JOHN K ARTHUR

John K Arthur Barrister at Law

Owen Dixon Chambers

205 William Street Melbourne Vic 3000

DX 94 Melbourne Vic

P: 03 9225 8553 F: 03 9225 7907

jkarthur@vicbar.com.au

snow@vicbar.com.au

12 February 2015

PROPERTY LAW UPDATE

Recent Developments in Sale of Land and Property Law By John K Arthur

This paper was presented by John Arthur at the iCU conference at Kooyong Lawn Tennis

Club as part of the Substantive Law program on 13 February 2015.

Introduction:

1. The object of this seminar it is to provide an update and overview on legislative

changes, and to highlight some relevant practices and recent significant cases

dealing with property law and sale of land disputes1. It is not possible to cover all

relevant legal developments, so the following focus is entirely my choice.

2. First, it is intended to a take a brief look at legislative changes which affect

property law, and then consider some recent superior court cases in the area2.

Legislation

1 For the principles involved in such applications see Enforcing Rights & Remedies under a Contract of the Sale of Land, by J Arthur, available at http://www.gordonandjackson.com.au/online-library. I acknowledge the assistance of Chelsea Campagna, final year law student at Deakin University who carried out valuable research for this seminar paper 2 I have been assisted by the LIV Property & Environmental Law Practice Section Latest News, http://www.liv.asn.au/For-Lawyers/Sections-Groups-Associations/Practice-Sections/Property-Environmental-Law/Latest-News and by recent bulletins put out by the LPLC, see: http://lplc.com.au/category/bulletins/, “New ID law means mortgages could be void”, 24th September, 2014 covering amendments to the Transfer of Land Act 1958 (Vic) made by the Transfer of Land Amendment Act 2014 (Vic) to require a mortgagee to properly verify the authority and identity of a mortgagor by taking ‘reasonable steps’ before the execution or variation of a mortgage; “Amended section 32 statement” which covers amendments to section 32’s contained in the Sale of Land Amendment Act 2014.

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Electronic Conveyancing National Law

3. The Electronic Conveyancing (Adoption of National Law) Act 2013 (Vic),

commenced operation on 14 March 2013. The Act adopted the Electronic

Conveyancing National Law in Victoria, and made consequential amendments to

the Transfer of Land Act 1958 (“TLA”) and other Acts. The National Electronic

Conveyancing System (“NECS”) project will be delivered by Property Exchange

Australia Ltd (“PEXA”). PEXA is an online property transfer and financial

settlement e-conveyancing platform, owned by various state governments and

major banks, which enables the electronic settlement of property transactions,

including the preparation of transfer documents, payment of duty, payment of

the price, and lodgment and registration of the transfer documents at the Land

Titles Office3. According to the PEXA website “it provides an electronic business

environment for completing property transactions including electronic lodgment

with Land Registries and the electronic settlement of funds”4. It is now available

for settlements and lodgments in Victoria5.

4. While the use of electronic conveyancing is at present optional, it has been

indicated that it could soon be compulsory.

5. Practitioners need to be familiar with electronic conveyancing, how it works, as

well as the skills and practice required, including regulatory measures and

requirements. The LIV provides training about e-conveyancing6.

3 LCA factsheet on the NECS, see: http://www.lawcouncil.asn.au/lawcouncil/images/NECS.pdf 4 See PEXA website, https://www.pexa.com.au/ and go to: “About” 5 for all Victorian lawyers and conveyancers from February, 2015 6 See “Farewell to paper: Electronic conveyancing to go national” by Murray McCutcheon, Oct 2013 87 (1) LIJ, p 40; “Who are you? Prove it?” by Simon Libbis, October 2014 88(1) LIJ, p. 40; Property: Introducing e-settlement” by Russell Cocks, Dec 2014 88 (12) LIJ, p. 78 “Property: E-conveyancing: what you need to know”, by Simon Libbis, Jan/Feb 2015 89 (1/2) LIJ, p. 78; LIV’s e-conveyancing web page which contains much useful information, references to articles and other links: http://www.liv.asn.au/For-Lawyers/Sections-Groups-Associations/Practice-Sections/Property-Environmental-Law/e-conveyancing. The Legal Services Board has issued a notice about use of the PEXA Source Account and the LIV encourages practitioners to carefully consider the implications of using the PEXA Source Account, see: http://www.lsb.vic.gov.au/documents/Notice-PEXA_e-conveyancing_system_rollout-2015.pdf

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6. The Law Institute of Victoria and the Real Estate Institute of Victoria7 have

prepared an electronic conveyancing special condition for use in transactions

where the parties agree that settlement and lodgment will be conducted

electronically in accordance with the Electronic Conveyancing National Law8

(a copy is an appendix to this paper).

Transfer of Land Amendment Act 2014

7. The main purposes of the Transfer of Land Amendment Act 20149 were to

facilitate the alignment of paper and electronic conveyancing requirements, make

various amendments to mortgage provisions in the TLA, and make other

miscellaneous amendments. Among other things, the amendments require a

mortgagee to take reasonable steps to verify the authority and identity of a

mortgagor before the execution, variation or transfer of a mortgage10, and give a

mortgagee the right to apply for removal or reinstatement of a lease11, or removal

of easement of restrictive covenant12. A new Div 1B of Part V dealing with Priority

Notices is introduced13, as well as new provisions dealing with Client

authorisations14.

