Haslam v Money for Living

DETAILS OF TRANSACTIONS 13 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.' 14 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.' 15 The nature of the interests claimed and the manner of their acquisition arise from the following circumstances in relation to the Easterbrook and Gray claim and property: 26 March 2001 Athol Edward Easterbrook and Yvonne Gray registered as registered proprietors. Towards the end of 2004 Yvonne Gray and Athol Easterbrook spoke to Stephen O'Neill about the Money for Living scheme. 2 December 2004 Money for Living sent letter to Athol Easterbrook and Yvonne Gray advising that: … the Valuation of your property has come in at $220,000 … We are prepared to pay you the amount of $216,080, payable in one up front lump sum of $20,000, with the balance being payable by 240 monthly instalments of $817 … In addition to this offer, we are prepared to offer you a lease on the property at a 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 Friday at 10.30. 10 December 2004 Athol Easterbrook and Yvonne Gray executed an Agreement for Sale of Real Estate with MFLPH, including the following terms: · purchase price of $220,000 with a deposit of $20,000 was payable by MFLPH; and · the balance of the purchase price was payable by instalments of $991.00 per calendar month commencing on the one month anniversary of the settlement date and payable calendar monthly thereafter. 10 December 2004 Athol Easterbrook and Yvonne Gray 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 10 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 hereby agrees to forgo the amount of three thousand nine hundred and twent [sic] dollars ($3,920.00) 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. 13 December 2004 Settlement took place. On or about 21 January 2005 A further $1,900, being the balance of the deposit, was received by Athol Easterbrook and Yvonne Gray. 22 March 2005 Mortgage entered into between Athol Easterbrook and Yvonne Gray and Perpetual and principal amount advanced by Perpetual. 26 May 2005 Transfer of Land and Mortgage lodged with Titles Office. 27 May 2005 Transfer of Land and Mortgage registered. 27 October 2005 Caveat dated 25 October 2005 lodged on behalf of Athol Easterbrook and Yvonne Gray as the holder of an equitable estate in fee simple. 16 In essence the important facts in relation to each transaction were as follows: · Each retiree was registered proprietor of the property at all times until the new registered proprietor (MFLPH) became registered as proprietor. · At all times each retiree remained and continued to remain in physical possession of the property. · In the case of the Victorian properties, each retiree agreed that the parties would enter an irrevocable lease agreement prior to the settlement entitling the retirees to possession of the property from the settlement. · In the case of Easterbrook and Gray, the retirees agreed that the parties would enter into a lease agreement prior to the settlement entitling the retirees to possession of the property from the settlement. · Settlement took place on the same day that each retiree executed a Deed of Agreement, and apart from Easterbrook and Gray, a Residential Tenancy Agreement which included the terms as set out above. · In relation to Gainsford, the sequence of events is this: (i) Mortgage to Perpetual entered into on same day as settlement (9 December 2004); (ii) Perpetual pays money into account of MFL, rather than MFLPH; (iii) thereafter, on 4 January 2005, MFLPH and Perpetual lodge respective dealings for registration; and (iv) subsequently, on 4 January 2005, the Titles Office registers the interests of MFLPH and Perpetual. · In relation to Smith, the sequence of events after settlement is this: (i) MFLPH lodges dealing for registration as registered proprietor on 14 December 2004, and transfer is registered on the same day; (ii) Mortgage with Perpetual entered into on 23 December 2004; and (iii) subsequently, on 21 January 2005, Perpetual lodges Mortgage with Titles Office for registration, which registration occurs on the same day. The mortgage was thus entered into and created after settlement and after registration of the Transfer of Land. · In relation to Easterbrook and Gray, the sequence of events after settlement is this: (i) Mortgage to Perpetual entered into on 22 March 2005; (ii) thereafter, MFLPH and Perpetual on 26 May 2005 lodge respective dealings for registration; and (iii) subsequently, the Titles Office registers the interests of MFLPH and Perpetual on 27 May 2005. The mortgage was thus entered into and created after settlement although before the registration of the Transfer of Land (and Mortgage).

PRELIMINARY MATTERS 17 I mention two preliminary matters. 18 First, I find as fact that the mortgages were entered into and created on, and intended to be effective from and on, the date which each mortgage document bears: Anderson v Weston (1840) 133 ER 117; Dillon v Gange (1941) 64 CLR 253. There was no other evidence which would indicate to the contrary, and the principal sums under the mortgage were in fact advanced by Perpetual on these dates. 19 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 & 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 Act1928 (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. 20 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. 21 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.

WERE THE LEASES VOID FOR UNCERTAINTY AND WITHIN THE SCOPE OF THE TLA AND LTA? 22 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. 23 I see no reason to depart from the views expressed by Gobbo J in Greco v Swinburne Ltd [1991] 1 VR 304 that a lease for life or lives is not void for uncertainty. Whilst the essential characteristic of a fixed term lease is that it must be of a specified maximum duration, this rule may not apply to periodic leases or leases for life (see Re Midland Railway Company Agreement v British Railways Board [1971] Ch 725 at 731-2; Bradbrook, MacCallum & Moore, Australian Real Property Law (4th ed, Lawbook Co, 2007) at [14.100]; and Foa's General Law of Landland and Tenant (8th ed, Thames Bank Publishing Co, 1957) at [150]-[154] although see Prudential Assurance Co Ltd v London Residuary Body [1992] 3 WLR 279 and Peter Sparkes, Certainty of Leasehold Terms (1993) 109 LQR 93). 24 However, whether this be the correct position or not, unlike the position in Lace v Chantler [1944] KB 368, which was relied upon by Perpetual, in this proceeding the tenancy agreement can be construed as though it were a grant of a freehold life tenancy. The tenancy agreements in this proceeding are very similar to the agreement in Zimbler v Abrahams [1903] 1 KB 577, where the agreement was construed as a lease for life. Zimbler was treated as being correctly decided by Lord Greene MR in Lace. In fact, Lord Greene MR said in discussing Zimbler that if the contract was construed as an agreement to grant a lease for life, one could understand it being so treated and specifically enforceable (at 372). 25 Further, the authorities show that it is very common to speak of an estate for life created in terms of a lease as a lease (see Australian Maritime Safety Authority v Quirk (1998) NSW ConvR 55-858 per Bryson J). 26 If the lease is not void for uncertainty, one then needs to determine whether this interest of a life tenancy is one encompassed with the notion of tenancy in s 42(2)(e) and s 40(3)(d). 27 In my view, such an interest is one so encompassed, and one only needs to refer to the following passage of Dixon J in Burke v Dawes (1938) 59 CLR 1 at 17-18: In Victoria these words have received an interpretation and an application as a result of which 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 some sort, whether at will or for years. Thus, a purchaser under a contract of sale, who at law is in possession as tenant at will of the vendor, has been held protected in respect of his equitable ownership as purchaser (Robertson v. Keith; Sandhurst Mutual Permanent Investment Building Society v. Gissing), a lessee in respect of an option of purchase contained in his lease (McMahon v. Swan) and a wife in respect of an equitable life interest claimed under an unsigned separation agreement made with her husband (Black v. Poole). a'Beckett J. decided the last named case in deference to previous decisions and against his own opinion, which he stated to be that "those words were intended to refer to a tenancy as ordinarily understood arising out of an agreement under which the person in possession was allowed to occupy in consideration of some kind of rent or service of which the proprietor was to have the benefit." The cases are collected and criticised by the late Dr. Donald Kerr in his work on The Australian Lands Titles (Torrens) System (1927), at pp. 75 et seq. But the interpretation has stood for nearly seventy years, and it would, I think, be most undesirable now to undertake the re-examination of its correctness. This passage still remains applicable to the interpretation to be given to the TLA and LTA. I draw particular attention to the reference to Black v Poole as being an indication that the concept of tenant extends beyond that of a strict 'tenancy' to include the freehold interest of a life interest, obviously equitable or legal. 28 Therefore, I do not regard any lease that may exist as being void and of no effect on the ground of uncertainty of duration as raised by Perpetual. Further, in my view, a lease for life is within the concept of the tenancies referred to in s 42(2)(e) and s 40(3)(d) even if, from a strict point of view, they may be estates for life.

