FAI Leasing Pty Ltd, Re [1993] QSC 261 [1994] 2 Qd R 482

0 0 0 0 IN THE SUPREME COURT OF QUEENSLAND No. 356 of 1993 IN THE MATTER OF THE CITY OF BRISBANE TOWN PLANNING ACT 1964 IN THE MATTER OF THE TOWN PLAN FOR THE CITY OF BRISBANE IN THE MATTER OF AN APPLICATION BY F.A.I. LEASING PTY LTD JUDGMENT - MOYNIHAN J Delivered the 13th day of September, 1993 COUNSEL: Mr Harrison QC for the Applicant Mr Derrington for the Respondent SOLICITOR: W T Purcell Chadwick & Skelly for the Applicant Clayton Utz for the Respondent DATE OF HEARING: 30 April, 1993 -- 1 of 15 -- 0 0 0 0 IN THE SUPREME COURT OF QUEENSLAND IN THE MATTER OF No. 356 of 1993 THE CITY OF BRISBANE TOWN PLANNING ACT 1964 IN THE MATTER OF THE TOWN PLAN FOR THE CITY OF BRISBANE IN THE MATTER OF AN APPLICATION BY F.A.I. LEASING PTY LTD JUDGMENT- MOYNIHAN J Delivered the 13th day of September, 1993 The applicant, .(F.A.I. Leasing Pty Ltd) claims to be entitled as against the respondent (A.G.C. Advances Limited) to nominate the site to which a "transferable site area" of a building subject to the heritage provisions of the Town Plan for the City of Brisbane (the Town Plan) may be transferred. The respondent (A.G.C.) contends that:- (a) the transferable site area is unaffected by the mortgage which the respondent (F.A.I.) contends founds its entitlement. and (b) it is entitled to the transferable site area by reason of a fixed charge over it. -- 2 of 15 -- 2 In those circumstances F .A.I. seeks declarations that: (a) it is presently the only person entitled to nominate a site to which the transferable site area attaching to the building situated at 501 Ann Street, Brisbane known as "The RACQ Building", under and pursuant to Ch .22 of the City of Brisbane Town Plan, may be added; (b) on completion of a contract of sale between it (as vendor) and a purchaser of the land and upon registration of such purchaser as the proprietor of an estate in fee simple in the said lands, the purchaser shall be the only person entitled to nominate a site to which the said transferable site area may be added. This led A.G.C. to take out a counter summons seeking the following declarations:- 1. That A.G.C. is entitled to a fixed and specific charge over all the right title and interest in and to the transferable site area attaching to the building situated at 501 Ann Street, Brisbane under and pursuant to S. 22 of the City of Brisbane Town Plan, including the right to nominate the site or sites to which the said transferable site area will attach and including the right to sell or otherwise. dispose of the said transferable site area. AL TERNATIVEL Y 2. (a) that A.G.C. is presently the only person entitled to nominate a site to which the transferable site area attaching to the building at 501 Ann Street, under and pursuant to s. 22 of the City of Brisbane Town Plan, may be added. F .A. I. shall only be able to nominate a site at the direction of A.G.C. and/or solely for the benefit of A.G.C. and further 0 0 0 0 -- 3 of 15 -- 0 0 0 0 3 (b) if on completion of a contract sale between F.A.I. (as vendor) and a · purchaser of the land at 501 Ann Street and upon registration of such purchaser as the proprietor of an estate in fee simple in the said lands, the purchaser shall be the ·only person entitled to nominate a site to which the said transferable site area may be added, the purchaser shall only be able to nominate a site at the direction of A.G.C. and/or solely for the benefit of A.G.C. The countervailing claims arise in these circumstances. F .A.I. is the registered first mortgagee from a company called Ermond Pty Ltd of land held under the Real Property Acts at 501 Ann Street. The land is under the Town Plan. The security was given on 18 October 1988 to secure the provision by F.A.I. of finance facilities to First Phoenix Consolidated Ltd. Clause 22 of the Town Plan, importing the heritage provisions of the Town Plan, became law on 25 February, 1989. lt will be appreciated that by that time Ermond had become the owner of 501 Ann Street and had given the first registered mortgage to F.A.I. By virtue of cl. 22 of the Town Plan certain buildings, including that located a~ 501 Ann Street, were designated "Heritage Buildings" and as a consequence restrictions were imposed on the development of the land on which buildings were located. In order to compensate the owners of such buildings for the deprivation of the ability to develop the site cl. 22. 11(a) created a "transferable site area" which the owner of the site can seek to have attached to another site so enhancing the development capacity of that other site. On 29 November, 1989 Ermond gave A.G.C. a mortga!iJe debenture granting a fixed and specific charge over "all the right, title and interest of [Ermond] in and -- 4 of 15 -- 4 to the transferable site area. The charge was registered on 29 December, 1989. On 15 January, 1990 a second mortgage, executed on 28 November, 1989, in favour of A.G.C. over the land at 501 Ann Street was registered. At some time after the execution of the mortgages F.A.I. and A.G.C. entered into a deed of priority whereby the rights of F.A.I. under its registered mortgage were given priority as between the parties. On 3 July, 1990 F.A.I. gave notice of its intention to exercise its rights under its first registered mortgage. On 4 January, 1991 it gave to the lessee of the premises at 501 Ann Street "notice requesting payment of rent by tenant". . . 