Huang v 18 Woodville Holding Pty Ltd; Tao v 18 Woodville Holding Pty Ltd

[2023] NSWCA 15

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Huang v 18 Woodville Holding Pty Ltd; Tao v 18 Woodville Holding Pty Ltd [2023] NSWCA 15

Hearing dates:

11 October 2022

Date of orders:

15 February 2023

Decision date:

15 February 2023

Before:

Meagher JA at [1];
Kirk JA at [58];
Griffiths AJA at [59]

Decision:

In proceeding 2022/240885

(1) Grant leave pursuant to s 500(2) of the Corporations Act 2001 (Cth) to the appellants to commence the proceeding against the second respondent (in liquidation).

(2) Dismiss the appeal.

(3) Order the appellants to pay the respondents’ cost of the appeal.

In proceeding 2022/240730

(1) Grant leave pursuant to s 500(2) of the Corporations Act 2001 (Cth) to the appellants to commence the proceeding against the second respondent (in liquidation).

(2) Dismiss the appeal.

(3) Order the appellants to pay the respondents’ cost of the appeal.

Catchwords:

LAND LAW — Torrens title — Exceptions to indefeasibility — Unregistered tenancy — Whether s 42(1)(d) of the Real Property Act 1900 (NSW) can apply with respect to the interest of a tenant at will

Legislation Cited:

Conveyancing (Amendment) Act 1930 (NSW), s 38

Real Property Act 1877 (Qld), s 11

Real Property Act 1900 (NSW), ss 42(1), 43A(1)

Transfer of Land Act 1928 (Vic), s 72

Transfer of Land Act 1958 (Vic), s 42(2)(e)

Cases Cited:

18 Woodville Holding Pty Ltd v Hua Cheng International Holdings Group Pty Ltd (in liq) (No 2) [2022] NSWSC 947

Burke v Dawes (1938) 59 CLR 1; [1938] HCA 6

Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10

Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47

Downie v Lockwood [1965] VR 257

FCT v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55

Friedman v Barrett; ex parte Friedman [1962] Qd R 498

Hammond v Farrow [1904] 2 KB 332

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; [1983] HCA 30

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1965] HCA 17

McMahon vSwan [1924] VLR 397

Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326; [1976] HCA 9

Munro v Stuart (1924) 41 SR (NSW) 203

Oertel v Hordern (1902) 2 SR (NSW) Eq 37

Ong v Luong (1991) 9 BPR 16,759

Robertson v Keith (1870) 1 VR E 11

Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329

Turner v York Motors Pty Ltd (1951) 85 CLR 55; [1951] HCA 52

United Star-Bowkett Co-op v Clyne [1968] 1 NSWR 134

Wheeler v Mercer [1957] AC 416

Wicks v Bennett (1921) 30 CLR 80; [1921] HCA 57

Wilkes v Spooner [1911] 2 KB 473

Texts Cited:

D Kerr, The Principles of the Australian Lands Titles (Torrens) System (1927, Law Book Company of Australasia)

Peter Butt, The Standard Contract for Sale of Land in New South Wales (2nd ed, 1998, LBC Information Services)

Parliamentary Debates (New South Wales, Legislative Council, Parliamentary Debates (Hansard), 13 May 1930 at 5019–20)

Category:

Principal judgment

Parties:

Xiuzhen Huang (First Appellant, proceeding 2022/240885)
Reynold Zhou (Second Appellant, proceeding 2022/240885)
Zhe Tao (First Appellant, proceeding 2022/240730)
Jianmin Tao (Second Appellant, proceeding 2022/240730)
18 Woodville Holding Pty Ltd (First Respondent)
Hua Cheng International Holdings Group Pty Ltd (in liq) (Second Respondent)
Registrar General of New South Wales (Third Respondent)

Representation:

Counsel:

L Chan, A Lim (Appellants, proceeding 2022/240885)
M Condon SC (Appellants, proceeding 2022/240730)
JP Knackstredt, AF Girgis (First Respondent)

Solicitors:

