registered proprietor, where the took as purchaser or mortgagee bona fide for valuable consideration    Doesn’t matter if A’s vendor or mortgagor was registered through fraud, error, or under a void or voidable interest

Deferred indefeasibility: no longer accepted•    Theory that indefeasibility did not take effect immediately in cases where the instrument was void or voidable•    Theory now largely discarded•    Arose out of decision in Gibbs v Messero    FACTS    -    Owner of land left certificate of title with solicitor    -    Solicitor forged owner’s signature to transfer possession in favour of fictitious person, who became registered owner    -    Solicitor forged mortgage from Cameron to innocent mortgagee, who took for value and without fraud, and became registered proprietor of mortgageo    HELD - Owner could have registration set aside – innocent mortgagee did not have indefeasible title•    Court said that if innocent mortgagee dealt with another person who acted on the existing state of the register, and purchased for value without fraud, that person would have indefeasible title    -    Reason•    Did not deal with registered proprietor under s43, as dealt with forger, and so did not get protection    -    NOTE – This is not the current approach: Modern view is to look at section 42, which does not need deal to be with registered proprietor

Immediate Indefeasibility: Current approach•    Eg if A is registered proprietoro    B steals A’s certificate of titleo    B poses as A to sell land to Co    B forges A’s signature to transfer land to C, and hands certificate of titleo    On registration, C acquires a title that A cannot set aside    -    C’s Title is immediately indefeasible    -    A could only take personal action against B, or maybe have a right to compensation under assurance fund

Purchaser has immediate indefeasible title even though there was fraud•    Frazer v Walker [1967] o    FACTS    -    Mr and Mrs Frazer own Torrens title land•    Mrs Frazer forges husband’s signature and mortgages property•    Mrs Frazer fails to meet repayments•    Mortgagee sells property to purchaser, who registers ito    HELD - Purchaser has immediate indefeasible title even though there was fraud by Mrs Frazer

    -    Significant case where Privy Council came down in favour of immediate indefeasibility

Indefeasibility for registrable dealing•    Breskvar v Wall (1972) o    FACTS    -    Plaintiffs registered owners of Torrens title land    -    As security for loan from M, they gave him certificate of title    -    M fraudulently inserted the name of X in the transfer, who knew of the fraud    -    X sold land to A Pty Ltd•    Purchaser for value without notice of plaintiffs claim•    Bought land in reliance on what was on register    -    Before A Pty Ltd lodged the transfer for registration, plaintiff lodged a caveato    HELD    -       Right of A Pty Ltd to be registered had priority over any rights of the plaintiff      -       A acquired the right to register and obtain immediate indefeasibility     -    Note: Could have set aside X’s interest if got there before he sold it, as X knew of fraud    -    High Court referred approvingly to doctrine of immediate indefeasibility

Registered mortgage is extinguished by a registered discharge of a mortgage, even where the discharge is a forgery•    Shultz v Corwill Properties Pty Ltd (1969)

Caveats and unregistered interests

•    Three relevant aspects:o    Legislative schemeo       Effect of lodging a caveat o       Effect of Not lodging a caveat

•    Legislative Scheme

•    Unregistered interest in Torrens title land may be protected by a caveat lodged with the Registrar Generalo    Caveat protects unregistered interest by freezing register – prohibits the recording of any dealing affecting the estate or interest

Person who claims to be entitled to a ‘legal or equitable’ interest or estate in Torrens title through an unregistered dealing or devolution of law may lodge a

caveat•    Section 74F(1)o    Cannot be lodged to protect a mere contractual or personal right, or a right based on statute not also conferring an interest in land    -    Linden v Wigg

Examples of caveat-able interests•    Interests of purchaser under a contract of saleo    Kuper v Keywest Constructions•    Interest of mortgagee (including mortgagee by deposit of title deeds)o    Re Victorian Farmers’ Loan and Agency Co Ltd•    Interests of person arising from contributions made to the purchase price of the propertyo    Morling v Morling•    Option to buy land (As is equitable interest in land on option holder)o    Laybutt v Amoco Australia•    Right of pre-emption is NOT caveat-ableo    Walker Corp v WR Pateman    -    Although will be once act occurs that triggers exercise of that right•    Sterns Trading v Shteinman•    Contractual rights are elevated into proprietary interest by creating interest in land to secure contractual obligationso    Builder given charge over land to secure repayments of amounts owing under building agreement    -    Griffith v Hodgeo    Lender given charge over land of borrower or guarantor to secure repayment of debt    -    Murphy v Wright

Any registered proprietor who fears improper dealing with his or her title may lodge a caveat prohibiting any dealings being recorded on it•    Section 74F(2)

A caveat can not be lodged to protect an interest that can only arise in the future (ie must have caveat-able interest•    Martin v Official Trustee in Bankruptcy

•    Effect of lodging a caveato    Caveat does not give interest in land any greater priority than it otherwise would, it merely freezes the registero    Failure to lodge a caveat may lead to loss of priority that interest may have hado    Failure to caveat is merely one factor which will be taken into account when searching for the better equity

•    Butler v Fairclough (1917)

•    Effect of Failure to Lodge A Caveat

Failure to lodge caveat before later interest is acquired means that prior interest is postponed•    Butler v Fairclough (1917) 23 CLR 78o    FACTS    -    June 30•    Good (Registered proprietor of Torrens land) gave unregistered mortgage to Butler    -    July 2•    Good sells property to Fairclougho    Fairclough searched register and found nothing    -    July 8•    Butler lodged caveat claiming equitable interest in land as equitable mortgagee    -    July 12•    Fairclough attempts to register the property – stopped by caveato    HELD - Fairclough wins, as defendant paid purchase price before caveat lodged

Anyone who gets an interest in land should lodge a caveat•    Rose’s Case: Osmanoski v Rose [1974] o    FACTS    -    X sells to A who does not register    -    X t hen sells to B who searches the register and finds no interest lodgedo    HELD - B prevails over A, as B searched register

Priorities regarding unregistered equitable interests•    Generally first in time prevails, but court will consider:1.    Whether conduct of prior interest holder might lead subsequent interest holders to purchase in belief that prior interest did not exist2.    Whether reasonably foreseeable that conduct of prior interest holder might lead another to acquire subsequent interest3.    Whether holder of interest omitted any precaution that a prudent purchaser would have taken that may have disclosed the prior interest4.    Whether holder of subsequent interest suffered loss or detriment

   Conduct of prior interest holder leading to belief that did not exist

Will lose out if own action led to the wrongful transfer: ie arm third person with ‘power to go into world under false colours’

Failure to lodge caveat also relevant, as lodging would ‘disarm’ the person•    Abigail v Lapin [1934] o    FACTS    -    Respondents owed money to solicitor, so executed an instrument of transfer in favour of solicitor’s wife•    Gave transfer and duplicate of certificate of title to solicitor as security for payment of costs    -    Solicitor’s wife used documents to become registered proprietor of the land•    Also, wrongfully mortgaged land to appellant (in breach of agreement)    -    Conflict between earlier equitable interest of respondents with later equitable interest of appellanto    HELD (Privy Council) - Later unregistered interest has priority•    Respondents ‘bound by the natural consequences of their acts in arming…the power to go out in the world as absolute owners of lands, and thus execute transfers and mortgages of lands to other persons”•    “They ought to be postponed to the equitable rights of Abigail”•    Failure to lodge a caveat reinforced Solicitor’s wife’s apparent ownership of the land

•    Heid v Reliance Finance Corporation Pty Ltd (1983) o    FACTS    -    Appellant agreed to sell company•    Contract arranged for part of purchase price to be:o    Paid in casho    And some Settled by mortgage in favour of the appellanto    And some Deposited with finance company•    Appellant gave nominated employee of company a signed instrument of transfer, and arranged certificate of title to be forwarded to him•    Appellant told consideration provided, BUTo    Mortgage never registeredo    Cash not deposited with finance company    -    Purchasing company used certificate of title and signed instrument of transfer to borrow money from unknowing respondent on security of the land    -    Court had to decide which unregistered interest would gain priorityo    HELD - Unregistered interest of appellant deferred to later unregistered interests of respondent•    Appellant armed third person ‘with the power of going into the world under false colours’•    Failure to lodge a caveat significant, as could have disarmed the capacity of the third party to deceive others    -    Outcome would have been different if caveat lodged before respondent lent money, as respondent would then have acquired interests with notice

Reasonably foreseeable

Failure to lodge a caveat will not see interest defeated if it was not reasonably foreseeable that the interest would be adversely affected by failure to lodge•    Jacobs v Platt Nominees Pty Ltd [1990] o    Appeal Division of Supreme Court of Victoriao    FACTS    Father and mother controlled company which owned motel•    Had company grant an option (for valuable consideration) to their daughter to purchase the motel    -    Daughter did not lodge caveat, as relied on mother to ensure that company did not dispose of the land    -    Unknown to mother and daughter, father sold the land to a trustee companyo    HELD - ‘In fairness and justice the daughter should not be deprived of her prima facie priority’•    Not reasonably foreseeable to the daughter that the trustee company would be adversely affected by her failure to lodge a caveat•    Failure to lodge a caveat was reasonable as it would have been a deceit to her family to lodge one

•    Omission of precaution of prudent purchaser•    Must search the registerThere is a duty to make enquiries into the ownership: Failure to lodge caveat will not postpone if search of title was not sufficient•    Prior interest will not be deferred to subsequent interest who refrains from making those enquiries which a prudent purchaser would make•    J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) o    FACTS    -    Equitable mortgagee did not lodge caveat, but did obtain possession of duplicate certificate of title    -    Another mortgagee subsequently searched the original certificate of title at the registrar’s office, but did not seel production of the duplicate certificate•    Gave owners a second equitable mortgageo    HELD - First equitable mortgagee not postponed to later mortgagee•    No duty to lodge a caveat•    On the facts, duplicate of certificate of title was sufficient to protect interests, as appellant ought not to have settled without obtaining possession of the duplicate•    Butler v Fairclough (1917) 23 CLR 78o    Search of register was sufficient, showed no caveats, so interest prevailed

•    Avco v Fishman [1993] o    Doubt about the way this case would be decided in NSW

o    FACTS    -    A gives registered mortgage to Avco, who also gets certificate of title    -    Avco gets second mortgage from A, but second mortgage is unregistered and uncaveated    -    A grants third mortgage to Fishman, who searches register and found only one mortgage    -    When A defaulted, court had to decide prioritieso    HELD    -    It seems that Fishman would have priority over second mortgage, but court found Fishman should have asked possessors of certificate of title to tell him of all the interests they have over the land    -    Note: doubt as to if case was in NSW

Must search register just before granting mortgage•    Drulroad Pty Ltd v Gibson (1992)o    FACTS    -    RP gives unregistered mortgage to A•    A ineffectively lodges caveat    -    RP negotiates mortgage to B•    B searches register and finds no record of A’s interest    -    The day before mortgage granted to B, A successfully lodges caveat    -    B grants mortgage without making final searcho   HELD - There was constructive notice – a prudent purchaser would have checked the register just prior to the granting of a mortgage

Have to look at document itself, and not just rely on summary of registrar general•    Bursill Enterprises Pty Ltd v Berger Bros Trading Pty Ltd (1971) o    FACTS    -    B submits registered transfer to grant right of way over certain land, and to transfer a fee simple interest in airspace above part of the land to a neighbour A    -    Registrar general’s notification of the transfer described the right of way, but made no reference to the airspace    -    Years later, C buys Bs land after having checked the register•    C tries to get airspace as wello    HELD    -    Prudent purchaser should have looked at past summary of the transfer, and should have continued search and discovered that airspace also considered    -    Requires Similar search as for old title land

Person only needs to search the Torrens register•    Section 43A(2)•    Finlay v R&I Bank [1993]o    Windeyer J

o    FACTS    -    Company put charge over land to A.•    A did not lodge caveat, but did register charge in Companies register    -    Company gave charge to B•    B searched Torrens register and found no caveat•    Did not check companies registero    HELD    -    B prevailed because a failed to lodge caveat    -    Only need to search Torrens register Section 43A Real Property Act•    Purchaser under Torrens Title only has equitable interest until registrationo    No deed of conveyancing giving legal title as in old systemo    So, is subject to any earlier equitable interests in the absence of postponing conducto    Section 43A(1) attempts to fill this gap

A person who acquires an interest in Torrens title land need not be concerned about notice of an unregistered interest they may have received in the course of the transaction•    Section 43, Real property acto    Although courts have read this down to only apply to registered interests, thus section 43A

A purchaser (between the transfer and registration) with a dealing registrable has a legal interest in lando    Legal estate•    Makes you free of earlier equitable interest•    Is not the equivalent of registered estateo    Dealing which is registrable•    Must be able to be registered immediatelyo    Only gives protection until registration – once this occurs, they enjoy indefeasibilityo    Only gives protection to later interest from earlier interest•    Does not afford protection to earlier interest from later one•    Section 43A(1), Real property acto    No other state has equivalent to s43A (although ACT and NT do)

Section 43A gives the same measure of protection given at common law to a person who has acquired a legal estate in land without notice of some prior equitable interest•    Ie Wilkes v Spooner applies to Section 43A:o    If the first purchaser does not have notice of an earlier equitable interest, the

second purchaser is given the same protectiono    Legal interest is not the same as registrationo    If there is notice, it is a case of competing unregistered equitable interests•    Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW)

Ie, No protection for purchaser who has notice of prior equitable interest.o    Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW)

1. Transfer by direction has protection of section 43A (point 1 in case). 2. Successive effect (point 2)•    Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) o    FACTS    -    Registered proprietor of land subject to registered mortgage•    Entered into contract to sell land to P    -    Before sale completed to P, P entered into contract to sell same land to Jonray (J)•    There was insufficient time for P to get his interest registeredo    Usual practice would be for the three parties to get together, and J would leave with two transfers – from the registered proprietor to P, and from P to J•    Upon settlement to J, Partridge (P) proposed to hand J a memo of transfer by direction, together with an unregistered discharge of As mortgage    -    J tried to get out of contract, delayed performance of the contract for two reasons, claiming that:1.    Under the traditional method, J would not get a dealing from P that is immediately registrable, and thus there is not protection under section 43A2.    If there was a irregularity in the mortgage (ie a defect in the discharge), J would owe an equitable interest to the mortgagee, as J would receive no protection under s43A, as he was not taking the discharge (an interest) directly from registered proprietor, and thus did not have a dealing registrableo    HELD1.    J is effectively taking a transfer from the registered proprietor, and thus will receive the benefits provided by section 42, 43, 43A2.    Evoked rule from Wilkes v Spooner: Someone who takes an interest without notice hands the land on to subsequent holders free of that interest•    Thus, J is given the protection of s43, and is not entitled to require that discharge of mortgage be registered by P before settlementThere is constructive notice if there is a failure to search the register as a prudent purchaser•    Drulroad Pty Ltd v Gibson (1992)o    FACTS    -    RP gives unregistered mortgage to A•    A ineffectively lodges caveat

    -    RP negotiates mortgage to B•    B searches register and finds no record of A’s interest    -    The day before mortgage granted to B, A successfully lodges caveat    -    B grants mortgage without making final searcho    HELD    -    There was constructive notice – a prudent purchaser would have checked the register just prior to the granting of a mortgage

Must have a dealing registrable to gain the protection of section 43A. Requires possession or control of the certificate of title. Must also be registrable without any intermediate dealings having to be carried out•    Finlay v R & I Bank of WA (1993) NSWo    FACTS    -    Registered proprietor gave registered mortgage to A•    Mortgage registered, and A held certificate of title    -    Registered proprietor gave unregistered mortgage to B, then another unregistered mortgage to C    -    Issue whether B or C prevails•    B argued had earlier interest, therefore should prevail•    C argued protection under s43Ao    HELD    -    No protection under s43A, as no possession or control over certificate of title    -    Registered proprietor owned land in Taree and Nelson Bay    -    Commonwealth Bank registered first mortgage over Taree land, and held certificate of title

No protection under 43A for a void dealing (eg forgery)•    Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) o    NSW Court of Appeal    -    A registered proprietor who title is threatened by a yet to be registered void dealing can “probably prevent registration of the instrument, whether or not the transferee had notice of it”o    Thus, they get no protection under 43A(1) or Wilkes v Spooner

Statutory Exceptions to Indefeasibility

•    Built in exceptionso    Fraudo    Earlier recorded interestso    Listed exceptions in s42(1)o    Volunteers (possibly)•    Exceptions through general principleso    In personam/personal equity

o    Later statute

Fraud•    Fraud is an exception under section 42(1)

(i) What is fraud in the Torrens system?(ii) What is the relationship between fraud and notice?

