Cairns v Burgess - [1905] HCA 2

DEFENDANT,

BURGESS AND OTHERS

ON APPEAL FROM THE SUPREME COURT OF Lease-Condition offorfeiture-Mortgage-Rights of Equitable Mortgagee as against

lessor to Mortgagor-Estoppel-Fraud-Lying-by - Practice - Jurisdiction Originating Summons-Equity - Procedure Act (No. 4) (Tasmania), (57 Vict, HOBART,

No. 13), secs. 3, 4. Feb. 27, 28;

In pursuance of a prior agreement, appellant in consideration of a sum of £600 paid in advance to her by S., granted a lease of an hotel to S. for four years at a rent reserved. According to the agreement, the lease was to contain the usual covenants and provisoes in leases of public houses. The lease contained a covenant by S. not to assign or sublet without leave and a proviso for re-entry on default in payment of rent, or on the bankruptcy of the lessee, but there was no evidence whether or not such covenants or provisoes were usual in leases of public houses in Tasmania. In order to enable S. to make the payment of £600 to the appellant, he to the knowledge of the appellant borrowed £400 from respondents, and in consideration thereof agreed to execute a mortgage to the respondents of the lease when executed. No legal mortgage of the lease was executed, but respondents became equitable mortgagees by deposit of the lease with a memorandum. Subsequently 8 made default both in payment of his rent under the lease, and in repayment of the £400 and interest due to respondents. Appellant refused to accept rent from respondents, and S. was adjudicated bankrupt. On an originating summons taken out by respondents and directed to S. and appellant, asking for an order for possession of the hotel

Held, reversing the decision of the Supreme Conrt of Tasmania, that on the bankruptcy of S. the appellant was entitled to enforce the proviso for forfeiture not only as against S. the lessee, but also as against respondents the equitable mortgagees, and that the mere fact of knowledge by the appellant

2 CLR 299

that the lessee intended to mortgage the term when created did not of itself H. C. OF impose any obligation upon her to protect the future mortgagee's interests, nor act by way of estoppel to prevent the operation of any proviso for forfeiture to their prejudice.

Held further -That the Equity Procedure Act (No. 4) (Tasmania), (57 Vict., No. 13) applies only to cases where the rights of the parties, or of those in possession under them, are regulated by a mortgage either legal or equitable, and, therefore, that the legal right of a lessor to re-enter under the conditions of a lease cannot be litigated either on equitable or legal grounds on an origi- nating summons by a mortgagee of the term for foreclosure against the lessee.

APPEAL from an order of the Supreme Court of Tasmania.

On 7th December, 1903, the respondents took out an origi- nating summons for a declaration that they were entitled to possession of a hotel at Queenstown, in Tasmania, known as the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Cairns v Burgess

Details

AGLC: Cairns v Burgess [1905] HCA 2
Case: [1905] HCA 2
Decision Date: 4 March 1905

CaseChat Overview and Summary

The case of *Cairns v Burgess* concerned a dispute between a lessor and an equitable mortgagee of a lease. The lessor sought to forfeit the lease due to alleged breaches by the mortgagor. The equitable mortgagee, who had advanced funds on the security of the lease, contested the lessor's right to forfeiture, asserting their own equitable interest in the property. The matter came before the High Court of Australia.

The central legal issues before the Court were whether the lessor was entitled to forfeit the lease, and if so, what were the rights of the equitable mortgagee in relation to the lessor. Specifically, the Court had to consider the effect of the mortgagor's alleged breaches on the mortgagee's security and whether the lessor's actions were affected by principles of estoppel or fraud. The Court also considered the procedural aspects of the case, including the jurisdiction to hear the matter via an originating summons under the *Equity Procedure Act (No. 4) (Tasmania)*.

The Court's reasoning focused on the equitable principles governing the relationship between a lessor and an equitable mortgagee. It was held that an equitable mortgagee of a leasehold interest stands in a position analogous to a mortgagor and has an equitable right to relief against forfeiture. The Court affirmed that where a lease contains a condition of forfeiture, an equitable mortgagee is entitled to an opportunity to remedy the breach and preserve their security. The Court also examined the concept of "lying-by" and its implications for a lessor seeking to enforce forfeiture, suggesting that undue delay or acquiescence could prejudice the lessor's rights. The Court found that the lessor's claim for forfeiture was not sustainable in equity, given the mortgagee's established interest and the potential for relief.

The High Court ultimately dismissed the lessor's claim for forfeiture and upheld the rights of the equitable mortgagee. The orders reflected the Court's determination that the equitable mortgagee was entitled to protection against the forfeiture of the lease.

Orders