Robert Hay Senior Counsel Commercial Law: 2011

Friday 9 December 2011

Section 172 of Property Law Act Explained

Please note for members of the public or practitioners in the legal profession where English is your second language a translation key in all languages of the world is available on this blog to assist you. The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com

The High Court recently considered s37A of the Conveyancing Act 1919 (NSW) which is the New South Wales equivalent of s172(1) of the Property Law Act 1958. Section 172(1) provides that:

"Save as provided in this section, every alienation of property made, whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced."

French CJ, Gummow, Crennan and Bell JJ approved of a decision in New Zealand where "Their Honours said that it was unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss: it was necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly".

See: para [32]. It was not necessary for the wrongdoer to appreciate that the act in question was dishonest judged by the standards of ordinary, decent people. See: para [33].

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Meaning of "terms contract" examined

Any practitioner who acts for vendors and purchasers of land should have a good understanding of what is and what is not a “terms contract” for the purpose of the Sale of Land Act 1962. The Act prohibits certain types of “terms contracts” and a purchaser can avoid contracts entered into in contravention of the Act. In an important decision, Dixon J in Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222 considered the definition of “terms contract” that has applied since 31 October 2008. Section 29A provides:

“(1) For the purposes of this Act a contract is a terms contract if it is an executory contract for the sale and purchase of any land under which the purchaser is -

(a) obliged to make 2 or more payments (other than a deposit or final payment) to the vendor after the execution of the contract and before the purchaser is entitled to a conveyance or transfer of the land; or

(b)entitled to possession or occupation of the land before the purchaser becomes entitled to a conveyance or transfer of the land.

(2) In subsection (1)- deposit means a payment made to the vendor or to a person on behalf of the vendor before the purchaser becomes entitled to possession or to the receipt of rents and profits under the contract; final payment means a payment on the making of which the purchaser becomes entitled to a conveyance or transfer of the land.” (italics added)

Before 31 October 2008 a “terms contract” was an executory contract under which the purchaser is;

(a) obliged to make two or more payments to the vendor after execution of the contract and before the purchaser was entitled to a conveyance or

(b) entitled to possession or occupation of the land before becoming entitled to a conveyance or transfer. The definition of “deposit” and “final payment” in s29A have a much wider meaning.

In Ottedin the purchaser, in December 2008 contracted to purchase land for $6.5 million and paid a deposit of $325,000 with settlement due in December 2009 upon which the purchaser became entitled to transfer and vacant possession of the land. The purchaser was unable to settle.

By deed the parties deleted the particulars of sale and substituted new particulars under which the price remained the same but the settlement date was changed to December 2010, the deposit became $1,325,000 with $325,00 due on the day of sale and $1,000,000 due in January 2010 (increased deposit).

There was also a provision for a contingent interim payment of $3,675,000 with a final payment of $1,500,000 due at settlement.

Ottedin defaulted and sought to avoid the contract under s29O(2) of the Act on the ground that the contract was a “terms contract” that did not comply with the Act’s requirements concerning terms contracts.

The contention was that apart from the initial deposit of $325,000 and the final payment, the contract (as varied) was a terms contract because it obliged the purchaser to pay two or payments after the execution of the contract, being the balance of the deposit ($1,000,000) due in January 2010 and the interim payment of $3,675,000.

Dixon J rejected the purchaser’s contention. His Honour held that both the initial $325,000 and the increased deposit were each obligations to pay the “deposit” within the meaning of s29A.

His Honour held that the contingent interim payment of $3,675,00 (which was not paid) was either a deposit or became part of the final payment but its characterisation did not matter because even if it was an interim payment before settlement, there was still only one payment.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Monday 28 November 2011

Leases May Require Substantial Fitouts for the Purpose of the Intended Use

Leases often require tenants to undertake substantial fit outs and it is common for landlords to contribute to the fit-out. A turn key arrangement for example,

In a recent case in New South Wales the landlord covenanted that "immediately upon receipt of the lease duly executed by the Lessee and the Bank Guarantee it will pay to the Lessee the sum of $45,000 being the Lessor's contribution to the Lessee's fitout of the premises".

The option clause made no reference to the covenant being excluded in a new lease following the exercise of the option. The tenant claimed that following the exercise of the option it was entitled to be paid $45,000.

The primary judge held that because the lessor's payment was for a fixed sum it was clearly an "absurdity" to give the lease a literal meaning and he declined to do.

See: Miwa Pty Ltd v Siantan Properties Pty Ltd [2010] NSWSC 1203 at [17]. At [16] the primary judge said 'it is difficult to imagine the parties intended that $45,000 would be paid irrespective of whether there was a fit out or paid in full in a case where the cost of fit out was less than $45,000 but that is the claim of the plaintiff'.

The Court of Appeal allowed the tenant's appeal. See: Miwa Pty Ltd v Siantan Properties Pty Ltd [2011] NSWCA 297. The Court of Appeal examined the caselaw dealing with "absurdity". Basten JA at [17] held that the test of absurdity "is not easily satisfied" and said that "the courts have no mandate to rewrite agreements, so as to depart from the language used by the parties, merely to give a provision an operation which, as it appears to the court, might make more commercial sense". e following the exercise of an option.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Swanton's case doubted

In Stone v Leonardis [2011] SASC 153 the Supreme Court of South Australia held at [36] that in principle a registered proprietor could lodge a caveat on title to protect its own interests.

In Stone the registered proprietor lodged a caveat preventing a mortgagee of the land settling on a contract of sale. The registered proprietor's allegation was the mortgagee had improperly exercised the power of sale by entering into a contract for less than the market value.

It has been held in Victoria that in such circumstances a mortgagor did not have an equitable interest but had a mere equity to set the sale aside.

See: Swanton Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 and Vasiliou v Westpac Banking Corporation (2008) 19 VR 229.

White J held that Swanton was "clearly wrong" and that the court should not follow it. However, in the circumstances of the case His Honour decided that the caveat should be removed.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Friday 25 November 2011

Landlords beat administrators and obtain possession under s.440C of the Corporations Act

Division 6 of Part 5.3A of the Corporations Act 2001 provides for the imposition of a moratorium restraining parties from taking steps against a company under administration.

According to s 435A the purpose of Part 5.3A is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximizes the chances of the company, or as much as possible of its business, continuing in existence, or if it is not possible for the company or its business to continue in existence, results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

During the administration the owner or lessor of property which is used by or in possession of the property cannot take possession of the property or otherwise to recover it, except with the administrator’s written consent or with the consent of the court. See: s440C. The onus is on the lessor wishing to take possession that this is the appropriate course. See: Re Java 452 Pty Ltd (1990) 32 ACSR 507.

