Hodson v UNO Investment Pty Ltd (ACN 068 469 152) [2003] QDC 345 (10 October 2003)

Last Updated: 13 October 2003

DISTRICT COURT OF QUEENSLAND

CITATION:	Hodson v UNO Investment Pty Ltd (ACN 068 469 152) [2003] QDC 345
PARTIES:	MAUREEN PATRICIA HODSON Plaintiff and UNO INVESTMENT PTY LTD (ACN 068 469 152) Defendant
FILE NO/S:	323/2003
DIVISION:	District Court
PROCEEDING:	Application
ORIGINATING COURT:	Southport
DELIVERED ON:	10th October 2003
DELIVERED AT:	Southport
HEARING DATE:	22nd September,2003
JUDGE:	R D Hall DCJ
ORDER:	[1] I give judgment for the defendant against the plaintiff in respect of the claim and the defendant's counterclaim. [2] I order that the plaintiff pay the defendant's costs of and incidental to this claim to be assessed.
CATCHWORDS:	PRACTICE AND PROCEDURE--Summary Judgment- Application by defendant--Relevant principles LAND--INDEFEASIBILITY--Registered interest free of unregistered lease--whether act of purchaser had created an equity in the lessee of land subject to a monthly tenancy - Land Title Act 1994,Ss 184,185. Cases cited: Bahr v Nicolay (No 2) (1987) 88 [1988] HCA 16; 164 CLR 604 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-2) 149 CLR 337 Palace Backpackers Australia Pty Ltd v Christensen Industries Pty Ltd (2002) QDC 084
COUNSEL:	Ms J McCormack for the plaintiff Mr M Eastwood for the defendant
SOLICITORS:	Hoy & McCormack for the plaintiff Lee & Associates for the defendant

[1] The defendant in this action has applied for judgment pursuant to r 293 of the Uniform Civil Procedure Rules. That application is brought in respect of the plaintiff's claim and the defendant's counterclaim. The action arises out of the purchase by the defendant of a shopping centre at the Gold Coast, which purchase was completed on 14 February 2003. The plaintiff was the lessee of premises known as Shop 1A situated in that shopping centre and then owned by one Charles Penley Rahe. The plaintiff's lease of Shop 1A was not registered pursuant to the Land Title Act, 1994 and was due to expire on 17^th December, 1992. That Lease ws for 5 years and contained an option to renew for a further five years. According to the terms of clause 21 of the lease, the plaintiff was required to give the lessor not less than three months' notice of her intention to exercise the option. The plaintiff failed to comply with clause 21 but purported to give notice in writing of the exercise of the option on 20 November 2002.

[2] The plaintiff alleged in the statement of claim that she had been informed by an agent for the lessor that notwithstanding the plaintiff's failure to exercise the option within the time specified in the lease, the lessor was prepared to renew the lease. A document entitled "Lease by way of Renewal" was prepared by solicitors acting for the lessor but it was never executed by either party.

[3] On the 13^th February 2003 the defendant company executed a Deed of Covenant pursuant to clauses in the leases relating to the shopping centre purchased by the defendant. The defendant covenanted with the vendor of the land that "From the completion date, the purchaser agrees to be bound by and shall observe all of the provisions of the leases as though the purchaser was named therein as a party to the leases."

[4] Clause 3 of the Deed of Covenant provided as follows:

"3. Contract of Third Party Benefit

The purchaser agrees that this Deed is entered into for the benefit of the lessees who hold as lessee from the vendor and described in the leases and as such the lessees are the beneficiaries of the covenants contained herein within the meaning of that term as described in s 55 of the Property Law Act (Qld)1974."