New section 32 vendors statements: 8. Amendments to the Sale of Land Act 1962 (Vic) (“SLA”) were made by the Sale of

Land Amendment Act 201415 “to re-enact, reform and modernise the provisions

relating to statements made under section 32 of that Act” (s. 1). Most of the

7 Russell Cocks, David Lloyd and Murray McCutcheon are the authors; LIV Property & Environmental Law Practice Section Latest News, http://www.liv.asn.au/For-Lawyers/Sections-Groups-Associations/Practice-Sections/Property-Environmental-Law/Latest-News 8 LIV Property & Environmental Law Practice Section Latest News, http://www.liv.asn.au/For-Lawyers/Sections-Groups-Associations/Practice-Sections/Property-Environmental-Law/Latest-News 9 No. 70/2014; Assent Date: 23.9.14; Commencement Date: Ss 3–25 on 24.9.14: s. 2 10 Ss. 87A – 87E TLA; See LPLC Bulletin 24th September, 2014: New ID law means mortgages could be void 11 S. 88A 12 S. 88B 13 Ss. 91C- 91J 14 Ss. 91K- 91M 15 , No. 33/2014 which was assented to on 13 May, 2014 and commenced (ss 3–6 on 1.10.14: Special Gazette (No. 282) 26.8.14. Two other Acts made minor amendments to the Sale of Land Act 1962, namely, Victoria Police Amendment (Consequential and Other Matters) Act 2014 , and Consumer Affairs Legislation Amendment Act 2014.

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existing provisions of s. 32 are re-enacted either entirely or substantially. The

main change is that while presently Division 2 of Part II currently comprises only

one section, namely, section 32, which sets out the disclosure requirements

vendors must meet when selling land in Victoria, the new Division 2 of Part II

comprises new sections 32 to 32P, each of which re-enacts (either with or without

amendment) particular aspects of the existing section 3216.

9. A section 32 statement is now defined in s. 30(1) Sale of Land Act 1962 as a

statement required to be given by a vendor under section 32 in accordance with

Division 2 of Part II of the Sale of Land Act 1962. Previously there was no such

definition.

10. The new sections re-enact or substantially re-enact the existing provisions of s. 32

with new numbering. However there are some changes which practitioners

should be aware of. For example, the new section 32D sets out notices made in

respect of land that vendors are required to disclose in section 32 statements,

substantially re-enacting the existing obligation under section 32, with

amendments to limit a vendor's obligation to the disclosure of documents that

directly and currently affect the land. New section 32H requires vendors of land to

specify in their section 32 statements if certain essential services (namely,

electricity, gas and water supply, sewerage and telephone services) are not

connected to the land. Vendors will not be required, as is the case currently, to

provide information about connected essential services. New sections require a

vendor (s. 33B(1)) or licensed estate agent and acting for a vendor (s. 33B(4))

offering land for sale that is either vacant residential land or land on which there

is a residence to ensure that a due diligence checklist is made available to any

prospective purchaser from the time the land is offered for sale. Failure to meet

these requirements is an offence which attracts a maximum penalty of 60 penalty

units. The due diligence checklist must be in the form approved by the Director of

Consumer Affairs Victoria.

16 Substantial reference has been made to the Explanatory Memorandum for the Sale of Land Amendment Bill 2014 available at http://www.legislation.vic.gov.au/.

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New definition of “terms contract”:

11. The Consumer Affairs Legislation Further Amendment Bill 2014 (Vic) (if enacted)

will introduce an amendment of s. 29A Sale of Land Act 1962 (Vic) so that terms

contracts will be constituted by sales where more than one payment, other than a

deposit, is paid before the purchaser takes a transfer of the land or where the

purchaser takes possession or is in receipt of rents or profits before being entitled

to a transfer. The definition of deposit has been amended to make clear that a

deposit is a part of the purchase price specified in the contract as a deposit and

required to be paid within 60 days of the execution of the contract. It can be paid

in more than one amount provided it is paid within the 60 days. The amendments

also provide that any amount paid by a purchaser as a result of a default by them

does not make the contract a terms contract17.

Sale of Land (Public Auctions) Regulations 2014

12. The Sale of Land (Public Auctions) Regulations 2014 which came into effect on 1

October, 2014 prescribe standard rules for public auctions for the sale of land, as

well as written information statements that must be made available for public

auctions for the sale of land, how that information is to be made available, and

the obligations of auctioneers at public auctions for the sale of land18.

Powers of Attorney Act 2014

13. The Powers of Attorney Act 2014 (Vic) (“POA”) received royal assent in August,

2014 and is scheduled to come into operation on 1 September 2015 unless

proclaimed earlier19. The POA came 4 years after the Parliament's then Law

Reform Committee tabled its extensive report on its inquiry into powers of

17 Source: Legal Practitioners’ Liability Committee’s quarterly risk management newsletter, http://lplc.com.au/check-issue-65/ 18 See reg 1 “Objectives” 19 Ibid

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attorney20. The POA was to meet the uncertainty and confusion as to the various

options currently available for persons to appoint others to act on their behalf,

and the powers that each appointment confers on the appointee21.