Juris Cor Legal (Appellants)
Vincent Young Lawyers (First Respondent)

File Number(s):

2022/240885; 2022/240730

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Commercial List

Citation:

[2022] NSWSC 947

Date of Decision:

19 July 2022

Before:

Ball J

File Number(s):

2021/329986

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellants in each proceeding paid the purchase price for, and then were allowed into possession of, three apartments in a strata plan development. The principal issue in the proceedings is whether the first respondent, as registered mortgagee with respect to the development, was entitled to take possession of those apartments in exercise of its power of sale. This issue turned on whether the first respondent’s registered interest was paramount to any unregistered interests held by the appellants.

The primary judge held that the first respondent’s interest prevailed because the fact of registration made that interest indefeasible, and that the appellants could not rely upon any exception to indefeasibility.

The appellants sought to appeal this decision, maintaining that their interests fall within the exception to indefeasibility set out in s 42(1)(d) of the Real Property Act 1900 (NSW). If this exception to indefeasibility applies, they also claim that their interests would take priority over that of the first respondent in the resulting general law priority contest.

The Court (Meagher JA, Kirk JA and Griffiths AJA agreeing) dismissed the appeals.

One main legal issue arose for consideration by this Court:

1. The Court held that a tenancy for a term must be distinguished from a tenancy at will, and therefore that the s 42(1)(d) does not apply to tenants at will of the vendor as purchasers in possession. The position in Victoria, whereby the interests of such tenants may be protected under that State’s equivalent legislation, can be distinguished as a matter of statutory construction.

Burke v Dawes (1938) 59 CLR 1; [1938] HCA 6; Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329; FCT v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55; Robertson v Keith (1870) 1 VR E 11; Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10; Oertel v Hordern (1902) 2 SR (NSW) Eq 37; Wicks v Bennett (1921) 30 CLR 80; [1921] HCA 57; Munro v Stuart (1924) 41 SR (NSW) 203; United Star-Bowkett Co-op v Clyne [1968] 1 NSWR 134; Ong v Luong (1991) 9 BPR 16,759; Friedman v Barrett; ex parte Friedman [1962] Qd R 498; McMahon v Swan [1924] VLR 397; Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326; [1976] HCA 9; Wheeler v Mercer [1957] AC 416; Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47; Hammond v Farrow [1904] 2 KB 332; Turner v York Motors Pty Ltd (1951) 85 CLR 55; [1951] HCA 52, considered.

Given that the appellants held their interests in the apartments under a tenancy at will, the Court found that the exception to indefeasibility set out in s 42(1)(d) did not apply, and therefore the first respondent’s interest remained indefeasible and was paramount to those interests claimed by the appellants.

Judgment

1. MEAGHER JA: The issue in the underlying proceedings, and in each of these appeals (proceedings 2022/240730 (Huang appeal) and 2022/240885 (Tao appeal)), is whether the first respondent, 18 Woodville Holding Pty Ltd (18 Woodville), as registered mortgagee, was entitled in purported exercise of its power of sale to possession of three apartments described as units A702, A703 and A801, being respectively lots 44, 45 and 48 in a strata plan development in Hurstville.

2. The Huang appellants were allowed into possession of lots 44 and 45 as purchasers under contracts for sale with the second respondent developer and mortgagor, Hua Cheng International Holdings Group Pty Ltd (in liq) (Hua Cheng). The Tao appellants claim to be in the same position with respect to lot 48. By their cross-claims in the underlying proceedings, the appellants sought orders for the specific performance of the three relevant contracts for sale.

3. As the primary judge observed (18 Woodville Holding Pty Ltd v Hua Cheng International Holdings Group Pty Ltd (in liq) (No 2) [2022] NSWSC 947 at [1]), whether 18 Woodville or the Huang and Tao parties were entitled to the relief each sought turned largely on whether 18 Woodville’s interest in the strata lots as registered mortgagee was paramount to the unregistered estates or interests claimed by the appellants. In relation to each appellant, those interests are a tenancy at will of the vendor as purchaser in possession, and a purchaser’s equitable interest, in each case commensurate with the availability of specific performance of a contract for sale.

