ON APPEAL FROM THE SUPREME COURT OF Vendor and Purchaser-Sale of land-Hotel property-Tied house-Certificate of
tide under Real Property Act-Mortgage by a previous proprietor-Bond for exclusive trade with mortgagee for several years with right to retain certificate of title as security-Discharge of mortgage-Effect upon bond-Clean certificate of title obtained by vendor's predecessor-Subsequent sale by registered proprietor -Notice of restrictive covenant in bond discovered by purchaser-Objection to title-Real Property Act 1900 (N.S.W.) (No. 25 of 1900), secs. 42, 43, 44- Conveyancing Act 1919 (N.S.W.) (No. 6 of 1919), secs. 55, 89.
In 1926 the respondent, who was the registered proprietor under the Real Property Act 1900 (N.S.W.) of certain land, sold the land to the appellant, together with the hotel thereon and the licence and goodwill thereof. Subject to a mortgage (which the respondent undertook to discharge prior to the completion of the contract) the respondent showed a clean title to the land on the face of the certificate. In 1901 a predecessor in title of the respondent, who had given a mortgage over the land and premises to a brewery company to secure moneys advanced by the company to him, which had been discharged and a new certificate issued to the mortgagor, had simultaneously with the instrument of mortgage given a bond, not mentioned by the respondent in the particulars of title or otherwise, tying the trade of the hotel to the company for all beers, &., until 1935, and agreeing that the company should hold and retain possession of the certificate of title to the land until 1935 or until the bond was discharged. On discovering these facts the appellant refused to accept title on the ground that the tie so created would be binding on him as a purchaser with notice thereof; and the respondent thereupon forfeited the appellant's deposit under the contract and rescinded the contract.
Held, by Knox C.J., Isaacs, Higgins and Starke JJ. (Gavan Duffy J. dissenting), that the appellant was not justified in refusing the title.
Decision of the Supreme Court of New South Wales (Davidson J.): Toohey V. Gunther, (1927) 28 S.R. (N.S.W.) 229, affirmed.
APPEAL from the Supreme Court of New South Wales.
By a contract dated 23rd November 1926 the appellant, John Stephen Septimus Toohey agreed to purchase from the respondent, Margaret Jane Gunther, certain land at Pennant Hills upon which was erected a hotel, together with the hotel furniture, fittings and effects and also the licence and goodwill of the hotel. Upon investigating the title to the land, which was under the Real Property Act 1900 (N.S.W.), the appellant discovered that one Astby, a predecessor in title of the respondent had, by a bond dated 13th April 1921, tied the trade of the hotel for a period extending until 12th February 1935, to Tooth &Co. Ltd., a company carrying on a brewery business. The appellant having refused to complete the purchase on the ground that the tie SO created would be…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Toohey v Gunther [1928] HCA 19
Case
[1928] HCA 19
Decision Date
CaseChat Overview and Summary
The High Court of Australia heard an appeal from the Supreme Court of New South Wales concerning a dispute over the sale of a hotel property. The appellant, the purchaser, refused to complete the purchase from the respondent, the vendor, after discovering a restrictive covenant, known as a "tie," in a bond executed by a predecessor in title. This bond obligated the hotel's trade to a brewery company until 1935 and stipulated that the brewery company could retain the certificate of title as security. The vendor subsequently rescinded the contract and forfeited the purchaser's deposit.
The central legal issues before the High Court were whether the restrictive covenant in the bond was binding on a subsequent purchaser with notice, whether the discharge of the original mortgage affected the validity of the bond, and whether the provisions of the Real Property Act 1900 (N.S.W.) and the Conveyancing Act 1919 (N.S.W.) impacted the enforceability of such a covenant against a registered proprietor or a purchaser from one. The court also considered whether the title offered was too doubtful to be forced upon a purchaser.
A majority of the High Court, comprising Knox C.J., Isaacs, Higgins, and Starke JJ., held that the appellant was not justified in refusing the title. The court reasoned that the bond, when viewed in conjunction with the mortgage and bill of sale, constituted a single transaction that was subject to equitable principles preventing fettering of the equity of redemption. Furthermore, the court found that the provisions of the Real Property Act, particularly sections 42 and 43, protected subsequent registered proprietors and purchasers from unregistered interests, even if they had notice of such interests, unless fraud could be established. The majority concluded that the vendor had a clean title under the Act, rendering the restrictive covenant unenforceable against the purchaser.
The appeal was dismissed, affirming the decision of the Supreme Court. The court ordered that the appeal be dismissed, meaning the vendor was entitled to rescind the contract and forfeit the deposit, and the purchaser was not entitled to a declaration that the vendor had not shown a good title.