Deguisa & Anor v Lynn & Ors
[2020] HCATrans 128
[2020] HCATrans 128
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Adelaide No A4 of 2020
B e t w e e n -
NICK DEGUISA
First Appellant
TORI McKENZIE
Second Appellant
and
ANN LYNN
First Respondent
CHRISTINE EVANS
Second Respondent
RICHARD JOHN FIELDER
Third Respondent
KIEFEL CJ
GAGELER J
KEANE J
GORDON J
EDELMAN J
TRANSCRIPT OF PROCEEDINGS
FROM CANBERRA BY VIDEO LINK TO BRISBANE, SYDNEY AND MELBOURNE
ON WEDNESDAY, 2 SEPTEMBER 2020, AT 10.00 AM
Copyright in the High Court of Australia
____________________
MR A.L. TOKLEY, QC: May it please the Court, I appear in Canberra with my learned junior, MR H.M. HEUZENROEDER, for the appellants. (instructed by Clarke Hemmerling Lawyers)
MR W.J.N. WELLS, QC: May it please the Court, I appear with my learned friend, MR R. ROSS‑SMITH in Adelaide, for the respondents. (instructed by Lindbloms Lawyers)
KIEFEL CJ: Thank you. Justice Keane and Justice Edelman and I are appearing in Brisbane, Justice Gageler in Sydney and Justice Gordon in Melbourne. Yes, Mr Tokley.
MR TOKLEY: Thank you, your Honour.
KIEFEL CJ: Mr Tokley, I should say we will follow the Court’s usual practice of having a 15-minute break at about 11.15.
MR TOKLEY: Thank you, your Honour, I am grateful for that intimation. Your Honours, I will be following very closely the oral outline that has been provided to the Court and I will be dealing with the matters that I identified in italics on that outline, namely, addressing the statutory framework, including section 51B, the interpretation of Bursill and other important authorities, certain factual matters, taking the Court to the leading authority of Re Dennerstein and identifying certain errors as well if need be. Your Honours, because of the video conferencing system, I will endeavour to make it as practicable as possible and I will also endeavour to keep my voice up so that I can be heard clearly. Your Honours, we, of course, rely upon our written submissions as well.
By way of preliminary observation may I just make the first point, that is that the mischief to which the Torrens system was directed arises from the history of land dealing in colonial South Australia, which required efficiency, simplicity and security as primary remedial purposes. I wish now to take your Honours to the statutory scheme. It is a statutory scheme of title by registration of certificates of title and instruments, and one has to start this case with construing the statute.
If I could please invite your Honours to take up the joint book of authorities, and in particular Part A, and I will be taking your Honours to those parts of the statute as it applied in 2008, when the appellants purchased their interest. But the outline of our oral submissions has pinpoints, references to both the 2008 and to the 1964/1965 version, which was the version that prevailed at the time that the encumbrance was created.
Could I first of all invite your Honours to go to sections 10 and 11, which appear at the joint book of authorities at page 22. As I go through the sections I will be making various observations which, of course, pertain to the matters that are to follow. I hope your Honours will not mind that I also have to look down at the page, which means I turn away from the screen.
KIEFEL CJ: Of course, Mr Tokley.
MR TOKLEY: Thank you very much, your Honour.
KIEFEL CJ: We all do the best we can.
MR TOKLEY: Your Honour is too kind. On page 22, your Honours will see the objects of the Act are set out and, as stated, they are:
to simplify the title to land and to facilitate dealing therewith, and to secure indefeasibility of title to all registered proprietors, except in certain cases specified in this Act.
And in section 11:
This Act shall always be construed in such manner as shall best give effect to the objects hereinbefore declared.
Now, your Honours know that the Torrens system deals with registration of title and the relevant part that I must take your Honours to begins at page 34 of that book. Your Honours will see the heading at Part 5, Division 1, “Registration of title in the Register Book” and section 47, which says:
This Division applies to, and in relation to, the registration of title to land in the Register Book.
The expression used in South Australia, unlike New South Wales, is “the register book”, as opposed to “the register”. Section 48 says that certificates of title shall be filed in the register book. One of those is the original, the other is the duplicate, which is given “to the registered proprietor of the land”. Importantly, section 49 notes that:
Each original certificate shall constitute a separate folium of the Register Book, and the Registrar‑General shall record thereon distinctly and separately all memorials affecting the land included in each certificate.
Section 51 then sets out the requirements of a memorial:
[it] shall be sealed with the seal of the Registrar‑General, and shall state the nature of the instrument to which it relates and such other particulars as the Registrar‑General directs, and shall refer by number or symbol to such instrument.
Section 50, which was obviously part of the Act, was not present when our clients purchased but it is in an earlier version and I will take your Honours to that earlier version in due course. I just mention, though, that section 50 was the section that imposed the requirement that there should be a memorandum kept and on the memorandum there was to be made a note to the effect that the memorial had been entered. The memorandum is the back sheet of the encumbrance in this matter and we will, of course, go to that in due course as well.
Section 51B refers to registration of title by other methods and registration of title electronically. Your Honours, what I would like to say about this very briefly is this, that the purpose of section 51B, in my respectful submission, is to enable the recording or registration of title by the sorts of processes that are set out therein, for example, electronic, electromagnetic, optical or photographic. Your Honours will note that it excludes Division 1, so that Division 1 is those hardcopy folios that were previously created. Division 2 deals with the processes that I have just mentioned. In paragraph (a) it says that:
the term Register Book will be taken to include the records maintained by the Registrar‑General pursuant to this section relating to the land -
Now, we place emphasis upon the words “maintained by the Registrar‑General pursuant to this section relating to the land”, because when one then goes over the page to page 35 and has a look at paragraph (b), your Honours will see that:
the term certificate or certificate of title will be taken to mean—
(i)the records maintained by the Registrar‑General pursuant to this section -
Then there is (i), (ii), or both of those meanings, as the context requires, and then:
the term original certificate or original certificate of title will be taken to mean the records maintained by the Registrar‑General pursuant to this section relating to the land;
(d)the term duplicate certificate or duplicate certificate of title will be taken to mean the certificate of title issued under the seal of the Registrar‑General in respect of the land –
but your Honours will notice that the words “pursuant to this section” are not mentioned. Then in paragraph (e), where there is:
a requirement that a record relating to the land be made–
(i)by entry or endorsement of a memorial or memorandum in the Register Book or on the certificate or other instrument of title –
that can:
be satisfied if the Registrar‑General makes the record by an electronic, electromagnetic, optical or photographic process –
In my respectful submission, the purpose of section 51B was to enable the creation of records by means other than a hard copy, and those records were to be maintained pursuant to this section, and those records form part of the register book. But the section does no more than that. It does not mean that other matters become part of the register book by virtue of the words “records maintained by the Registrar‑General pursuant to this section”. That is simply a way of identifying the electronic records that are maintained pursuant to that section.
Your Honours, I go then to page 36 and to section 52 at the very bottom of that page, and your Honours will see that:
Upon registering the instrument the Registrar‑General must endorse the date of the registration on the instrument and the endorsement must be accepted in legal proceedings –
That really goes to proof of legal proceedings, but also the endorsement, and, of course, priorities. Then, over the page, page 37, to the retention of records, and of course once information has been recorded by the Registrar‑General, the Registrar must retain it in the form in which it was originally registered or in similar form. But the contrast between section 51B and section 53 is that in section 51B it talks about maintenance of records and in 53 it talks about retaining records.