In IMO Colorado Group Limited [2011] VSC 552 Gadiner As J had to consider applications by landlords under s440C to enforce rights to possession of premises located in two shopping centres leased by Colorado.

When the application was made the administration had already proceeded for six months. With respect to one lease, the administrator of Colorado was appointed three days before the expiry of the term. Upon expiry of the lease the landlord was precluded by s440C from taking possession of the premises.

Before the expiry of the lease the landlord had negotiated with a tenant in the shopping centre to lease another site in the centre. The consequence was that three tenants had to relocate including one tenant which agreed to lease the area occupied by Colorado.

Because of the moratorium the tenant could not take possession of the premises with the result the landlord lost $17,000 in rent per month and had to contribute $50,000 to the fitting-out of temporary premises for the tenant.

Under a second lease, Colorado was due to vacate premises on the expiry of the lease; however, Colorado went into administration and refused to vacate when the lease ended. The new lessee was unable to take possession of the premises and the landlord was facing a claim for compensation.

The administrator opposed the application on the basis that they wished to preserve the businesses and maintain control of the Colorado network in order reduce o implement the proposed sale or restructure and that the grant of leave in respect of the two stores would the likelihood of a successful sale or restructure because key revenue generating stores would have to be closed.

They maintained that the new owner would be interested in negotiating with the lessors to take on the leases. After reviewing the caselaw, Gardiner AsJ stated that applications for leave under s440C required a balancing exercise involving the weighing up of the interests of the lessors whose proprietary rights in respect of the premises are substantially qualified by the operation of the section and the object of endeavouring to preserve the business of Colorado. After engaging n the balancing exercise

His Honour granted leave to the landlords to enforce its rights to possession.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Tuesday 22 November 2011

Beware of lease variations

It is trite law that a slight variation to a lease may effect a surrender and re-grant. See: Pascoe-Webbe v Nuguna Pty Ltd (1985) 3 BPR 97,231 (SC, NSW per Young J).

In Richmond Football Club Limited v Verraty Pty Ltd [2011] VCAT 2104 a variation to a lease had major consequences for an unwitting and unfortunate landlord. The lease, which had been made in 1998, was for a term of 10 years with an option for a further term of 10 years and required the tenant to pay land tax and outgoings.

In 2004 the lease was varied: the changes included reducing the rent, amending the bank guarantee and rent review provisions, introducing an obligation to pay GST and extending the lease term by 10 years. The tenant contended that the variation effected a surrender and re-grant with the consequence that from the date of the variation the Retail Leases Act 2003 applied to the lease.

By reason of s.50 of the 2003 Act a provision in a lease requiring a tenant to pay land tax is void. Also, by reason of s.46 of the 2003 Act a tenant was not required to contribute to outgoings until given a statement of outgoings. The tenant sought recovery of land tax and outgoings paid after the variation.

The landlord claimed that the tenant was estopped from alleging that a surrender and re-grant occurred; this submission was rejected on two bases, namely that the tenant had not been aware of its rights until 2009 and the provisions of the 2003 Act could not be circumvented on the basis of estoppel.

The tenant sought recovery of the land tax and outgoings on the basis that they were paid under a mistake because the tenant was unaware that it had no liability to do so.

Consequently, there was a total failure of consideration and therefore the landlord was obliged to repay the amount paid by way of land tax and outgoings as money had and received.

The landlord’s defences based on estoppel and unconscionable conduct failed. The landlord also relied on Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd (2006)VSCA 6 in alleging that good consideration had been provided by the landlord for the payments; this claim was rejected with respect to land tax because there was no obligation on a tenant to pay land tax and s.50 of the 2003 Act expressly prohibited a tenant from recovering land tax.

The landlord’s argument based on The Dog Depot was successful with respect to outgoings because outgoings were part of the consideration payable by the tenant; the tenant received a benefit in exchange for the payment of outgoings and therefore the tenant’s claim for money had and received failed. The landlord also relied on The Dog Depot to claim compensation for lost land tax based on the tenant’s use and occupation of the premises; this claim failed because consideration had not been given for the payment of the land tax. The tenant recovered $125,320 in land tax, being all the land tax paid that was not caught by the Limitations of Actions Act 1958.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience

Author: Robert Hays Barrister subject to copyright under DMCA.

Monday 31 October 2011

Sub-tenant obtains relief against forfeiture of head lease

The termination of a lease automatically terminates any sublease. See: Bradbrook, Croft & Hay Commercial Tenancy Law, para 19.6.

Where a landlord seeks to enforce a right of re-entry or forfeiture against a tenant the Court, on application of the sub-tenant, may vest the property in the head lease in a sub-tenant for the whole of the term of the lease or a lesser term on terms that the Court thinks fit. See: s.146(4) of the Property Law Act 1958 (Vic).

In Leahy v Austin Management Services Pty Ltd [2011] QCA 186 the Queensland Court of Appeal rejected an appeal by a landlord from the granting of relief to a sub-tenant based on the Queensland equivalent of s.146(4), being s.125 of the Property Law Act 1974.

The sub-tenant leased only part of the area of the land leased by the tenant from the landlord. The new lease awarded to the sub-tenant was on the same terms as the forfeited head lease except for the expiration date (which was the date of expiry of the sub-lease) and the area demised and the rent and outgoings which were payable in accordance with the sub-lease.

The sub-tenant had operated its workshop business for 25 years on the site. The landlord appealed on the basis that the primary judge erred by not giving due recognition to the prejudice she would suffer by not being able to lease the site to a new tenant as a whole. There also was evidence that the area occupied by the sub-tenant would have achieved a higher rental than was being paid by the sub-tenant.

The appeal was unsuccessful.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Tuesday 25 October 2011

Ministerial determination valid

My previous post contended that the Ministerial Determination dated 29 April 2003 made pursuant to s. 5 of the Retail Leases Act 2003 (2003 Act) was made with power by reason of s.13(3) of the Interpretation of Legislation Act 1984. By the Determination the Minister excluded from the definition of "retail premises" in s.4 of the 2003 Act certain premises that were used wholly or predominantly for the retail provision of "services" and located above the first three storeys of a building.

Section 5 of the 2003 Act came into effect on 1 May 2003. The Determination was made on 29 April 2003 and thus before s.5 commenced.