14. The POA consolidates the provisions for non-enduring (general) powers of

attorney, and enduring powers of attorney which existed in the Instruments Act

1958 and a creates a new appointment, that of supportive attorney. It repeals the

requirements of an enduring power of guardianship under the Guardianship and

Administration Act 1986, and provides that appointments for personal or lifestyle

matters are made as enduring powers of attorney. Powers made before the

commencement of the POA will continue to have effect22. While the POA makes a

clear distinction between appointments that a person chooses to make for

someone to act on their behalf, and appointments that VCAT makes where a

person is not capable of making such appointments themselves, with the former

being referred to consistently as attorneys, and the latter as guardians, the POA

also allows a person to confer under a single enduring power of attorney powers

that may previously have required both an enduring power of attorney and an

enduring guardianship, and to specify more clearly which of those powers are

being conferred23.

15. The avowed purposes of the POA24 are to:

(a) consolidate and provide for certain aspects of the law relating to powers of attorney, including the following: (i) the principles to be applied by persons acting under enduring

powers of attorney or under the provisions of this Act relating to enduring powers of attorney

(ii) the powers and duties of attorneys under enduring powers of attorney

(iii) the protection of persons whose affairs are being dealt with under enduring powers of attorney

20 Attorney-General Robert Clark, Second Reading Speech, 26 June 2014, LA 21 Ibid 22 Reference has been made to the Explanatory Memorandum for the Powers of Attorney Bill 2014. 23 Ibid, Attorney-General Robert Clark, Second Reading Speech, 26 June 2014, LA 24 Section 1

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(b) provide for the meaning of the capacity of persons to make decisions for matters to which enduring powers of attorney and supportive attorney appointments relate

(c) provide for the appointment of a supportive attorney as one who supports the person making the appointment to make and give effect to the person's own decisions

(d) repeal Parts XI and XIA of the Instruments Act 1958 and Division 5A of Part 4 of the Guardianship and Administration Act 1986

(e) make related amendments to the Instruments Act 1958, the Guardianship and Administration Act 1986 and other Acts, and

(f) provide for related matters.

16. The POA is a long Act with 165 sections running to 124 pages. The following list

sets out some of the main elements of the Act25:

(a) new definitions are introduced, for example, the donor of a power is

referred to as a principal26

(b) neither of the previous Acts (the Instruments Act 1958, and the

Guardianship and Administration Act 1986) defined capacity, which is a

critical concept in the area of powers of attorney and the operation of

the legislation. The new Act defines “decision-making capacity”27 and

provides guidance about how it should be assessed28. According to the

Second Reading Speech, these provisions protect a person's right to make

their own decisions whenever possible29

(c) the Act makes only minor amendments to the law regulating non-enduring

powers of attorney, including general powers of attorney, which are

referred to as general non-enduring powers of attorney30

(d) it introduces a principles-based approach to exercising a power under an

enduring power of attorney31. A person exercising a power, carrying out a

function or performing a duty for a principal under an enduring power of

attorney must do so in a way that is least restrictive of the principal's

freedom of decision and action as is possible in the circumstances and

25 Largely drawn from Legal Practitioners’ Liability Committee’s quarterly risk management newsletter, http://lplc.com.au/check-issue-65/ 26 Section 3(1) 27 meaning of decision making capacity, s. 4 28 S. 5 29 Attorney-General Robert Clark, Second Reading Speech, 26 June 2014, LA 30 ibid, Second Reading Speech, R Clark 31 See s. 21

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ensures that the principal is given practicable and appropriate support to

enable them to participate in decisions affecting them as much as possible

in the circumstances. An attorney must give all practicable and appropriate

effect to the principal's wishes and take such steps, if any, as are

reasonably available to encourage the principal to participate in decision-

making even though the principal does not have decision-making capacity.

An attorney must also act in a way that promotes the personal and

social well-being of the principal32

(e) the scope of enduring powers of attorney is set out in terms that are

commonly understood33

(f) the Act provides for a consolidated enduring powers of attorney form to

cover both financial and personal matters with a separate form for

general non-enduring powers of attorney34

(g) the Act provides consistency in the requirements for making35,

witnessing36 and accepting37 an enduring power of attorney, as well as

consistent eligibility criteria about who can be appointed as an attorney

under an enduring power of attorney. The bill requires an attorney

appointed under an enduring power to formally accept their appointment

and for the acceptance to be witnessed38

(h) the Act allows for the appointment of alternative attorneys or multiple

attorneys to act jointly, severally, jointly and severally or as majority

attorneys. It also provides that where there is a disagreement between an

attorney for personal matters and an attorney for financial matters where

they both have power over a matter, the view of the attorney for personal

matters will prevail39

32 ibid, Second Reading Speech, R Clark 33 ibid, Second Reading Speech, R Clark see ss. 22 - 27 34 Ibid, Second Reading Speech, R Clark 35 Ss. 32-38 36 S. 35 37 S. 37-38 38 ibid, Second Reading Speech, R Clark 39 Ibid; Second Reading Speech, R Clark, see ss. 8 and 30