Could I then go to page 38, and to section 57, which talks about the “Effect of registration of instruments”. Your Honours will see that:
Every instrument shall, when registered, be deemed part of the Register Book, and shall have the effect of and be deemed and taken to be a deed duly executed by the parties who have signed the same.
And there is a similar provision in section 77. And then please over the page to page 39 and to section 65, and your Honours will see that section 65 allows a search of the register book. It says:
Any person shall have access to the Register Book –
and it contrasts that with:
and to all instruments filed and deposited in the Lands Titles Office for the purpose of inspection during the hours and upon the days appointed for search.
So, instruments that are simply filed or deposited do not form part of the register book.
GORDON J: Is that right, Mr Tokley, though with definition of instrument in section 3?
MR TOKLEY: Your Honour, the definition of “instrument” includes the words “capable of registration”, so that a document can be an instrument but once it is registered the instrument forms part of the register book. So, a document which is filed but is not registered does not form part of the register book.
GORDON J: Thank you.
MR TOKLEY: Similarly, with documents that are deposited. Your Honours, if I could move forward please to then page 42 and your Honours will see the part dealing with “The title of registered proprietors” and section 67. Section 67 obviously deals with the point at which the instrument is effectual to pass land or render land liable as a security for payment and the words that I wish to emphasise are the words after the words “shall pass”:
or, as the case may be, the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such instrument or by this Act declared to be implied in instruments of a like nature.
We then come, most importantly, to section 69 and to the words:
The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be notified on the original certificate of such land, be absolute and indefeasible, subject only to the following qualifications –
which are not presently relevant. The notification to which section 69 refers is to be construed, we say, according to the provisions I took your Honours to in 10 and 11 while taking into account its statutory context. Those sections, if I may just emphasise them, were that:
to simplify the title to land and to facilitate dealing therewith –
then the Act:
shall always be construed in such manner as shall best give effect to the objects hereinbefore declared.
Section 69 employs the concept of “notified” on the certificate of title. We say it does not entail a search in any way analogous to searching titles as occurred under the old system of land. Encumbrances, which are dealt with in sections 128 and 129 – I will take your Honours to those in a moment - are notified on the certificate of title by memorial. That follows from the sections I have taken your Honours to. All memorials of encumbrances to which the land may be subject must be recorded on the certificate of title.
The memorials of instruments capable of registration are brought in to the register book such that they are within what is notified, that is, by incorporation so that they are on the certificate of title. That follows from the sections I have taken your Honours to, the definition of “instrument” and the cases that I will be taking your Honours to.
But, your Honours, I might take your Honours now to sections 128 and 129 which appear at page 70 of the joint book of authorities and your Honours will see in section 128:
Whenever any land is intended to be charged or made security in favour of any person the registered proprietor shall execute a mortgage in the appropriate form; and whenever any land is intended to be charged with, or made security for, the payment of an annuity, rent‑charge, or sum of money, in favour of any person, the registered proprietor shall execute an encumbrance in the appropriate form.
Here the relevant encumbrance was made security for a rent charge, and it followed the form in the old tenant schedule. Importantly, in section 129(1), it says:
Every such instrument shall, for description of the land intended to be dealt with, refer to the certificate of the land, or shall give such other description as may be necessary to identify the same –
Et cetera. And the words that I want to emphasise are the words following:
and shall also contain or have endorsed thereon a memorandum of all leases, mortgages, and encumbrances (if any) affecting such land.
So it seems that section 129(1) contemplates that an encumbrance can have endorsed thereon a memorandum of all leases, mortgages and encumbrances, if any, affecting such land. There is, in section 129(2)(b), a section which deals with the situation where:
the mortgagor or encumbrancer is required to –
(i)build in accordance with any plans and specifications which are in existence at the date of the mortgage or encumbrance –
And I suspect that that section was introduced after Gibb’s Case, which is one of the cases mentioned in my learned friend’s authorities:
the Registrar‑General may require that a copy of the plans and specifications or the document concerned be attached to the mortgage or encumbrance or be deposited in the General Registry Office or in any other public registry in the State.
Your Honours, over the page to page 71 and section 132, which deals with the effect of a mortgage and encumbrance, and their effect as a security. But your Honours will note they:
shall not operate as a transfer of the land thereby charged and in case default be made in the payment of the principal sum . . . or in the observance of any covenant therein ‑
It goes on to say that ‑ and if:
such default be continued . . . the mortgagee or encumbrancee may give to the mortgagor or encumbrancer notice in writing to pay the money then due or owing on such mortgage or encumbrance, or to observe the covenants therein expressed or implied, as the case may be, and that sale will be effected –
and the like. Your Honours, one of the matters that has arisen in the course of the submissions is the effect of cancelled certificates of title. In our submission, council certificates of title are not legally effective, because obviously they cease to exist.
The paper embodiments of council certificates of title may be required to be so endorsed, and that can be found, for example, in section 80H which your Honours will find at page 50 of that booklet. Your Honours will see in section 80H(2):
Upon the cancellation of a certificate, instrument, entry or memorial pursuant to this section, the estate and interest evidenced thereby shall cease and determine.
One of the authorities we mention, but I will not take your Honours to it, is Hassett’s Case, and Hassett’s Case stands for the proposition that a cancelled certificate of title is legally ineffective.
In short, your Honours, it is our submission that the register book consists of the individual certificates or folios contained within it at any given time. Added to these are documents that may be deemed to be embodied in the register book upon registration, and together those documents indicate the parcel of land in a particular title, the person entitled to the interests therein, and the nature and extent of those interests.
Your Honours, I am now going to paragraph 12 of our oral outline. To ascertain the extent and state of the registered title, one begins with the relevant certificate of title, together with instruments that have been memorialised upon the face of the certificate of title, and the relevant authorities for that proposition are the Westfield Case and Bursill’s Case, which I will be taking your Honours to.
Your Honours, the Westfield Case can be found in Part C, or volume 3 of 5 of the joint book of authorities, at page 383. If I may, your Honours, I will be taking your Honours simply to particular paragraphs of this judgment. One of the important ones is to be found at page 386, and it is paragraph 5, which your Honours will find at the bottom of that page, and your Honours will see the words:
Together with the information appearing on the relevant folio, the registration of dealings manifests the scheme of the Torrens system to provide third parties with the information necessary to comprehend the extent or state of the registered title to the land in question. This important element in the Torrens system is discussed by Barwick CJ in Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd.
Your Honours will see footnote (31) directs attention to the report of Bursill’s Case, and to the particular pages 77 and 78, which I will be going to, and I will be taking your Honours to, and:
also the remarks of Connolly J in Hutchinson v Lemon –
If I could then ask your Honours please to go forward to page 393, and under the heading in italics, “Extrinsic material”, and their Honours there were dealing with the introduction of material which had been used in order to prove intention, or contemplation on the part of the parties. Their Honours – and, of course, this was a unanimous decision of the Court - noted that:
Hodgson JA (again correctly) remarked that the decision of the primary judge appeared to be the product of an error in preparedness to look for the intention or contemplation of the parties to the grant of the Easement outside what was manifested by the terms of the grant.
We say the same is true here, insofar as Justice Peek used what is known as the “Gaetjens Plan” to ascertain the intention of the parties.
