D and L Design Pty Ltd v Designex (WA) Holdings Pty Ltd
[2007] WASC 192
•21 AUGUST 2007
D & L DESIGN PTY LTD -v- DESIGNEX (WA) HOLDINGS PTY LTD [2007] WASC 192
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 192 | |
| Case No: | CIV:1533/2007 | 13 JUNE 2007 | |
| Coram: | JOHNSON J | 21/08/07 | |
| 28 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's application allowed | ||
| B | |||
| PDF Version |
| Parties: | D & L DESIGN PTY LTD (ACN 093 539 194) DESIGNEX (WA) HOLDINGS PTY LTD (ACN 112 123 510) |
Catchwords: | Interlocutory injunction Continuation of interim injunction Lease for term of less than five years with option to renew Indefeasibility Survival of rights in personam |
Legislation: | Transfer of Land Act 1893 (WA), s 68, s 134 |
Case References: | Bahr v Nicolay (No2) (1988) 164 CLR 604 Breskvar v Wall (1971) 126 CLR 376 Conlan v Registrar of Titles (2001) 24 WAR 299 Frazer v Walker [1967] 1 AC 569 Grgic v Australian and New Zealand Banking Group Pty Ltd (1994) 33 NSWLR 202 Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 Mills v Stokman (1967) 116 CLR 61 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
DESIGNEX (WA) HOLDINGS PTY LTD (ACN 112 123 510)
Defendant
Catchwords:
Interlocutory injunction - Continuation of interim injunction - Lease for term of less than five years with option to renew - Indefeasibility - Survival of rights in personam
Legislation:
Transfer of Land Act 1893 (WA), s 68, s 134
Result:
Plaintiff's application allowed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Ms E C Hensler
Defendant : Mr B R Gannon and Mr D H Solomon
Solicitors:
Plaintiff : Marks & Sands
Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
Bahr v Nicolay (No2) (1988) 164 CLR 604
Breskvar v Wall (1971) 126 CLR 376
Conlan v Registrar of Titles (2001) 24 WAR 299
Frazer v Walker [1967] 1 AC 569
Grgic v Australian and New Zealand Banking Group Pty Ltd (1994) 33 NSWLR 202
Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407
Mills v Stokman (1967) 116 CLR 61
(Page 3)
1 JOHNSON J: The plaintiff, D & L Design Pty Ltd, leases from the defendant, Designex (WA) Holdings Pty Ltd, the premises known as Suite 2, No 90 King Street, Perth ("the premises"). The plaintiff operates a wholesale clothing business from the premises. The lease, which was due to expire in early March 2007, entitled the plaintiff to exercise an option to extend the lease for a further three years. Under the terms of the lease, the option had to be exercised in the three months before 2 December 2006.
2 The plaintiff asserts that it did exercise the option by sending a letter to the defendant's agent on 26 October 2006 ("the option letter") which read:
"We would like to take the option of the lease in 92 King Street, Perth, WA 6000 for another 3 years. Please contact us with the option market rental in your earliest convenience."
3 The defendant maintains that the option letter was never received by the defendant's agent. On 13 April 2007 the defendant sent a notice of termination to the plaintiff advising that the then monthly tenancy would terminate on 18 May 2007. By later correspondence the defendant advised that it would seek to take possession of the premises as from 25 May 2007.
4 On 25 May 2007 the plaintiff applied by chamber summons for an interlocutory injunction restraining the defendant from terminating the lease and re-entering the premises. On 25 May 2007 the plaintiff also filed a Writ of Summons with a general endorsement in the following terms:
"1. The Plaintiff's claim is for the specific performance of a Lease under the terms of which the Defendant leases part of the ground floor of 90 King Street Perth in the State of Western Australia to the Plaintiff. The Plaintiff's claim arises from the Plaintiff's exercise of an option to renew the Lease, or in the alternative, from a new lease negotiated and agreed between the Plaintiff and the Defendant.
2. Further, the Plaintiff claims damages from the Defendant for the Defendant's breach of contract in terminating the lease without cause."
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5 The application for injunctive relief was brought on as a matter of urgency and heard on 25 May 2007. By that time the defendant had sought to take possession of the premises by changing the locks. The defendant was represented at the hearing but due to the late notice of the application, counsel for the defendant was not in a position to adduce evidence in opposition to the application. Counsel did, however, make submissions and advised the Court of the basis of the defendant's objection to the orders being sought.
6 On behalf of the plaintiff, one of the directors, Wei Ping Ke, filed an affidavit. She deposed to the fact that she is also known and uses the name of Holly Ke. Ms Ke stated that she drafted, signed and posted to the defendant's agent the option letter. She then pointed to various pieces of correspondence between herself and the defendant's agent, after 26 October 2006, which she says shows that the parties were then negotiating over the rent that would apply to the three year option.
7 The first letter received after the option letter was dated 16 November 2006 and signed by Allison Hadlow, the Commercial/Retail Property Manager of Churchill K night, the defendant's agent. The letter notes that the current term of the lease expires on 2 March 2007 and has an option for a period of three years commencing 3 March 2007. The next paragraph is in these terms: "In the event that you exercise your option a Rent Review will fall due effective 3rd March 2007 in accordance with your Lease". The letter then advises, "in order to assist you in deciding whether to exercise your option" that the defendant would be seeking a gross rental of $57,433.50 per annum plus GST.
8 The letter in reply, signed by Vicki Ching from the Accounting Department on behalf of the plaintiff, advised that the plaintiff was unable to afford the new gross rental fee and stated that the plaintiff considered it deserved a better rate. However, the opening paragraph of the letter states: "We were pleased to receive your correspondence of 16/11/06 indicating new lease commencing at 3rd March 2007". By letter dated 28 December 2006 Ms Hadlow replied to Ms Ching and advised that the defendant was not willing to negotiate on the price and that they fully expected the price to be met.
9 On 17 January 2007 Ms Ching wrote to Ms Hadlow by letter incorrectly dated 17 January 2006. She expressed the plaintiff's disappointment that the defendant would not negotiate and added the following:
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- "However, we will still like to continue our tenancy at these premises. At this stage, we will employ the valuer to estimate the market value at above address."
10 On 16 February 2007 Ms Ching wrote a further letter to Ms Hadlow, also incorrectly dated as 16 February 2006, advising that the rental valuation report had been obtained and enclosing the report. The second paragraph of the letter is as follows:
"My employer, she decide to exercise her option with the valuer advise of total leasing fee AU$320,000 plus GST per annum at the premise mentioned."