The term "the leases" is defined to mean the leases described in the schedule to the Deed. In that schedule the details of the lease relating to Shop 1A appear in its appropriate place as follows:

"SHOP	BUSINESS NAME	TENANT NAME	LEASE DOCUMENT	RELEVANT CLAUSE REF
1A	House of Dance	Hodson	Lease dated 17/12/97 Lease by way of renewal undated	22	Deleted (inits twice)"
At the foot of the schedule the following appears:
"SHOP	BUSINESS NAME	TENANT NAME	LEASE DOCUMENT	RELEVANT CLAUSE REF
1A	House of Dance	Hodson	Lease dated 17/12/97	22	(inits twice)"

[5] Mr Eastwood, for the defendant, submitted that the deletion of details relating to Shop 1A from the schedule and its apparent reinstatement creates an ambiguity so that the parol evidence rule does not apply. He referred to Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-2) 149 CLR 337 at 347 et seq. At p 352 Mason J said:

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, ....

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification."

[6] Mr Eastwood argued that evidence contained in an affidavit of Kee Hyoung Lee, the solicitor for the defendant relating to conversations he had with the solicitor for the vendor and correspondence passing between them was admissible to resolve the ambiguity. I agreed with that submission and accepted the evidence of Mr Lee who said that he spoke to Mr Lester, the solicitor for the vendor, on or about 24^th January 2003 and Mr Lester told him that: "(a) the term of the subject lease had expired by effluxion of time; (b) the option contained within the lease had never been validly exercised by the plaintiff; (c) the plaintiff was in possession of the premises under a tenancy from month to month; (d) no new lease pursuant to the option contained in the old lease had been entered into; (e) the draft renewal of lease had never been submitted to the plaintiff for execution or perusal and had not been executed."

[7] Subsequently on a date between 29^th January 2003 and 5^th February 2003 Mr Lee had a further conversation with Mr Lester in which (a) Mr Lester said that there was a draft Deed of Covenant, (b) Mr Lee said that the mistake was the inclusion of the subject premises in the schedule to the Deed, (c) Mr Lee told Mr Lester that that inclusion had been deleted and initialled by the purchaser, (d) Mr Lester said that that was unacceptable to his client since under its lease with the plaintiff it should be included. Mr Lee said that the inclusion was meaningless since he had already made the representations referred to above in these Reasons but that his client would be prepared to sign the Deed on the basis of a deletion of the reference to "Lease by way of Renewal". Mr Lee suggested that by signing the Deed in that way the vendor complied with the lease but there was no creation of any rights in the plaintiff as against the defendant. Mr Lee said that Mr Lester agreed with his suggestion. All these conversations and the meaning of them were conveyed to the defendant by Mr Lee and were confirmed by correspondence between the solicitors totalling nine letters between 20^th January 2003 and 13^th February 2003.

[8] In my view those conversations, confirmed by the letters between the solicitors for the vendor and purchaser, clearly demonstrate not only that the defendant was entirely aware of the existence of a monthly tenancy between the vendor and the plaintiff, but also that the purchaser did not agree to be bound by the terms of any lease by way of renewal in favour of the plaintiff or the monthly tenancy itself.

[9] That situation is established not only by the evidence of the conversations between the respective solicitors but also in the correspondence which followed. That correspondence, in addition to confirming the conversations sworn to by Mr Lee, clearly demonstrates that the plaintiff had only a monthly tenancy of Shop 1A and that the defendant proposed to negotiate a new lease with her after settlement of the purchase transaction.

[10] Nothing in the admissible evidence tendered on behalf of the plaintiff is capable of contradicting the factual situation demonstrated in the material considered above.

[11] R 292 of the UCPR requires an applicant, whether plaintiff or defendant, to establish that the respondent cannot succeed in his claim or in his defence and that there is no need for a trial of the action. This is so clearly established that authority is not required but I refer to the judgment of McGill DCJ in Palace Backpackers Australia Pty Ltd v Christensen Industries Pty Ltd (2002) QDC 084 at paragraph 17 where authorities are conveniently collected.

[12] Mr Eastwood referred me to ss 184 and 185 of the Land Title Act 1994 which provides as far as is relevant:

"184(1) A registered proprietor of an interest in a Lot holds the interest subject to registered interests affecting the Lot but free from all other interests.

(2) In particular, the registered proprietor -

(a) is not affected by actual or constructed notice of an unregistered interest affecting the Lot; and

(b) is liable to a proceeding for possession of the Lot or an interest in the Lot only if the proceeding is brought by the registered proprietor of an interest affecting the Lot.