Going over the page to page 394, their Honours in paragraph 37 made the observation that:
in the course of oral argument in this Court it became apparent that what was engaged by the submission respecting the use of extrinsic –
material gave rise to:
more fundamental considerations. These concern the operation of the Torrens system of title by registration, with the maintenance of a publicly accessible register ‑
We would insert “register book”:
To put the matter shortly, rules of evidence assisting the construction of contracts inter partes . . . did not apply to the construction of the Easement.
We would say that documentary evidence that does not exist within the register book cannot be used to determine the intention of parties. In paragraph 38 they make the point that recent decisions of this Court:
have stressed the importance in litigation respecting title to land under the Torrens system –
and of the principle or centrality of the principle:
of indefeasibility expounded in particular by this Court in Breskvar v Wall.
Then to paragraph 39, and obviously we wish to adopt these words:
The third party who inspects the Register –
We would insert “register book”:
cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee.
We would say that the analogous situation applies here in what my learned friend, Mr Wells, is seeking to do.
Could I then take your Honours please to Bursill’s Case which your Honours will find at page 275 of the booklet. That is Part C, volume 3 of 5. Your Honours I will have to spend a little bit of time on Bursill’s Case because it forms the lynchpin of my learned friend’s argument. Beginning if I may, please, at page 278, what I would do here, your Honours, is first of all to describe what I call the architecture of the decision and to then take your Honours to specific passages which I think are very important in understanding both the case and its ratio. Your Honours will see in the paragraph beginning ‑ ‑ ‑
GAGELER J: Could you give the CLR reference, please?
MR TOKLEY: Certainly, I beg your pardon, your Honour. The reference is (1971) 124 CLR beginning at page 73 and the page I am on, your Honour, is page 76. Your Honours may have to forgive me, because of my short‑sightedness I have to put my glasses on each time I look at the screen but take them off each time I look down to read. Your Honours will see at the paragraph beginning:
I agree with my brother Windeyer and for the reasons which he expresses that in so far as the memorandum purported to transfer title to that space, it was effective to do so.
But his Honour Chief Justice Barwick then goes on to address a particular argument so that his agreement that I have mentioned just there is with the reasons given by Justice Windeyer for that particular point. At about point 6 of the page his Honour then begins addressing section 37 of the Act of 1862 and your Honours will see that it says:
“Every memorial entered in the Register Book shall state the nature of the instrument to which it relates –
The argument here centred around the words – sorry, centred around whether the description on the memorial was a sufficient statement of the nature of the instrument, and your Honours will see that about point 9 where his Honour Chief Justice Barwick said:
But does the endorsement “state the nature of the instrument”.
He then posits the pro and contra arguments:
It says the instrument was a transfer but does not describe all that it achieves.
He then goes on to address those points at the bottom of page 278 and over to page 279, which is page 77 of the report. Then his Honour, beginning in the paragraph “The Act of 1862” sets out the structure of the relevant New South Wales Act, both 1862 and 1900, in the same way that I have endeavoured to do with the relevant South Australian legislation. His Honour says at about point 5 of the page:
It is not without significance that registered dealings being part of the Register Book are bound up with it ‑
Then this is the important paragraph:
It seems to me that it was not intended that the certificate of title alone should provide a purchaser dealing with the registered proprietor with all the information necessary to be known to comprehend the extent or state of that proprietor’s title to the land. The dealings once registered became themselves part of the Register Book. It was therefore sufficient that their registration should be by statement of their nature recorded on the certificate of title.
Then at the bottom of that page, page 77, his Honour says in the last sentence on that page:
In my opinion, the nature of the instrument to which s. 37 refers is its description as a transfer, lease . . . What it achieves in particular is not part of its nature for relevant purposes.
At about point 5 of that page is the sentence:
Once the memorial is sufficient to effect registration of the instrument, then the interest of the registered proprietor becomes subject to the registered instrument because of the words in the body of the grant on certificate of title describing the proprietor’s interest.
That is a reference back, in my submission, to the equivalent section 69 – I think it is section 62 of the New South Wales Act. Over the page, at page 79, his Honour concludes his discussion in the last sentence of the paragraph at the top of the page:
Consequently, in my opinion, the memorandum of transfer was duly registered under the Act of 1862.
Then his Honour goes on to say:
If, as I think, the memorandum of transfer was duly registered that registration was continued under the Act of 1900 ‑
Then he says importantly:
The estate or interest in the airspace occupied by the building over the right of way therefore was not an unregistered interest: on the contrary, it was a registered interest. That registered estate or interest was, in my opinion, sufficiently particularized on the present certificate of title in conformity with s. 32(2) of the Act of 1900. The notification brought to the knowledge of the purchaser the existence in the Register Book of the memorandum of transfer and therefore of the registered interest in the land of the registered proprietor which the registered memorandum of transfer created.
His Honour then goes on to make some additional comments and at about point 8 he says:
To my mind, it is inescapable that a person dealing with the registered proprietor . . . would be bound to search the registered dealing ‑
Then at about point 9:
In my opinion, no purchaser from the registered proprietor in this case could properly claim to hold the land free of the registered estate or interest created by the memorandum of transfer ‑
Then at the bottom of the page he says:
Consequently for the reasons given by my brother Windeyer and for these reasons, in my opinion, the appeal and cross appeal should be dismissed ‑
Your Honours, in my respectful submission, when one reads the decision of his Honour the Chief Justice, it is clear that he has addressed the relevant issues, first by agreeing with Justice Windeyer in respect of one matter but then going on to address the question, importantly, as to whether the nature of the instrument was correctly identified and the effect for the purposes of the equivalent of section 69 of that matter.
I will take your Honours to those passages because nowhere in the passages or the part of Justice Barwick’s judgment will your Honours see any mention of a prudent conveyancer, which is the mantra, if I may put it that way, that has been taken up by my learned friend, Mr Wells, and is used as the reason why he says a purchaser can go beyond the register book and look at other documents which are outside of the register book.
GAGELER J: Mr Tokley, what is the equivalent in the South Australian Act to section 35 of the 1862 Act?
MR TOKLEY: Your Honour, I will get that to you if you pardon me for one second. As I apprehend it, your Honour, the equivalent to section 35 is – it is section 57, your Honour, which your Honour will find at Part A, volume 1 of 5, paragraph 38, and what it says is that:
Every instrument shall, when registered, be deemed part of the Register Book, and shall have the effect of and be deemed and taken to be a deed duly executed by the parties who have signed the same.
Your Honours, I will just go to back to where I was dealing with Justice Windeyer. The architecture of Justice Windeyer ‑ ‑ ‑
KIEFEL CJ: Mr Tokley, what do you say is essentially what Chief Justice Barwick was saying in Bursill, in relation to what needs to be notified and what steps if any need to be taken?
MR TOKLEY: Your Honour, so the steps are that when – in Bursill’s Case, the steps were, when the transfer was presented and registered a memorial was made on the certificate of title directing attention to the existence of the transfer and giving it a number. I think from memory it was 9922. The registered proprietor’s title was then subject to the interest encapsulated in the transfer, and a person reading the transfer would understand the nature of the interest that it contained and would be bound by it.
His Honour did not say that it was necessary to go beyond the registered transfer and his Honour did not say that a prudent conveyancer would carry out searches. His Honour did say that a person would have to obviously read the document and I think he used the expression “search and examine” the document in order to understand its effect. If I may, it is at page 280 of the-
KIEFEL CJ: Perhaps if you just refer to the CLR page numbers, that might be easier.