NATURE OF INTEREST OF EACH RETIREE 29 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) 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. 30 In considering the nature of the interest of the retirees and of their possession of the property, Perpetual submitted that it was not aware of any case in which possession has been by the registered proprietor, the party with the ultimate interest. Rather, Perpetual argued, possession has been with a person other than the registered proprietor who specifically establishes an interest, usually as against the registered proprietor. For example: · a purchaser in possession under a contract of sale (Robertson v Keith (1870) 1 VR (E) 11; Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329); · a lessee of the registered proprietor (Austin Construction Co (Australia) Ltd v Becketts Holdings Pty Ltd (1958) 75 WN (NSW) 444; Downie v Lockwood [1965] VR 257; Abbey National Building Society v Cann [1991] 1 AC 56; Barclays Bank plc v Zaroovabli [1997] 2 All ER 19), including a lessee with an option to purchase (McMahon v Swan [1924] VLR 397); · a wife with an equitable life interest (Black v Poole (1895) 16 ALT 155); · a beneficiary under the will of the registered proprietor (Burke v Dawes 59 CLR 1); and · a party with an option for the creation of an easement granted by the registered proprietor (Barba 136 CLR 120). 31 Perpetual submitted that none of the interests claimed by the retirees created any antecedent interest separate from ownership, capable of creating any tenancy in the retirees which would bind Perpetual. 32 The fact that the retirees were registered proprietors of the properties at the time of entering into the agreement for lease or at the time of the grant of lease is irrelevant. The agreement for lease obliged MFLPH, when it had the ability to do so, to give to the retiree possession of the property upon settlement. In the case of Gainsford and Smith, a lease was in fact granted entitling them to possession on, and from, settlement. If not for such an agreement for lease or the grant of a lease, each retiree would need to vacate the property at settlement, and give possession to MFLPH. However, because of the agreement for lease upon settlement, each retiree would at least have been entitled to the order referred to above, giving to each retiree exclusive possession of the property. 33 From the moment of settlement the retirees remained thereafter in the property as tenants. Again, it does not matter that they also remained registered as proprietors, because they would otherwise have had no right to possession of the property after settlement, if not for the agreement for lease or the lease by MFLPH. MFLPH does not need to be the registered proprietor to effect a lease to the retirees - MFLPH was entitled to possession on settlement, and leased its right to possession to the retirees. There is nothing unusual in a person with a right to possession only of the land granting a right to exclusive possession of the land, as long as it is for a term less than that which the landlord has in the land. Of course, this would be subject to any superior title of a third person, but this is not the situation concerning us in this proceeding. 34 This is not a case where MFLPH, at the time of the actual grant of the lease, had no legal estate or interest in the land at the time of grant. At settlement MFLPH would have had a right to possession if not for the grant of the lease. This is not a case of needing to rely upon the principle of estoppel, each party being prevented from denying each other's title. As I have said, under the sale contracts, there was an obligation on MFLPH to give exclusive possession at settlement, and at settlement this was effected by the lease. At the time of settlement, MFLPH had the ability to perform the obligation to give exclusive possession as the person otherwise entitled to such possession. 35 A tenancy by estoppel arises most commonly on a fee simple conveyance, where the purchaser actually leases the property to a tenant before the purchaser acquires any interest in the land. In such a situation, if the landlord later acquires the necessary interest, usually the legal fee simple estate, the tenant will then automatically acquire a legal tenancy by question of law under the principle of 'feeding the estoppel'. In this proceeding the purchaser (MFLPH) agreed to enter into a lease at some time in the future (at settlement), and at settlement did actually grant the lease (other than to Easterbrook and Gray), that is, after MFLPH had acquired the possessory interest necessary for it to grant the lease. 36 In the case of Easterbrook and Gray, where no actual lease was entered into, the agreement to lease was enforceable in the way I have previously described. At the time of settlement and thereafter, MFLPH was able to lease the property to Easterbrook and Gray, MFLPH being entitled to possession of the property but for the agreement to lease. 37 I should mention that Perpetual argued that a person could not create a lease over an interest in land which it did not possess, and contended that MFLPH did not have the interest it purported to convey under the tenancy agreements. At best, it was contended, MFLPH could only create a tenancy by estoppel, which was 'fed' (giving legal effect to the tenancy) when MFLPH obtained the legal interest upon registration. It was contended that an equitable interest was inadequate to feed the estoppel. 38 If, contrary to my analysis and the tenancy by estoppel principles are applicable and relevant, then on the basis of the sequence of events I have found occurred, the estoppel would be fed prior to the grant of the mortgage. This is either because the mortgage was registered after the transfer of land, or because upon registration of the transfer of land, the title feeds the estoppel, so that the earlier grant of the lease operates retrospectively as if MFLPH had legal title (if that was required) at the time of the earlier grant of the lease or entry into the agreement for lease (see Hedley v Roberts (1977) VR 282 at 285 per Harris J (and the references mentioned therein)). 39 Perpetual also argued that the retirees were not tenants and that an owner cannot lease land to himself or herself relying on Rye v Rye [1962] AC 496. It was said that prior to registration of MFLPH as proprietor, the retirees were owners of the properties and occupied the properties in this capacity. It was said they could not have an interest in a lease in these circumstances. 40 In Rye v Rye, [1962] AC 496, the appellant and his brother carried on a partnership business, the profits of which were divisible between them in unequal shares. They had purchased in equal shares the premises used for the business and in order to reconcile their inequality as partners with their equal ownership of the premises they agreed orally to grant to the partnership a yearly tenancy of the premises at Ł500 per annum to be provided out of the partnership assets. The rent, which it was admitted was calculated from January, 1942, was payable on the usual quarter days and the first payment of rent was made and accepted on Lady Day, 1942. No time for the determination of the lease was agreed but, as the tenancy was an annual one, the law provided for its determination. After the brother's death in 1948, the respondent (his son) as an executor of his estate, became one of the owners of the premises. In 1950 the appellant took the respondent into partnership, but later the partnership was dissolved. After the determination of the partnership, the respondent continued to occupy a room on the first floor of the premises and carried on his own business from that room, although the appellant demanded possession of the room. The appellant brought an action claiming possession of the room on the basis that he was the surviving tenant under the yearly tenancy granted to the partnership in 1942 and was therefore entitled to exclusive possession of the premises as against the respondent. 41 It was held, inter alia, that the lease was invalid because it is not possible at law for a man to grant a lease to himself, nor several persons to grant a lease to themselves. Lord Simonds stated, at 505-506: In Grey v Ellison ((1859), 1 Giff. 436, 444) Stuart V-C. describes as fanciful and a whimsical transaction the proposal that a man should grant a lease to himself. He had, no doubt, in mind that a lease is in one aspect contractual. Of things necessary to a lease, says Sheppard's Touchstone Of Common Assurances (see 7th ed, Vol II, p 268), one is that: "There must be acceptance, [actual or presumed,] of the thing demised." Yet it is meaningless to say that a man accepts from himself something which is already his own. I recognise that a lease not only has a contractual basis between lessor and lessee, but operates also to vest an estate in the lessee. But what sort of estate is in these circumstances vested in the lessee? I will assume that it will not at once merge in the higher estate from which it springs, though I see no reason why it should not. Yet it must be an estate hitherto unknown to the law. Even a bare demise implies certain covenants at law: but to such an estate as this no covenants can be effectively attached. Nor can the common law remedy of distress operate to enable the lessor to distrain on his own goods. Again, at law in the absence of some special provision the lessee is entitled to exclusive possession of the demised premises. What meaning is to be attributed to this where the lessee is also the lessor? My Lords, my mind recoils against an interpretation of the Act which leads to so fanciful and whimsical a result, and it appears to me to be quite unnecessary. 42 And per Lord Denning at 513-514: This makes it necessary to determine the point of law: Is it possible for a person to grant a tenancy to himself? or for two persons to grant a tenancy to themselves? At common law it was clearly impossible. Nemo potest esse tenens et dominus. A person cannot be, at the same time, both landlord and tenant of the same premises: for as soon as the tenancy and the reversion are in the same hands, the tenancy is merged, that is, sunk or drowned, in the reversion; see Blackstone's Commentaries (1766 edition) vol II, p 177. Neither could a person at common law covenant with himself, nor could two persons with themselves. Neither could one person covenant with himself and others jointly. Such a covenant, said Pollock CB, is "senseless," see Faulkner v Lowe ((1848) 2 Ex. 595, 597). … My Lords, I have come to the clear opinion that even under the 1925 Act a person cannot grant a tenancy to himself: for the simple reason that every tenancy is based upon an agreement between two persons and contains covenants expressed or implied by the one person with the other. Now, if a man cannot agree with himself and cannot covenant with himself, I do not see how he can grant a tenancy to himself. Is the tenancy to be good and the covenants bad? I do not think so. The one transaction cannot be split up in that way. The tenancy must stand or fall with the agreement on which it is founded and with the covenants contained in it: and as they fall, so does the tenancy. And what about notice to quit? If A grants a tenancy to himself A, can he mutter a notice to quit to himself and expect the law to take any notice of it? Or, if A and B grant a yearly tenancy to themselves A and B, can there be a notice to quit unless both agree? Of course not. So that, instead of a yearly tenancy, it becomes a life-long tenancy determinable only by the agreement of both. Which is absurd. The truth is that they cannot grant a tenancy to themselves. 43 The case of Rye v Rye is, in my view, easily distinguishable from the present case if only because the agreements executed between MFLPH and the various retirees were agreements between two separate parties. Each of the parties still had separate and identifiable legal rights or interests under the arrangements entered into between the parties, and each was entitled to enforce its rights according to their terms. This is not a case of one person granting or purporting to grant a lease to himself or herself. 44 Accordingly, I do not consider that Rye v Rye has any application to this proceeding.

