Hudson v ARAP 1 (NSW) Pty Ltd

[2015] NSWCA 126

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

HUDSON v ARAP 1 (NSW) PTY LTD [2015] NSWCA 126

Hearing dates:

11 March 2015

Decision date:

14 May 2015

Before:

Bathurst CJ at [1]; Emmett JA at [51]; Bergin CJ in Eq at [57]

Decision:

Order that the decisions of the New South Wales Civil and Administrative Tribunal, in proceedings between the parties dated 1 July 2014, 21 August 2014 and 15 October 2014, be quashed.
No order as to costs.

Catchwords:

APPEAL – New South Wales Civil and Administrative Tribunal – judicial review under s 69 of the Supreme Court Act 1970 (NSW) – whether Tribunal had jurisdiction to hear an application under s 84 of the Residential Tenancies Act 2010 (NSW)

STATUTORY INTERPRETATION – plain reading – general purpose and policy - extrinsic material – prior statutory provisions – construction of s 8(1)(f) of the Residential Tenancies Act 2010 (NSW)

CONTRACT – construction – contract for sale of land - tenancy agreement – whether agreement was an agreement for the sale of land that conferred a right to occupy residential premises on a party to the agreement under s 8(1)(f) of the Residential Tenancies Act 2010 (NSW)

CONTRACT – construction – principles – implied term not to hamper performance of contract – implied term to co-operate in carrying out agreement

MORTAGAGES – common law mortgage – conveyance and option to repurchase - intention of parties – extrinsic evidence – whether agreement was agreement under a term of a mortgage that conferred a right to occupy residential premises on a party to the mortgage under s 8(1)(g) of the Residential Tenancies Act 2010 (NSW)

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)
Real Property Act 1900 (NSW)
Residential Tenancies Act 1987 (NSW)
Residential Tenancies Act 2010 (NSW)
Supreme Court Act 1970 (NSW)

Cases Cited:

Abigail v Lapin [1934] AC 491; 51 CLR 58
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory
Revenue (NT) [2009] HCA 41; 239 CLR 27
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Barry v Heider [1914] HCA 79; 19 CLR 197
Barton v Bank of New South Wales (1890) 15 App Cas 379
Beckett v Tower Assets Co [1891] 1 QB 1
Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378
Chan v Cresdon (1989) 168 CLR 242
Currey (Registrar of Titles) v The Federal Building Society [1929] HCA 28; 42 CLR 421
Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd [1999] HCA 20; 196 CLR 245
Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98
G&C Kreglinger v New Patagonia Meat and Cold Storage Company Ltd [1914] AC 25
Mackay v Dick (1881) 6 App Cas 251
Manchester, Sheffield and Lincolnshire Railway Company v North Central Wagon Company (1888) 13 App Cas 554
Partridge v McIntosh & Sons Ltd [1933] HCA 38; 49 CLR 453
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Santley v Wilde [1899] 1 Ch 474
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; 144 CLR 596
Stirling v Maitland & Boyd (1864) 5 B&S 840
Walsh v Lonsdale (1882) 21 Ch D 9

Category:

Principal judgment

Parties:

Geoffrey Stephen Hudson (Applicant)
ARAP 1 (NSW) Pty Ltd (First Respondent)
NSW Civil and Administrative Tribunal (Second Respondent)

Representation:

Counsel:
Jean-Jacques Loofs (Applicant)
M A Ashhurst SC and D G Healey (First Respondent)

Solicitors:
David Robert Legg, Burridge & Legg (Applicant)
Kemp Strang and Sarina Roppolo, Kemp Strang Lawyers (First Respondent)

File Number(s):

2014/309582

 Decision under appeal 

Court or tribunal:

New South Wales Civil and Administrative Tribunal

Jurisdiction:

Appellate Interlocutory; Divisional Final; Appeal Panel

Citation:

[2014] NSWCATAP 30; [2014] NSWCATAP 61

Date of Decision:

1 July 2014; 21 August 2014; 15 October 2014

Before:

S Westgarth, Deputy President, A Scahill, Senior Member; K Rosser, Tribunal Member; Wright J, President, M Harrowell, Principal Member

File Number(s):

AP14/0017; RT13/66464; AP14/0371

Judgment

1. BATHURST CJ: By a contract of sale dated 19 November 2012 (the contract), Geoffrey Stephen Hudson (the applicant) agreed to sell 13 Wylmar Avenue, Burraneer (the property) to Arap 1 (NSW) Pty Ltd (the first respondent).

2. Completion of the contract was subject to the execution of two further agreements. The first was an Option Agreement (the Option Agreement) by which the applicant was granted a call option to repurchase the property. Subject to a provision for extension, the option was exercisable within 12 months after completion of the contract.