4. In response to 18 Woodville’s claim to indefeasible title as registered mortgagee, the Huang and Tao parties relied on the fraud exception in the Real Property Act 1900 (NSW), s 42(1) and the exception created by s 42(1)(d) (extracted in [20] below). As to the latter, the appellants contended that it should be construed as having the same scope and application as s 42(2)(e) of the Transfer of Land Act 1958 (Vic) (the 1958 Victorian Act).

5. The primary judge held that neither of these exceptions was engaged, and in doing so rejected the construction of s 42(1)(d) urged by the appellants. His Honour also addressed the question of competing priorities, assuming that 18 Woodville did not have the benefit of indefeasible title. He held that, under the general law, 18 Woodville’s interest as mortgagee had priority over the appellants’ earlier in time interests as purchasers under the contracts for sale. He did so on the basis that 18 Woodville had the benefit of the protection enjoyed by the assignor of the mortgage to it, Super Vision Resources Limited (Super Vision), which was a bona fide purchaser for value without notice. In the outcome, orders for possession were made as sought by 18 Woodville, and the appellants’ claims for specific performance were dismissed. The appeals are brought from those orders.

6. In this Court, the appellants maintain that their interests are excepted from the indefeasibility provision in s 42(1) and that, under the general law, those unregistered interests take priority to Super Vision’s (and, accordingly, 18 Woodville’s) subsequent in time interest as mortgagee. They no longer rely on the fraud exception.

7. In the Huang appeal, the issues as to the construction of s 42(1)(d) are raised by ground 1(a), and the question of priority by ground 1(b). In the Tao appeal the construction issues are raised by grounds 1 and 2 and the priority question by grounds 3 and 4.

8. For the reasons which follow, the primary judge did not err in holding that, properly construed, s 42(1)(d) was not engaged by the Huang and Tao appellants’ interests as purchasers under their contracts for sale. Ultimately, it was not necessary for his Honour to deal separately with whether the tenancy interests claimed by the appellants satisfied the requirements of s 42(1)(d) because, on any view, those interests were subsequent in time to Super Vision’s interest as mortgagee (cf J[47], [72]). Accordingly, even if the tenancy exception to indefeasibility were made out, Super Vision’s interest as mortgagee had priority.

9. In this Court, 18 Woodville also contended that the tenancy interests claimed were not within s 42(1)(d) because those interests were not created for a term that did not exceed three years (cf s 42(1)(d)(i)). That argument also should be upheld, and provides an additional reason as to why the appeals should be dismissed.

10. These conclusions make it unnecessary to consider whether his Honour was correct to conclude that, under the general law, the appellants’ interests as purchasers were postponed to Super Vision’s interest as mortgagee and, therefore, that of 18 Woodville (see J[72]).

11. In the result, each appeal should be dismissed.

Relevant facts

12. On 4 July 2014, Hua Cheng, the developer of the mixed residential and commercial development, executed a Loan Agreement with Super Vision by which the latter agreed to advance moneys, equivalent to AUD 73 million, to the former in two tranches. The limit of that facility was subsequently increased. The loan was secured by a mortgage over Hua Cheng’s interest in the proposed development, and that mortgage was registered over the developed land on 4 July 2014, and subsequently over the individual lots after registration of the strata plan (SP94237) in November 2016.

13. The Tao appellants, Zhe Tao and his father Jianmin Tao, entered into a contract with Hua Cheng on 31 August 2009 to purchase lot 48 off the plan for $670,000. The primary judge held that in any action for specific performance of that contract, Hua Cheng would be estopped from asserting that the purchase price had not been paid in full (J[57]). The Tao appellants were allowed into possession in October 2016 and on 20 April 2017 lodged a caveat over lot 48, claiming a “legal and equitable interest” pursuant to that contract for sale.