What is fraud in the Torrens’ system?

o    Must be actual fraud    -    Dishonesty of some kind    -    Constructive fraud not sufficiento    Must relate to current state of title    -    Person to be impeached for fraud must have been fraudulent•    Fact that vendor fraudulent is irrelevant to purchasero    Fraud by agent of purchaser can affect titleo    Mere fact that you might have found out vendor had committed fraud if were more vigilant is not fraud    -    But, if shut eyes in fear of learning the truth, it is fraud•    Assets Co Ltd v Mere Roihi [1905]

Fraud when registered proprietor, when lodging for registration, either intentionally misrepresented the Register-General that statutory requirements for executing dealing were complied with, or was recklessly careless whether or not they were complied with:o    Misrepresentationo    Recklessly careless•    AGC v De Jager [1984] o    Tadgell Jo    FACTS    -    Bank gave mortgage to customer to sign    -    Applicant’s signature was forged    -    Witness to signature contacted bank and said that he was not there when signature signed    -    Mortgage still registered by banko    HELD - Mortgage was not indefeasible, as fraudulent for bank to lodge registration knowing that mortgage was improperly witnessed

Fraud must be made by the registered proprietor•    Grgic v Australian and New Zealand Banking Group Ltd (1994)

Refusing to acknowledge B’s rights constituted fraud within the meaning of s 134

•    Bahr v Nicolay (No 2) (1988) 62 ALJR 268o    Mason and Dawson (not majority)o    FACTS    -    Mr and Mrs Bahr sold land to Nicolay, subject to right to repurchase land at time and price stated in contract    -    Nicolay sold land to Mr and Mrs Thompson under contract that effectively provided that sale was subject to right of Bahr’s to repurchase    -    Thompsons became registered, and regused to give effect to rights of Bahrso    HELD    -    Mason and Dawson (not majority)•    T’s conduct in refusing to acknowledge B’s rights constituted fraud within the meaning of s 134•    Agreement between Nicolay and Thompsons created an express trust of benefit of the agreement in favour of the Bahrs•    Registration of Thompsons as proprietors did not present enforcement of that trust byo    The indefeasibility provisions in legislation as repudiation of agreement that Bahr’s should be entitled to re-purchase the land amounted to fraud

Relationship between Fraud and Notice

Mere notice is not fraud•    Section 43(1) Real Property Acto    Confers protection for registered holder against notice, except in case of fraud    -    Means that knowledge itself is not fraud

Notice of prior interest does not affect Indefeasible title once registered•    Oertel v Horden (1902)o    FACTS    -    A leases property to B, who goes into possession but does not register    -    A sells to C, who registerso    HELD    -    C can kick out B, as notice is not fraud•    C has indefeasible title, as mere notice of someone else’s interest is not fraudo    C takes land free of earlier equitable interests

Not bound by contract and notice•    Munroe v Stuart (1924)o    FACTS    -    A grants unregistered lease to B    -    A sells to C, who registers•    C has knowledge of Bs lease•    Contract states contract subject to any leases

o    HELD    -    C has indefeasible title, as mere notice of someone else’s interest is not fraud    -    Contract put C on notice of Bs interest, but does not bind him    -    NOTE: Bahr v Nicolay suggests that this may be reconsidered

Mere notice is not fraud, but when other factors it may be fraud•    Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491o    FACTS    -    A gives unregistered lease to B    -    A sells to C, who registers    -    C negotiated lower price off A due to fact B had lease over property    -    Upon registration, C attempts to evict B

o    HELD    -    C guilty of fraud•    Only gets defeasible title•    Does not prevail over B, and thus cannot kick B off

It is fraud to lull interest holder into not registering, and then relying on registered title to defeat that interest•    Mock v Thompson (1982)o    FACTS    -    A grants lease to B that requires registration    -    A sells to C    -    C asks B if C can register first, as it would be easier, but promises to lodge the lease straight afterwards    -    C does not lodge B’s registration, and then tries to kick him outo    HELD - C guilty of fraud, as lulled B into false sense of security

Fraud to frustrate registration of unregistered interest to acquire and register one’s own interest•    Costin v Costin

Fraud to become registered as proprietor under course of conduct engineered to deprive a beneficiary of his or her beneficial interest in a trust property•    Brun v Brun

*Earlier interest recorded

Have to look at document itself, and not just rely on summary of registrar general•    Bursill Enterprises Pty Ltd v Berger Bros Trading Pty Ltd (1971) o    FACTS    -    B submits registered transfer to grant right of way over certain land, and to

transfer a fee simple interest in airspace above part of the land to a neighbour A    -    Registrar general’s notification of the transfer described the right of way, but made no reference to the airspace    -    Years later, C buys Bs land after having checked the register•    C tries to get airspace as wello    HELD    -    Prudent purchaser should have looked at past summary of the transfer, and should have continued search and discovered that airspace also considered    -    Requires Similar search as for old title land

Listed Exceptions under s42(1)•    EasementsProtection for easements if:1.    Existing immediately before converted to Torrens title•    Ie easement left off register2.    Validly created easements after conversion to Torrens system•    Unlikely to apply when parties do everything formally required but have left it unregistered, as it is not validly created•    Section 42(1)(a1) Real Property Act1. Easement exception applies where there was easement when land was under old system title, but it was left off when converted to Torrens title•    Dobbie v Davidson (1991)o    FACTS    -    Easement by prescription created by using land for 20 years, created under old system title    -    When land converted to Torrens title, omittedo    HELD - Easement was ‘omitted’ under the scope of the legislation•    Auerbach v Beck [1985]o    FACTS    -    V owns 2 adjoining houses, and had overhanging eaves and gutters    -    V subdivided, one property sold•    Eaves and gutters projected into airspace next door    -    Was there a quasi easement due to continuos and apparent use?o    HELD    -    Easement by implication arose on sale of houseso    Torrens title relevance    -    Later conversion of land, R-G failed to discover the existing easement    -    As easement granted before transition, fits under exception

2. Implied easements that are not put on the register are likely to be destroyed under the new s42(1)(a1)o    Under the old section 42(1)(b), an implied easement is enforceable between the two parties under the rights in personam exception

o    When servient tenement is sold, the new purchaser is not subject to the easement    -    Thus, must make sure that implied easement is formally granted•    Australian Hi-Fi Publications Pty Ltd v Gehl [1979] o    Case under old s 42(1)(b), but likely to hold under the new section 42(1)(a1)o    FACTS    -    Originally, whole site owned by Savage, and easement existed    -    When divided and sold, easement not noted on either certificate of titleo    HELD - Was only equitable easement, and could only be enforced by the original parties    -    Third party purchaser gets indefeasible title    -    To be ‘omitted’ under the old act means that the Registrar General has not done what ought to be done, it does not allow for party’s mistakes

To make implied lease enforceable under Torrens, need to force owner of servient land to sign a transfer granting an easement, and lodge it for registration•    Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618

•    Auerbach v Beck [1985]o    FACTS    -    V owns 2 adjoining houses, and had overhanging eaves and gutters    -    V subdivided, one property sold•    Eaves and gutters projected into airspace next door    -    Was there a quasi easement due to continuos and apparent use?o    HELD - Easement by implication arose on sale of houseso    Torrens title relevance    -    Later conversion of land, R-G failed to discover the existing easement    -    As easement granted before transition, fits under exception

•    Short Term Leases

Exception to indefeasibility for short term tenant when tenant:o    If in Possession or entitled to immediate possessiono    Purchaser had notice of tenancy ‘against which they are not protected    -    Similarly to old system title rules of notice    -    Possession is notice    -    Constructive notice sufficient (Kline v Lowe 1969)o    Term of tenancy, including option for additional terms, does not exceed three years•    Section 42(1)(d)

If Original lease less than three years, and option takes it over 3 years, original lease may still be protected (but question left open)

•    Likely that the whole thing is unprotected•    Alcova Holdings Pty Ltd v Pandarlo Pty Ltd (1988) 15 NSWLR 53o    FACTS    -    A gives B unregistered lease for 2 years with option for further 2 years    -    A sells to C who registers

When lease exceeds 3 years, legal tenancy at will may be implied under section 127 of Conveyancing Act, which attracts protection of 42(1)(d), and requires one months notice•    Application of Chan v CresdonPersonal Equities/Rights in Personam

•    Implied into the act as a way in which title can be set aside without relying on the strictly interpreted fraud provisions

“Indefeasibility in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam”•    Frazer v Walker (1967)o    Lord Wilberforce

To establish a right in personam, must find a common law or equitable cause of action, not merely a sense of wrongfulness•    Lissa v Cianci (1993)o    FACTS•    Husband and wife take on mortgage to guarantee loan for son•    Husband in accident at time of signing, had no idea what he was doing•    Wife had only 3 years of schooling and spoke little Englisho    HELD•    Mortgage could be set aside•    Was a case of non-est factum, common law contract notion of not knowing what you are signing•    Logue v Shoalhaven Shire Council (1979)o    FACTS    -    Logue behind in rates.    -    Council sought to sell him up    -    In advertisement, council misrepresented sum of outstanding rates    -    Council could find no buyer, bought it back themselves    -    Logue sought to rely on personal equity – advertising wrong amount invalidated the saleo    HELD - Failed

Personal rights must have arisen out of acts, words and events to which the person whose title is being challenged must have been a party to

•    Garafano v Reliance Fin Corp (1992)•    PT Ltd v Maradona Pty Ltd (1992)

Registered title may be set aside if registered proprietor purchased in circumstances where vendor bound by unregistered interest of third party, and had contracted (express or implied) that it would recognise the third party’s interest•    Bahr v Nicolay (No 2) (1988) o    FACTS    -    Bahrs sold to Nicolay, subject to right to repurchase at time and price.    -    Nicolay sold to Thompsons under contract providing for rights of Bahrs    -    Thompsons became registered and refused to give effect to rights of Bahrso    HELD    -    Found Personal equity and Fraud    -    Registered title may be set aside if registered proprietor purchased in circumstances where vendor bound by unregistered interest of third party, and had contracted (express or implied) that it would recognise the third party’s interest•    Whilst purchase with mere notice is not enough to raise personal equity, additional factors indicating purchaser’s agreement to be bound by unregistered interest

Personal equities can create interests that did not actually exist before•    Snowlong Pty Ltd v Choe (1991) o    FACTS    -    Landlord gives lease to tenant for 5 years•    Lease remains unregistered    -    Landlord sells property to purchaser who registers the transfer    -    He sells to purchaser 2 ‘subject to the 5 year lease’    -    Purchaser 2 tries to evict tenanto    HELD - Purchaser 1 got indefeasible title by registering, giving tenant a lease at will determinable at 1 months notice    -    BUT, agreement between P1 and P2 means that tenant can enforce the full 5 year lease•    Justice Wood

Other factors in addition to forgery may create personal equity•    Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) o    FACTS    -    Mrs Gosper got mortgage from Mercantile which she is able to very easily    -    Mr Gosper forges Mrs Gosper’s signature to increase mortgage, and variation registered•    No evidence that signature was forgey, but they did not attempt to communicate with her

    -    Mr Gosper dies, and Mrs Gosper finds outo    HELD    -    Production of certificate of title without Mrs G was breach of obligations    -    Kirby J held only had to repay original amount    -    Mahoney J held that she gained a personal equity through the bank using the certificate of title without her permission    -    Judgements criticised due to lack of cause of action (Kirby’s), and difficulty in checking everything (Mahoney)

- Dissenting judge says that as registered without fraud by bank, usual indefeasibility of title results

Forgery alone is not enough•    Storey v Advance Bank (1993)]o    FACTS    -    Husband and Wife formed company    -    Company was registered proprietor of torrens land    -    Husband, without knowledge of wife, gave bank a mortgage on property by forging wife’s signature    -    Bank registered mortgage    -    Company tried to have mortgage put aside on basis of personal equityo    HELD    -    Bank was able to rely on the mortgage, as they should not have been expected to see through the forgery and the husband’s rouse    -    If all you can show is forgery, cannot establish cause of action against innocent mortgagee•    Bank gets indefeasible title

Personal equities and rights •    Grgic v Australian and New Zealand Banking Group Ltd (1994) o    REALLY NOT SURE ABOUT THIS CASE< DON’T USE ITo    Powell JAo    FACTS    -    ANZ officer attested to signature of person impersonating the registered proprietor    -    Mortgage payments not meto    HELD - G lost – bank did not know him personally, and so did not act improperly

Registrar-General’s Power of Correction

Registrar general is authorised to ‘correct errors and omissions in the Register•    Section 12(1)(d)o    In practice, exercised only to correct obvious clerical and administrative errors    -    Accords with settled view that it is not for the Registrar-General to settle

conflicting claims to land

RG can call in certificate of title to make amendments•    Section 136(1) (b) Real Property Act

•    James v Registrar-General (1967) 69 SR (NSW) 361o    FACTS    -    Easement properly created and proper forms lodged and registered, and appeared on certificate of title    -    When page was full, a new page started, and easement accidentally left off    -    RG realized mistake, and requested certificate of title to amend mistake    -    James refused    -    When James went to mortgage land some time later, Registrar general amended the certificate of title    -    Question whether RG had power to do thiso    HELD - RG simply doing what law required•    Has power to correct as long as can prove it was an omission