MR TOKLEY: Yes, I am sorry, your Honour. Of course, your Honour. It is at page 78 about point 8, the sentence beginning:
In practical terms this inadequate description cannot be of moment because even to ascertain the nature and extent of the right or rights of way which it is said to have created or extended the memorandum of transfer must be searched and examined. Potent however as such a practical consideration must be, it cannot itself resolve the question whether or not the inadequate, or if you will, misleading, description of the effect of the memorandum of transfer vitiated the memorial as a registration of the memorandum of transfer or prevented an endorsement which otherwise would qualify as such being a memorial.
So, once the transfer was memorialised the title then became subject to it and he said the same at page 79, again about point 8 of the page:
To my mind, it is inescapable that a person dealing with the registered proprietor in this case would be bound to search the registered dealing of which particulars were endorsed on the relevant certificate of title.
So, in the context of Bursill’s Case, the certificate of title directs the purchaser to the memorial which, in turn, directs the purchaser to the transfer. The purchaser is then required to read the transfer in order to understand the nature and extent of the interest in the registered title.
EDELMAN J: In the passage at page 79 that you just read from, is the Chief Justice saying anything more than that a person dealing with a registered proprietor needs to read the document amounting to the registered dealing rather than search?
MR TOKLEY: Your Honour, the former. He is not saying anything more than that. I think he is using the word “search” as in – not as in “go out and make” searches which you simply have to – but by “search” he means read because when ‑ ‑ ‑
KEANE J: Well, he has actually said as much, has he not, at page 77 of the CLR, halfway down the page:
It is not without significance that registered dealings being part of the Register Book are bound up with it . . . and thus available for search and inspection.
By “search” he means look at the register book.
MR TOKLEY: Correct, your Honour, yes, and that is how we would understand it, your Honour. Yes, that is how we would understand it. When one looks at what is said in context - and the point is also made, in my respectful submission, by Justice Windeyer. If I could take your Honours now to Justice Windeyer at page 92 and your Honours will see the paragraph:
The critical question, as I see the matter, is then whether the interest in respect of buildings that Guy conveyed to Long can be said to have been “notified . . . If it was, then Bursill holds its land subject to it; and that involves no inroad upon an indefeasible title.
The argument that the interest in the buildings is not notified on the certificate of title proceeded on the assumption that Bursill, when purchasing the land, could safely neglect to search the transfer No. 7922, which was expressly referred to on the certificate of title.
His Honour then goes on to address the argument that has been put to the Court:
It is contended that this reference to the memorandum of transfer did not amount to constructive notice of its full operation, because it was described as creating an “Extension of the Right of Way”. Doubtless this description would have been better if it had read “extension of right of way and rights in buildings above the way”. But it seems to me that what is “notified” to a prospective purchaser by his vendor’s certificate of title is everything that would have come to this knowledge if he had made such searches as ought reasonably to have been made by him as a result of what there appears.
I emphasise the word “there”:
I here use the words of s. 164 of the Conveyancing Act, 1919 (N.S.W.). We are not concerned in this case with s. 43, which gives a protection against unregistered instruments, for transfer No. 7922 was registered, and is noted on the certificate of title.
KIEFEL CJ: Mr Tokley.
MR TOKLEY: Yes, your Honour.
KIEFEL CJ: Do you say that Justice Windeyer, when his Honour says:
such searches as ought reasonably to have been made by him as a result of what there appears -
is referring to what is notified on the folium his Honour refers to at page 92?
MR TOKLEY: Yes, your Honour.
KIEFEL CJ: It is restricted to the folium. If one extrapolates into a case like this you do not need to go then back beyond what is notified in the folium itself?
MR TOKLEY: Correct.
KIEFEL CJ: Just whatever puts you on notice from the folium?
MR TOKLEY: Yes, your Honour, that is our case. If one were to omit the words “what there appears” then you might get a broader interpretation. But because he says in that sentence:
But it seems to me that what is “notified” to a prospective purchaser by his vendor’s certificate of title is everything that would have come to this knowledge . . . as a result of what there appears.
So it must be a reference back to the vendor’s certificate of title. His Honour then goes to say in the next paragraph that once you look at the transfer, the purchaser might have been surprised to discover all that his search revealed. He says:
But surely no prudent person, seeing the reference to a right of way, would neglect to ascertain what exactly was the nature of the right of way, the land subject to it, the persons –
and so on and so forth.
KIEFEL CJ: What their Honours were concerned with was something which – a description or the nature of the right of way which was quite misleading.
MR TOKLEY: Yes, your Honour, they were. Your Honour is quite right. The argument that was put to the Court was because the description failed to be broader and to say what, as his Honour Chief Justice Barwick said, the instrument actually achieved, that the memorial was ineffective to record the true nature of the instrument and hence it was not an appropriate memorial, and hence it was not notified on the certificate of title.
KEANE J: When Justice Windeyer is speaking of what a prudent conveyancer would do, he is actually saying a prudent conveyancer would read the instrument that is notified on the register book and would not be put off by the misdescription.
MR TOKLEY: Correct, your Honour.
KEANE J: He is not saying anything more than that about the practices of prudent conveyancers.
MR TOKLEY: Your Honour is absolutely correct, and that is our submission. So, your Honours, I am now at paragraph 13 of our outline. And to take up the point your Honour Justice Keane has just mentioned ‑ the prospective purchaser is not bound to search for documents outside of those notified on the register book. Council certificates of titles do not have any legal effect and, in my respectful submission, the judgment of Justice Windeyer and Justice Barwick’s, which I have taken your Honours to, are consistent with that proposition.
I have taken your Honours to the relevant parts of the statute, and we say that that supports the next proposition at paragraph 15, that in the context of a building scheme, the registered proprietor of land subject to it has an interest in every other allotment of the scheme ‑ I beg your pardon, I withdraw that, I have not supported paragraph 15 yet, but it is paragraph 16, and the registered encumbrance must identify, if it is to be brought to the attention of the persons, consistently with what we have just been through in terms of personal space, the encumbrance would have to identify the land to be benefited.
And I do not think that is in dispute, I think what is in dispute between the parties is where the materials that might be brought might be used to ascertain that fact. My learned friend goes beyond the register book to other materials. We say one is confined to the register book and it is to be examined or searched in the manner understood in those sorts of cases.
KIEFEL CJ: Just to be clear, Mr Tokley, does that mean that the idea that what is notified ‑ the memorandum of encumbrance, the fact that it is not attached to any land does not affect its validity? I mean, I know you are coming to it shortly, in your outline, but in the present case the instrument was the subject of a requisition which was not particularly cleared up, and I do not think it has ever been suggested that it actually showed that it was attached to any particular item of land, so what is its status?
MR TOKLEY: I think, in technical terms ‑ I am sorry, is your Honour referring to the back sheet of the document, or to the ‑ ‑ ‑
KIEFEL CJ: Yes.
MR TOKLEY: So, the back sheet of the document seems to have been a creation of the Land Titles Office in order to facilitate the operation of section 50, as it then was, under the earlier legislation. If your Honours will pardon me, if your Honours could take up ‑ ‑ ‑
KIEFEL CJ: Am I taking you out of the sequence of your outline? You are coming to all of this later, I think.
MR TOKLEY: Yes.
KIEFEL CJ: I was just curious to know, because it is not ‑ putting aside what actually happened with requisitions and whatever, because that is not necessarily what is notified, you said that it is not disputed that the memorandum of encumbrance, which is notified, the existence of it is notified, is itself not connected to any particular land, so there is nothing which reading the register would tell you which land was to be the subject of anything to do with the memorandum of encumbrance. Does that mean that the instrument notified on the register is ineffective, or is this a non‑issue in this case?