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(i) the duties of enduring attorneys (which closely resemble those owed at

common law by a fiduciary) are more clearly set out40. Also specified are

particular duties for attorneys with financial powers41

(j) the revocation of an enduring power of attorney by a principal or an

enduring attorney’s appointment is required to be in writing in the

prescribed form and be witnessed42. A principal who revokes the enduring

power of attorney or an attorney’s appointment is to take reasonable

steps to notify any attorneys43

(k) VCAT now has the power to order an attorney to pay compensation to a

principal for a loss caused by the attorney contravening the Act when

acting under an enduring power (which power was previously only

exercisable by the Supreme Court)44

(l) the Act retains and clarifies existing powers of VCAT in relation to enduring

powers of attorney and provides it with additional powers45

(m) adults may now appoint a person to act as their ‘supportive attorney’ to

support them to make and give effect to some or all of their own

decisions46, and

(n) a principal will be able to revoke the appointment of their supportive

attorney at any time if they have capacity to do so47.

17. Among other developments:

(a) the Victorian Small Business Commissioner has released Guidelines to the

Retail Leases Act 2003 (the Act) to assist in the understanding of what

constitutes “retail premises” for the purposes of the Act48

40 S. 63 ff 41 Ibid, Second Reading Speech, R Clark 42 Div 1 of Part 5 43 Ibid, Second Reading Speech, R Clark 44 ibid; Second Reading Speech, R Clark see ss. 77 - 80 45 ibid; Second Reading Speech, R Clark; see Part 8, ss. 115-134 46 ibid, Second Reading Speech, R Clark, this measure is to promote autonomy and dignity for people with a disability who have the capacity to make various decisions for themselves, provided they have support to make and give effect to those decisions, ibid. See Part 7, s. 84ff. 47 ibid, Second Reading Speech, R Clark, see s. 103 48 Drawn from Legal Practitioners’ Liability Committee’s quarterly risk management newsletter, http://lplc.com.au/check-issue-65/

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(b) significant changes to the Franchising Code of Conduct are set to take

effect on 1 January 2015. The replacement code is contained in the

Competition and Consumer (Industry Codes—Franchising) Regulation 2014

which was made on 30 October 201449, and

(c) the Federal Courts Legislation Amendment Bill 2014 (Cth), which amends

the Federal Circuit Court of Australia Act 1999 (Cth) to confer jurisdiction

on the Court in relation to certain tenancy disputes (involving

Commonwealth parties) has been introduced in Parliament50.

18. There were no significant amendments to the Property Law Act 1958 nor to the

Retail Leases Act 2003. The last significant amendments to the latter Act were by

the Retail Leases Amendment Act 201251.

Case law – recent High Court decisions:

Stamp duty:

19. Chapter 2 of the Duties Act 2000 (Vic) charges duty on certain transactions (s.

7(1)). One form of dutiable transaction (s. 7(2)) is a transfer of dutiable property

(s. 7(1)(a)). Dutiable property includes an estate in fee simple in land in Victoria.

Liability for duty arises (s. 11(1)) when a dutiable transaction occurs. Duty is

charged (s. 18) on the dutiable value of the dutiable property. Section 20(1) Duties

Act provides that the dutiable value of dutiable property that is the subject of a

dutiable transaction is the greater of: (a) the consideration (if any) for the dutiable

transaction (being the amount of a monetary consideration or the value of a non-

49 ibid, Legal Practitioners’ Liability Committee’s quarterly risk management newsletter, http://lplc.com.au/check-issue-65/ 50 ibid, Legal Practitioners’ Liability Committee’s quarterly risk management newsletter, http://lplc.com.au/check-issue-65/ 51 The amending Act’s purpose was “to reduce red tape and improve the operation of that Act” – amendments to s. 15- copy of lease to be provided at negotiation stage; s. 17 -a new provision in relation to landlord's disclosure statement and several others.

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monetary consideration); and (b) the unencumbered value of the dutiable

property52.

20. A very recent decision of the High Court dealt with what constitutes the

consideration for a transfer of dutiable property. The context was the

VicUrban/Lend Lease development of the Docklands precinct. In Commissioner of

State Revenue v Lend Lease Development Pty Ltd; Commissioner of State Revenue

v Lend Lease IMT 2 [HP] Pty Ltd; Commissioner of State Revenue v Lend Lease Real

Estate Investments Limited [2014] HCA 51 the High Court allowed appeals from a

decision of the Court of Appeal of the Supreme Court of Victoria holding that the

Commissioner of State Revenue was entitled to assess duty to be charged on

transfers of land in the Docklands area of Melbourne by reference not only to

payments made under specified land sale contracts but also to payments made

under a "development agreement" between VicUrban (previously the Docklands

Authority) by which the Docklands area was to be transformed from a polluted,

disused industrial area cut off from the Melbourne CBD to a residential and

commercial area. The Court of Appeal had allowed an appeal from the decision of

the trial judge (Pagone J) dismissing Lend Lease’s appeal from the Commissioner’s

assessment of duty to be charged on each transfer by reference to the amount

the Commissioner determined to be the consideration for the dutiable

transaction.