Used to be that power to correct under s12(1)(d) is lost once a bona fide purchaser or mortgagee has acquired an interest on the faith of the uncorrected register, and becomes registered•    Frazer v Walker•    James v Registrar General•    BUT: This was overturned by section 12(3) in 1970o    RG can make corrections to the register at any time, although correction is not to prejudice rights of a person who has registered a right before the change is made    -    Odd: how can a subsequent correction not affect the present owner?    -    Even if not enforced until next owner, affects price of sale

Error must be one of the registrar general, not the parties•    Scallion v RG (1988)

Overriding Statutes

•    Like any legislation, the Real Property act is subject to later legislationo    Principle that later statute impliedly overrules older statute to the extent that they conflict

•    Later statutes can create interests that bind the land, even if they are not registered, because:o    It is not an interest that can be registered    -    Miller v Minister of Mines (1963)o    It is not a proprietary interest

    -    Linden v Wagg (1968)•    Rent control legislation, when protected tenant died, close family could stay in possession of premiseso    No procedure in the Real Property Act by which it may be registered or recorded•    Thus, the Register is not an exhaustive list of interests in land

Legislation later than Real Property Act 1900 overrules it•    Pratten v Warringah Shire Council (1969) 90 WN (Pt 1) (NSW) 134o    FACTS    -    Block of land crossed by underground drainage pipes which were owned by the council    -    Council becomes owner of land, but drainage pipes not registered    -    Pratten wants to buy land from council, so searches register    -    Also writes twice to the council to check whether they own the pipes•    Council says they do not own pipes    -    Further, lawyers write to Registrar general and ask him to do an official search of the register which confirms that no interests in the drainage pipes are registered    -    Pratten finally buys land    -    Council later realises that it does own the pipes•    Under 1919 statuteo    HELD    -    Legislation which gives ownership to council is 1919 statute, which therefore overrules the Real Property Act    -    Estoppel raised, but could not be applied because statutory authorities who have obligations over land cannot be estopped from performing those duties

Estoppel and possessory title may be relevant defence to later statutory•    Quach v Marrickville Municipal Council (1991) o    FACTS    -    Drainage reserve not shown on register    -    Quach makes search, finds nothing, buys land and registers    -    Years later, council sought to assert ownership over reserve•    Given under 1919 statuteo    HELD - Later statute overrides RPA (as in Pratten)    -    BUT: •    Estoppel available as Mr Quach had paid rates for years for whole land•    Possessory titleo    Had possession for 12 years and so acquired the titleo    Council’s title extinguishedo    Although possibly lucky on this point, as under s45D of Real Property Act, cant acquire title to strips of land, only to the whole block

Volunteers•    Volunteer:o    Someone who has not paid valuable consideration for an interest•    Question whether volunteers, once registered, get same indefeasibility as those that give considerationo    Not specifically referred to as exception in legislationo    But, they are not a bona fide purchaser for value, as have provided no value•    Law may be different for NSW and Victoria•    Maybe no different: Section 42 does not discriminate•    May be less indefeasible:o    Not a purchaser as referred to in section 43

In NSW, volunteer gets exactly the same title and indefeasibility as those who pay value•    Section 42 does not say that you need to pay value to get indefeasibility, and so is indiscriminate as to whether you gave consideration or not•    Bogdanovic v Koteff (1988) o    FACTS    -    Koteff senior invites Bogdanovics to live•    Gives Mrs B a life estateo    Equitable interest under constructive trust    -    When he dies, house given to son, who knew nothing of equitable or contractual interest to B – wants her out    -    He became registered proprietor without knowledge of equitable or contractual rightso    HELD    -    Indefeasibility provisions apply same to registered proprietor of land who takes interest in land as volunteer•    Allows rp to take title free from prior equitable interests which she had no notice of    -    The oral promise to her would be sufficient, however in this case, Koteff’s son became registered proprietor without prior knowledge of contractual or equitable right, and obtained indefeasible title    -    King v Smail (Victorian Case) should no longer be followed, as Breskvar v Wall, following Frazer v Walker, established that the title of each registered proprietor arises from registration

In Victoria, Registered proprietor of torrens title land who took without value could have no better title than their predecessor•    IE they are bound by the equitable interests that stood under the old ownership•    Rasmussen v Rasmussen [1995] o    Victorian decision

•    King v Smail (Victorian)

o    Similar proposition to Rasmussen

- o    NOTE: In NSW, in Bogdanovic v Koteff, court said that King v Smail

(Victorian Case) should no longer be followed, as Breskvar v Wall, following Frazer v Walker, established that the title of each registered proprietor arises from registration

Mortgages

    * Mortgagor          o Grants the mortgage          o The borrower    * Mortgagee          o Takes the mortgage          o The lender Nature of Mortgages

    * Mortgage is an interest granted in land in return for money Two elements of a mortgage

    * Security in the property (real interest)    * Personal covenant to repay          o Mortgagor is covenantor          o Mortgagee is covenantee Old system title Mortgage

    * Mortgagee gets title to land as security          o Involves conveyance to the lender of a legal/equitable interest in property as a security for a debt, with a provision for redemption          o Mortgagee able to sell land          o Has right to possession (even if no defaults on payment)                + Equity might control this    * Under common law, if you do not pay back mortgage in correct amount of time, property goes to mortgagee          o Equity mellows this under the doctrine of redemption

Possessory security

    * Passes possession to the lender – not ownership    * Title retained by borrower as owner    * Potential right to sell item on default

Equity of Redemption

    * On repayment of loan, property reconveyed back to the owner    * Purpose of conveyance (under old system title) is merely to provide security

for the loan    * Mortgagor would still be regarded as in substance the owner    * Allows mortgagor to give out more than one equitable interest Torrens title Mortgage

    * Mortgage is a statutory charge over the property                + Section 57 Real Property Act

          o Does not involve transfer of ownership rights          o Land burdened with obligation          o Potential rights on default    * Mortgage must be registered to gain indefeasibility    * No right to possession unless default          o Section 60 Real Property Act

Equitable Mortgage

* Under old system title, first mortgagee get legal interest, and subsequent mortgagees get equitable interest* Legal mortgage under Torrens must be registered* Agreement to give mortgage is equitable mortgage under both old system and torrens

Look to form and substance to see if mortgage

* Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98o FACTS+ Mr G in $5000 debt+ To raise money, G Sold land to Bentley for $5,500, with right to buy back land for $5,500 within 12 months+ Market interest rate for mortgages was about 10%+ G unable to buy back property within 12 months, argued that the arrangement was in form a mortgage at 10%, and so should be able to redeem mortgage late          o HELD: High Court 3:2                + Was not a mortgage                + Was sale with right to buy back, both in form and substance Termination of the Equity of Redemption

   1. Redemption   2. Foreclosure   3. Sale

** Sale is the preferred remedy**

1. Redemption

Equitable Right to redeem after due date

    * On repayment of loan, property reconveyed back to the owner (old system), or charge discharged (Torrens)

Late redemption – 6 month notice rule

    * Under equity, mortgagor who seeks to redeem after the due date must give 6 months notice of intention to redeem, or pay 6 months interest in lieu of notice

Early Redemption

    * No right at common law or equity to redeem mortgage in advance of the contractual date    * Now a statutory provision

Under statute, must pay interest for the full period if you wish to redeem early

    * Section 93 Conveyancing Act          o Ie must pay interest on the unexpired portion of the term of the mortgage          o Can contract out of this – most mortgages have early repayment clauses Early repayment clauses are valid and enforceable

    * Steindlberger v Mistroni (1992)          o FACTS                + S borrowed $70,000 from M, secured by registered mortgage (Torrens title)                + Mortgage provided for 15% pa, and required S to repay unpaid principal on 29/5/2001                + Allowed S to repay “at any time provided [he] give 1 month notice and…pay all interest accruing to the date of discharge”                + S gave notice of intention to repay load early                + M claimed interest on unexpired term          o HELD                + Clause held valid – paid 1 month interest to redeem the mortgage

2. Foreclosure

    * Foreclosure is described as ‘the limit of equity’s indulgence’    * End of mortgagor’s right to redeem after the due date          o Only available once contractual date for redemption has passed          o Mortgagee takes property    * Extinguishes mortgagee’s personal covenant to repay the loan          o If property worth less than before, right to sue for loss is lost                + If property just resold, mortgagee can reclaim any loss from the mortgagor

Procedure for foreclosureOld System

    * Court gives order directing payment of a certified amount within 6 months (principal + interest)    * If no payment, foreclosure made absolute          o Effected by court order          o Can order sale instead                + Section 103(2) Conveyancing Act

Torrens Title

    * Unregistered mortgage          o Apply to the court as above in old system    * Registered Mortgage:                + Default for 6 months (or whatever prescribed in agreement)                + Offer land for auction, but highest bid was not sufficient to cover mortgagor’s debt                + Notice of application served on mortgagor and other mortgagees and any caveators                + Application to RG                + RG can make order to foreclose or direct sale in a particular way (Section 62(3))                      # Order of foreclosure vests interest of all the estate in mortgagee, free of interest of mortgagor, other mortgagees etc          o Result: Mortgagee left holding the property          o Section 61, 62 Real Property Act

Consequences of Foreclosure

    * Mortgagor’s interest in land extinguished completely and irredeemably    * Mortgagor’s interest vested completely in mortgagee          o Mortgagee has full beneficial ownership

    * Mortgagee takes property in full satisfaction of debt                + Right of mortgagee to sue mortgagor for breach of personal covenant to repay mortgage is extinguished          o Section 100 Conveyancing Act

3. Power of Sale

    * Allows mortgagee to sell the land free of the equity of redemption

    * Historically no right for mortgagor to sell land

Power of sale arises through:

   1. Express provision in mortgage   2. Implied under section 109 Conveyancing act (both old and torrens) Implied power of sale: section 109 Conveyancing Act

    * Applies to old system and Torrens title land    * Under section 109, Mortgagee has the right to          o Sell mortgage property (auction or private sale)          o Insure building or effects, and add premiums to money secured          o Appoint receiver of income of mortgaged property          o Sever and sell fixtures          o Sell easements, profits, rights or privileges over mortgaged property

Requirements to exercise power of sale for old system land: Section 111 Conveyancing Act

    * Must be:          o Monetary breach                + Must give one month notice to pay – cannot be shortenedOR          o Non-monetary breach                + Eg not to bring flammables into building)                + Can shorten notice period in contractAND          o Notice must stipulate that if not done within period, property will be sold under s109 Conveyancing Act Power of Sale for Torrens Title Land

    * Mortgagee may sell land despite the fact the mortgagor remains the registered

proprietor          o Sale under section 109 Conveyancing Act, power coming from section 58(1) Real Property Act    * Registrar general registers a transfer free from all liability on account of the mortgage, or any mortgage registered subsequent thereto          o Section 59 Real property Act

Order of payout once the property is sold

    * Mortgagee effectively becomes trustee of the proceeds of sale for the mortgagor

Order of payout:

1.      Costs of sale2.      Prior Mortgagee’s Debt3.      Themselves4.      Later mortgagees5.      Remainder to mortgagor          o Old system land                + Section 112(4) Conveyancing Act          o Torrens Title land                + Section 58(3) Real Property Act

If there is a deficiency, mortgagee can sue mortgagor for breach of personal covenant to pay

Protection of Purchasers At Sale

    * Purchasers protected from circumstances of sale          o Old System title: Section 112(3) Conveyancing Act                + But only if innocent purchaser – not if purchaser knows sale is improper                      # Forsyth v Blundell          o Torrens Title: Section 58(2) Real Property Act                + But not if fraud

    * Free pf all mortgages, charges etc          o Section 59 Real Property Act

Cannot sell to self

Cannot contract with self

    * Farrar v Farrar

If sell to company which mortgagee is associated, must establish it was at best price at that time: “truly independent bargain”

    * ANZ Banking v Bangadilly

If joint mortgages, cannot sell to one of them

Mortgagor may purchase at auction, but sale is not free of other mortgagees

    * Oller v Lord Vaux

Subsequent mortgagee can buy from selling mortgagee

Duties of the Mortgagee exercising the power of Sale

    * Two schools of thought regarding duties owed by mortgagee to mortgagor. High court yet to decide:         1. Obligation to act in good faith         2. Duty of care to get proper price                + Supported by Cuckmere Brick Co Ltd v Mutual Finance Ltd 1971]

1. Duty to act bona fide (good faith)??: Narrow test

    * ALREADY FAVOURED BY HIGH COURT Can’t fraudulently or wilfully or recklessly sacrifice the property of the mortgagor

    * Kennedy (1897)          o Lord Herschell

Bona fide test favoured by High Court in:

    * Pendlebury v The Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676          o FACTS                + Land sold 235 km from Melbourne                + Only advertised in 2 Melbourne papers                      # Ads did not stress quality of property

                      # Merely location and size                + Price low                + Mortgagor argued collusion between mortgagee and purchaser          o HELD                + Completely and recklessly ignored interests of mortgagor                + Griffiths CJ                      # “Mortgagee must not recklessly or wilfully sacrifice the interests of the mortgagor, and that if he does, he is to be regarded as not having acted in good faith”                + Isaacs J                      # “If he acts in good faith, his conduct cannot be challenged”                + Part of acting bona fide is acting without negligence, but negligence is less than recklessness Low price is evidence of bad faith, but must actually act in bad faith

    * Pendlebury v The Colonial Mutual Life Assurance Society Ltd (1912)           o Isaacs J                + “If he acts in good faith, his conduct cannot be challenged”

2. Duty to not act negligently

    * NOT YET CONSIDERED BY HIGH COURT

Court favoured negligence test: Exercise reasonable precautions to obtain true market value at time

    * Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971]           o FACTS                + Mortgagee exercised sale by public auction                + Land had permission to build 35 townhouses and 100 flats                + Advertisement stated permission to build houses but not flats                + Auctioneer refused to postpone to allow disclosure of flats                + Value approx $65-75K, sold for $44K          o HELD                + Negligence test applied                      # Had to exercise reasonable precautions to obtain true market value at time                      # Absence of flat developers kept price down                      # Proximity could hardly be closer                      # Mortgagor vitally affected                      # Duty of care and negligence          o Criticised for fusion of equitable and tort remedies

Possible merger of the two tests?

    * Ie that taking reasonable precautions is part of the obligation to act in good faith    * Suggested in Forsyth, but as satisfied narrower test, no need to fully explore

    * Forsyth v Blundell (1973)           o FACTS                + Mortgage over petrol station                + Planned auction – reserve $100,000                + Shell said would pay $150,000                + Mortgagee sold to X for $120,000 (which was what mortgagee owed)                + Shell and X didn’t know of each other’s interest          o HELD                + Was reckless indifference to interests of mortgagor                + Satisfied narrow test                + Menzies dissent on facts:# To take reasonable precautions to obtain proper price is but part of obligation to act in good faith Uncertainty over tests creates dilemma for trial judge

    * Tend to apply bona fide test instead of negligence test          o Eg Hawkesbury Valley Developments v Custom Credit (1995)                + “The mortgagee is not answerable for mere negligence or carelessness in carrying out the sale. Ant departure from reasonable standards must be so serious as to be unconscionable in order to render the mortgagee accountable”    * Corporations law requirement to take reasonable care when disposing of property of company (s420A) may push toward negligence test.