11 In response, the defendant's submission was that the option letter was drafted as a facsimile. Jenkins J observed that the option letter did appear to be in the form of a facsimile. The defendant further submitted that the plaintiff's solicitors initially corresponded with the defendant's solicitors on the basis that it was a facsimile. It pointed to the fact that there was no transmission report that one would expect to accompany a facsimile, and neither was there any endorsement on the top of the document to indicate that it had been faxed. According to the defendant, it was only after its agents advised that it never received the option letter, and after the defendant's solicitors sought a transmission report in respect to the facsimile, that the plaintiff asserted that it was a letter rather than a facsimile that was posted to the defendant's agent. The defendant submitted that the plaintiff's position was not credible and that the Court should conclude that the option letter was neither posted nor sent by facsimile. In support of that submission, the defendant relied on the fact that the option letter has a signature on it which purports to be the signature of Ms Ke. Counsel for the defendant drew to the Court's attention that the affidavit filed by Ms Ke bore a signature which, at least to the untrained eye, was different from the signature on the option letter. The defendant also pointed to the fact that the correspondence between the parties which was subsequent to 26 October 2006 is inconsistent with the option letter having been sent or the plaintiff having otherwise given notice to the defendant's agent that it had exercised the option under the lease.
12 Whilst acknowledging that some of the matters raised on behalf of the defendant appeared to have some significance, Jenkins J noted that the only evidence she had before her was the affidavit of Ms Ke filed on behalf of the plaintiff in which she deposes to the fact that she drafted, signed and sent by normal post to the defendant's agent the option letter.
(Page 6)
- Her Honour expressed the view that she could not conclude that such was not the case when there was no evidence to the contrary, only inferences which the defendant had asked the Court to draw.
13 Jenkins J concluded that, if Ms Ke was correct, there was clearly a serious issue to be tried between the parties. On the basis that her Honour was not in a position to draw a contrary conclusion she determined that there was a serious question to be tried. Having concluded that damages would not compensate for the prejudice of losing possession of the premises where the plaintiff's business was conducted, Jenkins J concluded that the balance of convenience favoured the grant of a short injunction.
14 The terms of the injunction were that, until 15 June 2007, the defendant be restrained from terminating the lease, again changing the locks at the premises, interrupting the plaintiff's quiet enjoyment of the premises and re-entering the premises. The defendant was given liberty to apply to discharge the order and the plaintiff was given leave, within seven days, to file and serve a chamber summons to extend the interlocutory injunction.
15 On 1 June 2007 the plaintiff filed a chamber summons to extend the interlocutory injunction until further order. Ms Ke filed a further affidavit dated 1 June 2007 in support of the application. Ms Ke deposes to the fact that when she signs formal documents she signs the name "Wei Ping Ke". I note that both of Ms Ke's affidavits are in the name of "Wei Ping Ke". Although her signature on both affidavits is difficult to decipher, it appears consistent with the name "Wei Ping Ke". According to Ms Ke, when she signs everyday letters, she signs Holly Ke. Ms Ke states that she signed the option letter as Holly Ke and identified her signature on that letter. Ms Ke also deposes to the fact that her first language is Chinese. She can speak and understand English. She can read and write English but with some difficulty.
16 Ms Ke further deposes to the fact that she assumed the letter from Churchill Knight of 16 November 2006 was in response to her letter of 26 October 2006 and was advising of the new rent for the renewed term. As she did not like the amount of the rent, she gave that letter to her bookkeeper, Ms Ching, and told her to draft a response and show it to her, which she did. The response was sent on or about 30 November 2006. Although Ms Ke did not sign every letter sent by the plaintiff she did see and authorise a draft of all letters. She believed that the correspondence between the plaintiff and Churchill Knight on behalf of the respondent
(Page 7)
- was simply to negotiate the rent and that the option to renew the lease had been exercised by her letter of 26 October 2006. Ms Ke further states that in or about February 2007 she instructed her Perth manager to obtain a market valuation for the rent for the premises.
17 Finally, Ms Ke deposes to the significance of the location. She states that the plaintiff is a clothing wholesaler and that there are many clothing wholesalers on or about King Street. She further asserts that most clients come solely to King Street to buy from these wholesalers. Therefore the location of the premises is very important.
18 On 6 June 2007 I made orders entitling the defendant to file and serve by 7 June 2007 an affidavit in response to Ms Ke's affidavit. An order was also made for the plaintiff to file and serve an affidavit in reply by 12 June 2007.
19 The defendant has filed affidavits from Allison Lee-Ann Hadlow and from Remo Paolucci, a director and shareholder of the defendant.
20 Ms Hadlow deposes to the fact that she was the defendant's property manager for the premises for the period September 2005 to 31 May 2007. According to Ms Hadlow she did not receive prior to 14 May 2007 or at any time the original of the option letter or a copy either by facsimile, by post or by any other means. The relevant Churchill Knight file has been examined and the option letter is not on the file.
21 Ms Hadlow also maintains that she did not receive a response from the plaintiff to her letter of 16 November 2006 about the option. She stated that the first she became aware of any allegation that the option letter existed, had been sent, or the option was thereby exercised was on or after 14 May 2007. Ms Hadlow further states that during the period 3 September 2006 to 2 December 2006 she received no communication from anybody indicating that the plaintiff wished to exercise its option to extend the terms of its lease of the premises from 3 March 2007, other than the letter from Ms Ching of 30 November 2006 which indicated that the plaintiff would continue to lease the premises if the proposed rent in the extended term was reduced. Ms Hadlow states that the defendant never agreed to such a request.
22 Ms Hadlow further states that, as the plaintiff failed to exercise the option, it would become a monthly tenant under cl 17 of the lease document as from 3 March 2007. After the period for exercising the option expired, Ms Hadlow states that she had instructions from Mr Paolucci, director of the defendant, to discuss what rental would be
(Page 8)
- paid under such monthly tenancy. Ms Hadlow further states that, when the plaintiff communicated that it did not want to pay the rent that had been proposed for the monthly tenancy, she was instructed by Mr Paolucci to offer a surrender of the monthly tenancy.
23 In his affidavit, Mr Paolucci, states that he did not receive at any time the original of the option letter or any copy whether by facsimile, by post, or through any other means. Neither was he informed by Ms Hadlow or any other person representing the managing agent, Churchill Knight, that the plaintiff had exercised its option to extend the lease from 3 March 2006. Mr Paolucci states that he had not been aware of any allegation that the option letter existed and had been sent and the option had been thereby executed until after 14 May 2007.
24 According to Mr Paolucci the plaintiff became a monthly tenant of the premises as it had not exercised the option. After the period for exercising the option expired, he instructed Ms Hadlow to discuss what rental would be paid under such a monthly tenancy. Mr Paolucci deposes to the fact that, if the plaintiff would not agree to the rent that had been proposed for the monthly tenancy starting 3 March 2007, he instructed Ms Hadlow to offer a surrender of the monthly tenancy under the lease. The only other alternative that the defendant was prepared to consider was some form of determination by a valuer for the rent to be paid under the monthly tenancy under the lease. In the absence of agreement the defendant intended to bring the monthly tenancy to an end by notice.