21. Lend Lease had agreed to buy the Land from VicUrban and to design, construct

and sell large residential and commercial buildings and VicUrban would share in

the proceeds of sale of the buildings. The total base amount to be paid by Lend

Lease to VicUrban was $100.3m. The projected gross revenue on sale was more

than $1,811.7 m. The question for the Court was what was “the consideration…

for the dutiable transaction”? There was no dispute that “the consideration … for

the dutiable transaction” was “the money or value passing which moves the

52 Commissioner of State Revenue v Lend Lease Development Pty Ltd; Commissioner of State Revenue v Lend Lease IMT 2 [HP] Pty Ltd; Commissioner of State Revenue v Lend Lease Real Estate Investments Limited [2014] HCA 51 at [1].

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conveyance or transfer”53. Lend Lease submitted that the only amount properly

brought to duty as consideration for the transfer of the Land was in each case the

amount of the Stage Land Payment, while the Commissioner submitted that the

consideration for the transfer of the land was in each case, not only the Stage

Land Payments but the total of the various sums which Lend Lease was obliged to

pay VicUrban under the development agreement.

22. The High Court pointed out that the search is for “what was received by the

‘vendor’ so as to move the transfers to the [purchaser] as stipulated in the

Agreement”54. It was held that the development agreement, with the land sale

contracts, formed a single, integrated and indivisible transaction for the sale and

development of the Docklands area. The Court held that the consideration for the

transfer of land was the performance by Lend Lease of the several promises of

payments under the development agreement, and that the Commissioner was

right to include those amounts in the assessments.

Indefeasibility of title:

23. In another recent High Court case, Cassegrain v Gerard Cassegrain & Co Pty Ltd

[2015] HCA 2 a company, which was the registered proprietor of Torrens system

land, transferred land to a husband and wife as joint tenants. The consideration

was to be satisfied by debiting the husband's loan account with the company.

However the husband knew that the company did not owe him the amount

recorded in the loan account and the debit was not recorded in the company's

books until after the transfer had been registered. The husband subsequently

transferred his interest in the land to his wife for a nominal consideration. The

questions were whether the wife's title, first as joint proprietor with her husband,

and second deriving from or through him under the subsequent transfer, were

defeasible by the company?

53 At [18]; the High Court citing Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) [1948] HCA 28; (1948) 77 CLR 143 at 152 per Dixon J; [1948] HCA 28; Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd [2005] HCA 3; (2005) 221 CLR 496 at 518 [71] per Gummow, Kirby and Hayne JJ; [2005] HCA 3. 54 The High Court cited Dick Smith Electronics at CLR 518 [72].

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24. The High Court noted that legislation implementing the Torrens system of land

title is not uniform in Australia and that care must be taken to consider and apply

the particular statute which is engaged ([16]). The High Court pointed out that a

“central and informing tenet” of the Torrens system is that it is a system of title by

registration and not registration of title55 so that the title which a registered

proprietor has "is not historical or derivative. It is the title which registration itself

has vested in the proprietor."56 (ibid). As the High Court pointed out “the title of a

registered proprietor is not absolutely indefeasible” and the Real Property Act

1900(NSW)(“RPA”), as well as other versions of the Torrens legislation, provided

for circumstances in which a registered title may be defeated or qualified, one of

which was the "fraud" exception. The case concerned the ambit of such exception

in sections 42(1) and 118(1) Real Property Act 1900 (NSW)57.

25. In the result the High Court held first, that the wife's title as joint proprietor was

not defeasible on account of her husband's fraud, but secondly, that, the wife not

being a bona fide purchaser for value of her husband's interest in the land, the

interest which she derived from him (an interest as tenant in common as to half)

was defeasible and could be recovered by the company58. It was not alleged by

the company that the wife was a participant in, or had notice of, the husband’s

fraud at the time that the property was transferred to them as joint tenants59.

55 Breskvar v Wall (1971) 126 CLR 376 at 385 per Barwick CJ; [1971] HCA 70. 56 Ibid, Breskvar v Wall at 386 per Barwick CJ. 57 S. 100(1) RPA was also relevant. Section 42(1) provides that the estate of a registered proprietor is paramount. It provides that, subject to some exceptions which are not relevant to this case: "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". (emphasis added) Section 118(1) provides that: "Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except as follows:... (d) proceedings brought by a person deprived of land by fraud against: (i) a person who has been registered as proprietor of the land through fraud, or (ii) a person deriving (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud". 58 The company’s proceeding was a statutory derivative action under s. 237(1) Corporations Act 2001 (Cth) brought on its behalf by leave granted in September, 2008 in Cassegrain v Gerard Cassegrain & Co Pty Ltd [2008] NSWSC 976 59 Another recent case which dealt with indefeasibility and an allegation of fraud in the registration of the plaintiff as registered proprietor was Arambasic v Veza [2014] NSWSC 258

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Case law – recent Supreme Court decisions:

26. A rough survey of property law cases in the Victorian Supreme Court in 2014

shows that, generally speaking, the cases ranged across sale of land and

vendor/purchaser cases (for example, which party had rescinded, and was

entitled to the deposit)60; landlord-tenant (most of which were construction

disputes as to the interpretation of the lease)61, and applications for the removal

of caveats (which were by far the most numerous)62. There were also cases on

whether a transfer was a voidable transaction under s. 172(1) Property Law Act

195863, a summary recovery of land under O. 53 by a mortgagee64 and by a

Trust65; whether a mortgagee had taken all reasonable steps to obtain the market

value of the mortgaged property66; an application to modify a restrictive covenant

under s. 84(1)(c) Property Law Act 195867. In other States and Territories, there

were a similar range of cases, including applications to remove caveats, landlord

and tenant disputes, applications for possession of land usually by mortgagees, as

well as cases on easements68, an occasional body corporate dispute69, several

rating of land cases70, and a case concerning whether a transfer was made with

intent to defraud creditors71.