MR TOKLEY: Insofar as it created a rent charge it may have some validity. Insofar as the covenants – the other covenants are there – they are not part of the rent charge, and that is apparent when one, for example, compares the – because it is the exact same – the wording is almost identical, save for the relevant parties, to the wording of the encumbrance that was considered by Chief Justice Bray in the Clem Smith Case ‑ ‑ ‑
KIEFEL CJ: Yes.
MR TOKLEY: ‑ ‑ ‑ where he held that it was, in effect, an easement in gross or an encumbrance – a covenant in gross – it did not attach to the land. That, in my respectful submission, is correct. There is no – whereas the rent charge obviously creates an interest in land, the covenants do not, and there is no material difference between the encumbrance in this case and that which was considered by ‑ ‑ ‑
KIEFEL CJ: I suppose what I am asking, is, is this case really concerned with notification of an ineffective instrument?
MR TOKLEY: Yes.
KIEFEL CJ: So, why was the focus not on the efficacy of the instrument, on the basis of, even if ‑ at a practical level, even if the searches were taken to have been required, it goes nowhere because the instrument itself cannot tell you? I suppose the approach taken by the parties in the courts below is just the Torrens system focuses upon notification and that is how they wish to be resolved. The only problem I suppose it throws up is that once you get into an area of discussing further searches, as may be necessary as the majority held in the Full Court, you seem to be searching for something that is going to tell you that it is ineffective and that seems a – well, perhaps that is why one may not undertake these searches, but ‑ ‑ ‑
MR TOKLEY: I suppose ‑ ‑ ‑
KIEFEL CJ: Yes.
MR TOKLEY: I am sorry, your Honour. I interrupted you, your Honour. I suspect my learned friend, Mr Wells, will be putting the opposite, that it was an effectual instrument, and even if it was the fact is the existence of a building ‑ we say that the existence of a building scheme and the lands to be benefited under that building scheme were not relevantly notified within the meaning of section 69, and so the purchaser, our clients, were not bound by such interests.
KIEFEL CJ: Because they do not amount to an interest?
MR TOKLEY: Because they do not amount to an interest, because they were not notified. If they did, they were not notified of them.
KIEFEL CJ: Just to some extent the issues seem to blur, but I am sure it will become clearer to me.
MR TOKLEY: I am sorry, your Honour. Your Honours, I will just find where I was. So, the point we make in paragraph 15 I think is not a controversial one. It is that if there is a building scheme, that the participants in the scheme have an interest in every other allotment that is part of the scheme as well as their own and the authority for that is Pirie’s Case, which in the interests of time I do not propose to take your Honours to. We say that paragraph 16 follows from that proposition, together with the relevant sections I have taken your Honour to, in particular section 129 that the registered encumbrance must, therefore, identify all other quasi‑dominant tenements to disclose the nature and extent of the title. But it does not here, and so we say the building scheme fails.
Although it is a single judge’s decision, I might take your Honours to Re Dennerstein, and the reason for doing so is because Re Dennerstein has been followed by many other decisions, including Clem Smith and including Re Netherby, which are decisions mentioned in our written submissions.
Your Honours, Re Dennerstein can be found at page 605, that is Part D of the joint book of authorities, and it begins at – the relevant part is at page 613. His Honour Justice Hudson ‑ ‑ ‑
GORDON J: Which page of the report are you on, please, Mr Tokley?
MR TOKLEY: I am sorry, it is page 696 of the report, your Honour. It is [1963] VR 688, and then page 696. At about point 3 of that page his Honour makes the observation that:
What has been notified is simply a covenant by the transferee with his transferors their executors, administrators and transferees. Upon its true construction this has been held to be a covenant which fails to identify any land in favour of which the benefit thereof is to be annexed. It is only when resort is had to an inquiry as to the circumstances under which the covenant was entered into, that it may be inferred that it was to give effect to a building scheme to which the owners of lands affected by the scheme were parties; only when this has been done can it be postulated that the benefit and the burden of the restrictions were intended to pass to and bind subsequent registered proprietors. No reference to the existence or the extent of such a scheme is contained in the covenant, and, for all that appears in it, the covenant may have been intended to have no greater effect than what the law would give it.
He then goes on to deal with the argument put by Mr Searby, about point 7 of that page, that it would be possible for the purchaser to find out, for example, from a lodged plan of subdivision, the person could identify the lots and so on and so forth, which is the very point that is being put against us here:
and by searches of the transfers of those lots, it could be ascertained as a matter of reasonable inference –
and so on. So the very same argument that we are having to address here. And then his Honour goes on to say:
In my view, a purchaser of land under the Transfer of Land Act is not bound to prosecute inquiries and searches and make deductions such as would be involved if Mr. Searby’s contentions were accepted. Even when all the materials and evidence in relation to the circumstances under which an estate has been subdivided and sold are available it is not by any means easy to determine whether the sale of allotments in the estate has been made under or pursuant to a common building scheme. To require a person interested in purchasing one of those allotments to make this determination after obtaining necessary evidence perhaps years after the original sale if it is available would render conveyancing a hazardous and cumbersome operation, and, in the case of dealings in land under the operation of the Transfer of Land Act, would defeat the object of the Act and destroy in large measure the efficacy of the system sought to be established thereby.
We would adopt those words, your Honours, as a correct statement of the legal position which has been followed on many occasions and is replicated in many of the judgments. I skip ahead for one moment. Your Honours will know from the judgments of Justice Kourakis in the court below ‑ Chief Justice Kourakis in the court below – that there are pages where he endeavours to ascertain whether there is one, two or three common building schemes and he begins his introduction with the expression “a conveyancer’s nightmare”.
GORDON J: So if we can just apply those principles to the facts here, is the position that if on the memorial instead of saying this is part of a common building scheme, as it does, it identified that scheme by number and attached the plan, that would have been sufficient?
MR TOKLEY: If the covenants themselves contained a description of the other land and the instruments of encumbrance in those other lands, then it would identify – the relevant lands would have been identified in the covenants and one would not have to go searching for them in the way which has been required in this particular case. As my learned junior reminds me, that was the position in Burke v Yurilla which is one of the Full Court authorities we have mentioned where the encumbrance set out the various allotments and the land relevant to those various allotments in the encumbrances of one of the covenants of the encumbrance itself.
EDELMAN J: Is that any more than saying that there just needs to be provision of the extent of the building scheme?
MR TOKLEY: I think it is the equivalent, your Honour.
GORDON J: So that means practically one could have it by saying there is a common building scheme, these are the allotments, this is by reference to a plan with the certificates of title notified on them and they are affected in all the same way, which is consistent with what 129(2) in the chapeau at the end is recording, is it not?
MR TOKLEY: Yes, your Honour, that is, yes.
GORDON J: That was not done here.
MR TOKLEY: No, correct, your Honour. That is correct. Thank you, your Honours. In the interests of time, I will rely upon the propositions that are stated in our oral outline at paragraphs 16 and 17 and to the references therein. What I would now like to do is take your Honours to some factual matters and if I could invite your Honours please – and I apologise in advance, your Honours, that there are so many volumes. Unfortunately, the clarity of some of the photocopying was not good enough, but if I could invite your Honours please to go to what is known as the respondent’s book of further materials and if I could invite your Honours to first of all go to page 95.