3. The second was an agreement described as a Residential Tenancy Agreement (the Tenancy Agreement) between the respondent as landlord and the applicant as tenant. The agreement was expressed to be for a period of 12 months from the date of settlement of the contract. The Tenancy Agreement provided that it was an essential condition that the applicant observe the terms and conditions of the Option Agreement. It should be noted that the Option Agreement provided that it was a condition of the extension that the applicant enter into a 12 month Tenancy Agreement.

4. The contract was completed and the Option and Tenancy Agreement were entered into. The Option was not exercised nor was an extension sought within the time specified in the Option Agreement.

5. On 4 November 2013, the respondent served a notice on the applicant pursuant to s 84 of the Residential Tenancies Act 2010 (NSW) (the Act) terminating the Tenancy Agreement and requiring vacant possession on 8 December 2013. Possession was not delivered up on 8 December 2013 and the respondent commenced proceedings in the Consumer and Commercial Division of the NSW Civil and Administrative Tribunal (the Tribunal) on 17 December 2013. In the proceedings, the respondent sought an order under s 84 of the Act that the Tenancy Agreement had terminated and an order under s 187(1)(i) of the Act for possession of the premises.

6. The applicant argued that the Tribunal had no jurisdiction to hear the application as the Act did not apply to the Tenancy Agreement. The applicant submitted that the exemption in s 8(1)(f) of the Act applied, namely, that the contract was an agreement for the sale of land that conferred a right to occupy residential premises on a party to the agreement.

7. That argument was successful at first instance but was reversed by the appellate division of the Tribunal, which held that the contract was not such an agreement under s 8(1)(f) of the Act. The matter was remitted by the appellate division to the Tribunal at first instance, which made the orders sought by the respondent. The appellate division, differently constituted, upheld this decision.

8. The applicant has sought leave to appeal from the two decisions of the appellate Tribunal and judicial review pursuant to s 69 of the Supreme Court Act 1970 (NSW) of the two appellate decisions and the second decision of the Tribunal at first instance, which made the orders sought by the respondent. At the hearing, this Court granted the applicant leave to bring the s 69 application out of time.

9. During the course of argument, the Court raised the question as to whether the agreement fell within the exception to the Tribunal’s jurisdiction contained in s 8(1)(g) of the Act, namely, whether it was an agreement that arose under a term of a mortgage and conferred a right to occupy residential premises on a party to the mortgage. Leave was granted to the parties to provide further submissions on this issue. The Tribunal, which was named as second respondent, filed a submitting appearance.

10. On 8 April 2015, the applicant and the first respondent informed the Court that the matter had been settled and sought consent orders to the following effect:

The appeal be allowed.

Pursuant to Section 69 of the Supreme Court Act 1970 that the orders made by the tribunal at an appellate level on 1 July 2014, at a divisional level on 21 August 2014 and at an appellate level on 10 October 2014 be quashed.

Each party bear its own costs of the appeal.

11. Notwithstanding, it remains necessary for the Court to form its own view as to whether the Tribunal lacked jurisdiction. However, the reasons which have led me to conclude that the Tribunal lacked jurisdiction can be stated relatively briefly.

The agreement

a The contract

12. The contract provided for the sale and purchase of the property at a price of $1,380,000, no deposit being payable. Clause 30.2 contained the following definition of Option Agreement and Tenancy Agreement:

“30.2   Definitions

The following definitions apply in this contract:

Option Agreement means the written agreement between the Purchaser (as Owner) and the Vendor (as Grantee) relating to the Property and entered contemporaneously with this contract.

Tenancy Agreement means the written agreement between the Purchaser (as the Landlord) and the Vendor (as Tenant) for the occupation of the Property, entered contemporaneously with this contract.”

It should be noted that although the Option Agreement was executed at the same time as the contract, the Tenancy Agreement was executed on the day of completion. Neither party suggested that anything turned on this fact.

13. Clause 38 of the contract provided for a rebate on the purchase price. It was in the following terms:

“38.   Rebate

38.1   Subject to the parties entering into the Option Agreement, the Vendor will allow the Purchaser a rebate to be deducted from the balance of the purchase price payable at completion of this contract, with such rebate to be calculated as follows:

Rebate = P – (A + B + C)

Where:

P means the balance of the purchase price that would have been payable on the date of completion of this contract if it were not for the rebate; and

A means the total of all moneys payable by the Vendor to discharge and release all registered mortgages over the property at the date of completion; and

B means the Purchaser’s costs comprising stamp duty, valuation fees, transfer, registration fees, loan establishment fees, company establishment fees, building and pest inspection report fees, insurance costs, mortgage release and new mortgage registration fees, legal and solicitor fees in relation to this contract, the Option Agreement, the Tenancy Agreement and any other matter necessary or incidental to the transaction contemplated in this contract (Purchaser’s Costs).