60 Eg. Patmore & Anor v Hamilton [2014] VSC 275 61 Eg. McDonald's Australia Limited v Bendigo and Adelaide Bank Limited and Benalla Retail Investments Pty Ltd [2014] VSCA 209; Jin Dun Pty Ltd v Di & Li Australia Pty Ltd [2014] VSC 562; Growthpoint Properties Australia Limited v Australia Pacific Airports (Melbourne) Pty Ltd [2014] VSC 556; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd & Anor [2014] VSC 479; SeaRoad Logistics v Patricks Stevedores [2014] VSC 170. Most of which involved construction of the terms of the lease 62 Upwards of 10 cases, eg. CFHW Pty Ltd v Burness & Ors [2014] VSC 451; White v White & Registrar of Titles [2014] VSC 449 (the primary issue in this case was whether a caveat should be amended); Lombardo v Bahnan [2014] VSC 410 ; A & S Boesley Pty Ltd v Stoney & Anor [2014] VSC 323; Li v F Vitale & Sons Pty Ltd & Anor [2014] VSC 326; West Coast Developments Pty Ltd v Lehmann [2014] VSC 293; 164 Fyans Street Pty Ltd v Morris Finance Ltd & Anor [2014] VSC 199; Horne v Snelling [2014] VSC 173 63 Petrovic v Brett Grimley Sales Pty Ltd [2014] VSCA 99 64 Suncorp-Metway Limited v Sunlongsolar Pty Ltd & Ors [2014] VSC 580 65 Framlingham Aboriginal Trust v McGuiness and Chatfield [2014] VSC 354 66 Boz One Pty Ltd & Anor v McLellan & Ors [2014] VSC 208 67 Wong v McConville & Ors [2014] VSC 148 68 ABI-K Pty Limited v Frank Shi [2014] NSWSC 551; Sahab Holdings Pty Ltd v Castle Constructions Pty Ltd [2014] NSWSC 1281; GM Amalgamated Investments (Dulwich Hill) Pty Ltd v Mills [2014] NSWCA 202; Shi v ABI-K Pty Ltd [2014] NSWCA 293; Holland & Anor v Carroll & Anor [2014] QSC 45 69 Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237 [2014] QCA 73 70 Remondis Australia Pty Ltd v Ipswich City Council [2014] QSC 27; Paton & Ors v Mackay Regional Council [2014] QSC 75; West Coast Council v Coverdale [2014] TASSC 42 71 Bowden v Weldon [2014] NSWSC 109

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Removal of caveats

27. As applications for removal of caveat are one of the most litigated types of cases

before the Supreme Court, there will be a brief discussion about the practice and

principles applicable to such applications.

28. As a matter of practice if a registered proprietor wishes to have a caveat removed

from title there are two ways by which this may occur. Which procedure is

adopted will depend on the circumstances, and a variety of factors. The first is the

procedure under s. 89A Transfer of Land Act 1958 (“TLA”).

29. The other procedure is to make application to the Court (either Supreme Court or

County Court) for removal of the caveat under s. 90(3) TLA. The pros and cons of

each of the applications have been examined elsewhere72. An application under s.

90(3) is made by originating motion supported by affidavit. The leading case is

Piroshenko v Grojsman (2010) 27 VR 489; [2010] VSC 24073. In that case, Chief

Justice Warren confirmed that the test for the maintenance of a caveat over TLA

land in Victoria is the same as for an interlocutory injunction74 and noted that

since the High Court case of Australian Broadcasting Corp v. O’Neill (2006) 227

CLR 57; 229 ALR 457; 80 ALJR 1672; [2006] HCA 46 at [14]-[23) applications under

s 90(3) Transfer of Land Act 1958 must be decided in accordance with the “prima

facie case” test as articulated in that case75.

30. We should also note the Chief Justice’s salutary reminder:

72 Caveats Against Dealings in Land - when to lodge and how to remove by Nicholas Jones, Barrister and Member of the Victorian Bar, 18 February, 2014, available at: http://www.gordonandjackson.com.au/online-library; 73 recently approved in Apartment Developments Pty Ltd v Johnson [2013] VSC 136 per McMillan J and in CFHW Pty Ltd v Burness & Ors [2014] VSC 451; and either applied, cited or applied in over 20 cases: Lexis Nexis Case Base Online 74 Relying on Eng Mee Yong v Letchumanan [1980] AC 331 adopted by the Queensland Supreme Court of Appeal in Re Jorss’ Caveat [1982] Qd R 458 at 464–5 and confirmed in Goldstraw v Goldstraw (2006) V ConvR ¶54-712 ; [2002] VSC 491 at [30], Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 and Bernstein v Georgakakis [2010] VSC 52. 4 (2006) 14 VR 447 75 at para ]14]

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Caveats are not “bargaining chips”. It is not sufficient for the caveator to establish a prima facie case that they have contractual, equitable or statutory rights against the caveatee; their interest or rights must attach to the property with respect to which the caveat has been lodged76.