14. The Huang appellants, Xiuzhen Huang and her son Reynold Zhou, entered into contracts with Hua Cheng to purchase lots 44 and 45, each for $425,000. The contract with Ms Huang was executed on 1 October 2013 and that of Mr Zhou on 26 September 2013. The primary judge held that the total purchase price due under those contracts was paid to Hua Cheng in December 2013 (J[50]). These appellants were allowed into possession of those lots shortly after November 2016 (J[9]) and on 18 September 2017 lodged caveats, each appellant claiming to be owner of “the entire equitable interest” of the relevant property (J[42]).

15. None of the appellants was in possession of lots 44, 45 or 48 at the time the mortgage from Hua Cheng to Super Vision was executed in July 2014. The primary judge found that, as at 4 July 2014, when the Super Vision mortgage was registered, it had no actual or constructive notice of any of the three relevant contracts for sale (J[72]).

16. In late December 2016 and early February 2017, Hua Cheng defaulted under the Super Vision loan facility. Receivers and managers were appointed in June 2017, and Hua Cheng went into liquidation on 21 July 2017 (J[40]). On 7 July 2017, Super Vision served statutory notices on Hua Cheng in respect of the three lots under the Real Property Act, s 57(2)(b) and Conveyancing Act 1919 (NSW), s 111(2)(b).

17. By a Sale and Purchase Deed dated September 2021, Super Vision assigned to 18 Woodville the amount then owed by Hua Cheng, and also transferred its mortgage to 18 Woodville. Notice of that assignment was given to Hua Cheng and the transfer of the mortgage was registered on 8 October 2021. Notice of the assignment of the debt and mortgage was given to the appellants on 14 October 2021.

18. On 19 November 2021, 18 Woodville commenced proceedings for possession of Lots 44, 45 and 48. In response, the Huang and Tao parties contended that they were in possession of those lots as purchasers under contracts for sale and accordingly under tenancies terminable at will. They also contended that they were entitled to specific performance of each of the contracts for sale.

19. On 25 March 2022, the receiver and manager of Hua Cheng gave notice to the Tao appellants, and, on 28 April 2022, to the Huang appellants, terminating any tenancies at will (J[44]).

Disposition of the appeal

Section 42(1)(d) of the Real Property Act

20. Section 42 relevantly provides:

42   Estate of registered proprietor paramount

(1)   Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except—

…

(d)   a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected—

Provided that—

(i)   The term for which the tenancy was created does not exceed three years, and

(ii)   in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years.

(iii)   (Repealed)

(2)   In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio.

(3)   This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.

21. As the primary judge observed at J[60], on its face s 42(1)(d) “only creates an exception in respect of tenancies for a term which, together with any option, does not exceed three years. The exception is only available if the registered proprietor had notice of the tenancy before he or she became the registered proprietor”.

22. In addition to the questions whether there was a tenancy and, if so, whether it was created for a term not exceeding three years, there was also a question as to whether, before it became the registered proprietor, 18 Woodville had notice of the tenancy, being notice against which it was not protected (s 42(1)(d)). Here, the notice against which a registered proprietor may find him or herself not ‘protected’ is notice received after a registrable instrument has been obtained and before the time of that instrument’s registration. The provision in s 43A(1), which gives the registered proprietor protection against such notice (see United Star-Bowkett Co-op v Clyne [1968] 1 NSWR 134 at 146 (per Walsh JA)), has no application in the present case, where it was accepted that 18 Woodville had notice of the appellants’ interests under the contracts for sale and as purchasers in possession before it obtained any registrable dealing as transferee of Super Vision’s mortgage.

23. With respect to the two related tenancy questions in [22], which were not dealt with by the primary judge, 18 Woodville’s position was that each tenancy was not created for a term, whether or not exceeding three years, and that any tenancies at will had been terminated by notice in March 2022. If the tenancies did satisfy the requirements of s 42(1)(d), 18 Woodville continued to maintain that it was entitled to enjoy the benefit of the protection enjoyed by Super Vision as a bona fide purchaser for value (relying on Wilkes v Spooner [1911] 2 KB 473).