Priorities    * Same as priorities generally Priorities under Old System

    * Consider whether legal or equitable, then consider postponing conduct, then notice

First legal v Second equitable

    * Legal prevails unless gross negligence by legal leads to creation of equitable interest

First Equitable v Second equitable    * First in time prevails if merits are equal First equitable v Second Legal    * Bona fide purchaser for value without notice takes free of interest Priority under Torrens Title

Priority according to order of registration, not according to date of dealing    * Section 36(9) Real Property Act Order of registration is order in which dealings lodged in registrable form    * Section 36(5) Real Property Act If all interests unregistered    * Priorities as in old system          o Look for legal unregistered interest          o For equitable interests, look to postponing conduct                + Eg should caveat have been lodged

Changing Priorities – Tacking

1. Tabula in naufragio· Old system

2. Further advances· Old system and Torrens Tabula in naufragio – Old System

    * Eg 1st legal mortgage to A    * 2nd equitable mortgage to B    * 3rd equitable mortgage to C

C can gain priority over B by tacking onto A’s mortgage (effectively buy A’s mortgage – pays it out) IF:

    * C had no notice of B’s second equitable mortgage at the time C advanced the money    * C can acquire the legal estate from A

    * NOTEo Can’t do this where B has registered mortgage, as there is constructive notice

Further Advances: Old System

If  * A has first legal mortgage    * B has 2nd equitable mortgage

A can forward extra amounts, and take priority for B for those amounts, so long as A does not have actual notice of B’s mortgage

* If B’s mortgage is registered, A has notice, as should search the register

If A’s contract expressly secures future advances and A is registered

          o A does not have to search the register before giving further advances – even if B is registered, this does not give A notice          o A requires actual notice          o If A has notice, he is excused from fulfilling the requirement of further advances* Section 184G Conveyancing Act Further Advances: Torrens Title

Even if A’s mortgage is registered, A should not get priority for future advances IF they have notice of B’s subsequent mortgage    * Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 Exception: Where future advances are to increase the value of the property

    * Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293          o FACTS                + A is legal mortgagee, provides for future payments to be made from time to time up to a total of $273,000                + Advances used to build flats ($76,000)                + A consented to further mortgages to B and C                + A continued making advances                + Mortgagor defaults          o HELD                + A took priority for the advances as well                + As advances used to increase value of land, exception to rule, and so A’s advances get priority                      # Reason: Equity of redemption is not reduced, so there is not

injustice to B and C

If A’s registered mortgage has provisions for advancements, Caveat by B does not give notice to A

* Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128o FACTS+ Registered mortgage to A, securing principal sum and any further sums (ie contract stated for advances)+ B second unregistered mortgage+ B lodged a caveat+ A advances another some+ Does A get priority for the subsequent advancemento HELD+ A gets priority for advances+ Actual knowledge required+ Even if constructive knowledge was enough, caveat does not give notice to prior interest holders+ A not required to do any further searches of the register

11 - Easements and Profits• By Student at Law Published 14/05/2007 Sydney Uni 2006 Unrated

11 - Easements and Profits

•    Easemento    Right to use someone else’s property for a particular purposeo    Does not involve taking away from someone else’s propertyo    Burdens one title and benefits anothero    Runs with the land

•    If merely contractual interest, will end with parties

•    Positive easement

o    Enables something to be done•    Such as right of way•    Negative easemento    Prevents something from being done•    Eg receive light through window

•    If properly created,o    Legal interest•    Questions of buying with notice become irrelevant•    If not properly createdo    Equitable interest

4 Basic requirements/characteristics for an easement•    If these are not met, arrangement is merely contractual, and so will not run with the property

Required Characteristics1.    Must have burdened and benefited land•    Dominant and servient tenement2.    Must accommodate the dominant tenement/benefited land, must benefit the land in connection with the ordinary use or enjoyment of the land3.    Benefited and burdened land must be in separate ownership, or at least separate occupation4.    Easements must be capable of forming the subject matter of a grant•    Re Ellenborough Park [1956] o    FACTS•    Owner built Georgian style houses that surrounded common land as pleasure ground•    Contracts said that ‘together with the owners (buyers) get to use Ellenborough Park as a pleasure ground•    Park overtaken by armed forces during second world war•    Developer compensated, and owners sought compensation for lack of use of easemento    HELD - Owners did have an easement, and so could be compensated

1. Burdened and Benefited land

For an easement to bind a successor in title, instrument must indicate burdened land and benefited land•    Section 88(1) Conveyancing Acto    Applies to old system and torrens title land

Must identify servient and dominant land at time easement is granted – cannot

benefit future land•    London & Blenheim Estates v Ladbroke Retail Parks [1994]

2. Must accommodate the dominant tenement, must benefit the land in connection with ordinary use and enjoyment of the land

Must benefit the land, not just the individual/owner•    Gapes v Fish [1927]•    Ackroyd v Smith (1850)

Rights giving purchasers of houses around a park the right to use the park were easements, as benefited the land itself rather than individual owners•    Re Ellenborough Park [1956] 1 Ch 131•    Riley v Penttila (1974) (Victorian Supreme Court)

After subdivision, an easement is presumed to benefit lots, unless as a matter of construction the easement that benefits the Dominant tenement in its entirety only•    Gallagher v Rainbow (1994)

Must simply be not wholly unconnected with land•    R v Registrar of Titles; Ex Parte Waddington [1917]

Does accommodate dominant tenement if connected with business•    Moody v Steggles (1879)

3. Lands must be in separate ownership (or at least occupation)

•    If developer buys land next door, this would extinguish easements the land previously had, but 2 exceptionso    Registered Torrens title easements are not extinguished by common ownership•    Section 47(7) Real Property Acto    Can create easement if use planned registration method which will not be extinguished by common ownership•    Section 88B Conveyancing act – applies to Torrens and Old system title land•    Only came into force in 1964o    Easements before this date don’t have benefit 4. Easement must be capable of forming the subject matter of a grant

•    Note the conflicting authorities – comment on that

Proposed easement cant be too vague or general – must be precise•    Passage of air over property is too vague, even if 20 years

o    Webb v Bird (1862)    -    Must be defined channelo    Chastey v Auckland [1895]    -    A’s house enjoyed wind-flow, B built wall after 10 years    -    Too vague and general to have easement for windflow•    Free flow of air through defined aperture can be easemento    Cth v Registrar of Titles (Vic) (1918)•    Cannot have easement to protect shelter your house receives from whether from another house, even if shelter provided for 20 yearso    Phipps v Pears (1966)•    Although held can have easement for protection of windbreako    Ford v Heathwood [1949] (Qld)•    Right to wander through park not too vague or generalo    Re Ellenborough Park [1956]•    Underground pipes can be an easemento    Shelf Holdings v Husky Oil Operations (1989)

Mere right of recreation and amusement, possessing no utility or benefit cannot be an easement•    Must show how right is connected to land•    No easement to hold horseraces on lando    Mountsey (1865)

Cannot have easement extensive enough to exclude owner from land, or which amounts to exclusive possession of the land•    Copeland v Greenhalf [1952]o    FACTS•    Owner of land for twenty years used neighbours land to park and repair heavy vehicles•    Owner complained and neighbour responded by saying he had an easemento    HELD: No easement – more like a proprietary right to possess land than an easement•    By parking trucks, it excludes neighbour from his property•    Grigsby v Melville [1962]o    FACTS•    Prescriptive easement claimed because A stored goods in neighbours cellar for over 20 yearso    HELD: Can’t have easement – this is right to exclusive possession, and excludes neighbour from benefit of site•    BUT Conflicting authorityo    There can be an easement to hang washing in neighbour’s kitchen•    Haywood’s Case [1962]o    Can store coal in woolshed

•    Wright v Macadam [1949]

But conflicting authority•    Powerlines not allowed (Victoria)o    Harada v Registrar of Titles [1981] VR•    Powerlines allowed (NSW)o    Prospect county Council v Cross (1990) 21 NSWLR 601

Creation of an Easement

Formal requirements for creation of easement

For an instrument to create an easement that is enforceable against a third party to its creation, the instrument must clearly indicate:o    Benefited lando    Burdened lando    If any persons have rights to release or modify the easemento    If any persons consent is required to release or vary the easement•    Section 88(1) Conveyancing Acto    Applies to both old and Torrens titleo    Process ensures that easement runs with the land

If Torrens land, easement must be created by a transfer which must be registeredo    Exception for omitted registration does not protect easement•    Section 47 Real Property Act

For old system title, must use a deed to have legal easement•    Section 23B Conveyancing Act

Where there is writing, there is an equitable easement (for old system land)•    Section 23C Conveyancing Acto    Extinguished by a purchaser for value without notice

Easement can be enforced without writing if there are sufficient acts of part performance•    Section 23E(d), 54A Conveyancing Act

Where a plan of easement is registered, the easement is automatically createdo    Applies to both old system and Torrens titleo    Only applies after 1964•    Section 88B Conveyancing Act

An owner who grants part of their land away may expressly reserve an easement

in favour of the part retained over the part granted away•    Section 45 Conveyancing ActEasement can be created for councils and statutory authorities through their own individual statutes

Where the law will imply easements:•    Implied easement is just as effective: full legal interest under section 23E of conveyancing act (for old system title land)

(a) Implied by general words in conveyance or transfer

Easements may be created by the ‘general words’ of the conveyance or transfer•    Section 67 Conveyancing Act•    Provides that conveyance conveys ‘all buildings…easements… pertaining to the land at the time of conveyance’o    Applies to old system land onlyo    Must have deed•    Section 51 Real Property Acto    Similar provision for Torrens title land

Conveyance construed as if it contained an express grant of the easement•    Auerbach v Beck (1985)

Limitations to the operation of s67:1.    Right must be capable of being granted as an easement2.    Conveyor must have been capable of granting the easement3.    No easement arises where enjoyment was always intended to be temporary only4.    Privilege must subsist at the time of conveyance

5.    Extent of resulting easement will reflect the extent and characteristics of the privilege enjoyed at the time of conveyance

Section 67 can be excluded in the conveyancing agreement by a contrary intention•    S67(3) Conveyancing Act

(b) By Implied grant or reservation

Grant or reserve of easement may by implied from terms of particular lease or conveyance•    Consider circumstances relating to land at time of conveyance

Full legal interest when property described as adjoining a road•    Roberts v Carr (1925)o    In days when roads often owned privately

o    Property sold was described as fronting or adjoining a road would imply easemento    This situation is very rare now (i) Common InterestGrant of easement implied where implication needed to give effect to the common intention of the grantor and grantee as to the use which the grantee will make of the lando    Implication depends not on terms, but on circumstances under which grant madeo    Essential that parties intended land granted to be used for some particular manner•    Auerbach v Beck (1985)o    Ie implied Where both parties aware that the purchaser intending to use the property for a particular purpose, and this would be impossible without grant of easemento    FACTS    -    V owns 2 adjoining houses, and had overhanging eaves and gutters    -    V subdivided, one property sold•    Eaves and gutters projected into airspace next door    -    Was there a quasi easement due to continuos and apparent use?o    HELD: Easement by implication arose on sale of houses

(ii) Necessity•    Where easements are necessary for the use of the land granted or retained•    Only arises in association with a severance of lando    Common owner must transfer either the dominant or servient tenement to a third party

Court can make an order imposing easement over land “if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement•    Section 88K Conveyancing Act

Necessity must exist at the time of severance: necessity arising subsequently will not suffice•    Sunset Properties v Johnston

No right of way by necessity when there is an alternative, though highly inconvenient means of access: easement must be absolutely necessary•    Goldberg v Edwards [1950]o    FACTS•    V owned large house with smaller house attached

•    V sells smaller house•    V had been using large house to access small house prior to the sale, although there was another way to enter•    New owner of small house wanted to claim an easement over the accesso    HELD: Easement denied – no necessity if there is an alternative•    Royston’s Case [1899]o    See below – cliff dropNo necessity if it is possibility of creating new method of access•    Royston’s Case [1899]o    FACTS•    Vendor sold land and left himself with inconvenient access•    From the plan it seemed that the house had access to the road, but in effect it was a 20 foot sheer dropo    HELD: No necessity – owner could excavate, put in road or absail etc!•    Bolton’s Case [1958]o    FACTS•    Vendor’s subdivides two-storey house but forgets to include easement for stairso    HELD: No necessity for access to stairs – could build new ones

Sufficient if easement is reasonably necessary for the enjoyment of the land in the way contemplated by the parties to a lease/conveyance•    Auerbach v Beck [1985]o    FACTS    -    V owns 2 adjoining houses, and had overhanging eaves and gutters    -    V subdivided, one property sold•    Eaves and gutters projected into airspace next door    -    Was there a quasi easement due to continuos and apparent use?o    HELD - Easement by implication arose on sale of houses

Necessity only found where it gives effect to the parties’ actual or implied intention as existing at the time of conveyance – no consideration of public policy grounds•    North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd [1971] o    FACTS•    Plaintiff owned several blocks of land which it wanted to develop into carpark, buildings and laneway•    Plaintiff subdivided land with intention of selling carpark to local council•    Sold building block and laneway to defendant, without expressly reserving right of way over laneway•    Plaintiff’s intention that after carpark sold to council, access would be via council land adjoining carpark•    Sale with council did not proceed, and carpark left landlocked•    Plaintiff sought declaration that it was entitled to right of way of necessity

o    HELD: No declaration of easement – plaintiff failed•    Had to prove that at least the plaintiff intended to retain a right of way over the laneway at time of conveyance•    As intention was not to retain right of way - failed

(iii) Reciprocal Easement

•    When vendor expressly gives easement to purchaser but has forgotten to reserve one for himself, and the two are very closely related•    By their nature, may be an easement of necessity

(iv) Continuous and Apparent Easements: Wheeldon v Burrows

Four elements required for implied grant of legal easement under rule in Wheeldon v Burrows1.    Severance: must be a grant of part of owner’s land2.    At time of severance, exercise of quasi-easement must be ‘continuos and apparent’3.    Quasi-easement must be necessary for the reasonable enjoyment of the land granted4.    At time of severance, quasi-easement must have been used by the grantor for the benefit of the land granted•    Implication in favour of the grantee, not grantor•    Wheeldon v Burrows (1879)o    FACTS•    T held fee simple in vacant lot and adjoining land upon which were located some workshops.•    In one of workshops, windows opened onto vacant lot•    T conveyed vacant lot to plaintiff (W), and one of the workshops to the defendant (B)•    W erected boarding which obstructed the light into the workshops•    B removed boarding, claiming he had an easement to the light•    Plaintiff sought injunction restraining defendant from trespassingo    HELD: Implication for grantee, not grantor•    T never reserved the right of access to the light when sold vacant lot, thus the defendant never acquired an easement•    Wilcox v Richardson [1997]o    FACTS•    2 businesses owned by same person•    One was fish and chip shop, other was wet fish shop•    The shops shared the same toilets and staff common room•    Owner leased out fish and chip shop•    No mention as to use of facilities in lease