C means the sum of $112,558.66

38.2   For the avoidance of doubt, the sum equalling A will be distributed to all registered mortgagees upon settlement to discharge the Vendor’s mortgage debts, the sum equalling B will be retained by the Purchaser to cover the Buyer’s Costs (as defined above) and the sum equalling C will be retained by the Purchaser in payment of the Option Fee payable in the Option [Agreement] referred to in clause 39 below and in payment of the rental payable under the Tenancy Agreement mentioned in clause 41 below.”

Neither party disputed that what was intended by the clause was to provide a rebate from the purchase price in a sum equal to the formula (A+B+C). Further, it was not disputed that the sum C, namely, $112,558.66, was the total of the option fee and 12 months rental under the Tenancy Agreement.

14. Clauses 39 and 41 of the contract provided as follows:

“39.   Option Agreement

39.1   Completion of this contract is subject to and conditional upon the Vendor and the Purchaser entering into the Option Agreement.

…

41.   Tenancy

41.1   The Vendor and the Purchaser acknowledge that the Vendor occupies the property at the contract date and will not be required to provide vacant possession at the date of completion of this contract, subject to the parties entering into the Tenancy Agreement.

41.2   Completion of this Contract is subject to and conditional upon the Vendor and the Purchaser entering into the Tenancy Agreement.

41.3   The Vendor requests to pay the first year’s rental pursuant to the Tenancy Agreement in advance upon settlement of this Contract (‘the Vendor’s Request’). In making the Vendor’s Request, the Vendor specifically acknowledges Section 33(2) of the Residential Tenancies Act 2010 No 42 which provides:-

‘33(2)   A landlord, or landlord’s agent, must not require a tenant to pay more than 2 weeks rent in advance under a residential tenancy agreement or to pay rent for a period of the tenancy before the end of the previous period for which rent has been paid.

Note. A tenant may pay more than 2 weeks rent if the tenant wishes to do so.

Maximum penalty: 10 penalty units.’

41.4   The Vendor’s Request is made voluntarily by the Vendor as an inducement to the Purchaser to enter into this Contract. The Purchaser will agree to the Vendor’s Request on the basis that the advanced payment of rental is made in the manner detailed in Special Condition 38 above. The Vendor represents to the Purchaser that it will not withdraw the Vendor’s Request during the term of the Tenancy Agreement. The Vendor acknowledges that the Purchaser would not have entered into this Contract if not for the Vendor’s Request.”

b The Option Agreement

15. The Option Agreement recited the agreement to grant the option by the respondent to the applicant and stated that if the applicant did not exercise the option, the respondent would be entitled to sell the property with vacant possession and the proceeds of any such sale were to be distributed in the manner set out in the agreement.

16. The Option Agreement contained the following definitions:

“Amount Owing means the aggregate of the following amounts from time to time:-

(a) the Owner’s Cost of Purchase; and

(b) the Owner’s Cost of Sale; and

(c) the Owner’s Holding Costs; and

(d) the Owner’s Fee; and

(e) the Rental Arrears.”

“Break Fees means all amounts determined by the Owner’s Mortgagee as being necessary to compensate the Owner’s Mortgagee for any loss, premium, penalty or loss of margin incurred by the Owner’s Mortgagee for any reason or in any circumstance, including:-

(a) funds borrowed or contracted by the Owner’s Mortgagee in order to fund the Owner’s Loan; or

(b) the payment, liquidation or re-employment of deposits or other funds acquired, contracted for or utilised by the Owner’s Mortgagee to fund the Owner’s Loan; or

(c) any payment made by the Owner to the Owner’s Mortgagee does not occur on the date required under the agreement or arrangement between the Owner and the Owner’s Mortgagee in relation to the fixed rate Owner’s Loan.”

