Case: Australian Securities &amp; Investments Commission, in the matter of Money for Living (Aust) Pty Ltd (Administrators Appointed) v Money for Living (Aust) Pty Ltd (Administrators Appointed) (No 2) [2006] FCA 1285
Outcome: considered
some cross-examination occurred in the course of the trial, no issues of credit arose in relation to any witness and, in the main, the relevant sequence of events was documented. The scheme that was introduced and operated by Money for Living was described by Finkelstein J in Australian Securities &amp; Investments Commission, in the matter of Money for Living (Aust) Pty Ltd (Administrators Appointed) v Money for Living (Aust) Pty Ltd (Administrators Appointed) (No 2) [2006] FCA 1285 , and I adopt that description which accords with the evidence before me. The nature of the interests claimed and the manner of their acquisition arise from the following circumstances in relation to the Gainsford claim and property: 12 May 1994 Elaine Gainsford registered as sole proprietor. 10 November 2004 Elaine and Edward Gainsford met with Stephen O'Neill, a representative of Money for Living, and discussed the Money for Living scheme. 16 November 2004 Money for Living sent a letter to Elaine Gainsford advising that: ... the Valuation of your property has come in at $240,000 ... We are prepared to pay you the amount of $30,000 payable in one up front lump sum with the balance being payable by 300 monthly instalments of $720. ... In addition to this offer, we are prepared to offer you a lease on the property at the rate of $1 P.A. from the date of settlement until your demise, or until you vacate the property permanently for a continuous period of six months or more, at a rate of $1 P.A. ... It is now appropriate that you consult with a solicitor, and as discussed, we have arranged Diakou Faigen to act on your behalf. They will now prepare the necessary contracts, which should be ready for you to sign on Thursday at 10.30 ... 18 November 2004 Elaine Gainsford executed Contract of Sale with MFLPH including the following terms: purchase price of $246,000 with a deposit of $30,000 payable 21 days from the day of sale or other such date as the parties may mutually agree; the balance of the purchase price was payable in instalments of $720.00 per calendar month commencing on the one month anniversary of the settlement date and payable calendar monthly thereafter; and the parties agreed that it was a condition of the contract that they enter into an irrevocable lease agreement prior to the settlement date. 18 November 2004 Elaine Gainsford executed Deed of Agreement with MFLPH. It contained the following terms: Recital B. The Company agreed to purchase the Property from the Vendor pursuant to the terms and conditions contained in the Contract of Sale of Real Estate dated ... ... ("the Contract of Sale"). Recital C. The Company has agreed to lease the Property to the Vendor at a rental of one dollar ($1.00) per annum until the Vendor's demise ("the Lease"). Clause 1.1 The Vendor hereby agrees to forgo the amount of six thousand dollars ($6,000.00) from the price which the Company would have paid under the Contract of Sale in consideration for the Company entering into the Lease at the request of the Vendor. Clause 1.2 The Parties hereby acknowledge that they have received a copy of the Lease and have had an opportunity to obtain legal advice in respect of the Lease and by executing this Deed, acknowledges that it understands the terms and conditions contained within the Lease and agrees to abide by those terms and conditions. Clause 1.9 The Company hereby undertake [sic] and agree [sic] to use their [sic] best endeavours to obtain the consent of any mortgagees to the Lease and the terms and conditions contained within this Deed. 18 November 2004 Elaine Gainsford and her husband Edward Gainsford executed an undated Residential Tenancy Agreement with MFLPH which contained the following terms: Clause 4. Period The period of the agreement commences on / / and ends on / / unless the Agreement terminates in accordance with the Residential Tenancies Act 1997 , the Agreement will continue as a periodic tenancy. OR The Agreement will commence on 9/12/04 and continue until terminated in accordance with the Residential Tenancies Act 1997 . ... Schedule B. Additional terms ... The parties agree that the intention of this lease is to allow the Tenants to remain in the property until their demise or until they both vacate the property for a period of greater than six months, whichever occurs earlier. 18 November 2004 Transfer of Land executed by Elaine Gainsford. 9 December 2004 Settlement took place. Mortgage entered into between Elaine Gainsford and Perpetual and principal amount advanced by Perpetual. 4 January 2005 Lodgement of Transfer of Land and Mortgage with Titles Office. Transfer of Land and Mortgage registered. 