Epworth Group Holdings Pty Ltd v Permanent Custodians Ltd

This case concerned an appeal to the Full Court of the Supreme Court of South Australia regarding the priority of an unregistered retail shop lease over a registered mortgage. The appellants, Epworth Group Holdings Pty Ltd and Commercial & General Law (SA) Pty Ltd, held an unregistered lease and sublease respectively over office premises. The respondent, Permanent Custodians Ltd, was the registered mortgagee of the land on which the premises were located. The dispute arose when the mortgagor defaulted, and Permanent Custodians sought possession of the premises, asserting its registered mortgage took priority over the unregistered lease.

The central legal issue before the court was whether an unregistered retail shop lease, for a term exceeding one year, could prevail over the interest of a registered mortgagee under the Torrens system in South Australia. This required the court to determine whether the provisions of the *Retail and Commercial Leases Act 1995* (SA) created an exception to the principle of indefeasibility of title enshrined in the *Real Property Act 1886* (SA), specifically in relation to unregistered leases. The court also had to consider the effect of sections 69(h), 118, and 119 of the *Real Property Act* on the rights of the parties.

The Full Court, affirming the decision of the primary judge, held that the unregistered lease did not prevail over the registered mortgagee's interest. The court reasoned that section 69(h) of the *Real Property Act* only provided an exception to indefeasibility for unregistered leases for a term not exceeding one year, which was not the case here. Furthermore, section 118 of the *Real Property Act* stipulated that no lease of mortgaged land is binding against a non-consenting mortgagee unless the mortgagee has consented in writing prior to registration, and no such consent had been given. Section 119 was also found inapplicable as the lease term exceeded one year and was not protected by a caveat. While the *Retail and Commercial Leases Act* applied to the lease and potentially extended its term, this statutory extension did not override the priority established by the registered mortgage under the *Real Property Act*.

Consequently, the appeal was dismissed, and the court affirmed that Permanent Custodians Ltd, as the registered mortgagee, was entitled to possession of the premises, subject to the rights of any tenant who might have had a registered interest or a protected unregistered interest under the *Real Property Act*. The unregistered lease, for a term exceeding one year and lacking a caveat, did not create an interest that prevailed against the registered mortgagee.