CREATION OF LEASES AFTER THE CREATION OF MORTGAGES 45 I accept Perpetual's argument that MFLPH was unable to grant a future lease, whether registered or not registered, after the creation of the mortgage without Perpetual's consent (see Independent Order of Odd Fellows of Victoria Friendly Society v Telford (1991) V ConvR 54-419 per Gobbo J; Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 at 599 per Hayne J; Rancho Holdings Pty Ltd v Impact Developments (Wodonga) Pty Ltd (1994) V ConvR 54-509 per Batt J; Maher v Commonwealth Bank of Australia [2004] FCA 248 at [24]; ss 66 and 77 of the TLA (and the equivalent provisions of the LTA); and cl 8 of the common provisions of the mortgage). The time of the creation of the mortgage is the time the mortgages are entered into, not registered. Once the mortgage is registered, it would take priority over any tenancy, but necessarily only a tenancy entered into after the mortgage was created. 46 Therefore, in this proceeding, if the leases came into existence after the creation of the mortgages, Perpetual would be entitled to priority because the title of the mortgage would prevail over the interests of the retirees, Perpetual not consenting to the leases. If the leases were created prior to the creation of the mortgages, then only if they fell within the exceptions to the indefeasibility principles would the leases be able to take priority in circumstances where the mortgage was subsequently registered. 47 I should say something more about this conclusion I have reached as to the relevant time for considering the competing claims and the creation of the mortgage. It is important to keep in mind that in this proceeding we are concerned with a competition between a lease and a mortgage, which necessarily brings into operation the principles discussed in Baranyay [1993] 1 VR 589,cl 8 of the common provisions of the mortgage, and the provisions of the TLA and LTA dealing with mortgages and leases. If one were dealing with a competition between a lease and, say, a registered proprietor of the property, the relevant time to consider may be the time of lodgement or registration of the relevant interest. This is because the registered proprietor would not be able to rely upon cl 8 of the common provisions, and the statutory provisions relating to mortgages and leases and their priority, and the focus would be only upon the operation of s 42(2)(e) of the TLA and s 40(3)(d) of the LTA. 48 In this proceeding, the sequence of events in relation to the creation of the lease and mortgage, other than in the case of Gainsford, can be easily resolved, because the leases were clearly entered into prior to the creation of the mortgages. In the case of Smith this is apparent, even accepting the arguments of Perpetual relating to the sequence of events. In the case of Easterbrook and Gray, this is so because there was an agreement for lease from the date of the Agreement for Sale of Real Estate, or upon settlement at which time Easterbrook and Gray were entitled to possession pursuant to an actual lease (which events occurred before the mortgage was created and the principal sum was advanced by Perpetual), or because, contrary to the argument of Perpetual (to be dealt with later), there was no simultaneous lodgement or registration of the transfer of land and mortgage. 49 In the case of Gainsford the creation of the lease and the mortgage occurred on the same day as settlement. There was no specific evidence of the exact time during that day when each transaction was entered into between the parties. However, at settlement, MFLPH then and there obtained possession of the property so was able to provide such to Gainsford pursuant to the agreement for lease previously entered into and the actual lease which was to commence on 9 December 2004, the settlement day. The intention of the parties as to commencement of the lease was clear; no presumption or prima facie position as to the commencement of the lease therefore need be applied (cf Forster v Jojodex Australia Pty Ltd (1972) 127 CLR 421 at 440-441 per Gibbs J, and Associated Beauty Aids Pty Ltd v Federal Commissioner of Taxation (1965) 113 CLR 662 at 668). The intention of the retirees and MFLPH was that upon the actual time of settlement, MFLPH would grant a tenancy in possession to the retirees, the retirees no longer being entitled to possession of the property. Of course, each retiree remained in actual possession throughout all the transactions, their actual possession never being disturbed. 50 However, in my view the mortgage was a separate and necessarily later transaction after MFLPH obtained the transfer and possession of the property. I return to this aspect later when dealing with a further argument advanced by Perpetual regarding the timing of the transactions and registrations. 51 In this context, I have considered cl 1.9 of the relevant Deeds of Agreement which it was argued by both parties gave some indication as to the sequence of the lease and mortgage transactions. It was a clause found in the arrangements with each of the retirees, including Smith who, even on Perpetual's argument as to the sequence of events, had entered into a lease prior to the creation of the mortgage and advance of funds by Perpetual (on 23 December 2004) or the lodgement and registration of the mortgage (on 21 January 2005). Therefore, in the case of Smith, the lease was in existence prior to MFLPH's undertaking to use its best endeavours to obtain the consent of the mortgagees to the lease and the terms and conditions contained within the Deed. The failure of MFLPH to obtain the consent in these circumstances may have had no legal consequences; it could certainly not affect the interests of Smith as an existing tenant in possession and the operation of s 42(2)(e)of the TLA. 52 Clause 1.9 did not refer specifically to Perpetual or to any existing mortgagee. I do not consider that cl 1.9 could be construed as a consent by the retirees that a later mortgage could override the interests of the retirees as tenants in possession. Equally, I do not construe cl 1.9 as necessarily indicating that any lease was in existence prior to the mortgage. In my view, cl 1.9 does not affect or impact upon an ascertainment of the factual position of when the mortgage and lease were created in the case of each retiree. If the lease was created prior to the mortgage being given, then cl 1.9, insofar as the retiree's interest was concerned, would have no impact on the issues raised in this proceeding. If the lease was created after the mortgage in any given case then, as the consent of Perpetual was not given, cl 1.9 would have no impact on the issues raised in this proceeding, and Perpetual would be entitled to priority assuming the subsequent arrangement was in fact 'a lease' for the purposes of ss 66 and 77 of the TLA (and the equivalent provisions of the LTA) and comes within the scope of cl 8 of the common provisions of the mortgages.