25 Mr Paolucci also states in his affidavit that his daughter and his wife trade in partnership as Dilettante Pour Homme et Femme ("the partnership") and have done so since about 16 November 2006. Previously the partnership operated from Suite 10. However, it is said that Suite 10 is suitable for office use only and is not premises suitable for carrying out retail trade. Mr Paolucci further states that the partnership is ultimately intending to trade as a retail fashion boutique for men and women.
26 In or about late December 2006, early January 2007 Mr Paolucci told his daughter that the plaintiff had not exercised the option. The daughter indicated to him that the premises would be an ideal location for the partnership to trade from as a fashion boutique, provided the improvements on the premises underwent refurbishment and she advised Mr Paolucci of the nature of the refurbishments she required. According to Mr Paolucci, he told his daughter that he was prepared to rent the premises to the partnership and to make the required improvements
(Page 9)
- should the defendant and the plaintiff be unable to agree a suitable rent. The daughter was also told that she should take preliminary steps with respect to operating from the premises as he was not confident that the plaintiff would agree to an acceptable rent. Mr Paolucci further states that when the plaintiff indicated in early April 2007 that it would not pay the rent the defendant sought, he spoke to his daughter and informed her that he would arrange for the required refurbishments to be carried out if the partnership would agree to pay market rent. The necessary refurbishments, which would take eight weeks to complete, were to be performed by another company of which Mr Paolucci is a director. Mr Paolucci told his daughter that the partnership could commence leasing and trading from the premises as from in or about 16 to 23 July 2007 and could lease the premises for as long as it liked. The daughter agreed to those terms on behalf of the partnership.
27 Mr Paolucci states in his affidavit that, given the transaction was between a company associated with him and a partnership comprising his wife and daughter, the defendant's agreement to lease the premises to the partnership was not documented. According to Mr Paolucci, such formality did not seem necessary at the time of the agreement. This seems to me to be highly relevant to the issue of whether there is any real likelihood of the partnership taking action against Mr Paolucci if the premises do not become available. Mr Paolucci states that he has been informed by Ms Paolucci that she has not taken steps since early April 2007 to locate other premises from which the partnership could trade. That evidence is hearsay and in the absence of affidavit evidence from Ms Paolucci must be given little, if any, weight.
28 The affidavit contains further hearsay evidence to the effect that the daughter has informed potential suppliers that the partnership will be trading from the premises from mid to late July 2007. Stationery and business cards are said to have been printed listing the premises as the trading address and a copy of the business card and the invoice from Snap Printers is annexed to the affidavit. I note that the business cards do not identify the business which is said to operate from that location, merely referring to Diana Paolucci as director, nor do they indicate the nature of the business to be carried out. Similarly, the tax invoice from Snap Printers which is addressed to Ms Paolucci at the premises and which relates to the making of the business cards, in no way identifies the name or nature of the business.
29 Further, I note that the date of the tax invoice is 13 January 2007. It would appear that the business cards were ordered at a time when the
(Page 10)
- extent of the arrangement between Mr Paolucci and his daughter was that he was prepared to rent the premises to the partnership "should the defendant and the plaintiff be unable to agree a suitable rent". It was not until early April 2007 that the plaintiff "would not pay the rent the defendant sought". It would appear that, based solely on Mr Paolucci's statement that he was "not confident that the plaintiff would agree to an acceptable rent", and on being told that she should take preliminary steps with respect to operating from the premises, the daughter purchased business cards containing the address of the premises.
30 In his affidavit Mr Paolucci notes that a land title search for property owned by the plaintiff in Western Australia reveals that no property is owned by it. He also deposes to the fact that the plaintiff has continued to pay the rent on the premises in the same amount as the rent payable for the month 3 February 2007 to 2 March 2007. It is apparent that the plaintiff is paying at the rate which applied prior to the end of the period of the lease.
31 Although no further affidavit evidence has been filed on behalf of the plaintiff, counsel for the plaintiff advised the Court, from the bar table, that the reference in the correspondence from the plaintiff's solicitors to the option letter being a facsimile, was an assumption made by the solicitors based on the appearance of the letter and was not the subject of any instruction from the plaintiff. Because of the form of the information I am not prepared to rely on it. However, it can be observed that, if established by evidence, it would explain the change in the description of the option letter, on which the defendant places considerable emphasis, after the request was made by the defendant's solicitors for the confirmation of facsimile document. I would also note that no document has been produced which establishes that Ms Ke described the option letter as a facsimile or suggests that it was sent by facsimile.
32 In opposing the application to extend the injunction, the defendant has raised a legal issue, not dependent on making findings of fact, which is said to exclude the plaintiff's claim. It is submitted that, in the absence of a caveat over the premises based on the plaintiff's claim to have exercised the option under the lease, the operation of s 68 and s 134 of the Transfer of Land Act 1893 (WA) ("the TLA") is such that, upon acquisition of the premises, the defendant obtained an indefeasible title.
33 Under s 68 of the TLA, except in cases of fraud, the proprietor of land holds the land subject to the encumbrances notified on the registered certificate of title but free from all other encumbrances. Section 68
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- includes a proviso which states that the land is deemed to be subject to any prior unregistered lease for a term not exceeding five years to a tenant in actual possession, notwithstanding that the lease may not be specifically notified as an encumbrance on the certificate of title. However, the proviso also states that no option of renewal in the lease shall be valid as against a subsequent registered interest unless the lease is registered or protected by caveat.
34 Section 134 of the TLA relevantly provides:
"Except in the case of - (a) fraud … no person contracting or dealing with or taking or proposing to take a transfer or other instrument from a person who is or becomes the proprietor of any registered land lease mortgage or charge shall be required or in any manner concerned to inquire or ascertain the circumstances under or the consideration for which such proprietor or any previous proprietor thereof was or becomes registered or required or in any manner concerned to enquire or ascertain the circumstances under or the consideration for which any mortgage or other encumbrance was or is discharged or removed from the Register at any time prior to or simultaneously with the registration of such transfer or other instrument or to see to the application of any purchase or consideration money or shall be affected by notice actual or constructive of any trust or unregistered interest any rules of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud."
35 The effect of s 134 is to validate the title of the registered proprietor without the need to look into the history of the title or to make inquiries of the vendor or previous registered proprietor to ensure that the title passed is valid.