31. Dealing further with salutary reminders, it should be noted that if a caveat is

lodged without reasonable cause the person lodging the caveat may be liable for

any loss caused by the caveat under s. 118 TLA77, and for indemnity costs if an

application is necessary to have the caveat removed78.

32. Often the issue in these cases is whether the caveat may be amended as it may be

asserted that while the caveat is bad in form the caveator does really have a

caveatable interest, albeit differently expressed. The issue of amendments of

caveats has been dealt with in several recent cases79.

An update on freezing orders:

33. The principles in relation to the grant of a freezing order (formerly known as a

mareva injunction) under r. 37A were set out in DCT v AES Services (Aust) Pty

Ltd80 per Forrest J where his Honour referred to his decision in Zhen and Mo v

Ors81 (which has been consistently followed in this State)82. The principles

76 Piroshenko v Grojsman (2010) 27 VR 489 77 Ibid, Caveats Against Dealings in Land - when to lodge and how to remove by Nicholas Jones, Barrister, pp. 7 – 11 and see RDN Developments Pty Ltd v Shtrambrandt & Ors [2011] VSC 130; Deutsch v Rodkin & Ors [2012] VSC 450 (latter case referred to in the article) 78 Ibid, Love v Kempton & Anor [2010] VSC 254 79 Ren v Shi [2012] VSC 271; White v White & Registrar of Titles [2014] VSC 449 where the principles as enunciated in Percy & Michele Pty Ltd v Gangemi [2010] VSC 530, and Martorella v Innovision Developments Pty Ltd [2011] VSC 282 are applied 80 [2009] VSC 418; DCT v Ekelmans [2013] VSC 346 per Judd J where His Honour adopted (at [22]) Forrest J’s statement of legal principle in relation to such applications. 81[2008] VSC 300 at [22]-[30] ( 1) that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.( 2) the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process. (3) the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order. (4) that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts. (5) that before such an order can be made it is necessary that the applicant establish: (a) an arguable case against the defendant; and (b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value. (6)the balance of convenience must favour the granting of the freezing order. (7)that there is no set process determining the exact nature of an order. The order will be

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relevant to applications in the Federal Court were summarised in Deputy Cmr of

Taxation v Vasiliades [2014] FCA 1250, [34]-[37] (Gordon J).

34. In PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2014] WASCA 178, the

Court of Appeal (Buss JA with McLure P and Murphy JA agreeing) dismissed an

appeal from the decision of the primary judge (Le Miere J [2013] WASC 239) who

granted a freezing order under the Court’s inherent jurisdiction against an

Indonesian company which was the defendant to a pending proceeding in the

High Court of Singapore in relation to a contractual dispute for a money

judgment. The only relevant connection with Western Australia (and Australia)

was that the Indonesian company owned assets in Australia, being shares in a

publicly listed company, whose principal place of business was Perth. There is a

discussion of the case law on the jurisdiction to make a Mareva order against

both a party and a non-party to the principal litigation83, as well as on the

jurisdiction to make a Mareva order in relation to a prospective foreign judgment

where no substantive proceedings, apart from the application for the Mareva

order, have been or are to be commenced in the place where the Mareva order is

sought and there is no judgment in the foreign proceedings84.

35. In another recent case a plaintiff in a NSW District Court proceeding suing for

damages for assault obtained an extension of a freezing order85 from the

Supreme Court until the trial of the District Court proceeding limited to $240,000

despite only inferential evidence of fear of dissipation: Wong v Wong [2015]

NSWSC 22.

framed according to the circumstances of the case. (8) the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property. (9)there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court. 82 Surprisingly no harmonised jurisprudence is building up in the various Australian jurisdictions despite adoption of harmonised rules. 83 [100] and [111] ff; 84 [122]ff 85 The application being made under r. 25.14 UCPR.

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Other references:

36. Practitioners may also wish to make reference to the following:

(a) an appeal against an order that a transfer was a voidable transaction under

s. 172(1) Property Law Act 1958 (Vic). This provision derived from ‘the

Elizabethan statute’ which was intended to prevent debtors alienating

property when this would prevent their creditors from recovering the

moneys owed to them. The trial judge found that the transfer of a sum of

$360,000 to the appellant was, to the extent of $52,900 ‘an alienation with

intent to defraud creditors’ under s. 172. It was held that there was no

error in the trial judge’s finding that the mother intended to defeat

creditors86

(b) summary recovery of land under O. 53 brought by a mortgagee against

defendants occupying the property under agreements for lease entered

into after the mortgage. There was no factual dispute and the plaintiff was

entitled to possession87

(c) construction of market rent review provision under a lease88

(d) liability of tenant to pay rates, taxes, assessments and outgoings, including

