Case: Downie v Lockwood (1965) VR 257
Outcome: applied
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. I turn to the nature of the interest of each retiree. In my view, each retiree had an equitable interest in the land by reason of the fact that each was entitled to specific performance of the Contract of Sale or Agreement for Sale of Real Estate or the Deed of Agreement to the possession of the property as a tenant immediately upon settlement. The extent of that interest is to be determined by the form in which specific performance would be granted by a court. The retirees were entitled as against MFLPH to an order requiring MFLPH to sign and deliver to the retirees upon settlement a lease of the property upon the terms agreed, relevantly for life, subject to the condition that the retiree stay in possession for a certain period and pay the nominal rent (see Downie v Lockwood [1965] VR 257; Craddock Bros v Hunt [1923] 2 Ch 136; Chan v Cresdon Pty Ltd (1989) 168 CLR 242; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 332-333, [53]; Black v Garnock [2007] HCA 31 ; (2007) 230 CLR 438 at 449-450, [32] ). It is not necessary that specific performance be available at the time of the hearing: Bunny Industries Ltd v FSW Enterprises Pty Ltd [1982] Qd R 712. It is important to appreciate that the availability and the nature of specific performance is a precondition to the recognition of an equitable interest and the extent of that equitable interest in the property. Here, as I have said, a court, by reference to the terms of agreement between the retirees and MFLPH, would give each retiree possession of the land upon settlement by making an order that MFLPH sign and deliver a lease of the property to each retiree effective from the moment of settlement. Perpetual relied upon the above passage and the principle that s 42(2)(e) and s 40(3)(d) do not give a tenant in possession any greater protection than he or she would have had if the land were under the general law. My view is that if the retirees come within the terms of s 42(2)(e) or s 40(3)(d) , then no comparison of the competing interests is required of the type suggested by Perpetual. In Downie v Lockwood [1965] VR 257 , Smith J undertook no comparative examination of the equities, as submitted by Perpetual should occur in this proceeding. Barba , in reliance on comments in Burke v Dawes , merely decided that effect had to be given to special condition 8, and to that extent the application of the general law applied, and the person claiming to come under the exception to indefeasibility could have no greater rights than he or she would have under the general law. It will be recalled that special condition 8 made the sale subject to the easement to be granted, which special condition the High Court gave effect to by applying the general law.