REGISTRATION OF TRANSFER OF LAND AND MORTGAGE 53 As I have already mentioned, it was contended by Perpetual that prior to registration of the transfer of land, any lease by MFLPH would create, at best, a tenancy by estoppel binding on MFLPH and the lessee (the retiree vendor), but not Perpetual. The subsequent transfer it was contended, funded by Perpetual's advance, could not feed that estoppel at Perpetual's expense. 54 Perpetual submitted that the mortgage was registered simultaneously with the transfer, with the result that the purchaser/mortgagor never obtained unencumbered title enabling the creation of a tenancy (referring to Abbey National Building Society v Cann [1991] 1 AC 56 at 93; Allsop v Marshall (1942) 59 WN (NSW) 159 at 161-162; Austin Construction Co (Australia) Ltd v Becketts Holdings Pty Ltd (1958) 75 WN (NSW) 444 at 447; Sogelease Australia Ltd v Boston Australia Ltd (1991) 26 NSWLR 1 at 5-8). 55 Perpetual relied principally on Abbey to argue that the interest of the retirees as tenants in possession was only created upon registration of the transfer. Because a mortgage was registered at the same time, Perpetual argued, the interest of a tenant in possession is only in the registered proprietor's equity of redemption and any such interest of the retirees is subject to the mortgage. 56 Perpetual submitted that, in Abbey, it was the purchaser's reliance on mortgage funds which demonstrated that the transactions were simultaneous and that, in the present case, the conclusion that the mortgage and purchase were simultaneous arises not from proof that the particular mortgage funds were required for the particular purchase, but from the following facts: (a) the Money for Living entities were in the business of buying and selling properties; (b) during the period between purchase and on-sale, the relevant Money for Living entity was responsible for paying the annuity to the retiree; (c) Money for Living's only source of funding to make the up-front payments and pay the annuities necessary to its ongoing business was sale proceeds generated by MFL and proceeds of mortgage loans granted by MFLPH, paid directly to MFL by way of loan; (d) in most cases, the payment was made by MFL to the relevant retiree on the same day that the payment was made by Perpetual to MFL; (e) funds on settlement were usually paid to the retiree, any existing mortgagee of the retiree's interest, and the retiree's solicitors; and (f) while payments by Perpetual were made to MFL and not MFLPH (the borrower), that occurred because MFLPH had no bank account at the relevant time, and money received by MFLPH was paid straight to MFL and recorded as a loan from MFLPH to MFL. MFL paid MFLPH's expenses (including its liability to make up-front and ongoing payments to retirees). 57 It was submitted that each Perpetual payment, secured by a mortgage, was indissolubly linked to the relevant property purchase by reason of the part that each of those matters played in the business model of Money for Living. Accordingly, it was contended, the Perpetual payments were an indispensable part of the business under which the property purchase was made. As in Abbey, it was contended by Perpetual, the relevant registrations were not only simultaneous, but the transactions which gave rise to those registrations were indissolubly bound together. 58 Perpetual submitted that the cases upon which the retirees rely in an attempt to distinguish Abbey have no application in this case (referring to Koompahtoo Aboriginal Land Council v KLALC Property & Investment Pty Ltd [2006] NSWSC 856; Barclay's Bank plc v Zaroovabli [1997] Ch 321; HKCB Finance Limited v Yuen Yi Wan [2004] HKEC 1564). 59 The ratio in Abbey [1991] 1 AC 56 was set out clearly by Lord Oliver at 92-93: … Of course, as a matter of legal theory, a person cannot charge a legal estate that he does not have, so that there is an attractive legal logic in the ratio in Piskor's case. Nevertheless, I cannot help feeling that it flies in the face of reality. The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together. The acquisition of the legal estate is entirely dependent on the provision of funds which will have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them. Indeed, in many, if not most, cases, of building society mortgages, there will have been, as there was in this case, a formal offer and acceptance of an advance which will ripen into a specifically enforceable agreement immediately the funds are advanced which will normally be a day or more before completion. In many, if not most, cases the charge itself will have been executed before the execution, let alone the exchange, of the conveyance or transfer of the property. This is given particular point in the case of registered land where the vesting of the estate is made to depend upon registration, for it may well be that the transfer and the charge will be lodged for registration on different days so that the charge, when registered, may actually take effect from a date prior in time to the date from which the registration of the transfer takes effect: see section 27(3) of the Act of 1925 and the Land Registration Rules 1925…Indeed, under rule 81 of the rules of 1925, the registrar is entitled to register the charge even before registration of the transfer to the chargor if he is satisfied that both are entitled to be registered. The reality is that the purchaser of land who relies on a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise. The "scintilla temporis" is no more than a legal artifice and, for my part, I would adopt the reasoning of the Court of Appeal in In Re Connolly Brothers Ltd (No 2) [1912] 2 Ch 25 and of Harman J in Coventry Permanent Economic Building Society v Jones [1951] 1 All ER 901 and hold that Piskor's case was wrongly decided. It follows, in my judgment, that Mrs Cann can derive no assistance from this line of argument. 60 In my view, Abbey is distinguishable from the facts at hand even if its principles have any application to the TLA or LTA. As Perpetual points out, it was the purchaser's reliance on mortgage funds in Abbey which demonstrated that the transactions were simultaneous. In many instances concerning the purchase of land, the purchase is entirely dependant on the provision of funds by a lender. In those circumstances, the result in Abbey, with respect, makes sense. I do not consider that MFLPH was in that situation. It appears from the facts that, at least in some cases, MFLPH was able to pay out whatever sum was required at settlement without resort to Perpetual. For example, in the case of Smith and Easterbrook and Gray, the mortgage was created and the associated loan of funds occurred many days after the transfer of funds by MFLPH to the retiree. I see nothing unusual about this for the operation of the scheme. Indeed, it would be unusual if there were not sufficient funds in such an operation to fund the purchases of the properties without resort to lenders in each instance. In the case of Gainsford, the loan amount of Perpetual was in fact not paid to MFLPH but to MFL, and whatever arrangements there were between MFLPH and MFL, the loan amount was still not payable to MFLPH for the purposes of concluding the purchase. 61 In my view, everything will depend upon the facts of each case, and Abbey is not setting down any inflexible rule or principle (see eg Koompahtoo Aboriginal Land Council v KLALC Property & Investment Pty Ltd [2006] NSWSC 856; HKCB Finance Limited v Yuen Yi Wan [2004] HKEC 1564 at [61]). The nature of the transactions, their sequence, and the Money for Living scheme indicate that the transactions the subject of the registration of the transfer and mortgage were not indissolubly bound together, and the mortgage should be regarded as a separate and distinct transaction from the transfer and grant of lease, which transactions did occur simultaneously, and prior to the creation of the mortgages in the case of each retiree. 62 If the time of lodgement or registration has any relevance to these proceedings, the evidence supports the existence of a moment in time between registration of the transfer and mortgage. As a matter of record at the Tasmanian Titles Office, Perpetual's Mortgage was shown to have been registered at a time later than the time at which the Transfer of Land was registered. 63 Mr Dihm of the Victorian Land Titles Office gave evidence that the registrations of the Transfer of Land and the Mortgage were not 'simultaneous', in that they were recorded one after the other: '… transfer first and the mortgage second.' 64 Mr Dihm gave evidence that: …the numerical sequence shows the priority… … …logically the mortgage can't precede the transfer because the mortgagor would be the wrong party. 65 Perpetual relied upon the evidence of Mr Males, Principal Examiner of Registrations at the Land Titles Office in Tasmania although, as the retirees point out, Mr Males was not the examiner to whom the Easterbrook Transfer of Land and Perpetual Mortgage were presented for registration. 66 However, he deposed that: Generally, where a transfer and mortgage of the same property are presented to the Land Titles Office together, the transfer is registered before the mortgage. The order of registration andpriority of dealings is provided for in section 48 of the Land Titles Act 1980. TASFOL records the time and date of registration. Where only a transfer and mortgage of the same property are presented to the Land Titles Office together, generally the transfer is registered at 12.00pm noon and then the mortgage is registered at 12.01pm. … 67 Further, the timing shown on the title searches shows the order of priority, with the transfer of land being registered prior to the mortgage. 68 As a matter of principle this seems to me to be the correct approach. One would normally expect the registration of a transfer of land first, then the registration of the statutory charge by the then registered proprietor. It also appears to me that the TLA (s 34) and LTA (s 48) envisage that the registrations of the transfer and mortgage would not be simultaneous, as an 'order' for registration for each dealing lodged for registration seems to be required.