12 October 2005 Caveat dated 12 October 2005 lodged on behalf of MFLPH claiming 'an estate in fee simple ... as registered proprietor not in control of the duplicate certificate of title to prevent any unauthorised or fraudulent dealings with the land.' 13 December 2006 Caveat dated 11 December 2005 lodged on behalf of Elaine Gainsford and her husband Edward Gainsford claiming: Lease-hold estate for the life of Edward and Elaine Gainsford or until Edward and Elaine Gainsford vacate the land for a period greater than six (6) months ... [p]ursuant to a residential tenancy agreement between Edward and Elaine Gainsford and MFL Property Holdings Pty Ltd dated 9 December 2004. 13 December 2006 Caveat dated 11 December 2005 lodged on behalf of Elaine Gainsford claiming '[a]n equitable interest as a licensee ... [a]s an unpaid vendor pursuant to a Contract of Sale between Elaine Mavis Gainsford and MFL Property Holdings Pty Ltd dated 18 November 2004.' The nature of the interests claimed and the manner of their acquisition arise from the following circumstances in relation to the Smith claim and property: 24 May 1984 Estell Sylvia Smith and William Kenneth Smith (who later passed away on 31 March 2004) registered as sole proprietors. Estell Smith after 31 March 2004 becomes sole proprietor. At or about the end of November 2004 Estell Smith met with Stephen O'Neill, discussed the Money for Living scheme. 7 December 2004 Money for Living sent letter to Estell Smith advising that: ... the Valuation of your property has come in at $225,000 ... We are prepared to pay you the amount of $235,600 payable in one up front lump sum of $10,000, with the balance being payable by 240 monthly instalments of $940 ... In addition to this offer, we are prepared to offer you a lease on the property at the rate of $1 P.A. from the date of settlement until your demise. ... It is now appropriate that you consult with a solicitor, and as discussed, we have arranged Diakou Faigen to act on your behalf. They will now prepare the necessary contracts, which should be ready for you to sign on Thursday at 10.30... 9 December 2004 Estell Smith executed Contract of Sale with MFLPH, including the following terms: purchase price of $235,600 with a deposit of $40,000 was payable 21 days from the day of sale or other such date as the parties may mutually agree; the balance of the purchase price was payable in instalments of $668.00 per calendar month commencing on the one month anniversary of the settlement date and payable calendar monthly thereafter; and the parties agreed that it was a condition of the contract that they enter into an irrevocable lease agreement prior to the settlement date. 9 December 2004 Estell Smith executed Deed of Agreement with MFLPH. It contained the following terms: Recital B. The Company agreed to purchase the Property from the Vendor pursuant to the terms and conditions contained in the Contract of Sale of Real Estate dated 9 December 2004. Recital C. The Company has agreed to lease the Property to the Vendor at a rental of one dollar ($1.00) per annum until the Vendor's demise. Clause 1.1 The Vendor has agreed to be paid the Purchase Price under the Contract of Sale by way of instalments over two hundred and forty (240) months in consideration for the Company entering into the Lease. Clause 1.2 The Parties hereby acknowledge that they have received a copy of the Lease and have had an opportunity to obtain legal advice in respect of the Lease and by executing this Deed, acknowledges [sic] that it [sic] understands the terms and conditions contained within the Lease and agrees [sic] to abide by those terms and conditions. Clause 1.9 The Company hereby undertake [sic] and agree [sic] to use their [sic] best endeavours to obtain the consent of any mortgagees to the Lease and the terms and conditions contained within this Deed. 9 December 2004 Estell Smith executed an undated Residential Tenancy Agreement with MFLPH which contained the following terms: Clause 4. Period The period of the agreement commences on / / and ends on / / unless the Agreement terminates in accordance with the Residential Tenancies Act 1997 , the Agreement will continue as a periodic tenancy. OR The Agreement will commence on 10/12/04 and continue until terminated in accordance with the Residential Tenancies Act 1997 . ... Schedule B. Additional terms ... The parties agree that the intention of this lease is to allow the Tenant to remain in the property until her demise or until the Tenant vacates the Property for a period of greater than six months, whichever occurs earlier. 9 December 2004 Transfer of Land executed by Estell Smith. 10 December 2004 Settlement took place. 14 December 2004 Lodgement of Transfer of Land with Titles Office. Transfer of Land registered. 