Chan & Anor v Cresdon Pty Limited

The applicants, Mr and Mrs Chan, sought special leave to appeal to the High Court of Australia from a decision of the Full Court. The dispute concerned a lease agreement which, due to its term exceeding three years, required registration under the *Real Property Act 1861* (Qld) to be valid at law. The primary judge had entered judgment for the landlord against the tenant for moneys claimed but refused judgment against the guarantors, including the applicants, on the basis that the unregistered lease was void at law. The Full Court, however, allowed the landlord's appeal, finding the lease to be good in equity under the doctrine of *Walsh v Lonsdale*, and extended this equitable principle to encompass the guarantors.

The central legal issues before the High Court were whether the doctrine established in *Walsh v Lonsdale*, which holds that an agreement for a lease, though unregistered, is good in equity as between the landlord and tenant, could be extended to third parties such as guarantors. Specifically, the court was asked to consider the status of guarantors when the lease in respect of which they provided their guarantee is void at law but enforceable in equity between the principal parties. This question arose in the context of Queensland legislation requiring registration of leases exceeding a certain term.

The applicants argued that the Full Court erred in extending the equitable doctrine of *Walsh v Lonsdale* beyond the relationship of landlord and tenant to include third-party guarantors. They contended that the doctrine, as understood and applied in previous cases, was confined to the direct contractual relationship between the parties to the lease. The High Court was therefore required to determine the scope of the equitable lease doctrine and its applicability to ancillary agreements, such as guarantees, when the underlying lease is not registered and thus invalid at law.

The High Court granted special leave to appeal.