Your Honours will see at page 95 the relevant documents for Lot 3 and over the page at page 96 that is the relevant certificate of title showing our clients as the registered proprietors. This is the second edition. Your Honours will see that about point 4 of the page. It is “Edition 2”. The earlier edition would obviously have shown the previous registered proprietors. The earlier edition, edition No 1, was not in evidence in any of the courts below. So the only one we have to go on is this edition 2.
Going down from the top it shows the title, the volume and folio number, parent title, converted title, estate fee simple, description of land and then the schedule of dealings, 2675722, is the relevant encumbrance. The relevant encumbrance, which I will take your Honours to now, the back sheet can be found at page 102. Unfortunately, even on this copy the relevant number has been slightly obliterated but it is 2675722. Your Honours will see that this is entitled “Memorandum of Encumbrance”, identifying the encumbrancers and the encumbrancees ‑ your Honours will see the words at about point 3:
MEMORANDUM. – A Memorial of the within Instrument No. 2675722 was entered in the Register Book, Vol. 3310 Folio 186 –
then the day, the time and the seal of the Registrar‑General. Then the words on the right‑hand side which have been reproduced in the judgments:
Is this encumbrance part of a common building scheme? If not to what land is it appurtenent?
Underneath you will see the signature of the estate agent and:
This encumbrance forms portion of a common Building Scheme.
Justice Peek wrongfully described that as a memorial. It is not a memorial, your Honours.
KIEFEL CJ: It is the answer to a requisition, is it not?
MR TOKLEY: It is, your Honour, yes. Then your Honours will see that there are two certificates provided by – I can tell your Honours, I will prove it in a moment – two signatures of a bank manager who had the relevant purchasers appear before him. Then at page 103 is the encumbrance itself. If I can quickly go to page 104, you will see that the encumbrance has been signed by the then two purchasers, Mr Guilio Boin and his wife, Franca Boin, and it is witnessed by the proclaimed bank manager at Brooklyn Park in South Australia on 4 November 1965.
It would I think be of assistance to your Honours if I were to take your Honours to those sections of the earlier version of the legislation as it applied at this time.
KIEFEL CJ: Mr Tokley, just so I am clear about it, is it your case that if a purchaser read the certificate of title and saw the encumbrance noted that they would by reference to the dealing number be able to identify the memorandum of encumbrance itself?
MR TOKLEY: Yes, your Honour, yes. The memorandum of encumbrance, of course, is set out in pages 103, 104, and that is the relevant instrument because when one reads the back sheet it talks about a “memorial of the withered instrument”. So, the purpose of the back sheet is to enable identification of the instrument. As I said earlier, in my submissions, there is no material difference between this document and the one considered in the Clem Smith Case.
GORDON J: Is it the position that what appears at 98 is the only plan that was attached to the bottom part of the register?
MR TOKLEY: Yes, your Honour. I am sorry, I thought there might be two questions.
GORDON J: I think I interrupted Justice Gageler.
KIEFEL CJ: I think Justice Gageler had a question.
MR TOKLEY: I am sorry, Justice Gageler, yes.
GAGELER J: Mr Tokley, I am sorry if this is a very basic question but the memorandum of encumbrance and the back sheet, as I understand it, were deposited in the general registry office. Is that so? They are not physically part of the register book, but they are deemed to be part of…..
MR TOKLEY: That is correct, your Honour, that is my understanding of the practice of the Lands Titles Office. I am sorry I have to take your Honours to so many different books but if I could invite your Honours to go to Part B of the joint book of authorities and there are two sections I wish to, in particular, bring to your Honours’ attention. It is page 178, first of all.
GORDON J: Could I ask what this is ‑ what you are referring to please by reference to the title?
MR TOKLEY: It is to explain why it is that there exists the back sheet, your Honour.
GORDON J: I see, thank you.
MR TOKLEY: I am sorry, your Honour. So, if your Honour would please go – it is on page 179, I beg your Honours’ pardon. It is the then sections 52 as it existed:
Whenever a memorial of any instrument has been entered in the Register Book, the Registrar‑General shall indorse on the instrument registered a memorandum of the date and hour on which the memorial was entered in the Register Book, and shall authenticate such memorandum by signing his name and affixing his seal thereto; and such memorandum shall be received in all Courts as conclusive evidence that the instrument has been duly registered.
So, as I apprehended, that was the purpose of having the back sheet, to comply with section 52.
Your Honours, there was one other section. If your Honours would just bear with me, please, for one moment. I am sorry, your Honours, I will not delay your Honours, I will find the section and provide it to you, but there is a section which requires that instruments such as encumbrances have to be witnessed, and that is why there is, on page 104 of the book, the witness by the bank manager. I did have a reference to it, but I cannot now find it. Your Honours, in terms of the - it is page 179 of that book, and it is section 56:
Every instrument presented for registration shall be attested by a witness, and shall be registered in the order –
et cetera, et cetera, to purposes of priorities. So the instrument itself is the document, at pages 103 and 104, and that is what is registered and brought to the attention of a person who would, seeing the memorial number, then follow it through to read the document.
Your Honours, it is not necessary for me to go to all of the other documents, I can simply make the observation that all of the encumbrances for the whole of the 52 lots are in identical terms. None of them say that there exists a building scheme. The only one that has the notation for - or the words that there is a common builder’s scheme is on the back sheet of this particular document
Your Honours, at paragraph 19 of our outline of oral submissions, we have referred to the fact that the evidence did not establish whether there was only one builder’s - I am sorry, in terms of fallback position, if we had to address it, we say the evidence does not establish whether there was one, two, or three building schemes.
We have given the references in the dissenting judgment of Chief Justice Kourakis and we have also made the point that the only way that one could rely - determine whether there was one building scheme, is to rely upon extraneous evidence, being the Gaetjens Plan, and it requires one to draw various inferences. It is simply not brought to the attention within the authorities as understood by us - to the attention of the purchaser.
Your Honours, I am conscious of the time. I think I do not need to trouble your Honours further with other factual matters, save, except what we have said there.
EDELMAN J: Mr Tokley, just one small point on the memorandum of encumbrance.
MR TOKLEY: Yes, your Honour.
EDELMAN J: Was there any evidence as to the date at which the answer to the requisition was inserted on the memorandum?
MR TOKLEY: There was no evidence to that effect, your Honour, but I believe that the stamp above the words “This encumbrance forms portion of a common Building Scheme” says “17 November RECD”.
EDELMAN J: I see.
MR TOKLEY: So one assumes that they got the answer to the requisition back on 17 November and then they entered the memorial on 19 November at 11 o’clock, is the best answer I can give your Honour.
Your Honours, in summary, in our respectful submission, there is nothing in the encumbrance which would enable one to ascertain that there was a common building scheme in existence, for the reasons that have been given and for the reasons mentioned by your Honour Justice Gordon.
A purchaser is not required to go and make further searches of other certificates of title and other encumbrances. The only evidence that was before the court below as to the existence of one common building scheme and the sale of all the lots was a document extraneous to the register, which was the Gaetjens Plan.
The approach urged upon the Court by the respondents would introduce uncertainty into a scheme which has as its essential certainty a title. In our respectful submission, we say it is fundamentally inconsistent with sections 10 and the objects of the Act, and the way in which the Act is to be interpreted.