36 Reference is also made in a number of the relevant cases on this topic to s 137 of the TLA which entitled any beneficiary or other person claiming any estate or interest in land to lodge a caveat with the Registrar in an approved form forbidding the registration of any person as transferee or proprietor of the land until after notice of the intended registration or dealing be given to the caveator or unless the instrument effecting such estate or interest is expressed to be subjected to the interest of the caveator.
(Page 12)
37 The effect of s 68 is that, when the defendant acquired the premises, it obtained a title subject to the lease, as the period of the lease was less than five years, but not subject to an option of renewal in the lease because it was not registered or protected by caveat.
38 The defendant's claim to an indefeasible title is based on the following facts:
1. At the time the defendant bought the premises the plaintiff was in possession of the premises pursuant to a lease;
2. The lease was for a period of less than five years.
3. The lease to the plaintiff was not registered on the title nor protected by caveat.
4. The instrument of purchase did not provide that the purchase was subject to the lease.
39 Counsel for the defendant submits that the registration of the transfer of ownership of the premises occurred on 8 September 2005. However, there is no evidence before the Court of that fact. Ms Ke deposes to the fact that the plaintiff leased the premises from the original landlord in March 2004 and that the term of the lease was three years. Therefore there is evidence that the defendant acquired the premises after the lease was entered into and that the lease was for a period of less than five years. There is no evidence that the lease to the plaintiff was not registered on the title nor protected by caveat. However, it has not been suggested on the part of the plaintiff that the lease was registered or protected by caveat. Further, if the plaintiff's interest was the subject of a caveat there would be no need for these proceedings. In the circumstances it is clear that, other than insofar as fraud may be established, the relevant exceptions to indefeasibility do not apply.
40 The final matter is whether the instrument of purchase addresses the position with respect to the lease. There is no evidence of that matter before the Court and no request has been made for a copy to be produced or for time to arrange for production.
41 The defendant refers to three authorities in support of the proposition that its title to the premises is not subject to any option under the lease: Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 at 418 - 419; Breskvar v Wall (1971) 126 CLR 376 at 385 - 386 per Barwick CJ and Conlan v Registrar of Titles (2001) 24 WAR 299 at 326 - 330 per Owen J. In particular, the defendant submits that the circumstances in
(Page 13)
- Leros Pty Ltd v Terara Pty Ltd are indistinguishable from those that apply in this case.
42 The plaintiff relies on the decision in Bahr v Nicolay (No2) (1988) 164 CLR 604 which is said to be authority for the proposition that conduct of the registered proprietor can create an in personam right against the new registered proprietor. The plaintiff asserts that the actions of the defendant are such as to create a constructive trust which, in accordance with the decision in Bahr v Nicolay(No 2),is preserved notwithstanding the operation of s 68 of the TLA.
43 In Leros Pty Ltd v Terara Pty Ltd the respondent had in 1987 become the assignee of a lease of Torrens system land for a term of less than five years with an option of renewal for seven years. In July 1988 a bank lodged a caveat to protect its interest under a mortgage by sub-demise granted by the assignee. The statement of grounds annexed to the caveat specified the term of the lease but made no reference to the option. In September 1988 the lessor sold the land and the purchaser was registered as proprietor. In July 1989 the assignee lodged a caveat claiming an interest under the lease and the option. In March 1990 the land was sold to a purchaser, the appellant, who was aware of the lease and the option and who became registered as proprietor. The majority of the High Court (Mason CJ and Dawson and McHugh JJ) held that the assignee's interest under the option to renew was extinguished upon registration of the new owner as proprietor in September 1989 and could not be asserted against any later proprietor. In reaching that conclusion, the court applied the decision in Bahr v Nicolay (No 2).
44 The majority further held that the bank's caveat afforded protection to the lessee's interest to the extent necessary to protect the bank's subordinate interest: at 423. In reaching that conclusion their Honours considered whether the caveat sufficiently specified the Bank's interest as mortgagee by way of sub-demise so as to satisfy the requirements of s 137 of the TLA: at 422. The court concluded that the term "specify", referred to in the caveat form, should be understood in the sense of "mention definitely or explicitly". As the option was not considered to have been sufficiently specified by the Bank's caveat, only the lease and not the option, was protected by the Bank's caveat: at 423.
45 The appeal in Leros Pty Ltd v Terara Pty Ltd arose out of proceedings commenced by the respondent for a declaration that it had a valid option for renewal. The validity of the existing lease was not in dispute: at 416. In considering the effect of s 68 of the TLA, the court
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- noted that the purpose of the last proviso in the section, which relates to an option of purchase or renewal, is to ensure that no such option should be valid against the person having the benefit of the subsequent dealing unless the instrument creating the lease is registered or a caveat protecting the lease is lodged: at 416, 418. The proviso is said to give expression to the essential principle of the Torrens system, namely, that the registered proprietor has the legal property in the land subject only to equities and such interests as the Act expressly preserves: at 418, citing Windeyer J in Breskvar v Wall at 400. The effect, then, of s 68 is that a purchaser who takes with notice of an antecedent equitable interest, who becomes registered without fraud, takes free from that interest: at 418 referring to Brennan J in Bahr v Nicolay (No 2) at 652 - 653. As becoming registered with notice of a prior unregistered interested has been held by the High Court not to constitute fraud, even when a purchaser has notice of an existing equitable interest, once the transfer is registered the purchaser takes free of that equitable interest: at 418; see also Mills v Stokman (1967) 116 CLR 61 per Kitto J at 78.
46 Nor is it possible for the interest to be later revived. As the majority observed (at 418 - 419):
"In other words, a person seeking to preserve an unregistered interest not falling within those exceptions must register that interest in advance of the registration of a subsequent inconsistent dealing or prevent such registration by caveat or otherwise, and thereby enable registration of the unregistered interest. Once that interest is defeated by registration of a subsequent inconsistent dealing bringing about the registration of a new proprietor, the first interest is extinguished for all purposes and cannot be asserted against any later proprietor. The first interest does not become an inchoate interest capable of being asserted against a later proprietor or an interest which remains in suspension so that it is capable of subsequent revival."
- Indeed, at a later point in the reasons for decision the court adopted the description used by Mason CJ and Dawson J in Bahr v Nicolay (No 2) (at 619) that the interest is "destroyed": at 419. One purpose of the caveat then is to give notice to the caveator so that he or she has the opportunity to oppose registration of the transfer of title that would extinguish the caveator's interest in the property.
47 It is apparent from this analysis that the defendant's submission that the plaintiff's interest, the option under the existing lease, is destroyed on
(Page 15)
- registration of a subsequent transfer of title unless protected by caveat, or by other means, is a correct statement of the relevant law. It is also the case that it is clear from the decision in Leros Pty Ltd v Terara Pty Ltd that this principle applies even where the subsequent registered proprietor was aware of the lease including the option unless there is fraud on the part of the registered proprietor.