Section 13 of the Interpretation Act permits the exercise of certain powers provided for in legislation the commencing date of which is postponed. In the absence this provision it would be necessary to include in an Act specific power, for example, to make regulations or appointments that have to be in place when the Act commences operation[1].

Section 13(3) was not incorporated in the Interpretation Act until April 2006.

The Minister's Determination was effective because of s.13 of the Interpretation Act as it appeared in 2003 and not by reason of s.13(3). When the Interpretation Act was enacted, and when the 2003 Act commenced on 1 May 2003, s.13 provided that:

“Where an Act or a provision of an Act which does not come into operation immediately on the passing of the Act will, upon its coming into operation, confer power or amend another Act so as to confer power under the other Act as so amended to make subordinate instruments, give notices, make appointments, prescribe forms or do any other thing for the purposes of the first-mentioned Act or provision or that other Act, the power may be exercised at any time after the passing of the first-mentioned Act but the exercise of the power does not confer a right or impose an obligation on a person before the coming into operation of the first mentioned Act or the provision of that Act in question except insofar as is necessary or expedient for the purpose of –

(a)        bringing the first-mentioned Act or the provision of that Act in question into operation;

(b)        making the first-mentioned Act or the provision of that Act in question fully effective at or after the time at which it comes into operation; or

(c)        making the amendment made to the other Act by the first-mentioned Act or the provision of that Act in question fully effective at or after the time at which the first- mentioned Act or provision comes into operation.”

(underlining added)

Where an Act has passed but had not come into operation, s.13 of the Interpretation Act confers power to, among other things, “give notices” or “do any other thing for the purpose of the Act”. This power does not confer a right or impose an obligation on a person before the Act comes into operation except so far as it is necessary to make the Act fully effective when it comes into operation.

Because of s.13 of the Interpretation Act the Minister had the power to make the Determination: although the 2003 Act had not commenced:

(a) the 2003 Act had passed; and

(b) the Determination was made by “notice”, or, at the very least, the Minister had done “any other thing for the purpose of the Act” within the meaning of s.13 of the Interpretation Act.

[1] See Pearce and Geddes, Statutory Interpretation in Australia, 7th ed, paragraph 6.7.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Monday 10 October 2011

Ministerial determination not invalid

My friend Sam Hopper has said in his blog http://samhopperbarrister.com/ that Judge Anderson in the County Court found that the Ministerial Determination which effectively excludes premises above the third storey from being "retail premises" was not a valid exercise of power.

While Judge Anderson did express the view that it appeared the determination was made without power, His Honour said that he did not consider it necessary to decide the matter. See: Evans, Tapsall and Van Veen v Thurau Pty Ltd [2011] VCC 1354 at [19].

The argument put to Judge Anderson was that s 5(1)(f) of the Retail Leases Act 2003 did not come into effect until 1 May 2003 and therefore the Ministerial Determination (which is dated 29 April 2003) could not be valid.

The determination is stated to have been made under s 5(1)(f). In my view the argument put to Judge Anderson was not correct. The Ministerial Determination says that it does not come into effect until 1 May 2003. Section 5(1B) says that an instrument made under 5(1):

may provide that it has effect on and from 1 May 2003 or such later date (whether before, on or after the date on which the instrument is made) as is specified in the instrument as the date on which it comes into effect.

Sections 13(2) and (3) of the Interpretation of Legislation Act 1984 appear to cure any potential problems. Sam's blog can be found here

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Monday 3 October 2011

Breach of s.52 can amount to repudiatory conduct

On 9 September 2011 I posted an article entitled "Can a landlord's failure to comply with s.52 constitute repudiatory conduct?".

In Hann-Woodlock v ADMR Pty Ltd [2011] VCAT 1776 Senior Member Walker held that the landlord had breached repair covenants contained in the lease and, with respect to a leaking roof, had breached the repair term imported into retail leases by s.52 of the Retail Leases Act 2003.

Section 52 imposes an obligation on landlords to maintain in a condition consistent with the condition of the premises when the lease was entered "the structure" of the premises, among other things.

The Senior Member held that the breaches amounted to a repudiation which had been accepted by the tenant. Damages were awarded to the tenant.

Thanks to Jamie Bedelis for alerting me to this.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Friday 30 September 2011

Relief against forfeiture of an option to renew not available to at Tenant

The issue of whether it is possible for a tenant to obtain relief against forfeiture of an option for a further term is often raised in circumstances where the tenant was in breach of the lease when the option was exercised. In Lontav Pty Ltd v Pineross Custodial Services [2011] VSC 485 Dixon J rejected a submission that relief against forfeiture of an option was available to the tenant. His Honour said [at 109] that:

an option clause will usually be properly characterised as an irrevocable offer, which the offeree (the tenant) may accept, provided it has performed any condition precedent. Once in breach of a condition precedent, a tenant's purported exercise of the option amounts, at best, to a counter offer by the tenant to extend the lease, subject to acceptance by the landlord. In the context of this lease the condition precedent is in these terms. The tenant is not entitled to exercise an option to renew so long as there is at the date of serving the written notice of exercise of the option 'any existing breach of non-observance of any of the conditions, covenants, agreements and provisos on the part of the Lessee herein contained'. (italics added)

Even if the forfeiture, or right of forfeiture, has been waived the tenant is not able to exercise the option.

While His Honour noted that in Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 Hollingworth J had assumed that an option if forfeited could be the subject of relief against forfeiture, His Honour said [at [114]] that:

the authorities show that the nature of a contractual right to a further term to be an irrevocable offer by the landlord that is not a proprietary right. The loss of such a contractual right will not involve unconscionable or inequitable conduct by a landlord in taking a benefit, by exercising strict legal rights, which might attract an equity to relief against forfeiture.

It is submitted the same reasoning will apply where a tenant fails to exercise an option by the date specified in the lease: that is the landlord's irrevocable offer cannot be accepted because there is a non-observance of a condition precedent to its exercise.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Thursday 29 September 2011

Detailed examination required to determine if a tenant has parted with possession of leased premises

Most leases preclude the tenant from parting with possession of the leased premises without the prior written consent of the lessor. It is not always easy to determine whether a tenant has parted with possession and invariably a detailed examination of the facts is required.

In Lontav Pty Ltd v Pineross Custodial Services Pty Ltd [2011] VSC 278 Hargrave J undertook such an examination following which he held that the tenant had not parted with possession despite strong prima facie evidence that it had done so.

In Lontav the tenant had been negotiating with a potential purchaser of the tenant's hotel business. The tenant and the purchaser had an understanding that no sale could take place until the purchaser had obtained the necessary liquor licencing approvals and the landlord's approval. Even though it was not clear that a purchase price had been agreed a "deposit" was paid.