•    Lessors wished to use the facilitieso    HELD: Implied easement: reasonable necessity to use the facilities, and there was a continued and apparent use as in Wheeldon v Burrows•    Auerbach v Beck [1985]o    FACTS    -    V owns 2 adjoining houses, and had overhanging eaves and gutters    -    V subdivided, one property sold•    Eaves and gutters projected into airspace next door    -    Was there a quasi easement due to continuos and apparent use?o    HELD: Easement by implication arose on sale of housesExample:o    If vendor is crossing lot 1 to get to lot 2, and sells lot 2 to a purchaser, the right to cross the reserve block will pass to the new purchaser

To be ‘apparent’, use must have been discoverable on a careful inspection of the servient land by a person familiar with the type of easement claimed•    Pyer v Carter (1857)

For a right of way, must be some indication of the use of the way observable on a reasonably careful inspection, though it need not be as obvious as a paved road or path•    Borman v Griffith [1930]

Do not need same degree of necessity as for an easement implied by necessity, but it does require more than mere ‘convenience’•    National Trustees Executors and Agency Co of Australasia v Long [1939]

Where land sold to separate purchasers simultaneously, each piece of land acquires the easements that were being used before as it would have acquired had that other part been retained by the grantor•    Hansford v Jago [1921]

Creation by prescription: Longstanding use•    Long-continued use of what appears to be an easement raises presumption that grant of easement has been made•    If there has been use for at least 20 years, at midnight on the last night that use becomes an easement

Right by prescription does not allow ‘access or use of light or air to or for any building’•    Section 179 Conveyancing Act

Claimant must show that they exercised the use as a right – ie as though entitled to

do so as incident of ownership of dominant land.

Use must be “not by force, secrecy or permission”: There is not prescriptive easement if done by stealth•    Coghill v Liverpool Councilo    FACTS    -    Factory owner flushed waste into sewers for 20 yearso    HELD: No prescriptive easement, as been done by stealthPermission for use bars a claim to prescriptive right, whereas if the servient owner acquiesces or tolerates the use as a matter of good neighbourliness, there is no bar to the right•    Mills v Silver

Permission is a bar to prescriptive right, and requires express consent•    Dobbie v Davidson (1991) NSWo    FACTS    -    Farmer used land for 50 years, including 25 years after commencement of real property act

Claimant’s mistaken belief that exercise of use derived from source does not prevent acquisition of a prescriptive right•    Bridle v Ruby

Use must be continuous – sufficient frequency to demonstrate to a reasonably minded servient owner that an enduring right to enjoyment is being assertedo    Use does not have to be ceaseless or incessant•    White v Taylor

Can only arise when land occupied by freehold owner, not tenant

Burdened land must have been occupied by someone capable of granting•    Eg mentally incapable person not sufficient

Person who owned burdened land must have known or reasonably been able to know that land being usedo    No legal right if actually trespass•    Dalton v Angus [1881]o    FACTS    -    Unknown to owner of land with factory, factory had been supported by house on adjacent block    -    Owner of house on adjacent block demolished, and began to excavate; factory began to subsideo    HELD: Easement prescripted, as owner of house ought to have reasonably

known- Although grant of easement never made, courts adopted legal fiction to

claim it had been lost- hange of ownership:- •    If land of servient tenement changes hands- o    Time starts again- •    If land of dominant tenement changes hands- o    Successive uses can add to cumulative total-- Lost Modern Grant Doctrine- •    Under the doctrine, enjoyment of easement for twelve years gives rise

to presumption that easement has been granted- o    Rationale is that 12 year use is based on fact that there must have been

a grant, but it was lost- o    Does not matter if can be proved that there never was a grant-     -    Dalton v Angus (1881) House of Lords-- Lost modern grant doctrine applicable to Australia- •    Delohery v Permanent Trustee Co of NSW-- Creation by acquiescence or estoppel- •    Such easements are equitable, as doctrines are equitable- •    Where landowner A encourages B to believe that B will acquire a right

over A’s land, and B acts to own detriment on the basis of that encouragement, equity will restrain A from denying the existence of the right

- •    Such easements run with the land similarly to legal easements, subject to 2 qualifications

- 1.    Being equitable, they rely for their enforcement on general equitable discretions

- 2.    They will not bind a purchaser of a legal interest in the servient land who buys without notice of them

-- •    Dabbs v Seaman (1925)- o    FACTS-     -    Jenkins subdivided land and sold portion to Seaman-     -    Seaman subdivided land, one block bounded by lane-     -    At direction of Seaman, that land transferred to Smith- •    Transfer referred to plan which showed 20 foot lane, but certificate of

title did not refer to an easement-     -    Jenkins remained the registered proprietor of the lane-     -    Seaman intended to use the lane to afford him access

-     -    When Smith died, land transferred to Dabbs-     -    Seaman sought to consolidate his various lots, and remove reference

to the lane to prevent Dabbs from acquiring a right of way- o    HELD: Easement by two ways- •    Seaman estopped from denying its existence- •    Acquired by implication due to reference to the road in the description

(right of way under both general law and torrens)-     -    When land transferred by Seaman to Smith, reference to lane in both

the description of the land and the transfer- •    Thus, was Inherent characteristic of the land which Dabbs was entitled

to have preserved-- Implied easements and the Torrens system: Section 42(1)(a1) Real

Property Act-- Protection for easements if:- 1.    Existing immediately before converted to Torrens title- •    Ie easement left off register- 2.    Validly created easements after conversion to Torrens system- •    Unlikely to apply when parties do everything formally required but

have left it unregistered, as it is not validly created- •    Section 42(1)(a1) Real Property Act-- 1. Easement exception applies where there was easement when land was

under old system title, but it was left off when converted to Torrens title- •    Dobbie v Davidson (1991)- o    FACTS-     -    Easement by prescription created by using land for 20 years, created

under old system title-     -    When land converted to Torrens title, omitted- o    HELD: Easement was ‘omitted’ under the scope of the legislation- •    Auerbach v Beck [1985]- o    FACTS-     -    V owns 2 adjoining houses, and had overhanging eaves and gutters-     -    V subdivided, one property sold- •    Eaves and gutters projected into airspace next door-     -    Was there a quasi easement due to continuos and apparent use?- o    HELD: Easement by implication arose on sale of houses- o    Torrens title relevance-     -    Later conversion of land, R-G failed to discover the existing

easement-     -    As easement granted before transition, fits under exception

-- 2. Implied easements that are not put on the register are likely to be

destroyed under the new s42(1)(a1)- o    Under the old section 42(1)(b), an implied easement is enforceable

between the two parties under the rights in personam exception- o    When servient tenement is sold, the new purchaser is not subject to the

easement-     -    Thus, must make sure that implied easement is formally granted- •    Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618- o    Case under old s 42(1)(b), but likely to hold under the new section

42(1)(a1)- o    FACTS-     -    Originally, whole site owned by Savage, and easement existed-     -    When divided and sold, easement not noted on either certificate of

title- o    HELD: Was only equitable easement, and could only be enforced by

the original parties-     -    Third party purchaser gets indefeasible title-     -    To be ‘omitted’ under the old act means that the Registrar General

has not done what ought to be done, it does not allow for party’s mistakes-- To make implied lease enforceable under Torrens, need to force owner of

servient land to sign a transfer granting an easement, and lodge it for registration

- •    Australian Hi-Fi Publications Pty Ltd v Gehl [1979]-- •    Auerbach v Beck [1985]- o    FACTS-     -    V owns 2 adjoining houses, and had overhanging eaves and gutters-     -    V subdivided, one property sold- •    Eaves and gutters projected into airspace next door-     -    Was there a quasi easement due to continuos and apparent use?- o    HELD: Easement by implication arose on sale of houses- o    Torrens title relevance-     -    Later conversion of land, R-G failed to discover the existing

easement-     -    As easement granted before transition, fits under exception-- Extent of Use-- (i) Express Easements-

- •    Matter of construction of the instrument-- Instrument construed according to natural meaning of words, read in the

light of circumstances existing at the time of the grant- o    Gallagher v Rainbow (1994)- o    See Todrick-- Circumstances considered include:- o    Physical nature of the easement- o    Use to which the dominant tenement is put- •    Todrick v Western National Omnibus Co [1934] Ch 561-- Consider whether use is within reasonable contemplation of the parties- •    Todrick v Western National Omnibus Co [1934] Ch 561- o    FACTS-     -    Instrument granted easement to use track at ‘all times, for all

purposes, with or without animals’-     -    Right of way was merely a rough country lane- •    9 ft wide- •    Stone pillars at end of driveway through which bus could only just fit- •    In some disrepair-     -    Land bought by bus company- o    HELD-     -    Not within reasonable contemplation of the parties that the laneway

would be used by buses, despite the broad grant of easement- •    White v Grand Hotel (1913)- o    FACTS-     -    Right of way to house capable of taking motor cars-     -    House later converted into motel-     -    Many more cars now than before- o    HELD-     -    Allowed – cars were within contemplation of parties, and still only

used for cars- •    British Railways v Glass (1965)- o    FACTS-     -    Right of way granted across railway tracks to get to farm-     -    Suitable for large vegicles-     -    Farm later changed to caravan park- o    HELD-     -    Still okay, as within contemplation of parties that large slow vehicles

would use the right of way- •    Jelbert v Davis (1986)

- o    FACTS-     -    Express grant of right of way-     -    3 owners used for farms-     -    1 farmer changes use to caravan park- o    HELD-     -    Allowed easement, as within reasonable contemplation of parties

that property be changed to caravan park-     -    Park could only develop to certain size, so that right of way did not

unreasonably interfere with right of others-- Words mentioning persons entitled to use the easement are generally

regarded as illustrative only, not restrictive- •    Baxendale v North Lambert Liberal and Radical Club-- Excessive use of easement does not in itself put an end to the easement or

qualify rights under it- •    Graham v Philcox-- Will only read into an agreement what is necessary to give it effect- •    Butler v Muddle (1995) NSW ConvR 55-745- o    FACTS-     -    Defendants had right of access across plaintiff’s land-     -    Defendant planned to construct townhouses, and sought to construct

3 driveways and a car- o    HELD-     -    Use of servient tenement for carpark etc would exceed the extent of

an easement, and would amount to appropriation of plaintiff’s land-     -    Could not be read into original grant, as not a necessary part of

passing and re-passing the land- •    Mercantile General Life Insurance Co v Public Trustee(1989)- o    FACTS-     -    Easement onto burdened land to repair benefited land- o    HELD-     -    There was a right to erect scaffolding on burdened land to repair the

benefited land, but does not permit putting scaffolding up to extend beyond the point of the benefited land, as not necessary under the easement

-(ii) Implied Easements

Easements of Necessity:o    Extent of permissible use limited by the necessity which led to its being

created, with regard to the use made of the dominant tenement at that timeo    Rights frozen under easement of necessity•    Corporation of London v Riggs (1880)o    FACTS    -    Farmer sold off part of farm, retained part which was landlocked•    Easement granted by implication of necessity,    -    Farmer wanted to change use of retained farm to picnic ground, which involved bringing building materials across the right of wayo    HELD    -    Easement limited to use for farming purposes    -    Could improve farm, but not change use of farm

“Continuous and Apparent” Easementso    Permissible use limited by the nature of the use which the grantor exercised immediately before the severance which gave rise to the easement•    Stevens v Allan

Rights frozen under continuous and apparent easement and easement of necessity: Kind of use may be expanded, but must not change quality of use•    Milbers safe co v Great Northern Railway (1907)o    FACTS    -    Easement of necessity through continuous and apparent use    -    Vendor had 4 houses, sold 2, and purchaser received right of way over two retained houses    -    Purchaser demolished 2 houses and built railway station, so that right of way had more traffico    HELD    -    No permission under changed use of land(iii) Easements acquired by prescription

Right to continue the same use of the servient tenement for the benefit of the dominant tenement, but not other uses•    Wimbledon and Putney Commons Conservators v Dixon

Can expand use of dominant tenement, but not change it•    RPC Holdings v Rogers (1953)o    FACTS•    Farmer acquired prescriptive right to cross golf course to get to road•    Use of dominant tenement changed to caravan parko    HELD•    Right of way was to farm, not caravan park•    Farmer could intensify farming, but could not have entirely different use of dominant tenement

General Rights and Obligations of Easement Holders

Obligation to repair

•    Nobody is obliged to repair easemento    Effectively, it will usually fall on the benefited landowner

•    Agreement to repair is a positive obligation, and will not run with the land unless:1.    Argue the essential fabric doctrine•    Argue that the easement and the need to repair are so closely entwined that they effectively run together•    Frater v Finlay (1969)2.    Argue the benefit and burden doctrine•    Argue that if you claim the benefit of a property, you must submit yourself to the burdens of ito    Halsall v Brizell (1957)•    This is pushing it a bit far, better to use special provision to keep agreement running – see point 33.    It is possible to register obligations to repair so that they run with the land•    Section 88B Conveyancing Act to register•    Section 88F so it runs with the land, to bind successors in title

Benefit and burdened doctrine successfully argued•    Halsall v Brizell (1957)o    FACTS    -    Subdivision of land in 1850s, where purchaser received rights to use roads, sewers, and common facilities, but were obliged to pay for upkeep    -    Successor claimed the right to use the facilities, but said not bound to pay for upkeepo    HELD    -    Enforced doctrine that if you want the benefits, you accept the burdens    -    Has been followed in Australia

Right to repair

Owner of benefited land has right to carry out repairs•    Hermitage case

Easement for support of building by another building may entitle dominant owner to enter servient tenement and carry out repairs to ensure existing supporto    Jones v Pritchard

•    See Mercantile below

Implication of rights necessary to carry out rights under easement•    See also in extend of express easements

•    Mercantile General Life Insurance Co v Public Trustee(1989)o    FACTS    -    Easement onto burdened land to repair benefited lando    HELD    -    There was a right to erect scaffolding on burdened land to repair the benefited land, but does not permit putting scaffolding up to extend beyond the point of the benefited land, as not necessary under the easement

•    Bulstrode v Lambert [1953]o    FACTS    -    Large furniture vans attempted to use right of way near furniture market    -    There were once posts in the way, which would have prevented vans from using laneway    -    Owner argued that should not be allowed to use it, and if they were, only to drive through, not to stop and unloado    HELD    -    By looking at site, It was within reasonable contemplation of parties that lane would be used by vans carrying furniture    -    Implied that vans would be able to stop and unload as ancillary right