23 December 2004 Mortgage entered into between Estell Smith and Perpetual and principal amount advanced by Perpetual. 21 January 2005 Lodgement of Mortgage with Titles Office. Mortgage registered. 27 September 2005 Caveat undated lodged on behalf of Estell Smith claiming an '[e]state for life ... [p]ursuant to a Contract of Sale ... between MFL Property Holdings Ltd and Estell Sylvia Smith'. 13 October 2005 Caveat dated 12 October 2005 lodged on behalf of MFLPH claiming 'an estate in fee simple ... as registered proprietor not in control of the duplicate certificate of title to prevent any unauthorised or fraudulent dealings with the land.' 15 November 2006 Caveat dated 14 November 2006 lodged on behalf of Estell Smith claiming 'lease-hold estate for the life of Estell Sylvia Smith or until Estell Sylvia Smith vacates the land for a period of greater than six (6) months whichever occurs earlier ... [p]ursuant to a residential tenancy agreement between Estell Sylvia Smith and MFL Property Holdings Pty Ltd dated 10 December 2004'. 15 November 2006 Caveat dated 14 November 2006 lodged on behalf of Estell Smith claiming an '[e]xecutory or contingent interest in fee simple ... [a]s the grantee, and by virtue, of an option to purchase the land pursuant to an undated Deed of Agreement between Estell Sylvia Smith and MFL Property Holdings Pty Ltd.' Secondly, the question of the operation of s 42(2)(e) of the TLA has been considered previously in the context of the Money for Living scheme in Australian Securities &amp; Investments Commission, in the matter of Money for Living (Aust) Pty Ltd (Administrators Appointed) v Money for Living (Aust) Pty Ltd (Administrators Appointed) (No 2) [2006] FCA 1285 , where Finkelstein J made the following comments (at [24] [25]): I base this conclusion on s 42(2)(e) of the Transfer of Land Act 1958 (Vic) and the equivalent provision in the Torrens legislation in other States. The effect of s 42(2)(e) is that the estate of a registered proprietor of land (including the proprietor of a mortgage) is subject to the rights of a tenant in possession. In this area the relevant principles are clearly established. The first is that the possession of a tenant is notice of any right of the tenant affecting the land: McMahon v Swan [1924] VLR 397 , 406. The second is that, as Dixon J confirmed in Burke v Dawes (1938) 59 CLR 1, 17-18, s 72 of the Transfer of Land Act 1928 (Vic) (which is the forerunner of s 42) was not intended to apply merely to a tenancy as commonly understood. See also Downie v Lockwood [1965] VR 257 , 259 where Smith J said "As appears from the cases the exception in s. 42 (2) (e) is to be widely construed; and it is to be treated as producing the result that "any person in actual occupation of the land obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which his occupation is incident, provided that at law his occupation is referable to a tenancy of sort, whether at will or for years". Thus, for the purposes of the section a purchaser under a contract, who is given possession by the vendor and is only a tenant at will, is protected in respect of his equitable ownership: Robertson v Keith (1870) 1 VLR(E) 11. So, too, is a vendor who remains in possession until the purchase price is paid: he is a tenant "whatever might be the legal denomination of the tenancy": The Commercial Bank of Australia Limited v McCaskill (1897) 23 VLR 10 , 12. It has also been held that an equitable life estate will prevail over a subsequent registered interest: Black v Poole (1895) 16 ALT 155. These principles will protect the tenancies granted to the clients (who it must be assumed were always in possession of their homes) over subsequent dealings with the land. Put another way, the clients' life tenancies are secure, that is their tenancies are "guaranteed" to survive any adverse claims made by subsequent registered proprietors and mortgagees, provided they (the clients) continue to pay $1.00 per annum by way of rent and do not vacate their home. Finkelstein J focused upon the TLA. In my view, his Honour's analysis of the relevant principles of law and their application to the TLA was correct, although in light of submissions made by Perpetual, I will need to return to those principles and their application in this proceeding. I will also need to consider the terms of the LTA. The relevant wording of the LTA is materially different from the TLA and, in relation to the circumstances of Easterbrook and Gray, the question arises as to whether they have the interest of a tenant within the meaning of s 40(3)(d)(iii) or (iv) of the LTA. An issue arose as to whether any of the arrangements created a valid tenancy at all, because they were, it was argued by Perpetual, effectively void for uncertainty of duration. The focus of the parties was upon the tenancies being for life which, Perpetual submitted, created the fatal uncertainty.