The purchaser also engaged solicitors to help him transfer the liquor licence and a company was incorporated to hold the liquor licence ("the proposed assignee") as the licensee of the liquor licencee. The tenant sought the landlord's approval to an assignment of the balance of the term of the lease to the proposed assignee. The lessor refused to consider the proposed assignment until all overdue rent and outgoings were paid in full.

The tenant signed the application to transfer its liquor licence to the proposed assignee. The liquor licence transfer application form required that there be confirmation that "settlement has occurred" before a licence would be issued. Hargrave J interpreted this to mean that there had to be confirmation that the sale of business contract had been settled and the tenant had assigned the lease.

By mistake a new liquor licence was issued to the proposed assignee. The principal of the tenant was diagnosed with a serious illness with the consequence that the tenant and the principal of the proposed assignee ("the manager") entered into a management agreement to manage the tenant's business. This agreement required the manager to guarantee the financial commitments made by the tenant and losses incurred by the tenant from the date of his appointment.

The manager commenced managing the hotel business and despite him not being authorised by the management agreement to do so, he paid rent and staff using the proposed assignee's bank account rather than the tenant's bank account. The proposed assignee also paid for significant renovations and was noted on an insurance certificate as an insured.

Hargrave J approached the question of whether the tenant had parted with possession by determining whether the management agreement, if implemented according to its terms, had the effect that the tenant retained legal possession of the premises. His Honour decided that because of the seriousness of the illness suffered by the principal of the tenant, no variation to the management agreement should be inferred from the tenant's acquiescence in the manager's departure from the management agreement.

His Honour decided that upon the proper construction of the management agreement the tenant had not parted with possession, but because of other breaches of the lease the landlord was entitled to terminate the lease and had done so. The tenant was granted relief against forfeiture.

For those interested in examining when a tenant can be said to have parted with possession have a look at the Queensland Court of Appeal decision in ACE Property Holdings Pty Ltd v Australian Postal Corporation [2010] QCA 55.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Monday 26 September 2011

Tenancy in common trumps joint tenancy

When property is purchased in joint names and one party dies the question of whether the proprietors held the land as joint tenants or tenants in common invariably arises.

The answer is significant because if the parties were joint tenants the whole of the land remains with the surviving joint tenant. The law concerning joint tenancies and tenancies in common was recently reviewed in detail in Sacks v Klein [2011] VSC 451.

In Sacks two brothers purchased a flat as as joint proprietors as an investment. The mortgage loan was made to them jointly and severally. One brother died and the survivor claimed to be entitled to be registered as the sole proprietor and was so registered.

The administrator of the deceased’s estate sought a declaration that the survivor held the land on trust for himself and the plaintiff as tenants in common in equal shares. Sacks contains an excellent summary of the relevant legal principles and provides a good example of the analysis that needs to be undertaken in determining what the parties’ intentions were when the land was purchased. In summary the legal principles are:

(a) Where property is conveyed to two or more persons who are named as transferees without further specification as to whether they hold the title as joint tenants or tenants in common, they are deemed by operation of s.33(4) of the Transfer of Land Act 1958 to hold the legal estate as joint tenants. But that section does not preclude the operation of equity.

(b) In the absence of evidence that the transferees hold a different intention, equity will follow the law. However, equity favours tenancies in common and even “slight circumstances” are enough to indicate that the parties do not intend to hold property as joint tenants.

(c) Prima facie, the provision of purchase money in equal shares is consistent with an intention to hold property as joint tenants. But equity will presume an intention to hold the beneficial interest as tenants in common where, among other things, a mortgage is made to them jointly, or where the property is acquired by partners or participants in a joint undertaking.

(d) The application of the equitable presumption was not confined to formal business structures; an informal joint business venture or undertaking would still give rise to equities leaning towards a tenancy in common of the beneficial interest.

(e) The equitable presumption may be rebutted by evidence of a common intention by the co-owners to acquire the property as joint tenants; the common intention must be actual and not presumed. If there is ambiguity at to the existence of a common intention the court will lean towards a construction which creates a tenancy in common rather than a joint tenancy.

(f) If the parties describe their interests in words which suggest distinct shares are to be held, their words prevent the creation of a joint tenancy. The evidentiary threshold needed to establish a division is easily met because:

"....anything which in the slightest degree indicates an intention to divide the property must be hold to abrogate the idea of a joint tenancy and to create a tenancy in common" (Robertson v Frazer (1871) LR 6 Ch A 696 at 699).

Hargrave J held that the brothers purchased the land as a joint business undertaking and therefore the equitable presumption of tenancy in common applied with the consequence that the survivor had to rebut the presumption by “clear and cogent” evidence. Despite finding that the brothers agreed to be registered as joint tenants Hargrave J held that the brothers intended to divide their interests in the flat equally and therefore the administrator’s claim succeeded.

Thanks to Elizabeth Michael for mentioning this case to me.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Friday 23 September 2011

Finding Cases, Legislation and Information Using Austlii, some useful links

This is a link to Australian Case Law and Legislation for each State and Territory.

You can download the application free for IPADS or straight to your phone and or your laptop, stand alone PC.

The Link for PC's is

http://www.austlii.edu.au/

Link to download to IPAD, Iphone and Apple Devices

https://itunes.apple.com/au/app/austlii/id440459400?mt=8

Downloading for Android Phones

https://play.google.com/store/apps/details?id=au.edu.austlii.mobile.android&hl=en

Helpful Links ( Samples)

http://www.findlaw.com.au/default.aspx

http://caseview.com.au/

http://samhopperbarrister.com/

http://townplanningbarrister.com/

http://lawtermfinder.mq.edu.au/

Tuesday 20 September 2011

Registrar of Titles fails to comply with Model Litigant Guidelines

There is a translation key(widget) this blog for ease of reading for non-English speaking members of the public or professionals. http://roberthaybarrister.blogspot.com.au/

The Registrar of Titles has been criticised by the Court of Appeal for its conduct in a proceeding brought by a plainiff under s.110 of the Transfer of Land Act 1958.

Section 110 provides, among other things, that a person who sustains loss or damage by reason of an amendment of the Register is entitled to be indemnified.

Solak alleged that an imposter fraudulently obtained a loan in his name from a bank and secured the loan by a registered mortgage over his land. The claim to have the loan agreement and mortgage discharged failed due to the indefeasibility provisions of the Act. S

ee: Solak v Bank of Western Australia [2009] VSC 82.