“Call Option means the option granted by the Owner to the Grantee to purchase the Property under Clause 2(a)”

“Commencement Date means the date of completion of the Purchase Contract”

“Contract means the agreement for sale of the Property in the form of Annexure B”

“Option Fee means the amount of $36658.66 per annum”

“Owner’s Cost of Purchase means costs incurred by the Owner to purchase the Property pursuant to the Purchase Contract including the purchase price for the Property specified on the front page of the Purchase Contract (less the Rebate), the Owner’s legal fees in the conveyance of the Property and this deed, stamp duty, registration fees, payments to the Grantee, costs of any inspection reports, costs of any property searches, disbursements and outlays, loan establishment fees, company establishment fees and all other costs incurred by the Owner in purchasing the Property”

“Owner’s Costs of Sale means costs incurred by the Owner in selling the Property including all marketing and advertising expenses, sales agent’s commission, the Owner’s legal fees, Owner’s Tax Liability and the Owner’s Mortgagee Fees”

“Owner’s Fee means the amount of $138,000.00”

“Owner’s Holding Costs means local authority and council property rates and charges, water and sewerage charges, body corporate levies (if any), property insurance costs, Owner’s Tax Liability and any other costs associated with ownership of the Property that the Owner determines necessary or reasonable”

“Owner’s Loan means the loan between the Owner and the Owner’s Mortgagee secured by first registered mortgage over the Property”

“Purchase Contract means the contract for sale of land between the Owner (as purchaser) and the Grantee (as vendor) in relation to the Property”

“Rebate has the meaning given to it in the Purchase Contract”

“Tenancy Agreement means the written agreement between the Owner and the Grantee for the occupation of the Property, a copy of which is annexed as Annexure C”

17. Clause 2 of the Option Agreement provided as follows:

“2.   Call Option and Termination

(a) In consideration of the payment of the Option Fee by the Grantee to the Owner (the receipt of which is acknowledged), the Owner grants to the Grantee an option for the Grantee to purchase the Property from the Owner on the terms and conditions set out in this Deed and the Contract.

(b) The parties acknowledge that the Option Fee will be immediately paid to the Owner or as the Owner may direct and will become the property of the Owner, regardless of whether or not the Call Option is exercised.

(c) This Deed is subject to and conditional upon the Owner and the Grantee entering into the Tenancy Agreement on or before the date of this Deed.

(d) The parties agree that it is an essential condition of this Deed that there is no Material Breach by the Grantee under the Tenancy Agreement and, in the event of Material Breach by the Grantee, then:-

(i) the Owner may terminate this Deed by notice in writing to the Grantee; and

(ii) the Call Option may not be exercised by the Grantee or any Nominee; and

(iii) the Owner will have no obligation to distribute any part of the sale proceeds of the Property to the Grantee.”

18. Clause 3 set out the terms of extension of the option:

“3.   Extension of Call Option and Payment of Break Fees

3.1 The Grantee may, at any time prior to the Option End Date, extend the Option End Date for a further period of twelve (12) months if and only if:-

(a) the Grantee gives written notice to the Owner and to the Owner’s Solicitor no later than eight (8) weeks prior to the Option End Date of the Grantee’s wish to extend the Option End Date pursuant to this clause; and

(b) the Grantee is not in Material Breach at the date of giving notice under subclause (a) above and at the Option End Date; and

(c) prior to the Option End Date the Owner can secure finance from National Australia Bank Limited or other lending institution of the Owner’s choice for an amount sufficient to cover the Owner’s Loan for the further twelve (12) month period on terms and conditions satisfactory to the Owner, in the Owner’s sole discretion (and the Owner agrees to make reasonable efforts to secure such finance); and

(d) prior to the Option End Date the Grantee enters into a further tenancy agreement in relation to the Property for a further period of twelve (12) months prepared by the Owner’s Solicitor which shall be on substantially the same terms and conditions as the Tenancy Agreement, except that:-

(i) the term will be for twelve (12) months commencing from the Option End Date; and

(ii) the amount of rent payable, which will be reviewed by the Owner and adjusted if necessary having regard to the amount needed to service the Owner’s Loan, the Owner’s Holding Costs and any interest rate changes applying to the Owner’s Loan and any predicted interest rate changes for the proposed period of the further Tenancy Agreement.

(e) prior to the Option End Date the Grantee enters into a Deed of Variation (prepared by the Owner’s Solicitor) recording the parties agreement to the terms of the extension to the Option End Date and that the new Tenancy Agreement replaces the existing Tenancy Agreement as a schedule to this Agreement; and

(f) The Grantee pays the Owner’s legal fees relating to the Deed of Variation referred to in clause 3.1(e) above.

3.2 The Grantee acknowledges that the Owner’s Loan may be for a period of one (1) year from the date of completion of the Purchase Contract with a fixed interest rate. Should the Grantee or its Nominee exercise the Call Option at a date which results in the Owner’s Loan being repaid at any time earlier than the date which is one (1) year from the date of completion of the Purchase Contract, the Owner’s Mortgagee may charge the Owner Break Fees. The Grantee acknowledges that all Break Fees form part of the Amount Owing.”