The appellants’ arguments in the appeal

24. The appellants’ primary case below and in this Court remains that s 42(1)(d) should be construed broadly and given the same scope as s 42(2)(e) of the 1958 Victorian Act, which provides:

Notwithstanding anything in the foregoing the land which is included in any folio of the Register or registered instrument shall be subject to —

…

(e)   the interest (but excluding any option to purchase) of a tenant in possession of the land;

25. This provision, and the language “the interest… of a tenant in possession of the land”, has been construed as referring to any equitable interest to which a tenant’s interest in possession is incident. When Burke v Dawes (1938) 59 CLR 1; [1938] HCA 6 was decided in the context of its predecessor provision in s 72 of the Transfer of Land Act 1928 (Vic) (the 1928 Victorian Act), that broad construction had been the subject of some criticism. See in particular D Kerr, The Principles of the Australian Lands Titles (Torrens) System (1927, Law Book Company of Australasia) at 175ff. Noting that criticism and that the broader interpretation had “stood for nearly seventy years”, Dixon J (as his Honour then was) was prepared to “accept” the correctness of that view on the basis that it would be “most undesirable now to undertake the re-examination of its correctness” (Burke v Dawes at 18).

25. Relying on that construction of a differently worded provision, the appellants contend that s 42(1)(d) excepted from the otherwise indefeasible title of the registered mortgagee not only their interests as tenants at will, but also their equitable interests as purchasers under their respective contracts for sale.

26. With respect to the purported termination of their interests as tenants at will, the appellants submit that, as purchasers under a specifically enforceable contract for sale, each has an equity protecting any existing tenancy at will whilst the contract for sale remains on foot and enforceable. That equity was not submitted to be founded on any contractual right to possession pending completion. Rather, as described by Higinbotham CJ in Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329 at 331, it is “an equity which would not allow [the] vendor to determine the tenancy at will except by converting it to an estate in fee simple”. Such an equity operates in personam and arises from the purchaser’s equitable interest in the property. It is not an incident of the tenancy at will, which it is directed to preserve, and it assumes that the purchaser who has been allowed into possession before completion will continue in possession until the contract is performed.

27. The arguments made in relation to this equity (generally as to which see Peter Butt, The Standard Contract for Sale of Land in New South Wales (2^nd ed, 1998, LBC Information Services) at [18.3]) did not articulate how it advanced the appellants’ case, either as to the construction of s 42(1)(d) or as to the existence of a tenancy interest which satisfied that provision. On its face, the existence of the equity is wholly irrelevant to the issue of construction. Moreover, it cannot affect the existence of the tenancy and whether that tenancy satisfies the requirements of para (d).

28. In relation to the question of priority, which only arises if the appellants establish an estate or interest within s 42(1)(d), it is accepted that it is to be decided on general law principles and by reference to the “better equity” (Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 276; [1965] HCA 17, approved in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333, 339; [1983] HCA 30).

Proper construction of s 42(1)(d)

30. The principles by reference to which this question is to be resolved are clear. That task must begin with a consideration of the text in its context, which includes its legislative history and any relevant extrinsic material. That consideration of context, however, cannot displace the meaning of the statutory language (FCT v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ)).

31. There is a clear divergence between the language of s 42(1)(d) of the Real Property Act and that of s 42(2)(e) of the 1958 Victorian Act. Each Act identifies estates or interests or “encumbrances” (which, as defined in s 4 of the 1958 Victorian Act, include “any estate interest mortgage charge right claim or demand which is or may be had made or set up in to upon or in respect of the land”) to which the otherwise paramount estate of the registered proprietor is subject.

32. In the case of s 42(1)(d), that estate or interest is a “tenancy”, rather than any other or incidental “interest” of a tenant in possession; whereas under s 42(2)(e) the excepted “interest” has been held not to be limited to that of a “tenant in possession of the land”, but rather to describe any equitable interest to which the tenant’s occupation is incident. In other words, s 42(1)(d) describes the excepted estate or interest in terms, whereas s 42(2)(e) has been construed as identifying the relevant estate or interest by reference to its holder, being a “tenant in possession”. That estate or interest is one to which that holder’s possession is incident.