48 However, in my opinion it is not correct to say that the circumstances in Leros Pty Ltd v Terara Pty Ltd are indistinguishable from those that apply in this case. The nature of the interest is the same and the timing of the acquisition of the interest and of the title is the same; that is, the plaintiff's interest pre-dates the acquisition of title by the defendant. However, there is a significant difference in the basis of the in personam right on which the plaintiff in this case relies. An in personam right is a right of action against a specific person or entity as opposed to an action in rem which is an action taken directly against property.
49 In Leros Pty Ltd v Terara Pty Ltd the respondent's contention was that it had an enforceable equity against the appellant arising out of the conduct of the appellant before it became registered as proprietor. It would appear that the conduct relied upon was simply the fact that, before it was registered as proprietor, the respondent had notice of the lease and the option and the caveat (lodged before the appellant's registration but after a previous transfer of title). The respondent's caveat was noted as an encumbrance on the instrument of transfer to the appellant. Indeed, before registration of the instrument of transfer the respondent commenced proceedings in the Supreme Court against the appellant's predecessor in title who was the registered proprietor when the respondent's caveat was lodged. Those proceedings were unsuccessful.
50 In addressing the effect of those circumstances, the court referred to the decision in Bahr v Nicolay (No 2) in which it was recognised that a purchaser who has undertaken to hold his or her title subject to a third party's right to repurchase is bound by that undertaking giving rise to a trust: at 421. The majority held (at 421):
"In the present case no such undertaking was given by Leros. Nor were the circumstances in which Leros became registered such as to justify an inference that Leros recognised the validity of the option of renewal claimed by Terara. Likewise, those circumstances do not warrant the conclusion that Leros' refusal to acknowledge the validity of Terara's option of renewal amounted to fraud, even according to the extended concept of
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- 'fraud', in the context of s 68, favoured by Mason CJ and Dawson J." [in Bahr v Nicolay (No 2) at 619]
51 It is evident from this extract that the decision of the court in Leros Pty Ltd v Terara Pty Ltd was based on a finding of fact. The court did not resile from the principle in Bahr v Nicolay (No 2), it simply concluded that the particular facts of the case did not justify the conclusion that the appellant recognised the validity of the option of renewal. Therefore, the conclusion drawn by the court in Leros Pty Ltd v Terara Pty Ltd was that the fact that the respondent's caveat was registered as an encumbrance on the instrument of transfer, and hence was known to the purchaser, was an insufficient factual basis to establish a right in personam and hence to establish the validity of the claim.
52 In this case, the plaintiff submits that by its letter of 16 November 2006, the defendant "adopted an obligation to extend the lease in the terms of the option" and therefore recognised its validity. In my view, the letter of 28 December adds support to that conclusion. Consequently, the decision in Leros Pty Ltd v Terara Pty Ltd would not result in a conclusion that any and all rights of the plaintiff have been destroyed if the plaintiff can establish the following two matters:
(1) That reminding the lessee that the current lease has an option exercisable for a period of three years commencing on 3 March 2007 and advising that in the event the lessee exercises the option a rent review will fall due effective 3 March 2007 amounts to a recognition of the validity of the lease and a recognition that the defendant is bound by the option provision of the lease;
(2) That a recognition of the validity of the lease after registration creates an action in personam which operates as an exception to indefeasibility.
53 In my view, these are matters which are arguable and, consequently, the principle of indefeasibility as applied in Leros Pty Ltd v Terara Pty Ltd does not preclude the plaintiff from pressing its claim. On that basis, in considering whether the interlocutory injunction should be continued it will be necessary to see whether any of the additional factual material changes any of the factors that are necessary to the grant of an interlocutory injunction.
54 The case of Breskvar v Wall was also relied upon by the defendant in support of the proposition that the defendant obtained indefeasible title to the property. In Breskvar v Wall, the appellants were the registered
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- proprietors of the relevant land before 15 October 1968. On that date the first respondent became registered as the proprietor of the land. His registration was procured by the fraud of his agent, the second respondent, who had made a loan of money to the appellants, and had obtained as security for the loan a signed memorandum of transfer of their estate and interest in the land, together with the certificate of title. The memorandum of transfer, in which the name of the transferee had been left blank at the time of its execution, was void by reason of the provisions of s 53(5) of The Stamp Act1894 (Qld). On 31 October 1968 the respondent sold the land to a third respondent which bought in good faith and for value and without notice of the fraud, and on 7 November 1968 the first respondent executed a memorandum of transfer in favour of the third respondent. However, the third respondent did not lodge its transfer for registration until 8 January 1969 and, in the meantime, the appellants lodged a caveat. The question for decision by the court was whether the appellants were entitled to a declaration that they were and had at all material times been seized of a legal estate in fee simple in the subject land, and a consequential alteration of the register, or whether the appellant's caveat should be removed, thus opening the way to registration of the transfer to the third respondent: at 411 - 412 per Gibbs J.
55 Gibbs J considered (at 412) that the first respondent did not obtain an indefeasible title upon the registration of the transfer to him because he became registered as a result of the actual fraud of his agent. Accordingly, the case was within one of the express exceptions to the paramountcy of title of the registered proprietor. On behalf of the appellants it was submitted that the registration of a void instrument is completely inoperative so that the person previously registered remains in law the registered proprietor, Gibbs J considered (at 412) that this proposition could not successfully be maintained since the decision of the Privy Council in Frazer v Walker [1967] 1 AC 569 (at 580) where it was held that registration once effected must attract the consequences which the legislation attaches to registration, whether it was regular or otherwise, as it is the fact of registration and not its antecedents which vests and divests title. Gibbs J concluded (at 413) that when the first respondent became registered in fact, he became vested with the legal title to the land, although his title was not immune from the adverse claim of the appellants, who had the right as against him to be restored as registered proprietors. Gibbs J was prepared to assume (at 413), in favour of the appellants, that after the first respondent's registration they continued to have an equitable interest in the land, rather than a mere equity to set the transfer aside.
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56 However, the third respondents which purchased the land in good faith and for value, and who were given a memorandum of transfer in registrable form signed by the first respondent, also acquired an equitable interest in the land and the right to the registration of that interest. In determining which of the competing equitable interests should take priority, Gibbs J held (at 413) that, although the interest of the appellants was created first in time, they had armed the second respondent with the power to deal with the land as owner by entrusting him with a certificate of title and a signed memorandum of transfer and thus had enabled him to register the first respondent as proprietor and had enabled the first respondent to sell to the third respondents. Consequently, the equitable interest of the appellants was postponed to that of the third respondent.
