Perpetual Trustee Company Ltd v Smith

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FEDERAL COURT OF AUSTRALIA

Perpetual Trustee Company Limited (ACN 000 001 007) v Smith [2010] FCAFC 91

Citation: Perpetual Trustee Company Limited (ACN 000 001 007) v Smith [2010] FCAFC 91
Appeal from: Haslam v Money for Living (Aust) Pty Ltd [2008] FCA 1536
Application for extension of time: Haslam v Money for Living (Aust) Pty Ltd (No 2) [2008] FCA 1832
Haslam v Money for Living (Aust) Pty Ltd (No 2) [2009] FCA 468
Parties: PERPETUAL TRUSTEE COMPANY LIMITED (ACN 000 001 007) v ESTELL SYLVIA SMITH, THE ESTATE OF ELAINE GAINSFORD, EDWARD JAMES GAINSFORD, ATHOL EASTERBROOK, YVONNE GRAY, WILLIAM BRUCE BURTON, ANNETTE MARION BURTON, ALBERT WALTER DALLY, LORRAINE JOY DALLY, SHIRLEE ESTHER DAVEY, RAYMOND JOHN DEBENHAM, ANNA ROSE KOCSIS, LESLIE LUSPIA KOCSIS and JOYCE DORIS ORCHARD
File number: VID 358 of 2009
Judges: MOORE, DOWSETT AND STONE JJ
Date of judgment: 21 July 2010
Catchwords:

CONTRACTS – respondents contracted with Money for Living for the sale of their homes in exchange for a lump sum payment, periodic instalments and a lease for life – Money for Living mortgaged property to appellant  – Money for Living wound up – mortgagee sought to enforce rights under mortgage – whether lease prior in time to  mortgage

EQUITY – priorities – general principles for determining priority of equitable interests – relevance of time of creation of interest – relevance of failure to caveat

REAL PROPERTY – Torrens Title – exceptions to indefeasibility in s42(2) Transfer of Land Act 1958 (Vic) – whether tenants are tenants in possession within the meaning of that term in s 42(2)(e) – whether mortgagee’s registered interest takes priority over unregistered interests of tenants for life where tenancy entered into prior to execution of mortgage

REAL PROPERTY – mortgages – tenants in possession – registered proprietor mortgaged property subject of lease – whether mortgagee had notice of the fact that there were tenants in possession – constructive notice – whether necessary for tenants to caveat their interests – whether tenants engaged in postponing conduct

REAL PROPERTY – mortgages – time and creation of lease and mortgage – whether mortgage created before lease where contract of sale, mortgage and lease executed on the same day – whether the respondents were tenants in possession at the time the mortgage was executed and registered

REAL PROPERTY – contract for sale of land executed at the same time as a deed of agreement conferring to the vendor a lease for life – whether purchaser was capable of granting a lease to the vendor while vendor was still registered proprietor    

REAL PROPERTY – leases – whether lease for life void for uncertainty of duration – whether certainty of duration rule applies to periodic leases or leases for life

REAL PROPERTY – equitable vendors’ liens – whether respondents had vendors’ liens and whether liens took priority over registered mortgage – held that registered interest prevails

Legislation: Land Titles Act 1980 (Tas) s 40(3)(d)
Transfer of Land Act 1958 (Vic) s 35(3), 42(2)(e)
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Details
Case
[2010] FCAFC 91
Decision Date

CaseChat Overview and Summary

The case of Perpetual Trustee Company Ltd v Smith involved a dispute concerning the sale of residential properties, the execution of mortgages, and the creation of life leases. The case was heard in the Supreme Court of Victoria, with the appeal process culminating in the Court of Appeal. The central issue in the case was the priority of various interests in the property, specifically whether the interests of the respondents, who had entered into a lease for life, took precedence over the interests of the appellant, who held mortgages on the properties.

The legal issues before the court included the determination of the priority between the equitable interests of the tenants in possession and the registered interests of the mortgagee. The court had to consider the applicability of section 42(2)(e) of the Transfer of Land Act 1958 (Vic), which provides exceptions to the indefeasibility of title in cases where tenants in possession are involved. Additionally, the court examined whether the lease was valid and whether the tenants' interests were protected by equitable principles. The case also involved the interpretation of the contract terms and the timing of the creation of the lease and mortgage to determine their respective priorities.

The court held that the equitable interests of the respondents, who were tenants in possession, took priority over the appellant's registered mortgage interests. The court reasoned that the tenants' interests were protected by section 42(2)(e) of the TFL Act, and the tenants had entered into possession before the mortgage was executed and registered. The court further held that the lease for life was valid and did not suffer from uncertainty of duration. The reasoning was based on the principle that if competing equities are of equal merit, priority is determined by the date of their creation. The court also found that the tenants' failure to caveat did not affect the priority of their interests. Finally, the court ruled that the appellant had constructive notice of the tenants' interests and that the tenants were not required to take any further action to protect their interests.