Must not cause unnecessary damage to site of easement

Cannot cause damage to servient tenement or unreasonably intude on servient owner’s rights and property•    Todrick

Must not unreasonably interfere with others’ use of easement

Can not expand to point where use interferes with others use•    Jelbert v Davis (1986)o    FACTS    -    Express grant of right of way    -    3 owners used for farms    -    1 farmer changes use to caravan parko    HELD    -    Allowed easement, as within reasonable contemplation of parties that property be changed to caravan park

    -    Park could only develop to certain size, so that right of way did not unreasonably interfere with right of others

Unreasonable and excessive use can be restrained by injunctiono    Injunction may detail use of easement•    Rosling v Pinnegar

Subdivision of dominant tenement

After subdivision of dominant tenement, Right of way benefits all subdivided parts, unless as a matter of construction it does not•    Gallagher v Rainbow (1994) High Courto    FACTS    -    A has right of way over Bs land.    -    A subdivides land into 8 lots    -    B objects to increased use of right of wayo    HELD    -    Increase is reasonable    -    BUT, English Authority says if increase is unreasonable, right of way will not remain open to them all    -    No easement to parts that are not accommodated by the dominant tenement (must still fit criteria)

Subdivision still subject to principles above about rights under the easement – ie within contemplation of parties for agreement, frozen for easement of necessity etc•    Butler v Muddle (1995) NSW ConvR 55-745o    FACTS    -    Defendants had right of access across plaintiff’s land    -    Defendant planned to construct townhouses, and sought to construct 3 driveways and a caro    HELD    -    Use of servient tenement for carpark etc would exceed the extent of an easement, and would amount to appropriation of plaintiff’s land    -    Could not be read into original grant, as not a necessary part of passing and re-passing the land

Extinguishment, Variation and Modification of an Easement

(i) By Express release by parties

Easement can be extinguished by express release by the owner of the dominant tenement•    Old system land:

o    By deed - section 23B(1) Conveyancing Act•    Torrens Title Lando    Registered transfer – Section 47(6) Real Property Act

(ii) By court order

Supreme Court may order extinguishment on certain set out groundso    Obsolete most commono    Also, agreemento    If would not injure those entitled to easement•    Section 89 Conveyancing Acto    Is effective with both Torrens and Old System title    -    Easement remains on register, but order effective    -    Servient tenement can apply to cancel recording of easement on ground of abandonment•    Section 32(6) Real Property Act

If owner of benefited land agrees to give up right of way, Court will give order for it to be extinguished under s 89•    Pieper v Edwards [1982]o    FACTS    -    Benefited land owner paid money by burdened land owner to give it up    -    Surrender never registered    -    Benefited land owner sold to purchaser who saw right of way and wanted to use it    -    Burdened land owner applied to have easement set asideo    HELD    -    Court said easement extinguished

-     -    EFFECTIVELY EXCEPTION TO INDEFEASIBILITY

(iii) By abandonment

RG may treat easement as abandoned if satisfied it has not been used for 20 yearso    But if other factors show no abandonment, not abandoned•    Section 49(2) Real Property Acto    NEW AMMENDMENT 1996o    Displaces common law tests

Easement can be lost by abandonment whether acquired expressly, impliedly or by prescription – Question of fact in all circumstances•    Treweeke v 36 Wolseley Road (1972)

Easement not abandoned by mere non use, Question is intention of dominant tenement owner•    Treweeke v 36 Wolseley Road (1972)o    FACTS    -    Registered right of way over torrens title land    -    Had never used it in 50 years    -    Became virtually unpassable:•    Sheer rock faces•    Impenetrable bamboo clump•    Swimming pool obstructed ito    HELD    -    No abandonment

•    Grill v Hockey (1991)o    FACTS    -    Right of way of benefited land ran along number of pieces of land to get to road    -    Owners fenced of easement as though part of their property    -    Gates blocked off easement, in 4 or 5 different placeso    HELD    -    No abandonment, even though non-use    -    Important that benefited owner has not placed obstructions there himself

No abandonment without evidence of intent to relinquish easement•    Moore v Rawson

Non-use over long period of time is important circumstance, but not enough of itself•    McIntyre v Porter (1983)o    FACTS    -    130 years of non-useo    HELD    -    Abandoned due to such an extensive period of time•    Guth v Robinson•    More v Ravvson (1824)o    FACTS    -    Easement for light to windows in wall of a building    -    Pulled down wall, blank wall without windows erected    -    14 years later, neighbour built wall permanently blocking off light    -    Decided wanted easement againo    HELD    -    Easement abandoned

(iv) Common Ownership and Possession

If easement registered under Torrens title, easement not extinguished by common ownership•    Section 47(1) Real Property Act

If easement created by registration of plan (under section 88B), not destroyed by common ownership•    Section 88B Conveyancing Act

In NSW, Easement not extinguished by common ownership and possession where the easement remains necessary for the use of the benefited land•    Margil v Stegul Pastoral

Otherwise, easement extinguished where dominant and servient tenement come into ownership AND possession of same person•    Post Investments v Wilson

Once extinguished by common ownership and possession, easement not revived when ownership and possession later separate•    Post Investments v Wilson

Profits a prendre

•    Interest in land giving Right to enter another person’s land and take away part of the soil or natural resource of the soilo    Eg soil, crops, timber, mineral, animals•    Arises out of lando    Requires Element of taking (prendre)    -    Mere right to enter land and conduct trade is not a profit    -    Mere right to enter to tend or cultivate land is not a profit•    May exist over given land, with the precise location left for the grantee to chose•    May exist in a number of ways, depending on construction of the grant of the profito    “in gross”    -    Unconnected with the dominant tenement:o    “in common”    -    exercisable in common with others – including the owner of the servient tenemento    “in severalty”    -    exercisable to the exclusion of all others

Creation of Profits•    lies in a grant (like easement)•    Old System Titleo    At common law    -    Created by deed (section 23B Conveyancing Act)o    In equity    -    Writing sufficient (Section 23C Conveyancing Act)    -    Act of part performance sufficient•    Torrens Titleo    Registered Transfer    -    Section 46, 47 Real Property•    Registration of a plano    Section 88B Conveyancing Act 1919•    Prescriptiono    Similar to easementso    But, likely to be defeated under Torrens Title by subsequent registered transfer, unless protected by caveat or being embodied in transfer and registered•    Statutory Provisionso    Profit to take timber from land may be granted under s25F Forestry Act 1916 (NSW)o    Right of access to land for hunting, fishing or gathering may be granted to Aborigines under s47, 48 Aboriginal Land Rights Act 1983 (NSW)

Extinguishment of Profits•    Similarly to easementso    Express releaseo    Abandonmento    Court order – section 89 Conveyancing Act•    If subject matter becomes exhausted•    Common ownership and possession•    No extinguishment in these circumstances if easement created by:o    Registered plan under section 88B Conveyancing Act 1919    -    Section 88B(3)(c)(iii)o    Registered Transfer under Real Property Act    -    Section 47(7) Real Property Act

12 - Covenants over Freehold Land• By Student at Law Published 14/05/2007 Sydney Uni 2006 Unrated

Covenants over Freehold Land

•    Covenanto    Promise in relation to lando    Can be positive or negativeo    Eg sell half block of land with restriction that must build in certain way•    Covenantoro    Burdened by agreement•    Covenanteeo    Benefited by agreement

•    Approach to questions:o    What is the covenant being enforced?o    Who wants to enforce it?o    Against whom do the want to enforce it?o    Law or equity?

Running with the Land

Burden at common law

At common law, the burden never runs with the land•    This is NOT affected by section 70A(1) Conveyancing Act•    Rhone v Stephens [1994] House of Lordso    FACTS    -    Landowner owns neighbouring two houses    -    Sells smaller of two, but promises to maintain the roof of his house to provide protection to the smaller house    -    Original owner sold larger house, question arose whether the new owner needed to maintain the roof as wello    HELD    -    Burden cannot run at common law    -    Section 70A does not change the law, just means that Vendor 1 is liable if it is breached

Can attempt to evade common law rule by:

1.    Argue the essential fabric of easement doctrine•    Argue that the easement and the covenant are so closely entwined that they effectively run together•    Frater v Finlay (1969)•    FACTS

o    Right to draw water from a well on servient land, which was piped to the dominant lando    Both owners shared costs equallyo    Both original owners soldo    Were successors bound?•    HELDo    Covenant to contribute to the cost of upkeep of easement bound successors in title because it was ‘part of’ or ‘incident to’ the easemento    Easement ran with land, and so covenant also ran with land•    Rufa v Cross (1981)•    FACTSo    Cross easements existed for support of each others wallso    Covenant for paying for an increase in a dividing wall•    HELDo    Did not run with land at common lawo    Did run with land at essential fabric doctrine (and also under burden and benefit)

2.    Argue the benefit and burden doctrine•    Argue that if you claim the benefit of a property, you must submit yourself to the burdens of it•    Implies requirement of choice to accept or not accept: Rhone•    Reciprocated burden/benefit relationship must be genuinely reciprocal, can’t just be any burden and any benefit: Rhoneo    Haball v Brizell (1957)    -    FACTS•    Subdivision of land in 1850s, where purchaser received rights to use roads, sewers, and common facilities, but were obliged to pay for upkeep•    Successor claimed the right to use the facilities, but said not bound to pay for upkeep    -    HELD•    Enforced doctrine that if you want the benefits, you accept the burdens•    Has been followed in Australiao    Also applied in Rufa in 1981 (Qld), although full Court rejected the principal as too uncertain in    -    Government Insurance Office (NSW) v K A Reed Services  [1988] and applied in•    Calaby v Ampol (1990)

3.    A Chain of covenants•    Each successive purchaser from the covenantor (subject to burden) enters into a covenant with his predecessor to comply with the covenanto    Problem:

•    Vendor’s remedy for breach lies only in damages for breach of the covenant•    Original covenantor liable for breach in contract even after selling

 Burden of the Covenant at Equity

Covenant runs with land at equity if:1.    Complies with section 88(1) Conveyancing Act2.    Must be negative3.    Must benefit land of covenantee – touch and concern4.    Covenantor must have intended burden to run with land5.    Only equitable remedies available

1. Covenant must comply with section 88(1) Conveyancing Act•    Only runs with land if clearly indicates:o    Benefited lando    Burdened lando    Persons having right to release the restrictiono    Persons who consent to a release is stipulated for•    Note: Applies to schemes of development – “intended to be annexed”•    Clearly indicates means point to, need not have exact description

2. Covenant must be negative•    Covenant must require no actiono    Most covenants in real world are phrased negatively so that burden runs in equityo    Eg If build a house it must be worth $X    -    Negative, as does not require you to build house or do anything•    If covenant requires work or paying of money then it is positive, and does not run in equityo    Eg pay half for maintenance of fence•    Look to substance, not just formo    Eg ‘must not allow to fall into disrepair’    -    Phrased negatively, but requires action – is positive•    May sever positive parts of covenant to allow negative components to run with land•    Reason for this is to compliment the common lawo    If enforced positive covenants, would ignore privity of contract

3. Covenant must benefit the land of covenantee (owner of benefited land)

•    Must touch and concern the land•    See section on benefiting the land in easements section

•    See section about benefit below

4. Covenantor must have intended burden to run with land

•    Section 70A of Conveyancing Act will provide the necessary intention except where it has been explicitly contracted out ofo    Will bind successors in title unless contrary intention    -    This does not alter common law

5. Only equitable remedies available•    As there is only equitable remedies available:o    Bona fide purchaser of legal title for value and without notice takes free of the equitable interest    -    Not bound by burden of covenanto    Registered proprietor bound?o    Original covenantor and covenantee remain bound by the contract they have made, even if they sell the land    -    Liable for damages on breacho    Court of equity has discretions

Benefited land at Common law and equity•    Less strict about running of benefit than of running of burden•    Three requirements1.    Covenant must ‘touch and concern the land’: must in fact benefit the covenantee’s land2.    Must be an intention that the benefit should run3.    At time of covenant, vendor must have owned land that was benefited

1. Covenant must in fact benefit the covenantee’s land: ‘touch and concern’ land, not merely personal benefit•    See also section in easements•    Affect:o    Use of landORo    Value of land•    Roger v Hosegood (1990)o    “Must either affect the land as regards its mode of occupation, or must be such as per se, and not merely from collateral circumstances, affects the value of the land”o    FACTS    -    Covenant to build only a single storey dwelling house benefited the value of the land

Test may be easier under equity:•    Sufficient that the land must be “Reasonably regarded as capable of being affected by the performance or breach” of the covenanto    Kelly v Barret (1924)•    Sufficient that the covenant is “aimed in general at preserving the amenities and character of the neighbourhoodo    Northbourne v Johnson (1922)

Whole of land must be benefited•    Re Ballard's Conveyance [1937] 1 Ch 473o    FACTS    -    Landowner owned two neighbouring properties•    Very Large one and much smaller one        -    Sold smaller one with certain covenants•    Must build only dwelling house•    Red brick•    Limited use    -    Eventually sold larger one to purchaser who sought to have the benefit of the covenant runo    HELD    -    Did not touch and concern - Land so large that most of it would not be effected by breach of covenant

•    Marquiss of Zetland (1939)o    FACTS    -    Covenant not to do anything to cause nuisance or be detrimental to the neighbourhood, to benefit land of any vendor which remains unsold    -    Successor to covenantor wanted to open a fish shop    -    MZ owned land, not contiguous, claimed nuisanceo    HELD    -    As a matter of construction, the covenant could benefit each and every part of the covenantee’s land, so any that was left still able to benefit from the covenant

Subdivision: Room for argument – confusion over judgementso    Where covenant might benefit land it will not benefit subdivided lando    Ellison v O'Neill (1968) 88 WN (Pt 1) (NSW) 213    -    FACTS•    Landowner owns two properties•    Sells one to purchaser with certain covenants•    Subdivides other block of land•    Question whether new owners of subdivided lots could claim the benefito    Presumption above may be falling out of favour

o    Coles Myer v Dymocks    -    HELD: Simos J•    Disagrees with Ellison, says that subdivision does not stop benefit running•    May well depend on construction of the instrumento    If viewed that terms of covenant, in light of circumstances, intended benefit to pass to subdivided parts

2. Must be an intention that the benefit should run•    Statutory intention under section 70 Conveyancing Act unless otherwise indicated in covenant

3. Covenantee must own the land which is benefited at the time the covenant is made•    Kerridge v Foley (1964)o    FACTS    -    Developer made covenant to benefit blocks, but had already sold one of themo    HELD    -    Covenant for sold block was ineffective, as did not own it at date of covenant

