Nature of a tenancy in possession
39 In its written submissions Perpetual states that "none of the interests claimed by the respondents (ie interests under the tenancy agreements, vendors' liens, deeds of agreement, contracts of sale and estoppels) created a possessory interest separate from ownership and antecedent to the relevant mortgage". There are two elements to this submission. The first relates to the nature of any tenancy interest created. The second concerns the time at which any such tenancy arose and the time at which each mortgage was created. Perpetual submits that each mortgage was created before any tenancy could have arisen and therefore s 42(2)(e) does not apply. Perpetual's submission is best tested by a careful examination of each step in the chain of transactions.
40 For ease of consideration we will first examine the transactions involving Mrs Elaine Gainsford and her husband, Mr Edward Gainsford. On our analysis of these transactions the difference between the sequence of the transactions involving Smith, and Easterbrook & Gray (also the subject of the principal judgment) and the sequence of the Gainsford transactions is not material. Our consideration of the primary judge's reasons and the parties' submissions with respect to the Gainsfords should be taken as applying to Smith, and Easterbrook & Gray except where the contrary is expressly stated. As all the properties the subject of the 4 May orders are in Victoria, the provisions of the Land Titles Act 1980 (Tas), which applied to the property of Easterbrook & Gray are not relevant to this appeal. The transactions involving Easterbrook & Gray are relevant only for the order in which they occurred; see [36] above.
41 On 18 November 2004 Mrs Gainsford entered into a contract for the sale of her property. On the same day she also executed the Deed of Agreement and, with her husband, Edward Gainsford, signed the Residential Tenancy Agreement. As noted above the contract for sale provided for the payment of the purchase price by way of a deposit and subsequent instalments. The deposit was to be paid within 21 days or as otherwise agreed. We accept that at contract MFLPH acquired a proprietary interest which would, for example, be capable of competing with the proprietary interest of a third party however, as between the contracting parties the contractual requirements are determinative of their obligations; Chang v Registrar of Titles (1976) 137 CLR 177 at 190 per Jacobs J.
42 The contractual arrangements between MFLPH and Mr and Mrs Gainsford are clear. The Contract of Sale, the Deed of Agreement and the Residential Tenancy Agreement were all executed by the Gainsfords on the same day, 18 November 2004. These agreements establish that it was the intention of the parties that MFLPH's right as owner of the land was to be subject to the right of Mrs Gainsford and her husband to remain in possession as tenants for the duration of their lives or until they vacated the property for a period exceeding six months. Mrs Gainsford's evidence in her affidavit of 24 March 2007 was that the "Settlement Date was to be the date upon which the deposit of $30,000 was paid by MLFPH to me, and MLFPH subsequently accepts title". The settlement statement annexed to Mrs Gainsford's affidavit confirms that settlement occurred on 9 December 2004 and, although Mrs Gainsford stated that she did not insert the date of 9 December 2004 in the Residential Tenancy Agreement as the commencement date for the lease, it is clear that as between the Gainsfords and MLFPH the lease was to commence at the latest on that date.
43 In its submissions in the appeal Perpetual argued that MFLPH could not grant a tenancy in respect of land in respect of which, in this case, Mrs Gainsford was the registered proprietor. The primary judge rejected this submission saying that "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". We also reject the submission.
44 As between vendor and purchaser the right to possession is governed by the terms of the contract between them. Whether the vendor is to provide vacant possession at settlement or is to be permitted to remain in possession, and if so under what terms, depends on the terms of the contract. In this case the contract specifically provided that the vendor was to remain in possession and, in conjunction with the Deed of Agreement and the Residential Tenancy Agreement, it provided that the lease was to commence at settlement. These provisions impliedly recognise that at settlement MFLPH obtained the right to possession subject only to the more limited right which it immediately granted to Mr and Mrs Gainsford. In other words, the capacity in which Mrs Gainsford occupied the property shifted from occupation as owner to occupation as tenant with Mr Gainsford.
45 From the time of entering into the contracts executed on 18 November 2004 Mrs Gainsford was entitled to specific enforcement of MFLPH's contractual obligations, including the obligation to grant her a lease. That obligation was, of course, subject to the performance of the contractual obligations that she owed to MFLPH. On her part those obligations were fully performed at settlement and she had a specifically enforceable right to a lease; Walsh v Lonsdale (1882) LR 21 ChD (CA). In addition to the lease in equity that arises under the specifically enforceable contract, the occupation under the agreement to lease also brings into existence an implied tenancy at common law; Chan v Cresdon Proprietary Limited (1989) 168 CLR 242 at 248 per Mason CJ, Brennan, Deane and McHugh JJ. On settlement, MFLPH acquired an equitable interest in the fee simple estate in the land and, in equity, was able to carve out of that estate, an equitable lease in favour of the Gainsfords. The fact that Mrs Gainsford was the registered proprietor at the time was, as the learned primary judge held, irrelevant.
46 The appellant cites the High Court decision in Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453 as authority for the proposition that "Where a person purports to lease an interest in land which that person does not own, all that is created is a tenancy by estoppel". The case is distinguishable from the present circumstances in a number of ways.
47 Partridge v McIntosh concerned a mortgagor who had attorned tenant to the registered mortgagee of land under the Torrens system. The mortgagor defaulted under the mortgage and the mortgagee levied distress upon goods on the premises including goods belonging to the mortgagor's wife who was not a party to the mortgage. The issue before the High Court was whether the mortgagor had committed a trespass to her goods. The crucial point was that the mortgagee, having only a charge on the land (as is the case with Torrens title land) did not have a reversionary interest capable of supporting a lease or entitling the mortgagee to levy distress against the goods of a stranger to the mortgage agreement. The Court held however, that the mortgagor was estopped from relying on the absence of the reversion but that the estoppel would bind only the parties. The case has nothing to say about the right of the purchaser of the fee simple estate (MFLPH) to grant a lease in equity.
48 Before the primary judge Perpetual argued that any lease which would otherwise have been granted to the Gainsfords would be void for uncertainty because it offended the rule that, to be valid, a lease must be for a term certain; Lace v Chantler [1944] KB 368. His Honour rejected this submission for a number of reasons. His Honour said, at [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).
49 In addition his Honour said that the arrangement could be construed as creating a freehold life tenancy such as was accepted in Burke v Dawes (1938) 59 CLR 1 as falling within the words of s 72 of the Transfer of Land Act 1928 (Vic), a predecessor to s 42(2)(e). See also Black v Poole (1895) 16 ALT 155.
50 We agree with his Honour's conclusions. The duration of the lease in question was for the lives of Mr and Mrs Gainsford albeit that it was determinable earlier if they vacated the property for more than six months. We are satisfied that there was a lease, albeit existing only in equity and in the circumstances it is not necessary for us to decide whether that interest was actually a determinable life estate or a lease for a term of years measured by the life of the survivor of Mr and Mrs Gainsford. See The Commercial Bank of Australia Limited v McCaskill (1897) 23 VLR 10 at 15 where a similar approach was taken.