ORDERS:
1. The appellant’s application for an extension of time within which to file and serve a notice of appeal against the orders made on 2 December 2008 is dismissed.
2. The appellant’s application for leave to amend further the notice of appeal be allowed with respect to orders 3, 5, 7, 9, 11 and 13 made on 4 May 2009 and the application is otherwise dismissed.
3. The respondents’ objection to the competency of the appeal is dismissed.
4. The appeal is dismissed.
5. The cross-appeal is dismissed.
6. The appellant is to pay the respondents’ costs of and associated with the appeal including reserved costs.

Orders

Orders of the court

1. The appellant’s application for an extension of time within which to file and serve a notice of appeal against the orders made on 2 December 2008 be dismissed.

2. The appellant’s application for leave to amend further the notice of appeal be allowed with respect to orders 3, 5, 7, 9, 11 and 13 made on 4 May 2009 and the application be otherwise dismissed.

3. The respondents’ objection to the competency of the appeal be dismissed.

4. The appeal be dismissed.

5. The cross-appeal be dismissed.

6. The appellant is to pay the respondents’ costs of and associated with the appeal including reserved costs.

Note:

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Without going into details of the interlocutory and ancillary processes, the position at the conclusion of this appeal is that, substantively, the appellant has failed in its attempt to have the orders made by the primary judge set aside. Although the appellant has succeeded in having the cross-appeal dismissed this has not made any difference to the respective positions of the parties. It is our view that there would be no benefit to any of the parties in attempting to apportion the cost and therefore we will order that the appellant pay the respondents’ costs of and associated with the appeal.CONCLUSION It follows for the reasons given above that:1.The appellant’s application for an extension of time within which to file and serve a notice of appeal against the orders made on 2 December 2008 is dismissed.2.The appellant’s application for leave to amend further the notice of appeal be allowed with respect to orders 3, 5, 7, 9, 11 and 13 made on 4 May 2009 and the application is otherwise dismissed.3.The respondents’ objection to the competency of the appeal is dismissed.4.The appeal is dismissed.5.The cross-appeal is dismissed. 6.The appellant must pay the respondents’ costs of and associated with the appeal including reserved costs. I have read the reasons prepared by Moore and Stone JJ. I gratefully adopt their Honours’ statement of the relevant facts. In so far as their reasons deal with the operation of s 42(2)(e) of the Transfer of Land Act 1958 (Vic) (the “TFL Act”) I am in general agreement with them. However there are a number of areas in which I have reservations which I should express. The operation of s 42 deprives the appellant (“Perpetual”) of the benefit of registration of its mortgages. As a result we must consider the respective priorities of each of the interests held by the relevant respondents (the “retirees”) as against the respective competing interests held by Perpetual pursuant to its notionally unregistered mortgages. Below, I discuss considerations relevant to the resolution of the question of priority as between competing equities. As will be seen, if competing equities are equal in merit, priority will depend upon the respective dates upon which they arose. See Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 276 (quoted below). Thus it may be necessary to determine those dates. In the case of Perpetual, the relevant equities are its interests under the notionally unregistered mortgages. There may have been a pre-existing agreement to advance money on security, but I do not understand Perpetual to rely upon any such agreement. Prima facie, the equitable mortgages will date for priority purposes from their respective dates of execution. Because of the way in which the matter was argued at first instance and on appeal, there has been little consideration of the relevant priority dates for the retirees’ equities. Prima facie, as between the retirees and the purchaser and mortgagor to Perpetual (“MFLPH”) the retirees’ interests would date from their creation. However only a tenant in possession has the benefit of s 42(2)(e). It seems at least arguable that for the purpose of determining the priority of such an equity as against a party deprived of the protection of registration by s 42(2)(e), the tenant’s equity should take priority from the date upon which he or she goes into possession in that capacity. Choice of the date of possession (ie in this case, the date of completion of each contract of sale) as the priority date of an interest protected by s 42(2)(e) would reflect the assumption which, I infer, underlies that section, that the registered interest holder will have had adequate opportunity to discover that the tenant was in possession and to make appropriate enquiries as to the basis for such possession. As I consider that this matter should be remitted to the primary Judge for reconsideration of the priority question, I need not express a final view concerning the effective priority dates of the retirees’ equities. Further, as the question seems not to have been addressed at first instance, and was not addressed on appeal, it is better that I express no concluded view. I have referred to the various transactions collectively but, of course, in resolving questions of notice and priorities, each case must be assessed individually.

Ratio Decidendi

Legal Principle Established

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