COMPARISON OF COMPETING EQUITIES 69 A significant point of contention at trial was whether, if the retirees' interests fall within the s 42(2)(e) or s 40(3)(d) exception, the retirees have proven their case or whether the section then requires a further step: a comparison of the two competing interests. Burke v Dawes (1937) 59 CLR 1 at 13, 18 and 25 and Barba v Gas & Fuel Corporation (1976) 136 CLR 120 at 140-141 were referred to by Perpetual in support of the proposition that a comparison of the competing interests is still required to be undertaken by the Court even if the retirees were tenants in possession. I do not consider that the difference in wording of s 40 and s 42(2)(e) affects my conclusion on this contention, and thus both the TLA and LTA can be dealt with together. 70 It is convenient to deal with the competing interests issue by reference solely to the decision in Barba 136 CLR 120. In Barba, by an instrument dated 21 July 1975 C, the registered proprietor of certain land, gave G an option for easement over the land. The purpose of the easement was to enable G to construct a pipeline through the land. The consideration for the grant was expressed to be 'the sum of $10.00 now paid to the Grantor (the receipt whereof is hereby acknowledged)'. 71 Clause 3 of the instrument read as follows: This option may be exercised by [G] in either of the following manners: - (a) by notice in writing that this option is exercised, signed on behalf of [G] by its Secretary or Substitute Secretary for the time being, which notice may be delivered to the Grantor by hand or forwarded to the Grantor at his address herein specified by ordinary prepaid letter at any time on or before but not after the option date: or (b) by commencing operations upon the said land for the laying of the pipeline before but not after the option date. 72 The instrument provided by cl 1 that: … The location and dimensions of the said strip of land upon the Grantor's said land are to be approximately in the position as located as a result of the above work or in such other position upon the Grantor's said land as [G] may with the prior consent of the Grantor determine …. 73 A strip had been marked out on the land with pegs before the option agreement was made. 74 On 25 August 1975 C received a letter dated 20 August 1975 from G enclosing a cheque 'for the amount of $10.00 being the Option Fee referred to in the Option for Easement … '. 75 On 17 December 1975 C signed and sealed an instrument of Creation of Easement over the land, which instrument was lodged at the Office of Titles on 12 January 1976 and subsequently registered, its registration dating from that day. 76 In the meantime, on 15 August 1975, the land was put up for auction. At the sale there was available for inspection a copy of a printed draft of the Creation of Easement, to which copy survey plans were attached showing the area proposed to be subject to the easement. The auctioneer had marked out the measurements of the proposed easement on an outline sketch of the land on his copy of an advertising brochure, which was held up for those present to see; it was doubtful whether what was marked on the sketch could be seen, but the auctioneer described the width and depth of the proposed easement, and read out the substantive part of the draft Creation of Easement. He read also the special conditions from the draft contract of sale that had been prepared by the solicitors for the vendor C and upon which the sale was to take place, including special condition 8 in the following terms: The Vendor warrants that it has received notice from [G] calling for the creation of a pipe line easement in favour of [G]. The Vendor has concurred in the granting of the said easement and the Purchaser acknowledges having read a true copy of the proposed creation of easement document prior to the signing of this Contract and it is hereby acknowledged by the parties hereto that all monies paid or to be paid by [G] by way of compensation in respect of the granting of the easements shall be paid to and shall belong to the vendors herein. 77 B purchased the land at the auction and on the same day signed a contract of sale. On 3 November 1975 B entered into, and thereafter remained in, possession of the land. 78 There was no evidence that when, on 15 August 1975, B purchased the land he had any knowledge or means of knowledge that C had granted the option. 79 On 2 December 1975 B denied and thereafter continued to deny access to G's workmen who sought to work on the land. 80 On 18 June 1976 the Supreme Court of Victoria declared, inter alia, that G was entitled to have registered the Creation of Easement dated 17 December 1975. 81 On appeal to the High Court,Gibbs ACJ, Stephen and Jacobs JJ held, inter alia, that: · The interest of B as a tenant in possession of the land was within the protection given by s 42(2)(e), and G was deprived by that provision of the paramountcy which registration of the instrument of Creation of Easement would otherwise have conferred. · The effect of special condition 8 in the contract of sale between B and C was that the Creation of Easement - not the option - prevailed over the rights of B; and s 42(2)(e) did not alter that position. 82 Their Honours referred at various times in the judgment to Burke v Dawes, which they approved generally. Gibbs ACJ stated, at 140: In Burke v Dawes (1938) 59 CLR at 17-18; Dixon J discussed as follows the effect of an earlier Victorian statutory provision which corresponded to s 42(2)(e): In Victoria these words have received an interpretation and an application as a result of which 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 some sort, whether at will or for years. Thus, a purchaser under a contract of sale, who at law is in possession as tenant at will of the vendor, has been held protected in respect of his equitable ownership as purchaser (Robertson v Keith (1870) 1 V.R. (E.) 11; Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329), a lessee in respect of an option of purchase contained in his lease (McMahon v Swan [1924] VLR 397) and a wife in respect of an equitable life interest claimed under an unsigned separation agreement made with her husband (Black v Poole (1895) 16 ALT 155). a'Beckett J. decided the last named case in deference to previous decisions and against his own opinion, which he stated to be that 'those words were intended to refer to a tenancy as ordinarily understood arising out of an agreement under which the person in possession was allowed to occupy in consideration of some kind of rent or service of which the proprietor was to have the benefit'. The cases are collected and criticized by the late Dr Donald Kerr in his work on The Australian Lands Titles (Torrens) System (1927), at pp. 75 et seq. But the interpretation has stood for nearly seventy years, and it would, I think, be most undesirable now to undertake the re-examination of its correctness. Similar views were expressed by Latham C.J.