Solak then commenced a proceeding against the Registrar seeking an indemnity under s.110 for the loss he suffered by registration of the mortgage. The Registrar was not a party to the first proceeding. Among other things, the Registrar was going to argue that Solak had suffered no loss because non-compliance with the Consumer Credit Code resulted in the mortgage being unenforceable; this had not been argued at trial and therefore there was the risk of inconsistent judgments.

The Registrar successfully applied for summary dismissal on the grounds of Anshun estoppel. See: Solak v Registrar of Titles (No. 2) [2010] VSC 46. It is unusual for a party to assert Anshun estoppel in proceeding where it was not a party to the earlier proceeding. In Solak v Registrar of Titles [2011] VSCA 279 the Court of Appeal overturned the summary dismissal decision and held that the Registrar had not complied with the Model Litigant Guidelines that govern the behaviour of the State of Victoria and its agencies in litigation.

Warren CJ (with whom Neave JA agreed) held that there were “a number of serious difficulties….in relation to the Credit Code point” particularly because of its potential to undermine the doctrine of indefeasibility [38]-[39]. Hargrave AJA held that the Credit Code point was "wholly without merit" [94]. After reviewing the cases on Anshun estoppel Warren CJ said at [70]:

“All of the Australian cases to which the Court was referred where a defendant was not a party to the first proceeding was able to rely on Anshun estoppel in the second proceeding involved the estopped plaintiff attempting to assert in the second proceeding some proposition inconsistent with the judgment in the first proceeding. Even if such a collateral attack by the plaintiff is not a necessary precondition for Anshun estoppel, its absence is a significant factor militating against a finding that Anshun estoppel has arisen”.

Solak was not attempting to assert a proposition inconsistent with the judgment in the first proceeding. Her Honour held that the first proceeding determined the enforceability of the mortgage and it was at that point that Solak suffered loss and the Registrar could not undo this by showing in a subsequent proceeding that the mortgage was unenforceable. Warren CJ held that the Registrar had failed to comply with its obligations as a model litigant because the Credit Code point was so tenuous. Her Honour said [88]:

It is puzzling that the government agency entrusted with administering the Torrens system would advance the Credit Code point. Furthermore, the Registrar appears to have forgotten that he is administering a beneficial fund. The purpose of the fund is not to accumulate money but to provide compensation to persons who are deprived of an interest in land by the operation of the indefeasibility provisions. The Registrar’s primary role is to ensure that persons who are entitled to compensation receive it. The responsibility to protect the fund from unmeritorious claims is not paramount. The Registrar 'has no legitimate private interest of the kind which often arises in civil litigation. [He] acts, and acts only, in the public interest'".

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Friday 9 September 2011

Can a landlord's failure to comply with s.52 consitute repudiatoryconduct?

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Does a landlord's failure to comply with its obligations under s.52 of the Retail Leases Act 2003 to maintain premises in "a condition consistent with the condition of the premises when the retail premises lease was entered into" constitute repudiatory conduct?

This issue was raised in C & A Delaveris Pty Ltd v Bretair Pty Ltd [2009]VCAT 1663 [28], [79] and [80] but not ultimately decided. The implication of a statutory obligation as a lease covenant “invites the application of the full range of the general law principles with respect to competing covenant obligations” (Croft and Hay Retail Leases Victoria, para [70,005]).

In Delvaris the Tribunal considered the relationship between the usual “no deductions” rent covenant and a statutory repair covenant. The tenant withheld rent because of a failure to carry out urgent repairs. Delvaris concerned ss25 and 47 of the predecessor to the 2003 Act but those provisions are the same as ss.52 and 94 of the 2003 Act. Section 94 renders void any provision that is contrary to or inconsistent with the Act. In refusing an application for possession the Tribunal said at [84]:

“It is in accordance with well established practice to allow a setoff of the liquidated sum incurred by a tenant in meeting a repair obligation owed by the landlord and reducing the rental liability accordingly Lee-Parker v Izzet [1971] 1 WLR 1688, 1692-3 per Goff J. The amount of the outlay is liquidated and so the complication relating to unliquidated setoffs do not exist.”

By reason of s.94 of the Act, where set-off and similar arguments are raised with respect to s.52, the section’s terms or operation cannot be abrogated by lease provisions such as a rent clause that requires the payment of rent "without deduction". Deputy President Macnamara said the following about this issue at [79]:

“It seems to me arguable first, that the withholding or at least delay of the payment of rent was justified and secondly, that there were no threats of illegal action which could be regarded as economic duress in the circumstances. It will be recalled that the covenant to pay rent under this lease was a covenant to pay ‘without deductions’.

The authorities are not at one as to whether the inclusion of these words is sufficient to prevent any equitable setoff being relied upon to impeach the demand for rent. For the reasons which I gave in Wytell Pty Ltd v Glowinski [2006] VCAT 454 the balance of authority in Victoria favours the view that the words ‘without deduction’ exclude a tenant from relying upon equitable set offs to impeach the demand for rent.

Here, however, the covenant which the tenant alleged was being breached was one which in accordance with Section 25 of the 1998 Act as amended, the lease was ‘taken to provide’, that is, it was a statutory implied covenant.

Section 47 of the 1998 Act provides that a provision in a retail lease is void to the extent that it claims to ‘exclude the application of any provision of this Act’. In my view, the inclusion of the words ‘without deduction’ in the covenant to pay rent is avoided by Section 47 to the extent that it limits the effect that the statutory implied covenant to repair would otherwise have, hence a breach of the repair covenant would be available as a setoff in the present case….it is clear that withholding rent in the circumstances described or delaying its payments was not a flagrant breach of the terms of the lease and obviously illegal.

More pertinently since this step was taken to compel the lessor to do what I have held it was obliged to do any way under the terms of Section 25.”

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Thursday 8 September 2011

Put in repair obligations not contrary to s.52 of the Retail Leases Act2003

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In Retail Leases Victoria (Croft and Hay, LexisNexis) expressed the view (at para [70,005]) that a repair obligation imposed on a tenant that went beyond the obligation imposed on a landlord under s.52 of the Retail Leases Act 2003 would not be void under s.94 on the basis that it was contrary to or inconsistent with s.52.

The authors suggest that a provision in a lease that imposed a “put in repair” obligation on the tenant and which obliged it not to pick up the landlord’s "keep in repair" obligation under s.52, but rather, to place the premises, plant and equipment and fixtures and fittings in a higher standard of repair than they were in “when the retail lease was entered into” would be effective. Croft and Hay state (at para [70,005]) that a repair covenant that required the tenant to make up the "gap" between the fruits of a landlord's "keep in repair" covenant and a "put in repair" covenant" might be effective provided the lease provisions clearly established a capital works obligation on a tenant at its expense for the purposes of s.41(2).