Suggestion that Covenantee who seeks to enforce burden of covenant must have a legal interest in the land•    Rogers v Hosegood (1900)o    That is to enforce the benefit at common law•    Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 72 ALJR 621; 152 ALR 149o    To enforce at equity, used to have to show that parties to covenant intended that tenants could enforce the covenant

It is now thought that this intention come under section 70, as aboveSchemes of Development and Common Building Schemes under Equity

Problem in Kerridge v Foley (1964)•    Impossible to impose uniform covenants across a subdivision, because lots sold earlier were not benefited by covenants placed on lots sold later

Solution under equity•    Schemes of development under which mutually enforceable schemes of covenants were binding, irrespective of date of purchase of particular lotso    Necessary to show that throughout the subdivision, all covenants are identical, or fit into an overall pattern (local law), which transcends purely contractual obligations

Four requirements for the scheme1.    Plaintiff (seeking to enforce covenant) and defendant must derive title through common vendor2.    Common vendor laid out estate in lots for sale subject to covenants which are consistent with some overall scheme of development3.    Original common vendor intended to sell all lots subject to the restriction which was to benefit all lots in the subdivision4.    Purchasers of subdivision purchased on footing that covenant was to be for benefit of all lots on subdivision•    Elliston v Reacher [1908] 2 Ch 374

Strict need to satisfy all 4 requirements has been relaxedo    Look for:    -    Vendors intention to impose a ‘local law’ under a mutually enforceable system of covenants•    4 requirements are a guide to this    -    Purchaser’s intention: Appreciation by each purchaser that they were buying subject to this overall scheme•    Re Mack (1975) per Wootton Jo    FACTS    -    Very large subdivision    -    A owned half, B owned half    -    Thus, requirement 1 of Elliston v Reacher not meto    HELD    -    Common building scheme existed anyway – intention important

Need to look to extrinsic circumstances eg advertising to find intentions to see if building scheme•    Problem, as class with Torrens system philosophy that everything is in the registero    Re Martin    -    Held that cannot have common building scheme in in Torrenso    Overturned in Re Louis (1971)

Can have a Common building scheme in Torrens lando    As you have to go outside the register to see if there is a covenant, can look also at extrinsic materialo    Still need to satisfy section 88(1) (pre 1964)•    Re Louis and the Conveyancing Act [1971] 1 NSWLR 164o    FACTS    -    Case before 1964 Section – Section 88B does not apply    -    Owner-developer transferred lots of land to A in July 1920 burdened by a covenant, but the land to be benefited was not described

    -    In August 1920 owner transferred lots to B burdened by covenants which benefited each and every lot in the development    -    In September 1922 transferred Lots to C burdened by covenants which benefited each and every lot in the development    -    October 1922 transferred Lots to D burdened by covenants which benefited each and every lot in the development    -    After lots sold on to third parties, issue of which covenants enforceable aroseo    HELD    -    Can have scheme, but•    A unenforceable as does not comply with 88(1)

Post 1964: Section 88B Conveyancing Act

Can create easements and covenants that run with the land by registering a plan•    Section 88B Conveyancing Act•    Can create even if both lands owned by same person•    BUT ONLY APPLIES AFTER 1964o    So in exam, ask if it was done post 1964    -    If it was, sidestep all problems

Other stuff under Conveyancing Act

Can give right to third party to verify, modify or relinquish covenant•    Section 881 Conveyancing Acto    Can cause problems: Jones v Sherwood Hills    -    Covenant on next door neighbour’s property relinquished by a third party    -    Woke up one morning to find shopping mall being built

Council may impose covenants even though no land being benefited•    Section 88D Conveyancing Act

Covenant requiring a brick building is satisfied by a brick veneer•    Section 88(1) Conveyancing Act

Covenants in the Torrens system•    Use to be a Problem, as RG can only register interests that he has statutory authority to recordo    Originally given no power to record covenants•    Registrar General now has power to record covenants, and is deemed to have always had that powero    Section 88(3) Real Property Act    -    Must accord with 88(1) Convyancing Act

Covenants are recorded but not registered•    No indefeasibility – similar to caveats•    No greater force as no registration – different to easement

Extinguishment of Covenants

1. Express extinguishment•    Owner of benefited land agrees to give up benefito    Old System    -    Requires deed (s23B) to be valid at law    -    Writing sufficient at equityo    Torrens Title    -    Deed of release followed by request to RG to have deed recorded in the register

2. Implied Release•    Acquiescenceo    Where covenant breached and covenantee acquiesces instead of enforcing covenant    -    Inactivity not always interpreted as implied release, especially if breach is continuing and frequent  •    As restrictive covenants are creatures of equity, not enforceable where doing so would be inequitable

3. Common Ownership

•    Old system covenants extinguished by common ownership of burdened and benefited lando    Kerridge v Foley

•    Torrens title covenants are not extinguished by common ownership as they are on the registero    Post Investment v Wilson (1990)    -    Powell J    -    Case may be overstating the effect of the recording of the covenant    -    FACTS•    Several covenants extracted as part of subdivisiono    Most important was height•    W owns high block•    R Wants to build extra story, and wants Post investments to build townhouses on two blocks he has bought•    Argued covenants can be extinguished on grounds:

o    Covenants obsolete as character of neighbourhood has changedo    Acquiescence of Wo    Relevant blocks in  unity of ownership    -    HELD•    Unity of ownership overcome due to record on register•    Other grounds also failed

•    Covenants through registration of plan under s88B are not extinguished by common ownership

•    Common building scheme covenants are not extinguished by common ownership, they are suspended

4. Purchase of Legal Estate without notice•    Extinguishes equitable running of the burdeno    Purchaser not bound by covenant

5. Statutory Power

•    Supreme Court can issue order to vary or extinguish covenanto    Section 89(1) Conveyancing Act    -    Grounds:•    Obsolete due to change in use of land, character of neighbourhood etc•    Would impede reasonable use of servient land without securing practical benefit to dominant owner•    Agreement•    Abandoned in whole or part by dominant owner•    Would not substantially injure benefited party    -    Discretion•    Even if grounds made out, NSW Court of Appeal says court retains discretiono    Pieper v Edwards [1982]•    High Court left matter openo    Treweeke v 36 Wolsely Road (1973)

Registered proprietor of land subject to burden of building materials covenant, fencing covenant or value of structures covenant that has been in effect for at least 12 years may make a written application in the approved form to the RG to have the restrictive covenant extinguished•    Section 81 Real Property Act

Local town planning schemes override private covenants•    Section 28 Environmental Planning and Assessment Act (1979)

o    Reflects developing policy direction that the community should determine what should be restricted rather than individuals

•    Coshott v Ludwig (1997) NSW Conv R 55-810o    FACTS    -    Covenant over house that only cottage could be built on land•    Ie Must be at least 55 feet from the front of the building to the street    -    L wanted to build substantially larger house    -    Council approved such extensions    -    L approached equity division to•    Modify/extinguish covenant under section 89 Real Property Act•    Consider declaration that covenant had been extinguished by local planning lawso    Regulations said that any covenant imposing restrictions to the extent of controlling or restricting development did not applyo    HELD    -    Council plans overrode private covenants    -    Development allowed even though in direct contravention of the covenant

Similarities between easement and covenant•    Rights annexed to land•    Requires land on both sides•    Both have to relate to the land as lando    In easement    -    Accommodate the lando    In covenant    -    Touch and concern the land

Differences between easement and covenant•    Easement can’t protect views or privacy•    Easement can be positive, covenant must be negative•    Restrictive covenant can only be applied at equity, but easement can exist as a legal interest•    At point of subdivision of dominant lando    Easement    -    Presumption of accommodation of burdened land•    Gallaghero    Covenant    -    Presumption against Benefited land? is that right - check

Leases and Licences• By Student at Law Published 13/05/2007 Sydney Uni 2006 Unrated

Leases and Licences

Lease Terminology

•    Leases are not estates like fee simple type estates•    The rights granted under a lease are not inalienable•    Leases can be assigned a lease by a landlord•    Subleases can be granted, often granted for technical reasons, ie so as not to assign the lease•    Landlord and Tenant Amendment Act 1948 (The Rent Control Act) only applies where there is a lease and not a licence

•    Lessoro    Landlord•    Lesseeo    Tenant•    Leasehold/Tenancyo    Tenant’s interest•    Reversiono    Landlords interest in the land after the lease is granted•    Assignmento    Where the whole of the tenant’s interest is assigned or transferred•    Subleaseo    Transfer of something less than the whole leaseo    Eg put sublease for one day less than their whole lease to obtain different legal rightso    Often require landlord’s consent to sublease    -    Landlord cannot unreasonably withhold consent (s133(b) Conveyancing Act

Requirements for a lease1.    Certainty of term/period2.    Exclusive Possession3.    Certainty of premises: Interest in land rather than mere personal privilege

Rent is not an essential component•    Burns v Dennis (1948)

Parties can stipulate rent other than money•    Greco v Swinburne [1991]

1. Certainty of term

Commencement Date: Date on which the lease commences must be certain or capable of being rendered certain before the lease takes effect

•    This requirement is satisfied with reference to the lease commencing:o    Tomorrowo    From completion of the building    -    Pirie v Saunders (1961)o    When the gas is connected    -    Terry v Tindale (1882)o    When a certificate issues    -    Panucci v Motor Body Assemblers (1958)

•    Lease with no ascertainable commencement date is void•    Where no commencement date is expressed, on might be implied under the general principle for implying terms in contract

•    Commencement date must be within 21 yearso    Section 120(A)(3) Conveyancing Act

Duration: Maximum duration of lease must be certain or capable of being rendered certain before the lease takes effect

There is no lease if the duration is referred to as:•    For the duration of the waro    Lace v Chantler [1944]•    Until the end of the peanut cropo    Bishop v Taylor (1968)•    For the period the lessee holds shares in the companyo    Re Lehrer and the Real Property Act[1961]•    Until the completion of the new premiseso    Mangiola v Costanzo (1980)•    Until the land is required by council for road widening purposeso    Prudential Assurance Co Ltd v London Residuary Body [1992] There is a lease if the maximum duration is known, but it may be cancelled earlier•    “For 20 years, or sooner ending of the war”

o    Prudential Assurance Co Ltd v London Residuary Body [1992]

The requirement of certain duration does not apply to:•    Tenancies for lifeo    Greco v Swinburne [1991]•    Tenancies at will•    Tenancies at sufferance•    Periodic Tenancies

If a lease is void for breach of requirement of certainty of terms, but the tenant goes into possession and begins paying rent, a valid tenancy may arise under section 127 Conveyancing Act

A lease cannot vest an interest in the tenant retrospectively, however the landlord and tenant can contract that obligations under the lease are to run from a date earlier to the actual grant of the lease•    Cadogan v Guiness [1936]

2. Exclusive Possession•    Exclusive possession is the main test of whether there is a lease•    Requires that the lease give the tenant the right to exclude anyoneo    Although most leases give the landowner the right to enter the premises

In determining whether it is a lease or a licence, the court looks to the substance, not the form of the textual agreement: Exclusive possession is a lease rather than a licence •    Radich v Smith (1959) 101 CLR 209 (High Court Australia)o    FACTS    -    Rent control legislation only applied to leases and not licences    -    Lawyer carefully drafted agreement in form of licence, using language of licence not lease    -    Radich brought forward claim that she was tenant, rather than licenceeo    HELD - It was a lease, and thus Radich had the protection of the Act

Radich applied in England•    Street v Mountford [1985] AC 809o    FACTS    -    Similar facts to Radich    -    Agreement included a clause saying “I the occupant agree that this gives me rights of a licensee and not a tenant”o    HELD - Exclusive possession meant lease existed

Exclusive possession can be implied by the nature of the rights granted

•    Lewis v Bell (1985)

3. Certainty of premises: Interest in land rather than mere personal privilege•    When rooms leased are not exactly specified, there will be a licence rather than a lease

Precision of language suggests lease rather than licence – poorly specified aspects, such as the area and manner of payment suggest licence•    National Advertising Pty Ltd v Wavon Pty Ltd (1988) o    Imprecise description of the area and manner of payment suggest licence

Sham provisions

An agreement that is in substance a lease cannot be converted into a licence merely by calling it one – (substance rather than form)

•    Radich v Smith (1959) (Australia)•    Street v Mountford [1985] (England) Types of Leases

Tenancy for a fixed term•    Lease for a given term

Periodic Tenancy•    Tenancy which rolls over from one period to the next•    Usually arises out of the way rent is paid•    Either party can bring periodic tenancy to an end by giving notice for the period of the leaseo    Eg weekly tenancy – 1 weeks noticeo    Exception: - Only six months notice required for annual lease

Equitable Leases•    Courts of equity not so concerned with whether a lease has met the formal requirements    -    No need for actual order of specific performance of the agreement to grant the lease    -    Sufficient that parties entitled to obtain such an ordero    Walsh v Lonsdale  (1882) (English) - ie if landlord does not have title, it is irrelevant if the tenant gets everything they require out of the lease    -    Estoppel •    An equitable lease is similar to any equitable interest

o    Liable to be defeated by a bona fide purchaser of a legal estate in the land without notice of the equitable lease•    Court of equity will grant specific performance of an equitable lease, but the legal interest survives if there is no noticeo    As long as tenant is in possession, there will be notice

Tenancy at will•    Lease where either party can terminate at their will without prior notice•    Can be granted expressly or by implicationo    Eg when tenant stays on after lease has expired

Usually no notice requirement, but may require notice in exceptional circumstances•    Landale v Menzies (1909) (High Court of Australia)o    FACTS    -    Two partes in a ‘holding over’ situation as they adopted a fence running along a stream as the boundary between properties on a give and take basis    -    Each therefore held parcels of land from the other on a tenancy at will    -    After giving a few days notice, but without permission, Menzies cut through the fence in order to get better access to the watero    HELD - Reasonable notice required due to importance of access to water. There was no reasonable notice, and so agreement was still in existence, and plaintiff entitled to injunction and inquiry as damages for trespass

Tenancy at will under section 127 Conveyancing Act•    Ie if tenant paying rent but lease does not meet statutory formalities

Formerly, under English law:

If you have a lease over three years, it must be written and signed•    Statute of Frauds 1677

If not written and signed, takes effect as a tenancy at will•    Statute of Frauds 1677

BUT: Common law courts of England ignored this:•    Said that if you have a lease that does not meet the formalities, but the tenant pays rent:o    Tenancy will be treated periodically from year to year until the full period agreed upon has transpired    -    Terminable with 6 months notice    -    Courts imply all terms agreed upon as long as consistent with tenancy from year to year

Under Section 127(1) Conveyancing Act•       Courts will hold that a tenancy at will exists •       To protect the tenant, one months notice required to bring the tenancy to an end

Courts will read into a s127 tenancy at will whatever obligations the parties originally agreed upon so long as they are consistent with a tenancy at will•    Dockerill v Cavanagh

BUT: That relates to Common law courts•    Courts of Equity would uphold agreements in the terms the parties had reached•    See below, Chan v Cresdon regarding guarantors