We say that there are other authorities that support the position we have adopted, and I have mentioned those other authorities, and they are set out in our written submissions. I notice the time, your Honours. If that is a convenient time to a have a break then Mr Heuzenroeder will take the submissions after the break.
KIEFEL CJ: Yes, thank you. The Court will adjourn for 15 minutes.
AT 11.14 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.30AM:
KIEFEL CJ: Yes, Mr Heuzenroeder.
MR HEUZENROEDER: May it please the Court. The arguments that I will attempt to address in economic terms in terms of the time are very much fallback positions for the appellants. As Mr Tokley has directed the Court to, and as has been identified in pinpoint references in the outline of oral submissions, there was an inference to be drawn, and which we say ought to be drawn, that there were up to three contiguous building schemes on what would, from a God’s eye point of view, be the Gaetjens Plan, which was a private document and not on any public register, and the respondents did not prove that Lots 3 and 35 were in the same building scheme.
Even if, in accordance with the principles in Brunner v Greenslade in the general law building scheme crystallised upon the sale of the first subdivided lot, under the Torrens system and once again assuming that one can go outside the certificate of title and memorialised instruments contrary to our primary argument, the purchasers of allotments in Deposited Plan 8199 purchased prior to - or some of them purchased prior to Deposited Plan 7593 being placed upon the grandparent title and therefore they could not have been notified on any view of the extent of the building scheme.
That, in our submission, destroys the efficacy of the respondent’s argument. In particular, as paragraphs 17 and 18 of the appellant’s amended submissions note, Deposited Plan 8199 was deposited on – the subdivision occurred on 7 September 1964. The first sales occurred in October 1964 and Deposited Plan 7953 was only subject to a subdivision on 10 December, so there was a chronological problem that the respondents have to face.
The third respondent relies, therefore, on two propositions which are in paragraph 83 of their written submissions, the first proposition being that Lot 5 was implicitly part of a scheme in the absence of it having an encumbrance, bearing in the mind that Mr Fielder, the third respondent, owned both Lots 5 and 35. So it is asserted that it is implicitly subject to an equity in part of the building scheme.
An alternative submission they put is that Lots 35 and 5 are affected by a scheme between Lots 1and 4, even though they are not part of it, and it is said that that is sufficient to ground standing for a declaration and an injunction. In relation to the first of those two propositions – and this is dealt with in paragraph 17 of our reply – there is a necessary element of reciprocity in any building scheme and, in our submission, in a Torrens system setting that means that a person investigating the title of Lot 3 had to be notified of a mirror encumbrance on Lot 5 to be notified of a building scheme. One cannot therefore rely upon general law authorities saying that lots that are not subject to an express encumbrance might implicitly be subject to such an encumbrance.
Thus, while as between the first purchasers of Lots 3 and 5 there may have been some implicit mutuality, upon a subsequent sale of Lot 3 any equities that might have existed were destroyed because of a lack of notice on the certificate of title. The subsequent purchaser, we would say being Mr and Mrs McKenzie in the 1960s, then took free of any equities because they obtained an indefeasible title.
I am sorry, can I next put some submissions in relation to point 12 on our outline. They could be shortly put because we have developed them in further detail in our written submissions, but your Honours perhaps should take up and have before you the encumbrance again. Your Honours will see that in the encumbrance, which your Honours will find in our book of further materials at continuous page 103, the relevant covenants are clause 2 and clause 3.
By the way, I perhaps should have mentioned, your Honours, in the earlier analysis, that it is not without significance that it is clear that the covenants were intended to inure force of the - intended to burden successive transferees from the Boins, and your Honours will see that in the final portion of the encumbrance, and there is no question about what was being intended. But if you go back to the covenants themselves and clause 2, first of all, the prohibition is not to:
erect or permit or suffer to be erected upon the said land or any part thereof –
That is a precedential reference back to an historical issue that had arisen with covenants that were annexed but not annexed to every part of the land. For a while it was being determined that therefore if that was not so, a part of the land might be able to be sold off and not be burdened with the covenant. So as a result, conveyancers took to adding that phrase “or any part thereof”, and then it says:
any building or buildings other than
(a) a dwellinghouse . . . and
(b) outbuilding or outbuildings –
At one level, textually, the question is whether the indefinite article “a” means “only”, or “one only” and, of course, our contention is that it means one only and it almost comes down to the emphasis that one puts on reading that through on the indefinite article. But when one considers that this was one of, I think in the end, 50 encumbrances out of a 54 lot subdivision, all of them in identical terms, it becomes very difficult to understand how in 1964/65 it would be sought to be suggested that in a new subdivision you could create further subdivisions and put more houses on – defeats the whole purpose of single dwellings.
But, more particularly, and this is – my learned friend Mr Heuzenroeder referred to Tonks’ Case (2003) 11 VR 124, a single judge decision in which the word “a” appeared, but two things did not appear. One was the reference to the prohibition on the erecting of any building or buildings, plural, and the other thing that did not appear in Tonks’ Case was clause 3.
Now, your Honours, we have referred in our written submission to the Victorian decision of Prowse v Johnstone, which stands for the aligned proposition that in a covenant which was referring to one house, it had been attempted to argue that that means you can have one house as in a building that looks like a house but actually inside is four apartments, so that you have got multiple households in one house.
It is clear, in our respectful submission, from clause 3 that what is being prohibited here is more than one household and it would be extraordinary, in our respectful submission, if in the light of clause 3, which is setting its face against more than one household in a dwelling, that clause 2 should then be construed in such a way as to enable several dwellings to be built on the one allotment, subsequently subdivided, so as to create two or more households. Everything, in our respectful submission, points to this as referring to a prohibition on any more than one dwelling house with its associated outbuildings on an allotment or any part thereof.
The submission has been put which was not put in the Full Court that as an aid to construction one should avoid construing a clause like this so as to constitute a restraint on alienation. In our respectful submission, that submission should not be entertained but is, in any event, with great respect, misplaced. It should not be entertained because the notion of a partial restraint on alienation involves a consideration of how that was going to affect value.
Your Honours will see that, although again, this is not a case which appears in the joint book of authorities but which is referred to in our written submissions, in a decision of the Full Court of the Supreme Court of South Australia in John Nitschke v Hahndorf Golf Club where this partial restraint on alienation was the subject of close consideration. I refer to it only to read to your Honours, when I eventually put my hand on it, one passage from it which was taken as being a critical passage.
John Nitschke Nominees v Hahndorf Golf Club (2004) 88 SASR 334 and the principle which was taken to be applicable was a principle expressed by Chief Justice McCawley in the Queensland case of Grayson [1922] St R Qd 155 and it is expressed like this:
“I think that in this case, when the area and locality of the lands devised are considered in conjunction with the limited number of persons to whom it may be sold and the duration of the restriction, the power to alienate must be regarded as restricted within limits so narrow as to constitute a substantial taking away, not of the whole power of alienation, but of a valuable portion of it, subjecting it to fetters which inevitably, by limiting the market, diminish the ordinary selling value of the land, and which might, in fact, destroy all opportunity of selling.”
This is manifestly a matter of degree. No evidence was gone into about that and, of course, this is a context in which the whole point of these covenants is to enhance value not to devalue but, more importantly than that, the Full Court in the Hahndorf Golf Club went on to say that the restraint on alienation as a doctrine of repugnancy is not absolute and that there are countervailing reasons why it might not be invoked.