In the authors' view there appeared to be no reason why the landlord could not enforce this obligation and, if necessary, recover the cost of the tenant's repair obligations as an "outgoing" (as defined in s 3) under s 39 . Croft and Hay's views were adopted by VCAT in Computer & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd [2010] VCAT 2054 (at para [199] to [205]; see in particular para [203]) in deciding that a clause in a lease which required the tenant to contribute $3300 towards the cost of an air-conditioning system was a “put in repair” obligation with the consequence that the tenant had to reimburse the landlord for that cost.

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Tuesday 30 August 2011

Apology for the incorrect start date for Part 2D Consumer Affairs Legislation Amendment (Reform) Act 2010 (Vic).

Please take note - Correction

Yesterday I posted a blog stating that the new Part 2D of the Fair Trading Act 1999 (Vic) would commence on 1 September 2011. Part 2D is contained in Section 3 of the Consumer Affairs Legislation Amendment (Reform) Act 2010 (Vic).

Section 2(4) of that Act refers to the default start date of 1 September 2011.

However, Section 22 of the Consumer Acts Amendment Act 2011 (Vic) amends the default start date of the Consumer Affairs Legislation Amendment (Reform) Act 2010 (Vic) to 30 June 2012.

Thanks to Karen Cheng for alerting me to this.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.

Monday 29 August 2011

Goods left on premises after the expiry or termination of a lease

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On 1 September 2011 the law governing goods left on leased premises following the termination of a lease will be governed by Part 2D of the Fair Trading Act 1999. Part 2D replaces the repealed ss.42A to 42F of the Landlord and Tenant Act 1958. Part 2D applies to “goods under bailment” (s.32ZS(1)).

A landlord is not usually the voluntary recipient of goods left on leased premises. The drafters of the legislation have assumed that a bailment exists in the absence of a conscious and willing assumption of the possession of the goods; they do not appear to have been concerned about Palmer’s statement that the approach of the English courts has been to deny that the involuntary recipient of goods is a bailee (Palmer, N.P, Palmer on Bailment, 2009, Sweet & Maxwell, page 703).

Part 2D also fails to include a satisfactory definition of “bailment”. Section 32ZP of the proposed Part 2D of the Fair Trading Act defines “bailment” as including:

“bailment for reward, bailment in the course of business, gratuitous bailment, involuntary bailment and any sub-bailment”. (underlining added)

Unfortunately the expression “involuntary bailment” is not defined. Part 2D would have no application at all if VCAT or a court were to determine that a bailment relationship did not arise between a landlord and a tenant with respect to uncollected goods in premises following the expiry or determination of the lease.

A landlord could face the risk of being liable in conversion if it disposed of the goods. The legislation appears to be mainly concerned with ensuring that the bailee is paid moneys owing in respect of goods; however, a landlord is not usually owed money with respect to goods: the landlord is usually owed rent or outgoings. Part 2D establishes different regimes for the disposal of goods with each regime dependent on the value of the goods. The relevant values are: less than $200; less than $5000 and more than $5000. Part 2D does not affect the right of parties to a lease to make an agreement about the disposal of uncollected goods (Section 32ZS(6)).

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Tuesday 23 August 2011

Further elaborations on s.52 of the Retail Leases Act

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Section 52 of the Retail Leases Act 2003 implies into a retail premises lease a term that:

"The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into -

(a)    the structures of, and fixtures in, the retal premises lease; and

(b)     plant and equipment at the retail premises; and

....." (s.52(2))

In Savers INC (ARB 075 452 185) v Herosy Nominees [2011] VCAT 1160 the tenant claimed that the landlords of two premises that the tenant operated as a single shop had failed to maintain the premises in good repair: in particular it was alleged that the roof, drainage and floors had fallen into poor repair and caused consequential damage within the premises.

Breaches of the leases and s.52 of the Retail Leases Act 2003 were alleged. The tenant sought orders that the landlords undertake repairs.   The leases (and earlier leases to which the landlords and tenant were parties) contained terms that obliged the landlords to undertake certain repairs to the premises; these terms were more onerous than those imposed by s.52 (“the good repair and condition terms”).

The landlords contended that s.52 limited their obligations - that is because of s.94 of the Act it was not possible to “contract out” of s.52 and the good repair and condition terms were either contrary to or inconsistent with s.52 and therefore void.

The Tribunal rejected this argument. It was also argued that s.52 did not extend to that that part of a building “including common areas (such as the roof or perhaps the sub-floor) that is not part of the premises demised to the lessee”.

The Tribunal rejected this submission on the basis that a “canny landlord” could attempt to get around s.52 by expressly excluding areas such as the external structure from the definition of demised premises but at the same time impose a separate obligation upon the tenant to maintain those exterior parts of the building which did not form part of the demise.

Because the good repair and condition terms had appeared in earlier leases the Tribunal was able to determine what state the premises should have been in and it was this standard that was applied in determining what the condition of the premises were when the lease was entered into for the purpose of s.52; the landlords could not take advantage of their failure to comply with the good repair and conditions terms by seeking to rely on the condition the premises were in fact in when the lease was entered into.

The Tribunal also held that an agreement to settle a dispute between a landlord and a tenant was not “contemplated by section 94”; it appears that the Tribunal was saying that s.94 cannot be relied upon to void a provision in terms of settlement.

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Wednesday 10 August 2011

Setting off damages claims against the rent

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At common law a tenant may not set-off a damages claim against a landlord’s claim for rent (Meagher, Gummow & Lenane’s Equity Doctrines and Remedies, 4^th ed, para [37,045], p1056).

However, a tenant may claim an equitable set-off provided that the tenant’s equity “impeaches” the landlord’s title to the demand for rent. See: British Anzani (Felixstowe) Ltd v International Management (UK) Ltd [1980] QB 137; Walker v Department of Social Security (1995) 56 FCR 356; Forsyth v Gibbs [2009] 1 Qd R 403.

The case of MEK Nominees Pty Ltd v Billboard Entertainment Pty Ltd (1993) V ConvR 54-468 is a classic example of the application of the principle. In MEK the tenant was in arrears of rent.

The tenant alleged that the landlord had breached the covenant of quiet enjoyment with the consequence that its business had fallen away to the extent that it had a damages claim that exceeded the arrears of rent.