(1938) 59 C.L.R. at p. 8 and by Evatt J. (1938) 59 C.L.R., at p. 24. McTiernan J. agreed with the remarks of Dixon J ((1938) 59 C.L.R., at p.27). The fifth member of the Court, Starke J., was perhaps not so definite in the expression of his opinion but he did not disagree with what the majority of the Court said on this point (1938) 59 C.L.R., at pp. 12-13. This question should therefore be regarded as settled. The interest of the appellants under the contract of sale from Craigie was within the protection given by s. 42(2)(e). However, it was decided in Burke v Dawes (1938) 59 C.L.R., at pp. 17-18 that s. 42(2)(e) does not give to a tenant in possession any greater protection than he would have had if the land were under the general law: see per Dixon J. (1938) 59 C.L.R., at p. 18, and per Starke J. (1938) 59 C.L.R., at p. 13. Evatt J., who dissented in the result, but whose views on this point were not in my opinion different from those accepted by the majority, said (1938) 59 C.L.R., at p. 25: In my opinion the effect of the exception in favour of every tenant of the land is to deprive the proprietor of the registered interest of the paramountcy which registration would normally confer. It follows that, in determining the competition between the tenant and the proprietor of the registered interest, the latter must be regarded as having been stripped of the benefit conferred by the fact of registration and as having been remitted to the position of holding an unregistered interest. In the present case the respondent is deprived by s. 42(2)(e) of the paramountcy which registration would otherwise have conferred. It then becomes necessary to consider whether, apart from registration, the interest of the respondent under the Creation of Easement will prevail over that which vested in the appellants by virtue of the contract of sale. This question depends on the effect of special condition 8 of the contract of sale. When an owner of land contracts to sell it to a purchaser there is no reason in principle why he should not reserve the right to grant an easement over the property sold or why he should not make the sale subject to the easement to be granted. If this is done effectively the easement when created will take priority over the equitable interest which was granted subject to it. Under the general law, apart from registration, the right of the owner of the easement will prevail over that of the purchaser, notwithstanding that he is in possession, and the provisions of s. 42(2)(e) will not give the purchaser any greater right. In Chesterfield v Pitisano [1964] V.R. 709at p.713, Smith J. said that a mortgage granted pursuant to a right reserved to the vendor by a contract of sale would take priority over the equitable interest of the purchaser, and that the rights of the mortgagee on registration would not be rendered subject by s. 42(2)(e) to the interest of the purchaser as a tenant in possession. I respectfully agree with his conclusion on this point. The question therefore is whether special condition 8 did make the sale subject to the easement to be granted. In my opinion the condition did have that effect. It is true that it did not in terms reserve the right to grant an easement, nor did it state that the sale was subject to the easement to be granted. However, the clause expressly stated that it was proposed to create an easement, and that the vendor should be entitled to the compensation paid when the easement was granted, and in my opinion these provisions plainly implied that the easement when granted was to be effective. The clause would be meaningless if the rights of the purchasers prevailed over the easement when it was created. In my opinion the effect of special condition 8 was that the Creation of Easement - not the option, as I have already explained - prevailed over the rights of the appellants. Section 42(2)(e) did not alter this position. It follows that the respondent became entitled to enter the subject land for the purpose of constructing the pipeline on 17th December 1975 when the Creation of Easement was signed, but it was not entitled to enter for that purpose before that date. … 83 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. 84 In any event, I have come to the view that even if there is to be a comparison of the two competing interests as suggested by Perpetual, the interests of the retirees have priority. Even accepting that Perpetual took the mortgage at arm's length, in the normal course of its business and for valuable consideration, I have formed this view for the following reasons: (i) the earlier equitable interest in the property of the retirees I have generally regarded as a stronger claim than the later interest of Perpetual; (ii) fairness and justice does not require or indicate the earlier equitable interest of the retirees should be postponed (see Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 341 (per Mason and Deane JJ)); (iii) any lack of notice by Perpetual is only one aspect of the circumstances I have taken into account, which does not displace the earlier interest of the retirees; (iv) Perpetual knew by itself, or its agents, that the properties were occupied, or at the very least expected the properties would be tenanted, even if Perpetual did not know the exact terms of the Contract of Sale or Agreement for Sale of Real Estate or of the lease. If I am wrong in this regard as to knowledge or expectation, this would still not alter my view as to the competing position; (v) the retirees were in fact in possession of the property which I regard as significant, although not 'decisive'(cf Burke v Dawes 59 CLR 1per Evatt J at 26); (vi) Perpetual had constructive notice of the retirees' rights and it took its interest subject to them, and this occurs even if the tenant is in possession pursuant to additional entitlements: Hunt v Luck (1902) 1 Ch 428; Lowe v Clyne [1968] 2 NSWR 292; Daniels v Davison (1809) 16 Ves 249; and Allen v Anthony (1816) 35 ER 679, and particularly McMahon v Swan [1924] VLR 397 at 405-406 and Burke v Dawes 59 CLR 1at 26-27 per Evatt J; (vii) Perpetual in failing to investigate the interest of the retirees did so at its 'peril' (see Evatt J at 27 in Burke v Dawes 59 CLR 1; and Lowe v Clyne [1968] 2 NSWR 292); (viii) whilst the retirees did not lodge timely caveats, the failure of the retirees to lodge a caveat is explicable. They were in fact still registered proprietors. In any event, 'the exception in s 42(2)(e) makes the failure to lodge a caveat of no moment, because it takes away from the registered proprietor that paramountcy which actual registration confers; and the only purpose of a caveat is to prevent such registration' (see Burke v Dawes 59 CLR 1 at 25-26 per Evatt J); (ix) further, I do not regard the failure to lodge a timely caveat as sufficient to postpone the retirees' interests, particularly as there was no evidence that Perpetual relied on the registration or absence of caveat (see IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 at [205] per Nettle J); and (x) no retiree consented to or ratified the mortgage to Perpetual.