57 Walsh J's reasoning was substantially similar and he reached the same conclusion; that is, that it was not open to the appellants to say that because the transfer was void, the registration of the first respondent as registered proprietor was absolutely void and inoperative: at 406. Walsh J considered (at 408) that the appellants would have been entitled to have the registered title restored to them because of the fraud by which the transfer was found to have been affected, if the property had not been sold to a bona fide purchaser for value. The right of the appellants was held (at 408) to be an equitable right to ask the court to compel the first respondent as the holder of the registered title to transfer it to the appellants but did not have priority over the interest which the third respondent acquired in the land (at 409). Again, this was because of the appellants' conduct in providing the second respondent with the means to register the first respondent as proprietor: at 409. The decision of Menzies J was to the same effect and also involved applying the decision in Frazer v Walker: at 397. His Honour concluded (at 399) that the first respondent was a proprietor of the property and therefore the third respondent had a right or claim to the registration of the estate which had priority over the claim in equity of the appellant because of the appellant's conduct in providing the second respondent with the means to register the first respondent as proprietor: at 399.
58 Barwick CJ (with whom Windeyer and Owen JJ agreed) also relied on the decision in Frazer v Walker in concluding (at 384 - 385) that there is immediate indefeasibility of title by the registration of the proprietor. The exceptions identified in the relevant statutory provision may result in proceedings being brought against the registered proprietor which may have as their terminal point orders binding the registered proprietor to divest himself wholly or partially of the estate or interest vested in him by the registration and endorsement of the certificate of title, but they do not
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- alter that fundamental position. Even a registration that results from a void instrument is effective according to the terms of the registration: at 386.
59 Barwick CJ dealt specifically with the position of the appellant in circumstances where the registration of the first respondent was achieved by fraud. His Honour held (at 387) that, although the first respondent was the registered proprietor, he held his estate subject to the rights of the appellants who had a right to sue to recover the land and to have the register rectified, but who required the assistance of a court having equitable jurisdiction.
60 As to the position of the third respondent, Barwick CJ held (at 387 - 388) that, as the third respondent purchased bona fide for value and without notice, they acquired an equitable estate in the land in competition with that of the appellants which falls to be resolved in accordance with equitable principles. Barwick J concluded that the conduct of the appellants in arming the second respondent with the means to place himself or the first respondent on the register was sufficient for the appellants to lose priority: at 389.
61 As I have noted, the plaintiff relies on the decision of the High Court in Bahr v Nicolay (No 2). The court in Leros Pty Ltd v Terara Pty Ltd also applied the decision in Bahr v Nicolay (No 2) although in that case the court concluded that the particular facts did not create an in personam right.
62 The facts of Bahr v Nicolay (No 2) are that in 1979, the Bahrs, the appellants, purchased lot 221 and lot 340 (collectively "the land"). In 1980, in order to raise money to develop the land, the Bahrs sold lot 340 to Nicolay, the first respondent for $32,000 under an arrangement which involved a lease back to the Bahrs for three years from August 1980. The Bahrs agreed, as a clause of the contract for sale (cl 6), that upon the expiration of the lease they would enter into a contract with Nicolay to purchase the land for $45,000 payable by a deposit of 10 per cent with the balance in 30 days. Nicolay was registered as proprietor of the land.
63 In 1981, Nicolay sold lot 340 to the Thompsons, the second respondents, for $40,000. By cl 4 of the contract of sale, the Thompsons acknowledged that the June 1980 agreement existed between the Bahrs and Nicolay. The Thompsons were registered as proprietors. In January 1982, the Thompsons sent to the Bahrs' solicitors a letter stating:
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- "We are writing to confirm … the clause relating to the purchase of Lot 340 [by the Bahrs] is recognised by us and providing 3 months notice of their intention to purchase is given on July 1st 1983 with 10% of the purchase money then we will agree to sign an offer for $45 000."
64 In February 1982, the Bahrs solicitors sent a letter to the Thompsons stating:
"We confirm that at the expiration of the lease our clients will enter into a contract with you to purchase Lot 340 for the sum of $45 000 in terms of their agreement with Nicolay and your recent letter…"
65 On 23 June, the Bahrs solicitors forwarded a cheque for $4,500 to the Thompsons by way of deposit and a "Notice of Exercise of Option" which stated that:
"On the basis of the agreement entered into between yourselves and Mr Nicolay and subsequent correspondence from yourselves to the then solicitors representing [the Bahrs] … a binding option agreement exists between you and the Bahrs."
- The Thompsons returned the cheque and refused to sell to the Bahrs, who commenced action against Nicolay and Thompson, claiming an order that the land vest in them on payment of $45 000 or, alternatively, specific performance of the June 1980 agreement and damages against both respondents.
66 Franklyn J dismissed the action. The Full Court dismissed the appeal, except for a negligence claim against real estate agents involved. The Bahrs appealed to the High Court.
67 Mason CJ and Dawson J delivered a joint judgment, as did Wilson and Toohey JJ. Brennan J also delivered a judgment on the matter. Mason CJ and Dawson J held (at 610) that cl 6 of the undated contract, stamped 25 June 1980, between the appellants and the first respondent created in the appellants an equitable estate or interest in lot 340, enforceable against the first respondent and, in the events that followed, against the second respondents, provided that relief by way of specific performance was available at the relevant time. The clause was said to constitute a binding contract between the parties to bring into existence the contemplated formal contract and carry it to completion. Mason CJ and Dawson J further stated that the contract constituted by cl 6 was not
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- conditional upon the execution of the contemplated formal contract. Further, by cl 4 of the agreement between the first respondent and the second respondents, the second respondents acknowledged that an agreement existed between the appellants and the first respondent, that agreement being the undated 1980 agreement. The clause does not purport to create in favour of the appellants new rights over and above those previously existing.
68 Mason CJ and Dawson J considered (at 612) that the outcome of the case did not turn on the precise nature of the appellants' equitable interest. The outcome was said to turn initially on the question whether s 68 and s 134 of the TLA defeats the interest by reason of the second respondents having become registered proprietors of the land. Mason CJ and Dawson J considered that the characterisation of cl 4 lay at the heart of the second respondents' case which was that mere notice of the prior unregistered interest does not amount to fraud within the meaning s 68: at 612 - 613. Having referred to the two provisions their Honours observed that they gave expression to, and at the same time qualified, the principle of indefeasibility of title which is the foundation of the Torrens system of title. However, their Honours added the following statement (at 613):
"Neither the two sections nor the principle of indefeasibility precludes a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself … So also with an equity arising from conduct of the registered proprietor before registration, so long as the recognition and enforcement of that equity involves no conflict with ss 68 and 134 … Provided that this qualification is observed, the recognition and enforcement of such an equity is consistent with the principle of indefeasibility and the protection which it gives those who deal with the registered proprietor on the faith of the register." [emphasis added]
- The decision in Breskvar v Wall at 384 - 385 was cited as authority for this proposition
69 Mason CJ and Dawson J further stated (at 613) that there is no fraud on the part of a registered proprietor in merely acquiring title with notice of an existing unregistered interest or in taking a transfer with knowledge that its registration will defeat such an interest.