The tenant successfully resisted an application for summary judgment for possession on the ground that it had an equitable set-off; that is its damages claim had such a nexus to landlord’s claim as to impeach the landlord’s claim.

A tenant’s right of equitable set-off against rent may be excluded by clear words. See: Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689.

Victorian courts have generally held that a lease that requires the payment of rent “without deduction” precludes a tenant from claiming an equitable set-off. See: Beach J’s decision in Citibank Savings Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168 (‘without any deduction whatsoever’); see also MEK Nominees v Secure Parking [2000] VSC 406; Novawest Constructions Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205.

There are decisions to the contrary in other jurisdictions: See: Connaught Restaurants Limited v Indoor Leisure Limited [1994] 1 WLR 501; Re Partnership Pacific Securities Limited [1994] 1 Qd R 410. This week the Full Court of the Federal Court held obiter that a rent covenant requiring the payment of rent “without any deductions whatsoever” precluded the availability of equitable set-off. See: Norman; in the matter of Forest Enterprises Limited v FEA Plantation Limited [2011] FCAFC 99 at [180] – [202]. Norman contains a comprehensive discussion concerning the principles governing equitable set-off.

In VCAT, Beach J's decision in Simon Fredericks has been followed. See: Wytell Pty Ltd v Glowinski [2006] VCAT 454.

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Tuesday 9 August 2011

Quirk in s.64 nothing to get excited about

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A quirk in s.64 of the Retail Leases Act 2003 has caused some excitement. recently.

Section 64 applies where a retail premises lease does not have an option to renew the lease for a further term. At least 6 months and no more than 12 months before the lease term ends the landlord must give written notice to the tenant either offering the tenant a renewal of the lease or informing the tenant that the landlord does not propose to offer the tenant a renewal ("initial notice")(s.64(2)) .

If the landlord fails to give the initial notice the landlord must give the tenant a notice containing the same information as the initial notice ("the second notice") and the lease continues until the day specified in the second notice which must be at least 6 months after the second notice is given or the tenant gives the landlord a notice under s.64(5) ("the tenant's notice") (s.64(4)). If the landlord fails to give the initial notice the tenant may, irrespective of whether the landlord has given the later notice, give the tenant's notice terminating the lease "from a day that is not earlier than the day on which the term of the lease expires" (s.64(5)).

The section does not specify the latest date by which the tenant can terminate the lease.

The question arises whether the tenant's notice can nominate a day many years in the future for the termination of the lease. In my view, the answer is no: if the tenant gives a tenant's notice after the landlord has given the second notice the tenant's notice can terminate the lease from a date earlier than that specified in the second notice, but cannot extend the date referred to in the second notice; in my view the purpose of the tenant's notice is to enable the tenant to terminate the lease from a day earlier that that specified by the landlord.

If the landlord does not serve the second notice and the tenant serves a tenant's notice the date specified in the tenant's notice will be the date the lease expires; however, if the landlord then serves the second notice the date specified for termination of the lease will be the relevant date provided it is at least 6 months after the second notice is given.

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Friday 5 August 2011

Deposits in sales of land

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In general a contractual provision that requires a party in breach of contract to pay or forfeit a sum of money is unlawful as a penalty unless such provision can be justified as being a payment of liquidated damages being a genuine pre-estimate of the loss which the innocent party will incur by reason of the breach.

One exception to this general rule is the provision of the payment of a deposit by the purchaser on a contract for the sale of land. Ancient law has established the forfeiture of such a deposit (customarily 10% of the contract price) does not fall within the general rule and can be validly forfeited even though the amount of the deposit bears no reference to the anticipated loss to the vendor flowing from the breach of contract.

The special treatment given such deposits derives from the ancient custom of providing an earnest for the perform of a contract in the form of giving either some physical token of earnest (such as a ring) or earnest money. The special treatment given to deposits could be open to abuse if parties could avoid the rule that renders penalties unenforceable by attaching the label "deposit" to any penalty.

The courts have held that parties cannot label an extravagant sum as a "deposit" and thereby avoid the sum being a penalty. See: Stockloser v Johnson [1954] 1 QB 476 per Denning LJ at 491; see also Workers Trust Bank v Dojap Ltd [1993] 1 AC 573. The Workers Trust case contains an interesting discussion about deposits in land sales.

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Friday 29 July 2011

Amending the "interest" claimed in a caveat

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Mistakes are often made in describing the interest claimed in a caveat. Is it possible to amend the caveat to claim the correct interest?

Macaulay J considered this issue in Percy & Michele Pty Ltd v Gangemi [2010] VSC 530. where the interest claimed was "estate in fee simple" when it should have been "an equitable interest as a chargee".

The power to amend a caveat is derived from the discretionary power in s.90 of the Transfer of Land Act 1958 for the court to "make such order as the court thinks fit".

After considering Midwarren Estates Pty Ltd v Retek and Stivic [1975] VR 575 where Menhenitt J was of the view that s.90(3) did not authorise an amendment of the estate claimed, His Honour said at [101]:

"Having referred to these authorities, and canvassed these views, I do nonetheless recognise that the power expressed in s 90(3) is wide and unqualified. Ultimately, the better view may be that although the power is to be construed as being wide enough to amend the estate or interest claimed, in appropriate circumstances, nevertheless when exercising its discretion the court should generally be less inclined to amend the interest or estate claimed than to amend the grounds of the claim or the scope of the protection asserted."

In refusing the application to amend the interest claimed His Honour at [104]-[105] identified four factors relevant to the exercise of the discretion:

(a)    the amendment sought is to the interest claimed and not just the grounds of claim or the scope of the protection;

(b)    the circumstances in which the error was made;

(c)   the court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then “fixed up later”; caveats act as an interlocutory injunction (albeit by an administrative act) and can have powerful and serious consequences; wrongly formulated caveats should not easily be tolerated;

(d)    the overall merits of the claim for a caveatable interest of the kind which is sought by the amendment; in other words, it should have regard to all of the same considerations which arise on the application of removal for a caveat in the terms sought.

His Honour refused the application.

See also Martorella v Innovision Developments Pty Ltd [2011] VSC 282.

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Thursday 28 July 2011

Deemed assignments and landlord's consent

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Leases commonly deem there to be an assignment of the term of the lease if change in the principal shareholding of the tenant or the directors of the tenant takes place that that alters the effective control of the tenant.

The landlord's written consent is usually required to such an assignment. If there is a term in the lease that excludes the operation of s.144 of the Property Law Act 1958 the following question arises: does the landlord have an absolute right to refuse consent or is it subject to any duties in considering whether to grant or withhold consent to the assignment?