33. Section 72 of the 1928 Victorian Act, considered in Burkev Dawes, relevantly stated:

… Provided always that the land which is included in any certificate of title or registered instrument shall be deemed to be subject . . . [and] where the possession is not adverse to the interest of any tenant of the land, notwithstanding the same respectively are not specially notified as encumbrances on such certificate or instrument. (Emphasis added.)

34. At 17-18, Dixon J stated, in a passage which concludes with the statement extracted above at [25]:

In Victoria these words have received an interpretation and an application as a result of which any person in actual occupation of the land obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which his occupation is incident, provided that at law his occupation is referable to a tenancy of some sort, whether at will or for years. Thus, a purchaser under a contract of sale, who at law is in possession as tenant at will of the vendor, has been held protected in respect of his equitable ownership as purchaser (Robertson v. Keith; Sand­hurst Mutual Permanent Investment Building Society v. Gissing), a lessee in respect of an option of purchase contained in his lease (McMahon v. Swan) and a wife in respect of an equitable life interest claimed under an unsigned separation agreement made with her husband (Black v. Poole) … The cases are collected and criticised by the late Dr. Donald Kerr in his work on The Australian Lands Titles (Torrens) System (1927), at pp. [1]75 et seq. But the interpretation has stood for nearly seventy years, and it would, I think, be most undesirable now to undertake the re-examination of its correctness. (Citations omitted.)

35. No such re-examination is required in construing the very different language of s 42(1)(d), the legislative history of which confirms that language is to be construed more narrowly, and in accordance with its ordinary meaning.

36. That provision was first enacted in the Real Property Act as s 42(d) by the Conveyancing (Amendment) Act 1930 (NSW), s 38. At that time there was already well-established case law giving a wide interpretation to s 72 of the 1928 Victorian Act: see Robertson v Keith (1870) 1 VR E 11; Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329; Commercial Bank of Australia Ltd v McCaskill (1897) 23 VLR 10. That the New South Wales Parliament did not adopt the same legislative language confirms, if confirmation were needed, that the different language used was intended to address a different purpose or mischief.

37. That purpose was explained in the Parliamentary Debates (New South Wales, Legislative Council, Parliamentary Debates (Hansard), 13 May 1930 at 5019–20). Upon its initial enactment, the Real Property Act did not contain any provision protecting short leases which were not registered and, as a result, unregistered short-term leases were liable to be defeated by a registered proprietor: see Oertel v Hordern (1902) 2 SR (NSW) Eq 37; Wicks v Bennett (1921) 30 CLR 80 at 95; [1921] HCA 57 (Higgins J); Munro v Stuart (1924) 41 SR (NSW) 203. The particular mischief which the amendment was intended to remedy was the problem of proprietors purchasing properties in the knowledge that they were subject to short-term tenancies and then moving to evict the tenants: see United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne [1968] 1 NSWR 134 at 139 (Herron CJ).

38. As the primary judge observed, none of the Victorian decisions or Burke v Dawes have been followed in New South Wales in the context of construing s 42(1)(d). On the contrary, in Ong v Luong (1991) 9 BPR 16,759 at 16,763, McLelland J rejected an argument based on the decision in Downie v Lockwood [1965] VR 257, which had applied s 42(2)(e) to a tenant’s equitable interest in land by reason of an entitlement to specific performance of a tenancy agreement that was also the subject of a right to rectification. His Honour observed, “That being the equitable interest of the tenant, that was the interest to which the title of the registered proprietor was, by virtue of s 42(2)(e), subject.” McLelland J continued, disposing of the argument shortly: “There is however no equivalent of s 42(2)(e) … in the New South Wales Real Property Act.”