land tax89

(e) sale by mortgagee - whether all reasonable steps taken to obtain

market value – plaintiff’s claims dismissed90

(f) an application for modification of a restrictive covenant restricting more

than one dwelling being erected was granted91

(g) application by a tenant for relief against forfeiture granted on terms92

86 Petrovic v Brett Grimley Sales Pty Ltd [2014] VSCA 99 87 Suncorp-Metway Limited v Sunlongsolar Pty Ltd & Ors [2014] VSC 580 88 Growthpoint Properties Australia Limited v Australia Pacific Airports (Melbourne) Pty Ltd [2014] VSC 556 89 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd & Anor [2014] VSC 479 90 Boz One Pty Ltd & Anor v McLellan & Ors [2014] VSC 208 referring to Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VLR 617 where the Court of Appeal considered issues related to a mortgagee’s power of sale. In that case the Court of Appeal considered the duty of a mortgagee to sell at market value or at the best price reasonable ascertainable in the circumstances under s. 85 Property Law Act 1958 (Vic.) and s. 420A(1) Corporations Act 2001 (Cth.). The Court dismissed the appeal holding that the Bank had failed to discharge its duty of care by not hiring a local estate agent and by using an inadequate marketing report (at [67]). The case contains a useful summary of the relevant principles. 91 Wong v McConville & Ors [2014] VSC 148

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(h) whether contract of sale of land validly terminated by vendor

(i) termination not effective; purchaser entitled to specific performance93,

and

(j) application granted for statutory power of sale by bankruptcy trustees of

one co-owner94.

CONCLUSION

37. It is hoped that this brief survey of legislation and recent cases has refreshed and

“thrown light on” important principles and practices in the area of property law

and sale of land in Victoria.

12 February, 2015

John K Arthur LLB., BA., FCIArb

Barrister and Member of the Victorian Bar Nationally Accredited Mediator

Isaacs Chambers Tel: 9225 8291; Mob: 0412 892199 E-mail: jkarthur@vicbar.com.au W: www.gordanandjackson.com.au Liability limited by a scheme approved under Professional Standards Legislation

92 Elevation (NSW) Pty Ltd v The Uniting Church In Australia Property Trust (NSW) [2014] NSWSC 331 93 Zhu v Snell [2014] NSWSC 468 94 Roderick Mackay Sutherland in Trustee of the Property of Kerrie Nisic aka Kerrie Tsaprounis a Bankrupt v Eugina Tsaprounis [2014] NSWSC 1255

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Special condition 2 – Electronic conveyancing95

Settlement and lodgment will be conducted electronically in accordance with the Electronic Conveyancing National Law and special condition 2 applies, if the box is marked “EC”. 2.1 This special condition has priority over any other provision to the extent of any inconsistency. This special condition applies if the contract of sale specifies, or the parties subsequently agree in writing, that settlement and lodgment of the instruments necessary to record the purchaser as registered proprietor of the land will be conducted electronically in accordance with the Electronic Conveyancing National Law. 2.2 A party must immediately give written notice if that party reasonably believes that settlement and lodgment can no longer be conducted electronically. 2.3 Each party must: (a) be, or engage a representative who is, a subscriber for the purposes of the Electronic Conveyancing National Law, (b) ensure that all other persons for whom that party is responsible and who are associated with this transaction are, or engage, a subscriber for the purposes of the Electronic Conveyancing National Law, and (c) conduct the transaction in accordance with the Electronic Conveyancing National Law. 2.4 The vendor must open the Electronic Workspace (“workspace”) as soon as reasonably practicable. The workspace is an electronic address for the service of notices and for written communications for the purposes of any electronic transactions legislation. 2.5 The vendor must nominate a time of the day for locking of the workspace at least 7 days before the due date for settlement. 2.6 Settlement occurs when the workspace records that: (a) the exchange of funds or value between financial institutions in accordance with the instructions of the parties has occurred; or (b) if there is no exchange of funds or value, the documents necessary to enable the purchaser to become registered proprietor of the land have been accepted for electronic lodgment. 2.7 The parties must do everything reasonably necessary to effect settlement: (a) electronically on the next business day, or (b) at the option of either party, otherwise than electronically as soon as possible – if, after the locking of the workspace at the nominated settlement time, settlement in accordance with special condition 2.6 has not occurred by 4.00 pm, or 6.00 pm if the nominated time for settlement is after 4.00 pm. 2.8 Each party must do everything reasonably necessary to assist the other party to trace and identify the recipient of any mistaken payment and to recover the mistaken payment. 2.9 The vendor must before settlement: (a) deliver any keys, security devices and codes (“keys”) to the estate agent named in the contract, (b) direct the estate agent to give the keys to the purchaser or the purchaser’s nominee on notification of settlement by the vendor, the vendor’s subscriber or the Electronic Network Operator; (c) deliver all other physical documents and items (other than the goods sold by the contract) to which the purchaser is entitled at settlement, and any keys if not delivered to the estate agent, to the vendor’s subscriber or, if there is no vendor’s subscriber, confirm in writing to the purchaser that the vendor holds those documents, items and keys at the vendor’s address set out in the contract, and

95 http://www.liv.asn.au/PDF/For-Lawyers/Practice-Sections/PELS/2014-Law-inBrief/6-November/1642_LPP_ContractSaleRealEstate_Condition2_d4.aspx

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(d) direct the vendor’s subscriber to give (or, if there is no vendor’s subscriber, give) all those documents and items, and any such keys, to the purchaser or the purchaser’s nominee on notification of settlement by the Electronic Network Operator. 2.10 The vendor must, at least 7 days before the due date for settlement, provide the original of any document required to be prepared by the vendor in accordance with general condition 6.