Unsigned lease gives rise to tenancy at will, and imputes all consistent obligations•    Wykes v Samilk Pty Ltd (1998) NSW o    FACTS - Tenant never signed lease•    Problem regarding s23C Conveyancing Act    -    Landlord sued for rent owing under the lease    -    Tenant claimed there never was a lease

HELD - Tenant was in possession and had paid rent, therefore lease under s127 Conveyancing Act, even though nothing in writing. In tenancy at will, obligations consistent, tenant liable to pay rent, and could be sued for unpaid rent

Unregistered Torrens title lease gives rise to tenancy at will•    Chan v Cresdon Pty Ltd (1989) FACTSShop leased on Torrens’ title land for 5 years•    Tenant required to pay rent and supply guarantorsLease was register-able, but not registered by the landlordTenant defaulted on payment, and landlord claimed against guarantorsGuarantors said they guaranteed against a registered lease, and not an unregistered one – guaranteed ‘under this lease’•    Guarantors argued that as not registered, total failure of considerationHELD - Guarantors not liable. As lease never registered, only a common law tenancy at will came into existence•    Terminable by one month’s notice•    Agreement treated as equitable leaseTherefore, the obligation to pay rent did not arise under the lease, it arose out of possession

Pastoral Leases

•    Wik Peoples v State of Queensland (1996) FACTSPastoral lease over two arid properties.Properties low intensity farming (relevant)Leases granted under statute – ie not common law leases•    Allowed others (eg mining prospectors) to enter the property, and minister could allow anyone on land for any reasonIssue whether leases extinguish Native title because they granted exclusive possessionHELD 4:3Use of the land not inconsistent with native title, and legislation showed no clear and plain intention to extinguish native title.As not common law leases, must examine statute•    Did not afford exclusive possession – others allowed on•    History of pastoral leases showed concern for traditional occupiers of the landSuggested that as intensity so low, possibility that peoples could co-exist on the properties with the farmersMinority•    Did extinguish, as required leasees to pay rent

Statutory Formalities for establishing a lease

Conveyancing Act•    Applies to old system title, and only sometimes to Torren’s title

To create a legal lease you must use a deedThis is a signed, sealed and delivered documentA standard signed contract will not suffice•    Section 23B Conveyancing ActDoes not apply to Torren’s title

To create an equitable lease, it is sufficient to use writingMust be signed by the landlord or agent•    Section 23C Conveyancing ActApplies to Torren’s title

You can create a legal lease without writing or deed so long as it:Does not exceed three years (including options to renew)Leases for life included, as they may end within three yearsIs at the market rateBest rent reasonably obtainable without requiring a lump sum paymentLease mist take effect in possession

Must give the tenant the right to immediate possession•    Section 23D(2)

There may be an equitable lease even though it is not in writing if it is partly performed•    Section 23E(d)Applies to Torrens’ title

A lease which is not in writing or not partly performed takes effect as a lease at will onlyOld statute of Frauds•    Section 23D(1)

Unsigned lease gives rise to tenancy at will, and imputes all consistent obligations•    Wykes v Samilk Pty Ltd (1998) NSW ConvR 55-871FACTSTenant never signed lease•    Problem regarding s23C Conveyancing ActLandlord sued for rent owing under the leaseTenant claimed there never was a leaseHELD - Tenant was in possession and had paid rent, therefore lease under s127 Conveyancing Act, even though nothing in writing. In tenancy at will, obligations consistent, tenant liable to pay rent, and could be sued for unpaid rent

Real Property Act•    Regarding Torrens’ Title land•    NOTE: Leases need not be by deed in Torrens’ title

Torrens’ title leases which exceed 3 years should be in ‘approved form’, and must be registered to gain indefeasibility•    Section 53 Real Property Act

Registration of the lease gives it priority over all alter registered interests•    Section 36(9) Real Property Act

If an interest is not registered it has no force at all•    Section 41 Real Property ActAlthough courts will treat it as an equitable interest

Unregistered leases which do not exceed 3 years in duration are protected against a change in ownership unless the purchaser had no notice of the leases

existence•    Section 42(1)(d)Basically puts into effect the equity conceptsNote:•    If a tenant is in possession of the land the purchaser almost certainly has notice of the lease•    One case which contradicts thisTenant on holiday

Unregistered Torrens title lease gives rise to tenancy at will•    Chan v Cresdon Pty Ltd (1989) 168 CLR 78FACTSShop leased on Torrens’ title land for 5 years•    Tenant required to pay rent and supply guarantorsLease was register-able, but not registered by the landlordTenant defaulted on payment, and landlord claimed against guarantorsGuarantors said they guaranteed against a registered lease, and not an unregistered one – guaranteed ‘under this lease’•    Guarantors argued that as not registered, total failure of considerationHELD - Guarantors not liable. As lease never registered, only a common law tenancy at will came into existence•    Terminable by one month’s notice•    Agreement treated as equitable lease    Therefore, the obligation to pay rent did not arise under the lease, it arose out of possession

Covenants (Obligations) in Leases where written agreement gives no guidance

•    In the absence of a contrary agreement between the parties, Common law implies 6 covenantsCovenants may be contracted away•    These are implied even in the absence of a deed: Baynes & Co v Lloyd & Sons [1895]

Landlord’s covenantsQuiet EnjoymentNot to derogate from the grant of the leaseFor furnished dwellings, ensure they are reasonably fit for habitation when the lease term starts

Tenant’s CovenantsUse the premises in a tenant-like mannerYield up possession to the landlord at the end of tenancy

For agricultural land, cultivate in a husband like manner

Quiet Possession/Enjoyment•    Neither landlord not those claiming through the landlord will interrupt the tenant’s peaceful enjoyment of the premisesImplied promise not to interfere with the use of the right givenKenny v Preen [1963]•    Examples of breach by landlord or agent:Removed doors and windows to coerce tenant into giving up possessionLavender v Betts [1942]Disconnected gas and electricity suppliesPerara v Vandiyar [1953]Structural repairs within an area properly occupied by the tenantDowse v Wynyard Holdings Ltd )1962)Repairs in a way that obstructed tenant’s potential customersJ C Berndt Pty Ltd v Walsh [1969]Allowing rainwater to damage the premisesMartins Camera Corner v Hotel Mayfair [1976]

Landlord is liable for breach, even if compelled to act by statute (eg fire safety), if the possibility of the need to interfere could have been reasonably foreseen at the date of entering into the covenantReid House v Benekee (1987)

Covenant extends to interference by third parties if:Interference by someone claiming through landlord•    No breach when interference by someone with title superior to landlord•    Eg if A rents for 6 months, then grants lease to B for 1 year. When A’s landlord evicts B, B cannot sue A for breach of covenant of quiet enjoymentBesley v BesleyProtection only extends to lawful acts of persons claiming through the landlord•    Remedies in tort for unlawful acts of third parties•    This does not apply if landlord specifically covenants against interruptions by a specific persons•    Protection then extends to unlawful interruptions by named person    Nash v Palmer (1816)•    Ozzy Traveller v Marklea (1997)FACTS•    Landlord owned large complex•    Leased room to A for selling camping equipment•    Leased room to B for manufacturing timber articles•    Noise interfered with camping business•    A sued Landlord for breach of covenant of quiet enjoyment

HELD - A succeeded. Landlord has right under lease to stop B causing nuisance and disturbance to other tenants. By declining to exercise clause, A suffered a loss, and LL was in breach of covenant for quiet enjoyment

Extended to include quality of possession•    The English Mill’s CaseEnglish council leased flat to MillsSoundproofing of walls in flat so poor that landlord had breached covenant of quiet enjoyment•    See Ozzy Traveller above

Not to derogate from the grant of the lease

If leased for a purpose, the landlord cannot interfere with tenant’s use of property•    Karraggianis v Malltown (1978) SAFACTSLandlord leased 6th floor of building for use as public restaurantLandlord shut off lifts -  cutting off access to 6th floorHELD - Derogation from grantNote: Most leases have express clauses allowing landlord to develop without suing•    Vasile v Perpetual TrusteesLandlord leased for coffee shop, then stopped up one of the two doors

Covenant breached when landlord’s activity or non activity renders the leased premises ‘unfit or materially less fit’ for the particular purpose•    Browne v Flower

Test is whether the premises ‘for practical purposes’ are to be ‘fairly regarded’ as having been rendered unfit•    Gordon v Lidcombe Developments urnished dwelling houses must be reasonably fit

Applies only to condition of house when lease begins: No implied covenant that house will continue to be fit for habitation•    Sarson v Roberts [1895]

Applies only to the premises, not to the furnishings or appliances•    Pampris v Thanos (1967)

Statutory Inroads:•    Can only rent ‘dwelling-house’ that is in ‘fair and tenantable repair’ at the

date of lettingSection 39 Landlord and Tenant (Amendment) Act 1948 (NSW)•    Landlord has duty to provide and maintain premises that are habitableExtends to contents supplied by landlordSection 25 Residential Tenancies Act 1987

Use the premises in a tenant-like manner•    Ie not to commit wasteMarsden v Edward Heyes Ltd

“If the house falls into disrepair through fair wear and tear or lapse of time, or for any reason not caused by him, the tenant is not liable to repair it”•    Warren v KeenLord DenningNote: Statutory alteration of covenant

Tenant must not commit voluntary waste•    Section 32(1) Imperial Acts Application Act 1969Leasehold tenant includes (s32(3))•    Tenant for a term•    Tenant under periodical tenancy•    Tenant holding under s127 Conveyancing Act•    Tenant at will

Tenant under a ‘residential tenancy agreement’ must not intentionally or negligently damage the premises, and must keep them in a reasonable state of cleanliness, having regard to their condition at the start of the tenancy•    Section 26 Residential Tenancies Act 1987

Yield up possession to the landlord at the end of tenancy

Landlord may recover damages for loss of rent and legal expenses incurred in evicting a tenant’s sub-tenant who, after the (head) tenancy expires, retains possession against the will of the tenant•    Henderson v Squire

Landlord may use ‘self-help’ to eject a tenant whose right to possession has come to an end•    MacIntosh v Lobel (1993)

Self-help allows only force that is reasonably necessary•    Section 18 Imperial Acts Application Act 1969

For agricultural land, cultivate in a husband like manner

Cultivation according to custom of the country: usage which is prevalent in the neighbourhood where the land lies and which has subsisted for a reasonable length of time•    Williams v Lewis

Tenant of farm must pay owner fair compensation for any deterioration of the farm during the tenancy owing to the tenant’s failure to cultivate in accordance with good farm management practices•    Section 13 Agricultural Tenancies Act 1900Conversely, owner must pay tenant fair compensation for general improvement of the farmSection 8

Covenants under Section 84 of Conveyancing Act•    Applies to both old and Torrens title land unless contracted away

Tenant has obligation to pay rent, and must pay it on time•    Section 84(1) Conveyancing ActRent decreases if premises become unfit for occupation through fire, flood, lightening, storm or tempestBelfour v Weston

Tenant must keep premises in ‘good and tenable repair’•    Section 84(1)(b) Conveyancing ActGive premises back in condition they were in at start of leaseNo obligation to repair damage caused byAccidentsWar damageDamage from flood, lightening, storm, tempestReasonable wear and tearDifficulty in definition of term repairDoes not mean rebuild, but what does it mean?

Tenant and Landlord covenants when lease is assigned•    Assignment:Transfer of whole of tenant’s interest in the leaseIe whole of unexpired term of lease•    Covenants and obligations bind the assignee if they are inherently relevant to the relationship of landlord and tenantObligations must touch and concern the leased premisesEg pay rent, repair etc

•    Reasoning: Privity of EstateExists between parties who stand in relationship of landlord and tenant

When landlord sells reversion•    Obligations and covenants run to the purchaser, as long as:Covenants relate inherently to the landlord, and tenantObligations touch and concern the leased premises•    Section 117 and 118 Conveyancing Act

Covenants when Sub-leased•    Sub-leaseTransfer of less than whole of tenant’s interest in the leaseSub-lease leads to joint tenancy•    No direct relationship between original landlord and new tenant, therefore obligations of original lease do not bind the sub lessee•    No privity of estate

Landlord Remedies•    If Tenant refuses to pay rentBreach of contractNote: At common law, no obligation to pay rent unless legal lease exists (by deed, or registration for Torrens title)•    Courts of equity hold it is sufficient if an equitable term is created•    If no precise amount of rent agreed uponLandlord awarded what the court thinks is a reasonable sum for the tenant’s use and occupationMayor of Thetford v Tyler•    If tenant repudiates lease, (eg through failure to pay rent)Landlord can accept repudiation and terminate the leaseForefieture means the obligation to pay rent terminates, but the landlord may claim damages including loss of benefit of future rent•    If tenant breaches the lease but does not repudiateLandlord has right to terminate the leaseQuestion regarding entitlement of landlord to damagesNon-monetary fault•    Sue for damages•    Repudiation – terminate the lease•    Must give notice before terminating the lease (Section 129 Conveyancing Act)Relief against forfeiture of a lease

•    If tenant remedies breach, and breach was non-monetary, and If lease terminated by landlord

Courts of equity grant relief against forfeiture of the lease by reinstating the lease

Waver of Breach•    If landlord knows about breach and is in position to exercise a remedy:Accepting payment of rent after breach amounts to waiver of the breach (Finley v Russell-Jones)•    Landlords often try to get around this with clause that acceptance of rent does not amount to a waiver, but court can find that breach was waived despite this•    Owendale Pty Ltd v Anthony

Right to assign or sublease

Right to assign or sublease is a right incident to every leasehold interest•    Keeves v Dean

Right attaches itself to leases for a term and periodic tenancies, including short term periodic tenancies such as those from week to week•    Cth Life Assurance v Anderson

Right to assign or sublease only part of the leased premises•    GJ Coles v Commissioner of Taxation

Exceptions to right to assign or sublease•    Tenancy at will arising at common law and tenancy at sufferance may not be subleasedAttempt to do so terminates tenants’ interest and confers no interest on the purported assignee or sublesseeAnderson v Toohey’s LtdTenancy at will under s127 Conveyancing Act can be assigned or subleasedBecause it is not a tenancy at will as in common law, but is essentially a periodic tenancy from month to month terminable by one month’s notice in writing expiring at any time

•    Contract often requires landlord’s consent to assign/subleaseCannot unreasonably withhold consentSection 133B Conveyancing Act•    Does not apply to tenancies at willAnderson v Toohey’s Ltd•    Only applies if true construction of lease contains a covenant not to assign or sublease without landlord’s consentUnreasonable refusal includes

Refusal where object is to gain collateral advantage by forcing tenant into giving up possession before end of lease•    Lehmann v McArthurForcing tenant or assignee into paying more rent that the leae requires•    Wagner v Phot EngraversForcing tenant to re-negotiate on terms more favourable to the landlord•    Australian Mutual Provident Society v 400 St Kilda Road