19. Clause 4.1 dealt with the exercise of the call option. It provided as follows:

“4.1   Exercise of Call Option

The Grantee or its Nominee may exercise the Call Option during the Call Option Period by delivery to the Owner or the Owner’s Solicitor:-

(a) a Option Notice which is duly completed and executed by the Grantee or its Nominee; and

(b) two (2) counterparts of the Contract duly completed and executed by the Grantee or its Nominee and (if applicable) the Guarantor, together with details of the Grantee or its Nominee and the Guarantor (if applicable) and the purchaser’s solicitor added and with no other amendment, addition or deletion unless previously agreed in writing by the parties; and

(c) a bank or solicitor’s trust account cheque for the Deposit.”

The contract referred to in that clause was annexed to the original Option Agreement. It was not included in the evidence the subject of the application for leave to appeal or the s 69 application.

20. Clause 7 dealt with the consequences of failure to exercise the option. So far as relevant, it contained the following provisions:

“7.1   In the event that the Call Option is not exercised by the Grantee prior to the Option End Date or an Extended Option End Date then the Owner and the Grantee agree that:-

(a) the Grantee must immediately vacate the Property, remove all of the Grantee’s chattels and personal belongings from the Property and leave the Property in a neat and clean condition and otherwise in the condition required under the Tenancy Agreement; and

(b) the Owner is entitled to sell the Property to a third party on such terms and conditions as the Owner determines in its sole discretion or as otherwise required by this Deed; and

(c) subject to clause 2(d) the Owner will distribute the proceeds from the sale of the Property, within fourteen (14) days from the date of completion of the sale of the Property to an arm’s length third party, as follows:-

(i) firstly, to the Owner in payment of the Amount Owing and the Default Interest; and

(ii) secondly, to the Grantee for the balance of such proceeds (if any).

…

7.2   The Owner will use its reasonable endeavours to sell the Property to a third party for the Property’s fair market value as soon as practicable following the Option End Date. However, if the fair market value of the Property is lower than the Amount Owing, the vendor may defer the sale of the Property until such time as the vendor elects, in its sole discretion.”

c The Tenancy Agreement

21. I have indicated the term of the Tenancy Agreement above at par [3]. The Tenancy Agreement provided for the applicant to pay an annual rent of $75,900, payable by fortnightly instalments. It provided that the applicant may, but was not obliged to, pay the whole of the rent in advance. As I indicated above, cl 41 of the contract expressly provided for this advance payment to occur.

The relevant provisions of the Act

22. ‘Residential premises’ are defined in s 3 of the Act as “any premises or part of premises (including any land occupied with the premises) used or intended to be used as a residence”. Section 6 of the Act provides for the Act to apply to residential tenancy agreements made before or after the commencement of the Act.

23. The Act defines residential tenancy agreements in the following terms:

“13(1)   A residential tenancy agreement is an agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence.

(2)   A residential tenancy agreement may be express or implied and may be oral or in writing, or partly oral and partly in writing.

(3)   An agreement may be a residential tenancy agreement for the purposes of this Act even though:

(a)   it does not grant a right of exclusive occupation, or

(b)   it grants the right to occupy residential premises together with the letting of goods or the provision of services or facilities.

Note. See section 8 for agreements that are not covered by this Act. Section 7 sets out premises not covered by this Act.

(4)   For the purpose of determining whether an agreement is a residential tenancy agreement, it does not matter that the person granted the right of occupation is a corporation if the premises are used (or intended for use) as a residence by a natural person.”

24. However, s 8 provides that the Act does not apply to certain agreements. Relevantly, it provides as follows:

“8(1)   This Act does not apply to the following agreements:

…

(f)   an agreement for the sale of land that confers a right to occupy residential premises on a party to the agreement,

(g)   an agreement that arises under a term of a mortgage and confers a right to occupy residential premises on a party to the mortgage,”

Do the agreements fall within s 8(1)(f) of the Act

25. The principles concerning construction of statutory provisions are well established. As was stated by the plurality of the High Court in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; 239 CLR 27 at [47], “the task of statutory construction must begin with a consideration of the text itself. … The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.” See also Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [23]; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [69].

26. In the present case, the section is designed to exclude from the protective provisions of the Act an agreement which confers a right to occupy a residential premises where the right is not conferred by an agreement operating as a lease or licence, but by a contract for the sale of land.

27. In this context, the section may be contrasted with its predecessor, s 6(1)(a) of the Residential Tenancies Act 1987 (NSW), which provided that the Act did not apply to a residential tenancy agreement if the tenant was party to an agreement made in good faith for the sale or purchase of residential premises.

28. Although neither the Second Reading Speech which introduced the 2010 Act nor the Law Reform papers referred to in that Speech made any reference to the reason for the change in the provision, it seems to me that the amendment makes it clear that the right to occupy must be conferred by the contract for the sale of land itself.