39. In argument in this Court, reference was also made to the dicta statements of Gibbs J in Friedman v Barrett; ex parte Friedman [1962] Qd R 498 at 510, where his Honour expressed the opinion that “the word ‘tenancy’ [in s 11 of the Real Property Act 1877 (Qld)] was narrower in meaning than the expression ‘interest of any tenant’ which appears in the Torrens statutes of some States”, including s 72 of the Transfer of Land Act 1915 (Vic), as had been contended by Mr Dixon KC in McMahon vSwan [1924] VLR 397 at 405-6. In the later High Court decision in Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 at 347; [1976] HCA 9, Gibbs J referred to and distinguished Friedman v Barrett as holding that s 11 of the 1877 Queensland Act “protected only the tenancy itself, and not the tenancy with all its incidents”.

40. The primary judge did not err in construing the exception in s 42(1)(d) as applying only to an estate or interest being a tenancy “whereunder the tenant is in possession or entitled to immediate possession”, where the term for which that tenancy was created does not exceed three years, being a tenancy of which the registered proprietor had relevant notice (see [21] above). It follows that his Honour was correct to hold that the appellants’ equitable interests as purchasers under contracts for sale were not estates or interests exempted from 18 Woodville’s otherwise indefeasible title as registered mortgagee.

Do the appellants nevertheless meet the requirements of a s 42(1)(d) tenancy?

41. The relief sought by the appellants in the event that their appeals are allowed is the setting aside of the orders giving 18 Woodville possession of the three units and the making of orders in their favour for the specific performance of their respective contracts for sale. That relief, as formulated, does not suggest that any order for possession should be made in the event that the claim to specific performance is rejected on the basis of 18 Woodville’s indefeasible title as mortgagee. Nor does it include any order for possession based on an equity protecting the appellants as purchasers from the termination of the tenancy whilst any contract for sale remains on foot.

42. Accordingly, although the resolution of the primary question of construction in favour of 18 Woodville means that the relief sought by the appellants must be rejected, it leaves to be decided whether the appellants nevertheless had a “tenancy” that satisfied the requirements of s 42(1)(d) so as to engage that exception.

43. As has already been noted (see [23] above), the primary judge did not expressly consider this issue.

44. The appellants contend that, in going into possession in around November 2016, they became tenants at will, the vendor Hua Cheng having allowed them into possession before completion without any special stipulation (see Wheeler v Mercer [1957] AC 416 at 425 (per Viscount Simonds)). Accepting that to be so, 18 Woodville says that any such tenancy interest was not a tenancy for a term that did not exceed three years, as required by s 42(1)(d).

45. In support of that contention, 18 Woodville relies on the language of para (d), which includes as a relevant estate or interest an agreement or option for the acquisition by a tenant in possession or entitled to immediate possession of a “further term to commence at the expiration of such a tenancy” (emphasis added); as well as the statements in the provisos (i) and (ii) that the “term for which the tenancy was created does not exceed three years”; and that the “additional term for which it provides would not, when added to the original term, exceed three years” (emphasis added). That language makes clear that the excepted tenancy is for a term, which, alone or taken with any further term, does not exceed three years, whether or not the subject of an option.

46. It is not controversial that there is a clear difference between a tenancy at will and a tenancy for a term. In Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47 at 49, this Court (Jordan CJ (Halse, Rogers and Street JJ agreeing)) distinguished between tenancies for a term or terms and tenancies “at will”. The former may be for any period, however short the period or periods; whereas a tenancy at will exists whenever by virtue of an express or implied agreement a person is in exclusive possession of the land for an estate which is not a freehold or for a term.

47. The appellants respond, emphasising that the word “tenancy” is capable of describing any relationship in which a person is in exclusive possession of land as a tenant. They point out that in United Star-Bowkett v Clyne [1968] 1 NSWR 134 at 147, s 42(1)(d) was applied to a periodic tenancy. That is so. A periodic tenancy is a tenancy for a term which proceeds for further equivalent terms until determined. In Hammond v Farrow [1904] 2 KB 332, the Court of Appeal held that a periodic tenancy from week to week until determined by a week’s notice on either side was “for a term not exceeding three months”, notwithstanding that the tenancy, if not determined, may continue for a period longer than three months.