(3) However, subsections (1) and (2) do not apply -

(a) to an interest mentioned in 185; or

(b) if there has been fraud by the registered proprietor, whether or not there has been fraud by a person from or through whom the registered proprietor has derived the registered interest.

185 Exceptions to s 184

(1) A registered proprietor of a Lot does not obtain the benefit of s 184 for the following interests in relation to the Lot -

(a) an equity arising from the act of a registered proprietor..."

[13] There is no suggestion of fraud on the part of any person. Accordingly it is argued that the defendant obtained, on registration, an indefeasible interest in the subject land, subject only to an equity "arising from the act of the registered proprietor". Provisions similar to ss 184 and 185 considered by the High Court in Bahr v Nicolay (No 2) (1987) 88 [1988] HCA 16; 164 CLR 604. At pp 652-3 Brennan J (as he then was) with whom Wilson and Toohey JJ agreed, said:

"These provisions are designed to achieve the main object of the Torrens system of registration of interests in land which the Privy Council in Gibbs v Messer, perceived to be: `To save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of the author's title, and to satisfy themselves of its validity. That end is accomplished by providing that everyone who purchases, in bona fide and for value, from a registered proprietor, and enters his deed of transfer or mortgage on the register, shall thereby acquire an indefeasible right, notwithstanding the infirmity of his author's title.'

The consequence is that whereas equity would subject the interest of a purchaser of land to an antecedent unregistered interest of which the purchaser has notice, a purchase who takes notice of an antecedent interest but who becomes registered under the Act without fraud takes free of that interest. ... Registration of the transfer is not fraudulent merely because a transferee knows that an antecedent interest of which he has notice will be defeated thereby. As Kitto J said in Mills v Stokman; `Merely to take a transfer with notice or even actual knowledge that a registration will defeat an existing unregistered interest is not fraud'.

However, the title of a purchaser who not only has notice of an antecedent unregistered interest but who purchases on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation."

[14] At p 654 Brennan J said:

"A registered proprietor who has undertaken that his transfer should be subject to an unregistered interest and who repudiates the unregistered interest when his transfer is registered, is in equity's eye, acting fraudulently and he may be compelled to honour the unregistered interest. The means by which equity prevents the fraud is by imposing a constructive trust on the purchaser when he repudiates the unregistered interest. That is not to say that the registration of the transfer to such a proprietor is affected by such fraud as may defeat the registered title: fraud which attracts the intervention of equity consists in the unconscionable attempt by the unregistered proprietor to deny the unregistered interest to which he has undertaken to subject his registered title."

[15] There is no question that the defendant company has become registered proprietor of the subject land. That appears from paragraph 2 of the affidavit of Willis Un filed on 8^th July 2003. Further, it is clear beyond question that the defendant agreed to be bound by the terms of an unregistered lease relating to Shop 1A which had expired by effluxion of time. The conduct of the defendant in acquiring registration of the subject land and in executing the Deed of Covenant did not create any equity in the plaintiff amounting to "an interest mentioned in s 185". Such an interest would arise only if the defendant purchased the subject land on terms that it be bound by the unregistered interest of the plaintiff. The only admissible evidence before me establishes that there was no agreement between the solicitors for the vendor and the purchaser (defendant) to take the registered interest subject to the plaintiff's unregistered leasehold interest. Indeed the evidence leads strongly to the contrary conclusion. Consequently, it can be seen that the plaintiff has no realistic prospect of success in the action and the defendant is entitled to judgment in a summary way.

[16] Accordingly I give judgment for the defendant against the plaintiff in respect of the claim and the defendant's counterclaim. I declare that the defendant holds its right, title and interest in Lots 1 to 9 on Registered Plan No. 92272 in the County of Ward, Parish of Nerang and contained in title reference 17152220 free of any right, title or interest therein claimed by the plaintiff.

[17] I further order that the plaintiff pay the defendant's costs of and incidental to this claim to be assessed.

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