THE LTA 85 Submissions were made specifically on the operation of s 40(3)(d) of the LTA and attention was directed to its specific terms, in contrast to the terms of s 42(2)(e) of the TLA. 86 In my view, the retirees cannot rely upon s 40(3)(d)(iv), as under that provision the tenancy must be granted by the owner of the premises, who must hold legal title to the premises. However, in my view Easterbrook and Gray can rely upon s 40(3)(d)(iii): they had an interest of a 'tenant under … a lease capable of taking effect in equity' for the reasons previously identified by me. 87 The retirees then contended that the onus is upon Perpetual to show that it falls within the exception 'except as against a bona fide purchaser for value without notice of the lease who has lodged a transfer for registration' and that Perpetual failed to discharge that onus for the following reasons: · Perpetual needed to demonstrate that it was a 'purchaser', and it was not, as it was a mortgagee; and · Perpetual had notice of the tenancy because it took and registered its mortgage with knowledge of the lease. 88 Perpetual contended that the tenancy agreement alleged by Easterbrook and Gray was, at best, a tenancy capable of taking effect in equity only. 89 However, Perpetual then contended that the exception to indefeasibility created by s 40(3)(d)(iii) of the LTA was subject to an exception of its own. An equitable lease does not dislodge the indefeasibility of a 'bona fide' purchaser for value without notice of the lease who has lodged a transfer for registration. For the purposes of the LTA, 'transfer' means 'the passing of any estate or interest in land under this Act, whether for valuable consideration or otherwise'. It was contended that the word 'purchaser' must be read in its context and in light of the customary common law usage of the phrase 'bona fide purchaser for value without notice' as extending to the taker of any legal interest in property, not just a transferee. Reference was made to Butt, Land Law (5th ed, 2007 Lawbook Co); Goodright d Humphreys v Moses (1774) 96 ER 599 at 600, and Pearce and Geddes, Statutory Interpretation in Australia (6th ed, 2006, LexisNexis) at [4.17]. That interpretation was said to be supported by the use of 'transfer' in s 40(3)(d)(iii); if 'purchaser' meant 'purchaser of the fee simple estate', a word other than 'transfer' (which by the s 3 definition, connotes 'the passing of any estate or interest') would have been used, such as 'assignment'. 90 It was contended that the exception does not elevate the interest of a tenant under an equitable lease above those of all others who hold a registered interest in the land; it merely makes clear that a bona fide purchaser without knowledge has priority over a tenant in all circumstances. It was then contended by Perpetual that the result of the provisions in the LTA is either that: (a) if Perpetual's mortgage was registered simultaneously with or before the transfer to MFLPH, Perpetual was not bound by the alleged tenancy; or (b) if Perpetual's mortgage was registered after the transfer to MFLPH, it was only bound by the alleged tenancy if the Court found that Perpetual did not act bona fide or give good consideration for the mortgage, or it had knowledge of the tenancy at the time of registration. 91 In the case of Easterbrook and Gray, the mortgage was created on 22 March 2005, well after the creation of any equitable lease, and after settlement when Easterbrook and Gray would have been entitled to possession pursuant to their agreement with MFLPH. The Transfer of Land and Mortgage were lodged for registration on the same day, and were each registered the day after. As discussed previously, the Mortgage was registered after the Transfer of Land. Therefore, Perpetual would be bound by the interests of Easterbrook and Gray, unless the exception found in s 40(3)(d)(iii) applied. 92 As to the operation of this exception, in my view, 'purchaser' does not include a mortgagee. This is for the simple reason that under the LTA (as under the TLA) a mortgage when registered has effect as a security, and is an interest in land, but does not operate as a transfer of the land mortgaged or involve any passing of any estate or interest in land (see s 72 and s 73 of the LTA). It would therefore not be correct to describe a mortgagee as a 'purchaser … who has lodged a transfer for registration.' It is never envisaged that a mortgagee would lodge a transfer for registration: the registered proprietor may mortgage his or her interest by a memorandum of mortgage in an approved form but not by transfer for registration. There could never be a lodgement of 'a transfer for registration' by a mortgagee. Therefore, the exception does not come into operation, and no issue of notice arises.