29. In the present case, the applicant submitted that there were two bases on which the Tribunal mischaracterised the agreement in reaching its conclusion. The first was that the Tenancy Agreement was a constituent part of the contract. The second was that the Tenancy Agreement did no more than regulate a pre-existing right of occupancy conferred by the contract.

30. I do not think, as a matter of construction, that either of these submissions can be made out. The contract itself confers no right of occupancy. Clause 41.1 first contains an acknowledgement that the vendor occupies the property at the date of the contract. That part of the provision does not confer any right to possession but simply acknowledges the position that the applicant was entitled to possession as registered proprietor of the land.

31. The latter part of cl 41.1 of the contract makes it clear that the position of the parties post-completion was subject to the parties entering into a Tenancy Agreement. Although the contract for sale provided in cl 41.2 that completion of the contract was subject to the parties entering into such agreement, there was no express obligation in the contract for this to occur.

32. If in fact there was no contractual obligation to enter into the Tenancy Agreement, but it was merely a pre-condition to completion, then it could not be said that the contract for sale conferred the right to occupy.

33. It is by no means clear in the present case whether the contract contained an implied term that the parties would co-operate to give each other the benefit of the contract for sale by entering into the Tenancy Agreement. Terms will readily be implied that neither party to a contract will do anything calculated to hamper the other in the performance of the contract: Stirling v Maitland & Boyd (1864) 5 B&S 840 at 852. Further, in circumstances where parties have agreed that something shall be done that cannot be done unless both parties concur in doing it, a term will be implied that each party will co-operate in doing all that is necessary on his or her part for the carrying out of the agreement: Mackay v Dick (1881) 6 App Cas 251. However, as Mason J pointed out in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; 144 CLR 596 at 607-608, it is not as easy to make this implication where certain acts are necessary to entitle the other contracting party to the benefit of the contract but are not essential to the performance of that party’s obligations. His Honour pointed out that the implication depends on the intention of the parties as manifested by the contract itself. See also Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124-125.

34. In the present case, where no deposit was required to be paid and, in a very real sense, no contractual obligation arose until the Tenancy Agreement and Option Agreement were signed, it may be doubtful that the contract of sale imposed an implied obligation on the parties to sign the Tenancy Agreement. However, even if it did, the right of occupancy post-completion would be conferred by the Tenancy Agreement not the contract for sale itself. In these circumstances, the exclusion contained in s 8(1)(f) of the Act does not apply.

35. In the written submissions filed by the applicant, it was contended, in the alternative, that the contract conferred an equitable lease for the term of the Tenancy Agreement under the principle in Walsh v Lonsdale (1882) 21 Ch D 9 at 14-15. However, for such an equitable lease to exist, it would be necessary to imply a term in the contract for sale that the respondent was obliged to enter into the Tenancy Agreement. This obligation must have been capable of being specifically enforced: Chan v Cresdon (1989) 168 CLR 242 at 252-253. This in turn depends whether there was an implied obligation to enter into the Tenancy Agreement (see pars [33] and [34] above). However, even if there was, the right of occupancy would be conferred by that Tenancy Agreement not by the contract itself.

36. It follows that the Tribunal was correct in concluding that the exception in s 8(1)(f) of the Act did not apply.

The application of s 8(1)(g) of the Act

37. I have set out the provisions of s 8(1)(g) above. In determining whether this provision applies, two questions arise. First, does the agreement between the parties constitute a mortgage and, second, can the Tenancy Agreement be described as an agreement that arises under a term of a mortgage which confers a right to occupy residential premises on a party to the mortgage.

38. Although s56 of the Real Property Act 1900 (NSW) makes provision for the manner in which a mortgage of land under the Act is to be created, it has been recognised that a mortgage can be created by registering an instrument of transfer of the legal title from the mortgagor and, at the same time, entering into an agreement that the transfer was by way of security only: Abigail v Lapin [1934] AC 491; 51 CLR 58 at 65; Currey (Registrar of Titles) v The Federal Building Society [1929] HCA 28; 42 CLR 421 at 434. The equitable interest in the mortgagor to redeem the property would be recognised at least inter parties, Barry v Heider [1914] HCA 79; 19 CLR 197 at 204-208, 213-216, and can be protected by a caveat.

39. The Act does not contain any definition of ‘mortgage’. In Santley v Wilde [1899] 1 Ch 474 at 474-475, Lindley MR described a mortgage as a conveyance of land as security for the payment of a debt or the discharge of an obligation for which it is given.