70 Implicit in the decision that the indefeasibility provisions do not preclude a claim to an estate or interest in land arising out of the acts of
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- the registered proprietor himself, is the view that cl 4 of the later agreement was designed to do more than merely evidence the fact that the second respondents had notice of the appellants' rights: at 616. Mason CJ and Dawson J considered (at 616) that, if that were the only purpose to be served by the acknowledgment it would achieve nothing. Their Honours concluded that the purpose of cl 4 was to provide that the transfer of title to lot 340 was to be subject to the appellants' rights under cl 6 of the 1980 agreement in the sense that those rights were to be enforceable against the second respondents.
71 Mason CJ and Dawson J next turned their attention to the legal effect of cl 4 and formed the view that a trust relationship was a more accurate and appropriate reflection of the parties' intention: at 618. The trust was considered to be an express trust rather than a constructive trust and had the effect that the second respondents held lot 340 subject to such rights as were created in favour of the appellants by the 1980 agreement: at 619. Their Honours further observed that, even if they had not reached this conclusion, they would not have regarded the registration of the transfer in favour of the second respondents as destroying the appellants' rights as, having regard to the intention of the parties expressed in cl 4 of the later agreement, the subsequent repudiation of cl 6 of the 1980 agreement constituted fraud. The case therefore fell within the statutory exception with the result that the appellants' prior equitable interest prevails over the second respondents' title, the second respondents taking with notice of that interest: at 619.
72 Wilson and Toohey JJ first considered the nature of the interest created by cl 6 of the agreement between the appellants and the first respondent. Their Honours considered (at 628) that on execution of the original contract the first respondent held the legal estate in lot 340 and the appellants held an equitable estate or interest measured by what a Court of Equity would decree in an action for specific performance. Consequently, the first respondent was free to dispose of his interest but he could not relieve himself of his obligation to transfer the land to the appellants in accordance with cl 6 and the equitable estate held by the appellants was not affected by a disposition by the first respondent of his legal estate: at 629.
73 Wilson and Toohey JJ next considered whether, upon the second respondents registering their legal interest, they acquired title which was indefeasible in the sense that it was no longer open to attack by the appellants. Consideration was also given to whether there was, in any relevant sense, fraud on the part of the second respondents: at 629. Their
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- Honours accepted as well established the fact that to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest, does not amount to fraud: at 630 - 631. Wilson and Toohey JJ reached the conclusion that, in order to establish fraud, it was necessary to prove that the designed object of the transfer to the second respondents was to cheat the appellants of a known existing right: at 636. Their Honours considered that the evidence fell short of establishing fraud but found that it did establish that the second respondents took a transfer of lot 340, knowing of cl 6, accepting an obligation to resell to the appellants and communicating that acceptance but banking on the appellant's inability to find the money necessary to implement the clause: at 636 - 637.
74 Reference was then made to the decision of the Privy Council in Frazer v Walkerat 585 which made it clear that the principle of indefeasibility in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant: at 637. The following comments of Sir Garfield Barwick in Breskvar v Wallat 384 - 385were also considered (at 637):
"Proceedings may of course be brought against the registered proprietor … or by persons setting up matters depending upon the acts of the registered proprietor himself. These may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration and endorsement of the certificate of title."
75 Wilson and Toohey JJ considered (at 637 - 638) that this vulnerability on the part of the registered proprietor is not inconsistent with the concept of indefeasibility because the certificate of title remains conclusive and if amended by order of a court it is conclusive of the new particulars it contains. As their Honours observed (at 638), the indefeasibility provisions of the TLA may not be circumvented but, equally, they do not protect a registered proprietor from the consequences of his own actions where those actions give rise to a personal equity in another. Significantly for the purposes of the plaintiff's case, Wilson and Toohey JJ expressed the following conclusion (at 638):
"Such an equity may arise from conduct of the registered proprietor after registration: Barry v Heider (1914) 19 CLR 197. And we agree with Mahoney JA in Logue v Shoalhaven
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- Shire Council [1979] 1 NSWLR 537 at 563 that it may arise from conduct of the registered proprietor before registration."
76 In the opinion of Wilson and Toohey JJ (at 638) the evidence led irresistibly to the conclusion that the second respondents bought lot 340 on the understanding common to vendor and purchaser that they were bound by the obligation to resell to the appellants and cl 4 was included to give effect to that understanding. Their Honours were also of the view that, while cl 4 may have been, of itself, insufficient to achieve that purpose, subsequent correspondence and the wording of the second respondents' two offers put beyond doubt their acknowledgment of their obligation to the appellants: at 638. Consequently, by taking a transfer of lot 340 on that basis, and the appellants' interest under cl 6 constituting an equitable interest in the land, the second respondents became subject to a constructive trust in favour of the appellants: at 638. Wilson and Toohey JJ further observed (at 638) that, if it be the position that the appellants' interest under cl 6 fell short of an equitable estate, they none the less had a personal equity enforceable against the second respondents. In either case, according to their Honours, s 68 and s 134 of the TLA would not preclude the enforcement of the estate or equity because both arise, not by virtue of the second respondents' notice of them, but because of their acceptance of a transfer on terms that they would be bound by the interest the appellants had in the land by reason of their contract with the first respondent: at 638 - 639.
77 The final judgment in Bahr v Nicolay (No2) is that of Brennan J. The starting point of Brennan J's reasons for decision was the conclusion that cl 6 was not a mere agreement to reach an agreement in the future. According to Brennan J (at 645), from its inception it was a contract binding on the parties to join in bringing a formal contract into existence and then to carry it into execution. As the primary contract required the parties to bring a formal contract of sale of land into existence, specific performance could be decreed. Further, as the prospective purchaser under such a contract is able to compel a transfer of the land to himself without further agreement on the part of the prospective vendor, the primary contract, like an option, confers on the prospective purchaser an equitable interest in the land: at 645 - 646.