That is a matter of policy – public policy as well and if there is a justification as a matter of public policy for particular restraint then it will not be subject to the doctrine at all. None of this has been gone into, of course, but in our respectful submission, it is very telling that in no case concerning restrictive covenants has restraints on alienation ever been raised as a reason for striking them down and there is good reason why that is so, in our respectful submission. It is a countervailing public interest which gives very little weight in those circumstances to a doctrine as sudden and decisive as restraint on alienation. In our respectful submission, it does not fall for any separate consideration here in the question of construction.
On the question of standing, our submission is based upon an assumption which goes against us and that is that what was notified on the title was not the building scheme consisting of 54 lots, but a building scheme consisting of four lots – that is Lots 1 to 4. Now, in our respectful submission, even if one were to undertake the exercise that the learned Chief Justice in the Full Court undertook, which was, as it were, to put himself in the shoes of the Boins, it is difficult in a sense to understand why one would put oneself in the shoes of the Boins, but his Honour did that which meant that from his point of view you were not allowed to look outside the register, which of course is contrary to authority when one is talking about establishing the fact of a building scheme.
But if, putting that aside for the moment, the Boins were led to the grandparent title, which was the way in which his Honour undertook this analysis and as a consequence of which his Honour said there is no reason why once getting there you would conclude that there was one building scheme, why would you not conclude that there were three, your Honours had our submission that that overlooks entirely the significance to be attached in the words of the encumbrance in the circumstances in which it is announced as part of a building scheme and therefore the significance of the word “assigns” as meaning all our assigns, “our” being the joint owners.
But if we assume for present purposes that we have to work with three building schemes, which as I say seems odd, and that therefore the third respondent, the present Mr Fielder, does not hold an allotment in the same building scheme as the appellants, our submission proceeds on that basis and on the basis that the third respondent is the owner of two other lots. One is Lot 5, the other is Lot 35. Lot 35 is in the 54 lots, but on the assumption I am making not in the four that the appellant is in.
It does not by any means follow, in our respectful submission, that that being so, particularly when there are identical encumbrances that are burdening all 54 of these allotments, even so apparently in three building schemes, it does not mean that the third respondent does not have standing to seek declaratory relief. He has, in our respectful submission, a clear interest in doing so.
It stands to protect him in circumstances where he is – he is not in an adjacent allotment and consideration of the Gaetjens Plan would show that he is separated by a number of allotments from Lot 3, but nevertheless he is in that same neighbourhood of the subdivision and everybody in that subdivision is the subject of this encumbrance and after 50 years here is someone who has stepped out and said well, I want to change the nature of this neighbourhood by subdividing and putting two households on an allotment rather than one.
He has a clear interest, in our respectful submission, in seeking a declaration as to the validity and effectiveness of the restrictive covenant as notified on the certificates of title. He does not have a direct right which is being interfered with, but he nevertheless has a very real interest in every sense of the word in which that is used and has been used in all the discussion about declaratory relief, particularly in relation to private rights.
Your Honours will have a reference in our written submissions to JN Taylor, the South Australian case in which Chief Justice King took up, in effect, the pioneering work that had been done by this Court in Jododex and applied it in a private cause.
There is one other case that is to like effect which again is not on anyone’s list, your Honours, because it is too new and I have not really until today had a chance to even notify my learned friend about this case which has only just recently come out. So, in fairness to my learned friend, I do not propose to make any submissions about it, but I feel I should give your Honours a reference to it.
It is a decision of the Full Court of the Federal Court in Clarence City Council v Commonwealth of Australia. It was a case that decided that the appellants had standing, that there was a matter which invoked the jurisdiction of the court and that the matter should be remitted to the trial judge to determine whether the declaration should be granted. The critical feature of it was that effectively it was a case where a stranger to a contract was seeking a declaration as to the interpretation of the contract.
The contract was leases between the Commonwealth and corporate lessees of airports. The terms of the contract involved a formula for the payment of rates, land tax and other taxes by the lessees to councils and the parties to the leases, that is, the lessees and the lessor, were in agreement about the correct interpretation of the lease. There was no suggestion of variation or anything like that. They just took the same view about what its interpretation was. But the councils who were the third party, the strangers to the contract, took issue with that interpretation because it had commercial effects for them and as a result they sought a declaration as to the interpretation.
The Full Court held that they had standing to do so. Whether in the circumstances the declaration should be granted was sent back to the trial judge. It was held that there was a matter, that is, a controversy between on the one hand the parties to the contract and on the other hand the councils, and that therefore federal jurisdiction was invoked and, as I say, it was remitted. But, in my respectful submission, a case that supports the contention that we put that here, although on the view that is taken this is a separate building scheme, there is reason nevertheless to grant standing for a declaration.
The position about Lot 5 is this, that it is the residual title of the common vendors. It is what was left and as Justice Megarry says in Brunner v Greenslade, the common vendor does not have to be the subject of an actual encumbrance in order to be bound or to have the benefit so far as the residual land is concerned, which this is, although it has passed to Mr Fielder by transition and it is on that basis that we would be suggesting also that that allotment, which is only two doors away, is also a basis for declaratory relief.
I would like to be in a position to urge upon the Court – I do in fact urge upon the Court that if declaratory relief in these circumstances were appropriate, it should be backed up by injunctive relief. I accept that that might be an extra step to take. On the assumptions that we are making we do not and cannot identify a right as such that the third respondent can seek
to protect as against the appellants and in that respect that is why we use the analogy of nuisance, for the same reasons that would provide the third respondent with a basis for a declaration. Those are our submissions, may it please the Court.
KIEFEL CJ: Is there any reply, Mr Tokley?
MR TOKLEY: Yes, please, your Honours – just three short points by way of reply. The first is, as your Honours are I am sure aware – the point of departure between my learned friend and myself concerns the interpretation of Bursill’s Case. In my respectful submission, the words that he fixes upon on page 93 of the Commonwealth Law Report judgment, in the judgment of his Honour Justice Windeyer, do not justify the process that he has undertaken ‑ that is, to take those words out of context and to give to them an effect that I do not think is warranted in all of the circumstances.
The second point I wish to make is that Cihan’s Case, which your Honours were taken to, although decided after the Westfield Case, makes no mention of the Westfield Case at all. The paragraph that your Honour Justice Gageler and your Honour the Chief Justice referred to concerning paragraph 64, in my respectful view, can be read in the way in which your Honours have interpreted it and also as consistent with what is said in Bursill’s Case. It does not advance the respondent’s case any further.
The third point I wish to comment upon is simply that in relation to cancelled certificates of title. At page 80 of the core appeal book in paragraph 38 of the judgment of the learned Chief Justice, Chief Justice Kourakis, he makes the point that a cancelled certificate may be kept in other records of the Registrar-General, but it ceases to be a part of the register book because there cannot be multiple certificates of title and therefore folios for the same land.
At footnote 42, he refers to sections 51C, 64, 78, 80H and 103. Your Honours are of course aware that in section 49 of the version of the Act which was applicable at the time the appellants purchased their interest, it refers to original certificates constituting a separate folium of the register book, and in section 69 it is the original certificate, and in my respectful submission, there can only be one original certificate for any one particular parcel of land at any point in time, and hence the cancelled certificate is of no legal effect in terms of its application to the interest to which a proprietor’s title is subject. May it please the Court, those are my submissions in reply.
KIEFEL CJ: Yes, thank you. The Court reserves its decision in this matter and adjourns to 10.00 am tomorrow.
AT 3.59 PM THE MATTER WAS ADJOURNED
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