40. It is well established that in considering whether a conveyance or transfer of land is in fact by way of mortgage, regard is to be had to the substance of the transaction and extrinsic evidence is admissible in cases where the real intention is in doubt: G&C Kreglinger v New Patagonia Meat and Cold Storage Company Ltd [1914] AC 25 at 36, 47; Barton v Bank of New South Wales (1890) 15 App Cas 379 at 380-381; Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 (‘Gurfinkel’) at 108 per Barwick CJ (in dissent); at 115 per Windeyer J.

41. That the mere fact that a conveyance is coupled with an option to repurchase does not, of itself, lead to the conclusion that the transaction constituted a mortgage, even if the transaction is entered into in the confident expectation that the option will be exercised: Gurfinkel at 113 per Windeyer J citing Manchester, Sheffield and Lincolnshire Railway Company v North Central Wagon Company (1888) 13 App Cas 554 at 567, 568 and Beckett v Tower Assets Co [1891] 1 QB 1 at 25.

42. In the present case, there are further indications that the transaction was one by which the land was transferred as security for a loan. In particular, the failure to exercise the option, subject to one exception, did not entitle the respondent to retain title to the property. Clause 7 of the Option Agreement entitled the respondent to sell the property if the option was not exercised and to account to the applicant for any surplus over the amount owing and default interest. I have set out the definition of ‘amount owing’ in par [16] above. It relates effectively to the respondent’s costs of the transaction, rent arrears, plus the owner’s fee, which was 10% of the purchase price. This tends to suggest that the transaction was one of loan with the provision of security rather than one of sale with the option to repurchase.

43. The provision in cl 2(d) of the Option Agreement, to the effect that the respondent may terminate the option deed if there is a material breach of the Tenancy Agreement, and that in those circumstances the respondent has no obligation to distribute any part of the sale proceeds of the property to the applicant, in my opinion, does not alter this conclusion. Whether such a provision would constitute a penalty does not need to be considered. The clause does not alter the substance of the transaction.

44. The fact that the transaction is, in substance, a loan with provision of security is supported by the proposal provided by the respondent to the applicant in its letter of 22 October 2012. The proposal that was outlined in the letter was the one that was subsequently entered into. Although the proposal is described in the letter as “a purchase of your property (s) which is a commercial arrangement that provides relief to property owners in financial distress with adequate security and a return to the ARAP group of companies”, the letter describes the proposal as follows:

“The ARAP Company enters into a contract for the purchase of property from the seller. The contract is designed to pay out the seller’s existing debts and provide a rebate of the purchase price to give the ARAP company adequate equity to obtain finance. The seller is given an option to buy the property back from the ARAP company under the terms of the agreement. The seller is required to rent the property from the ARAP company pursuant to a Tenancy Agreement for an amount of rent adequate to cover the holding costs of the ARAP company under the Option Expiry Date. If the seller does not exercise the option to buy back the property or defaults under the tenancy agreement, the ARAP company will sell the property to a third party and retain monies owed on account of the purchase costs, holding costs (including unpaid rent, repairs, maintenance and improvements as required) and costs of sale together with the specified ARAP fee as outlined in the indicative proposal. The balance i.e. seller’s retained equity if any, is distributed to the seller after the sale to a third party, providing the seller is co-operative throughout the process.”

45. In these circumstances, it is my opinion that the transaction in question was in substance a mortgage. The property was transferred as security for the amount paid to the applicant pursuant to the contract and the additional amount to which the respondent was entitled under the Option Agreement and the Tenancy Agreement.

46. It remains to be considered whether the Tenancy Agreement is one which arises under a term of the mortgage.

47. In my opinion, this question should be answered in the affirmative. Absent the Tenancy Agreement, the effect of the transfer was that the respondent was entitled to possession of the property. Having regard to the nature of the transaction (akin to a common law mortgage), the Tenancy Agreement was a necessary ingredient to enable the applicant as mortgagor to retain possession of the premises. Although such an agreement was not necessary in the case of a mortgage entered into in accordance with the provisions of s 56 of the Real Property Act, such an instrument may provide for the registered proprietor to attorn as tenant and a rental payment to be accepted. The object of such a clause is to give to the mortgagee the remedies of a landlord as well as that of mortgagee, albeit operating by way of estoppel in the case of a Real Property Act mortgage: Partridge v McIntosh & Sons Ltd [1933] HCA 38; 49 CLR 453 at 468; Figgins Holdings Pty Ltd v SEAA Enterprises Pty Ltd [1999] HCA 20; 196 CLR 245 at [24].

48. It follows, in my opinion, that the Tenancy Agreement arose under the terms of the mortgage and conferred the right to occupy the premises on the applicant, a party to the mortgage.

49. In these circumstances, s 8(1)(g) of the Act applies and the Tribunal had no jurisdiction to make the orders sought. The challenged orders therefore should be quashed.