48. The appellants seek to rely upon similar reasoning, contending that, whilst a tenancy at will may run for more than three years, its minimum “term” does not exceed three years because it may be terminated at any time. This submission ignores the fundamental difference between a tenancy at will and one created for a term, as explained in Commonwealth Life v Anderson; as well as the plain language of s 42(1)(d), which is directed only to tenancies created for a term.

49. In relation to question whether their tenancies were for a term not exceeding three years, the appellants rely on the following statement of Dixon J in Turner v York Motors Pty Ltd (1951) 85 CLR 55 at 64; [1951] HCA 52:

Whatever may be the proper conclusion as to the duration of the tenancy upon which the defendants held the land, it is clear enough that a tenancy subsisted between Sears and the defendants, even if it amounted to a tenancy at will only. It was of course a tenancy for less than three years and at the time of the transfer of land by Sears to the claimant company the defendants were in possession. The land was under the Real Property Act 1900-1940 (N.S.W.) and it follows that under s. 42 (d) of that Act the claimant company’s title was subject to the defendants’ tenancy, whatever its character should be held to be. (Emphasis added).

50. As 18 Woodville submits in response, Dixon J is not to be understood in this passage as saying that it is a characteristic of a tenancy at will that it is a tenancy for a term for less than three years. To the contrary, Dixon J (at 65) described a tenancy at will as one where there is “no fixed or periodical” term. His Honour’s reference in the passage cited above to the subsistence of a tenancy for a period of less than three years is to the duration of the tenancy relationship between the previous owner (Sears) and the respondents (York Motors), and not to the nature of the tenancy during the whole period. As Dixon J earlier observed (at 64), the relevant question concerned the nature of that tenancy at the time a notice to quit was given. His Honour’s analysis in relation to that question contemplated that, whilst the tenancy may have first subsisted as a tenancy at will, it was likely that thereafter, and by the conduct of the parties, its duration or character changed.

51. It follows that the tenancies between the appellants and Hua Cheng were not “created” for a term and accordingly not ones to which s 42(1)(d) applied. That conclusion is not affected by the existence of any equity entitling the appellants to restrain the termination of those tenancies.

52. There is an additional reason why those requirements were not satisfied. The primary judge recorded at J[44] that the tenancies at will were terminated by notice in March and April 2022. That being the position in fact and in law was relied on by 18 Woodville in its submissions in the appeal and not challenged as incorrect in either respect.

53. The appellants’ reliance upon an equitable right “to receive the legal estate” as protecting their possession of the three relevant lots has been dealt with above (see [27]-[28]). That equity is not an incident or attribute of any relevant tenancy. Moreover, even if it were an incident of the tenancies relied on, those tenancies, being tenancies at will, do not satisfy the requirements of s 42(1)(d). To the extent that the equity is an incident of the equitable interest of a purchaser in possession or entitled to immediate possession under an enforceable contract for sale, such an estate or interest is not within any exception to the indefeasibility of 18 Woodville’s right to possession as mortgagee.

Conclusion

54. In the language of s 42 of the Real Property Act, 18 Woodville’s estate or interest as registered mortgagee is “absolutely free” from either of the estates and interests contended for by the appellants.

55. It follows that the primary judge did not err in granting the possessory relief sought by 18 Woodville and dismissing the appellants’ claims to specific performance and ancillary relief.

56. Finally, by notices of motion dated 10 October 2022, the appellants in both appeals sought leave nunc pro tunc under s 500(2) of the Corporations Act 2001 (Cth) to commence these proceedings against the second respondent, which is in liquidation. Leave was not opposed, and the Court indicated that it would deal with the matter in its final judgment. Leave ought be granted in the terms sought.

57. Each of the appeals should be dismissed with costs.

58. KIRK JA: I agree with Meagher JA.

59. GRIFFITHS AJA: I agree with Meagher JA.

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Decision last updated: 15 February 2023