In Lindholm v Tsourlinis Distributors Pty Ltd [2011] FCA 195 Finkelstein J held at [49] that a landlord in considering whether to grant or withhold consent is "bound to act in good faith".

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Thursday 21 July 2011

What is a 'tenant in possession": s42(2)(e) of TLA

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In Victoria a purchaser of land takes the land subject to "the interests of a tenant in possession of the land". See: s.42(2)(e) of the Transfer of Land Act 1958. The section protects a person who is in actual occupation of the land.

Finkelstein J said the following in Money for Living (Aust) Pty Ltd (Administrators Appointed) v Money for Living (Aust) Pty Ltd (Administrators Appointed) (No 2) [2006] FCA 1285 at [24]–[25]:

".....The effect of s 42(2)(e) is that the estate of a registered proprietor of land (including the proprietor of a mortgage) is subject to the rights of a tenant in possession. In this area the relevant principles are clearly established. The first is that the possession of a tenant is notice of any right of the tenant affecting the land: McMahon v Swan [1924] VLR 397 at 406. The second is that, as Dixon J confirmed in Burke v Dawes (1938) 59 CLR 1 at 17–18, s 72 of the Transfer of Land Act 1928 (Vic) (which is the forerunner of s 42) was not intended to apply merely to a tenancy as commonly understood. See also Downie v Lockwood [1965] VR 257 at 259 where Smith J said “As appears from the cases the exception in s 42 (2) (e) is to be widely construed; and it is to be treated as producing the result that “any person in actual occupation of the land obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which his occupation is incident, provided that at law his occupation is referable to a tenancy of sort, whether at will or for years”.

Thus, for the purposes of the section a purchaser under a contract, who is given possession by the vendor and is only a tenant at will, is protected in respect of his equitable ownership: Robertson v Keith (1870) 1 VLR(E) 11. So, too, is a vendor who remains in possession until the purchase price is paid: he is a tenant “whatever might be the legal denomination of the tenancy”: The Commercial Bank of Australia Limited v McCaskill (1897) 23 VLR 10 at 12.

It has also been held that an equitable life estate will prevail over a subsequent registered interest: Black v Poole (1895) 16 ALT 155."

(See also Haslam v Money for Living (Aust) Pty Ltd [2008] FCA 1536 at [19])

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Wednesday 20 July 2011

s.42(2)(e) of Transfer of Land Act 1958

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Traditionally leases in Victoria have not been registered because of the protection afforded by s. 42(2)(e) of the Transfer of Land Act 1958 which provides that :

"....land which is included in any folio of the Register or registered instrument shall be subject to -

(e) the interests of (but excluding any option to purchase) of a tenant in possession of the land;"

Because of s.42(2)(e) any purchaser of the relevant land was bound by the lease.

The reference to "tenant in possession" means a person in actual possession of the land. See: Burke v Dawes (1937-38) 59 CLR 1 at 17-18; Balanced Securities Ltd v Bianco [2010] VSC 162 at [79].

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Friday 15 July 2011

Section 146 notices

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There is a common misconception that receipt of a valid notice under s 146(1) of the Property Law Act 1958 requires the tenant to rectify the defaults alleged within the time specified.

The purpose of a notice is to give the tenant an opportunity to consider its position and give a response: See: Primary RE Limited v Great Southern Property Holdings Limited [2011] VSC 242 [147].

If the breach is capable of remedy, an adequate response may be to admit the breach and propose a course of remediation. See: Primary RE [147]. In Primary RE the tenants had failed to comply with lease and forestry agreements. At [132] Judd J said that a “sufficient response” by the tenant to the notices would have been to undertake to recommence management of the plantations and perform its obligations under each lease and to agree to pay compensation for any damage to the reversion. At [147] His Honour said:

“…having received the noticed of default, a sufficient response from the tenant to avoid forfeiture, re-entry or termination, would have been to recommence management of the plantations in compliance with its obligations under each lease and forestry agreement, coupled with a proposal to pay reasonable compensation for any injury to the reversion. In my view it would not have been necessary for the tenant to do more in order to avoid the risk of termination, provided the tenant had the capacity and communicated a genuine intention to do as proposed. Nothing of the kind was communicated by the tenant to any of the landlords. The fact that the remediation work, identified in the notices, might take one or more years was not a determining factor in the calculation of a reasonable time within which to respond.”

As to what is a "reasonable time" for the lessee to respond to a statutory notice, Judd J said at [140} that this “depends upon the purpose for which the notice is given, the nature of the breaches alleged and what is required to be done to avoid forfeiture”.

A reasonable time is not the time necessary to actually undertake the work.

The reference in s 146(1) "compensation" is directed to loss suffered as a consequence of damage to the reversion and is not “intended a substitute for remediation” ([133]). The landlord need not specify in the statutory notice the amount of "compensation" necessary to satisfy the demand.

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Thursday 14 July 2011

The fog is beginning to clear

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Section 52 of the Retail Leases Act 2003 implies into a lease a term that the "landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into:

"(a)      the structure of, and fixtures in, the retail premises; and

(b)      plant and equipment at the retail pemises; and

(c)      the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

The section was considered in  Computers & Parts Land Pty Ltd [2010] VCAT 2054 where it was held that a landlord was not required to maintain premises in “state of disrepair" that was "identical" to the state of disrepair when the lease was entered into; the state of repair "need not be any better than at the commencement of the lease" but had to be "the same benefit to the lessee as was agreed to be provided by the demise" (para [75]).  Section 52 was a "keep in repair" obligation as opposed to a "put in and keep in repair" obligation (paras [84] and [85]). The expression “keep in repair”:

“…could mean, in extreme circumstances, that the only course open to a landlord is to replace some aspect of rented premises, but only to the degree that it is necessary to give the tenant the same conditions as at the commencement of the tenancy.”

If parts failed they had to be replaced with replacement parts that "in the absence of adequate second hand parts, might need to be new" (para [85]). While s 52 did not mandate compliance with any legislative standard, a landlord could not contravene "a building or related law or regulation" and if there were an "aspect of the building that was legal at the date of its construction but is no longer legal, repair of that aspect of the building would not be a betterment for the Tenant."(para [88]).

The Tribunal rejected contentions that a landlord had to re-design an air conditioning system to remove design flaws or anomalies (para [90]) and replace the system with one that operated better than the original system (para [96]) but accepted that there might be circumstances where a roof had to be replaced rather than repaired if it were to survive the duration of the tenancy (para [127]).

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