Orders

50. Notwithstanding the consent orders sought, it seems to me that the conclusion I have reached and the manner in which the parties now wish the issue to be disposed of can be accommodated by making an order under s 69 of the Supreme Court Act that the decisions of the Tribunal in question be quashed. In these circumstances, I make the following orders.

1. Order that the decisions of the New South Wales Civil and Administrative Tribunal, in proceedings between the parties dated 1 July 2014, 21 August 2014 and 15 October 2014, be quashed.

2. No order as to costs.

51. EMMETT JA: On 19 November 2012, Mr Geoffrey Hudson and Arap 1 NSW Pty Ltd (Arap) entered into a contract (the Contract) whereby Mr Hudson agreed to sell premises located in Burraneer, New South Wales (the Premises) to Arap. Contemporaneously with the entry into of the Contract, Arap and Mr Hudson entered into a call option (the Option Agreement), whereby Arap granted to Mr Hudson the option for Mr Hudson to repurchase the Premises from Arap. The Option Agreement contained provisions whereby Arap was to sell the Premises if the option granted by the Option Agreement was not exercised. Any surplus after Arap had been repaid the amounts paid out by it were for the benefit of Mr Hudson. On completion of the Contract, Arap, as landlord, and Mr Hudson, as tenant, entered into a residential tenancy agreement in respect of the Premises (the Tenancy Agreement).

52. On 21 August 2014, the NSW Civil and Administrative Tribunal (NCAT) made orders that Mr Hudson’s tenancy of the Premises under the Tenancy Agreement was terminated in accordance with s 84 of the Residential Tenancies Act 2010 (NSW) (the Tenancies Act) and that Mr Hudson give possession of the Premises to Arap. Mr Hudson thereupon commenced proceedings in the Common Law Division, which were transferred to this Court. By his second further amended summons filed on 11 March 2015, Mr Hudson seeks relief both under s 69 of the Supreme Court Act 1970 (NSW) and by way of appeal under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act). He asks that the relevant orders made by NCAT be quashed or set aside.

51. The question in the proceedings is whether NCAT had jurisdiction to make an order for the termination of the tenancy under the Tenancy Agreement. Under s 84(1) of the Tenancies Act, a landlord may, at any time before the end of the fixed term of a fixed term agreement, give a termination notice for the agreement that is to take effect on or after the end of the fixed term. Under s 84(3), NCAT must, on application by a landlord, make a termination order if it is satisfied that a termination notice was given in accordance with s 84 and the tenant has not vacated the premises as required by the notice. Under s 187(1)(i), NCAT may, on application by a landlord, make a termination order or an order for the possession of the premises. Section 28(1) of the NCAT Act provides that NCAT has such jurisdiction and functions as may be conferred or imposed on it by or under the NCAT Act or any other legislation.

52. The question of whether NCAT had jurisdiction to make the orders presently under challenge depends upon whether the Tenancy Agreement arose under a term of a mortgage within the meaning of s 8(1)(g) of the Tenancies Act. The Tenancies Act applies to residential tenancy agreements in respect of residential premises (s 6). However, under s 8(1)(f), the Tenancies Act does not apply to an agreement for the sale of land that confers a right to occupy residential premises on a party to the agreement. Under s 8(1)(g), the Tenancies Act does not apply to an agreement that arises under a term of a mortgage and confers a right to occupy residential premises on a party to the mortgage. Under s 13, a residential tenancy agreement is an agreement under which a person grants to another person for value a right of occupation of residential premises for the purpose of use as a residence. The Premises are residential premises for the purposes of the Tenancies Act.

53. I have had the advantage of reading in draft form the proposed reasons of the Chief Justice for concluding that the transaction in question was, in substance, a mortgage. On completion of the Contract, the legal estate to the Premises was transferred to Arap as security for the amount paid to Mr Hudson pursuant to the Contract and the additional amounts to which Arap was entitled under the Option and the Tenancy Agreement. The Option Agreement, in effect, constituted a proviso for redemption of the mortgage, and the Tenancy Agreement an attornment by Mr Hudson as tenant to Arap as landlord, since Mr Hudson was to remain in possession of the Premises following the transfer of the legal estate to Arap. I also agree with the Chief Justice that the Tenancy Agreement arose under the terms of that mortgage and conferred the right to occupy the Premises on Mr Hudson as a party to the mortgage.

54. In those circumstances, I agree that s 8(1)(g) of the Tenancies Act applies and that NCAT had no jurisdiction to make the relevant orders. I agree with the orders proposed by the Chief Justice.

55. BERGIN CJ in Eq: I agree with Bathurst CJ.

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Decision last updated: 14 May 2015