78 Brennan J considered that cl 4 was more than a mere acknowledgement by the second respondents of the fact that there was a contract between the appellants and the first respondents. This was because, in Brennan J's view, the extrinsic evidence showed that the intention of both the first respondent and the second respondents was that,
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- upon the second respondents acquiring lot 340, the second respondents were to be bound by cl 6: at 648. Brennan J explained the situation as follows (at 647):
"As the Bahrs' contract conferred on the Bahrs an equitable interest in lot 340, not a mere contractual right, and as the Thompsons knew of that interest at all material times, the interest which the Thompsons acquired when they entered into their contract to buy lot 340 was subject to the interest of the Bahrs….The Thompsons could not have compelled Nicolay to complete the sale to them except on terms that the Bahrs' interest under cl 6 should be protected, for completion of the sale without that protection would have involved a breach on the part of Nicolay of a prior contract affecting the land….The consequence of inserting cl 4 into the Thompsons' contract was that the Thompsons acknowledged not only the fact that the Bahrs' contract existed but also that the interest which they were purchasing was subject to the interest which the Bahrs had under cl 6 of the Bahrs' contract."
80 The second respondents' reliance on the indefeasibility provisions of the TLA was not considered by Brennan J to operate so as to relieve the second respondents from performing their obligation to the appellants: at 652 - 653. As Brennan J observed (at 652 - 653), the consequence of the indefeasibility provisions is that, whereas equity would subject the interest of a purchaser of land to an antecedent unregistered interest of which the purchaser had notice, a purchaser who takes with notice of an
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- antecedent interest, but who becomes registered under the TLA without fraud, takes free of that interest. It is implicit in that statement that registration of the transfer is not fraudulent merely because the transferee knows that an antecedent interest of which he has notice will be defeated thereby: at 653.
81 Brennan J concluded (at 653) that the title of a purchaser who not only has notice of an antecedent registered interest, but who purchases on terms that he will be bound by that unregistered interest, is subject to that interest and equity will compel him to perform his obligation. Brennan J referred (at 653), as did Wilson and Toohey JJ at 637, to the decision of the Privy Council in Frazer v Walker at 585 where it was said that the principle of indefeasibility in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant. Brennan J distilled from that statement (at 653) the proposition that the indefeasibility provisions are designed to protect a transferee from defects in the title of the transferor, not to free him from interests with which he has burdened his own title.
82 The way in which equity prevents a registered proprietor from repudiating an unregistered interest he has undertaken to accept was held by Brennan J to be by imposing a constructive trust. His Honour stated (at 654):
"A registered proprietor who has undertaken that his transfer should be subject to an unregistered interest and who repudiates the unregistered interest when his transfer is registered is, in equity's eye, acting fraudulently and he may be compelled to honour the unregistered interest. A means by which equity prevents the fraud is by imposing a constructive trust on the purchaser when he repudiates the unregistered interest. That is not to say that the registration of the transfer to such a proprietor is affected by such fraud as may defeat the registered title: the fraud which attracts the intervention of equity consists in the unconscionable attempt by the registered proprietor to deny the unregistered interest to which he has undertaken to subject his registered title."
83 Brennan J concluded (at 656) that, as the second respondents not only had notice of the appellants' interest but had undertaken that their title would be subject to the appellants' interest, they could not rely on the Property Law Act 1969 (WA), the Statute of Frauds or the TLA to avoid
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- honouring their undertaking. As a contractual undertaking it could be enforced by the first respondent to whom it was given. As the appellants' interest was created by an antecedent agreement pursuant to which the first respondent was bound to enforce the second respondents' undertaking to honour the appellants' interest, there can be no reason for denying the appellants' standing to enforce the second respondents' undertaking against the second respondents directly in a suit in which the first respondent is a party. Moreover, Brennan J held (at 656) that the constructive trust on which the second respondents held their title is a trust to give effect to the appellants' interest. As beneficiaries of that trust, the appellant's may enforce their interest against their trustee directly and are therefore entitled to enforce their right of purchase directly against the second respondents. They do not thereby impeach the registration of the transfer and nor does the TLA present a bar to the enforcement of the undertaking.
84 The decisions in Bahr v Nicolay, Breskvar v Wall and Leros Pty Ltd v Terara Pty Ltd were considered and applied by Owen J in Conlan v Registrar of Titles where his Honour recognised (at 329) that the Torrens statutes, while giving greater certainty to titles of registered proprietors, did not exclude the fundamental doctrines by which Courts of Equity enforce, as against registered proprietors, conscientious obligations entered into by them. Owen J observed (at 329) that it was not surprising that the authorities recognise that indefeasibility does not interfere with the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or equity, for such relief as a court, acting in personam, could grant: see Frazer v Walker at 585. However, as Powell JA observed in Grgic v Australian and New Zealand Banking Group Pty Ltd (1994) 33 NSWLR 202, cited by Owen J (at 329), the expressions "personal equity" and "rights in personam" encompass only known legal causes of action or equitable causes of action. Owen J applies these principles in the particular factual circumstances of the cases under consideration, but did not otherwise elaborate on the circumstances in which a right in personam may arise.
85 It is apparent from the authorities to which I have referred that the indefeasibility provisions do not preclude the plaintiff from relying on an action in personam, providing such an action can be established on the evidence. Actions in personam are not "destroyed" by registration and it is clear from the decision in Bahr v Nicolay that the circumstances which are said to give rise to a right in personam can occur before and after registration without being affected by registration. Having considered that evidence I consider that the plaintiff's position is arguable; that is, that
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- the defendant, through its agent, in writing the letter of 16 November 2006 and of 28 December 2006 not only indicated knowledge of the option but was acknowledging that it considered itself bound by the lease including the clause that provided for the option. I make no comment on the strength of the argument on which the plaintiff relies but I am satisfied there remains a serious question to be tried. Further, none of the factual matters raised in the additional affidavit material provide a complete answer to any matter of fact and do not, in my view, affect the balance of convenience which Jenkins J found to favour the grant of the injunction. I am not persuaded, for the reasons I have mentioned that there is a real risk that the defendant will be the subject of proceedings by the partnership as a result of the partnership not being able to operate from the premises on the date of which they were advised. For these reasons I consider it appropriate to continue the injunction as requested, subject to ensuring that an appropriate rent is paid by the plaintiff during the period in which this matter remains unresolved and the plaintiff continues in possession.
86 Finally, I indicated above that I would return to the issue of whether the instrument of purchase addresses the position with respect to the lease. The Court has not been provided with a copy of the instrument of purchase and the defendant has not been asked, and has not volunteered, whether the instrument contains such a provision. For present purposes I propose to assume that no such provision exists because I have formed the view that the failure to determine the correct position does not affect the outcome of this application; it would simply reinforce a submission that is already arguable. Also, if the action proceeds, the correct position will be identified as a result of the process of discovery and can be addressed in that context.
87 I will hear the parties as to the terms of the orders sought arising from these reasons.
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