OTHER CLAIMS OF THE RETIREES 93 As I indicated previously, the retirees raised a number of other interests said to support their position, none of which I consider improve upon the claim they have as tenants in the way I have already accepted. I merely outline these claims for completeness. 94 First, the retirees argued that their entering into possession pursuant to an agreement to grant a lease and paying rent will give rise to a common law tenancy, citing Chan v Cresdon Pty Ltd (1989) 168 CLR 242. In that case, Mason CJ, Brennan, Deane and McHugh JJ stated (at 248): It is well settled that entry into occupation followed by payment of rent under an agreement for a future lease brings into existence a common law tenancy from year to year, so long as the payment of rent is referable to a yearly tenancy, as where it is for an aliquot part of a year… 95 The retirees alternatively submitted that equity comes to the relief of a plaintiff who has acted to its detriment on the basis of a fundamental assumption, the adoption of which the defendant has played such a part that it would be unfair or unjust if the defendant were left free to ignore it - equity intervening on the footing that it would be unconscionable for the defendant to deny the assumption (see Grundt v Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641 at 675; Thompson v Palmer (1933) 49 CLR 507 at 547; and Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 and 404 (per Mason CJ and Wilson J)). 96 The retirees contended that the doctrine applied in the context of leasehold interests (see Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 1 All ER 897). The retirees argued that a representation was made by MFL sufficient to raise an estoppel that the retirees would acquire an interest for life in the relevant properties. 97 Another line of argument in certain of the retirees' cases arose because there was an option to repurchase the relevant property in the Deed of Agreement. This was, in the retirees' submission, an equitable interest in line with Barba 136 CLR 120, where Gibbs J stated (at 137-138): … it is clear that an option to purchase gives the grantee an equitable interest in the land. In Londonand South Western Railway Co. v Gomm (1882) 20 Ch.D. 562, at p.581 Jessel M.R. said: The right to call for a conveyance of the land is an equitable interest or equitable estate. In the ordinary case of a contract for purchase there is no doubt about this, and an option for repurchase is not different in its nature. A person exercising the option has to do two things, he has to give notice of his intention to purchase, and to pay the purchase-money; but as far as the man who is liable to convey is concerned, his estate or interest is taken away from him without his consent, and the right to take it away being vested in another, the covenant giving the option must give that other an interest in the land. See also Wright v Dean [1948] Ch. 686, at 693; In Re Button's Lease; Inman v. Button [1964] Ch. 263, at p.271; and Commissioner of Taxes (Q.) v. Camphin (1937) 57 C.L.R. 127, at pp.132-4. The equitable interest so created is a contingent interest which will become an absolute interest when the contingency is fulfilled: Griffith v. Pelton [1958] Ch. 205, at p.225; Du Sautoy v. Symes [1967] Ch. 1146, at p.1163. It was held in Morland v. Hales and Somerville (1910) 30 N.Z.L.R. 201, that the equitable interest which passes to the grantee when an option is granted prevails over the rights of a person who, after the grant of the option but before its exercise, has contracted to purchase the land without notice of the existence of the option. It may be assumed that the principles stated in those cases apply to the case of an option to acquire an easement. However, until the option is exercised the interest which it confers remains contingent and the grantee cannot call for a conveyance or demand to exercise any of those rights to which he is contingently entitled. 98 Finally, the retirees' submitted, a vendor is entitled to an equitable lien to the extent of the non-payment of the purchase money after completion of a contract of sale, referring to Hewett v Court (1983) 149 CLR 639, per Gibbs CJ at 645: Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity "as part of a scheme of equitable adjustment of mutual rights and obligations" … A vendor's lien for unpaid purchase money has been said to be founded on the principle that "a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration." 99 The retirees claimed to be entitled to an equitable interest in their property by reason of an equitable lien to the extent of the non-payment of the purchase price after completion of their respective sale contracts and as contemplated by a special condition in those contracts. By way of example, Gainsford's contract stated: The balance of the Purchase Price is payable by the Purchaser to the Vendor in instalments of $720.00 per calendar month commencing on the one month anniversary of the Settlement Date and payable calendar monthly thereafter … 100 It was argued that the lien is a form of charge over the land and may, in general, be enforced in the same way as any other equitable charge, namely by sale in pursuance of court order (see Hewett v Court 149 CLR 639 at 663 per Deane J). 101 The interest, according to the retirees, was an 'equitableinterestto which [the retirees'] occupation is incident', relying on Burke v Dawes 59 CLR 1 at 17. 102 At the time the retirees entered into the sale contracts, or alternatively on settlement, it was contended that they acquired an equitable interest in the relevant properties by reason of an equitable lien. Specifically, they contended, the lien subsisted in respect of any unpaid portion of the purchase price after completion of a sale contract (together with default interest) as contemplated by conditions of the sale contracts. 103 I should make some comments in relation to the argument relating to the vendor's lien. For the retirees to succeed on this point they must still rely upon the operation of s 42(2)(e) and s 40(3)(d), and be within the concept of tenants in possession as explained by the authorities. 104 It was accepted by Perpetual that an interest as a tenant in possession includes 'every interest in the land of … a tenant which grows out of, and is not disseverable from, his right to continue in occupation as a tenant …': Sandhurst Mutual Permanent Investment Building Society v Gissing (1889) 15 VLR 329 at 331; Burke v Dawes 59 CLR 1 at 13 per Starke J, or 'any equitable interest to which his occupation is incident, provided that at law his occupation is referable to a tenancy of some sort ….': Burke v Dawes 59 CLR 1 at 17 per Dixon J (McTiernan J concurring). 105 However, Perpetual submitted that the interest of an unpaid vendor does not arise out of, and is not an incident of, or referable to, any right of occupation or tenancy because a vendor's lien, like other equitable liens, is a species of equitable charge, not dependent upon possession (referring to Hewett v Court 149 CLR 639 at 645 per Gibbs CJ and at 663 per Deane J). The vendor's lien arises because the unpaid vendor has parted with the legal title by way of conveyance. It is 'created by equity as part of a scheme of equitable adjustment of mutual rights and obligations applying … to every ordinary contract for the sale of land': Davies v Littlejohn (1923) 34 CLR 174 at 185 per Isaacs J, and as part of the broader scheme whereby the equitable interest in land passes to the purchaser upon execution of the contract of sale: Tyler, Young and Croft, Fisher & Lightwood's Law of Mortgage (2nd Aust. ed, 2005) at [2.24]. Perpetual submitted that any vendor's lien flows from a separate document to that creating the right of occupation (alternatively, from a severable provision of the same document). The two rights are entirely severable, as each is capable of standing without the other. In each case, if the lease was terminated, the vendor's lien (if it then existed) would stand. Perpetual contended then that the right of occupation and the vendor's lien are not referable to or incident upon the other. 106 I accept Perpetual's submissions. Most commonly, a lien arises where a vendor no longer has legal title but is owed some or all of the purchase money. Whether the vendor's lien is seen as charge or not, it remains a security. A vendor's lien does not grow out of, and is severable from, the retiree's right to continue in occupation as a tenant; it is not an interest to which the retiree's occupation as a tenant is incident.

DISPOSITION 107 In summary, the position is that each retiree's interest is entitled to priority over the interest of Perpetual. In all instances, the interest of the retiree came into existence prior to the creation and registration of the mortgage, and the interest of Perpetual was subject to the interest of each retiree as tenant in possession. 108 Separate declarations should be made in relation to each retiree by reference to the relevant property. 109 I propose to order that the parties confer, and thereafter on or before 4.00pm on 30 October 2008 file and serve minutes of orders sought (including as to costs), or in the event of no agreement, submissions on the orders sought, in light of the above reasons. I certify that the preceding one hundred and nine (109) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.

Counsel for the Applicants: P J Marzella

Solicitors for the Applicants: Russell Kennedy

Counsel for the Seventh Respondent: M L Sifris SC with S J Maiden

Solicitor for the Seventh Respondent: Gadens Lawyers

Counsel for Amicus Curiae (ASIC): F M McLeod SC