0 On 10 January, 1991 the les~ee "confirmed" that it would pay the rent due under the lease to the applicant. 0 On 21 April, 1993 A.G.C. gave notice of the assignment by way of a charge of the transferable site area to the Brisbane City Council. On 24 June, 1991 F .A. I. served notice on Ermond of its intention to sell the land the subject of its securities. Subsequently the parties advanced the competing contention referred to 0 earlier in these reasons and came to seek the declaratory relief set out to resolve them . 0 . The success of F.A.I.'s application to a large degree turns on whether:- (a) lt is the "owner" of the site on which heritage building is erected at 501 Ann Street; (b) the transferable site area is an interest in land forming part of the mortgagor's estate in fee simple in the land at 501 Ann Street and subject to F.A.I.'s mortgage. "· -- 5 of 15 -- 0 0 0 Cl i ...____ _____ _ 5 lt is convenient to commence with a consideration of (a) F.A.I.'s submission that it is the owner of the heritage building is founded on this being the consequence of its having created the relationship of landlord and tenant between itself and the lessee by giving, as mortgagee, the latter notice to pay it the rent and the tenant's acceptance of the notice. The transferable site area and the rights associated with it are creatures of the Town Plan. Clause 22.11 (a) of the Town Plan provides that where the Council is satisfied that the conservation of a Heritage Building is ensured: " ... the Council may approve the adding of the transferable site area ... with respect to that Heritage Building ... to the area of some site nominated by the owner of that Heritage Building ... for the purpose of calculating the extent of development which may be carried out on that site." The Town Plan does not contain a definition of owner. At the time it became law S.28 of the Acts Interpretation Act 1954 relevantly provided: "Where any Act confers on any authority power to make, grant or issue any instrument ... then - · (a) unless the contrary intention appears, expressions used in any instrument so made, granted or issued shall have the same meanings as in the Act conferring the power; ... " The Town Plan originally took the force of law by reason of the provisions of the Brisbane Town Planning Act 1964. S.3 of that Act provided: "In this Act, unless the context otherwise indicates or requires, the following terms have the meanings set against them respectively, viz: 'Owner'- the person ... who for the time being is entitled to receive the rent of any land or who, if the same were let to a tenant at a ·rack rent, would be entitled to receive the rent thereof ... " Although the 1964 Act was repealed by the Local Government (Planning & Environment) Act 1990 as from 15 April, 1991, the 1987 Town Plan was -- 6 of 15 -- 6 continued in force by reason of S.8.1 0(3)(a) of the 1990 Act. S.4.1 of the 1990 Act provides that: "In this Act, unless the contrary intention appears- .. .'Owner', in relation to an allotment - (a). means- (iii) ... the person for the time being entitled to receive the rent of the allotment in respect of which the word is used or would be entitled to receive the rent thereof if the allotment were let to a tenant at a rent; 11 lt remains to mention that S.28 of the Acts Interpretation Act 1954 was Q repealed by the combined effect of S.48 and Clause 7 of Schedule 3 of the Statutory Instruments Act 1992 which became law on 1 June, 1992. S.37 of that 0 Act provides:- "words and expressions used in the statutory instrument have the same meanings as they have, from time to time, in the Act of statutory instrument (the 'authorising law'), or relevant provisions of the authorising law, under which the statutory instrument is made or enforced." . As I have indicated, F.A.I.'s claim to be the "owner" in terms of 22.11 (a) of the Town Plan is founded on its having being entitled to receive the rents and I do not understand it to be in issue that Ermond had defaulted or that F.A.I. had ent~red into possession by receiving the rents. In any event there seems to be evidence to support those conclusions. Section 60 of the Real Property Act of 1861 provides that a bill of mortgage such as F.A.I.'s is. to be "construed and have effect only as a security for the sum of money intended to be secured". lt does not operate or take effect "as a transfer of land, estate or interest intended to be thereby charged with the payment of any money". Such a mortgage does not, upon registration, effect a transfer to the 0 0 -- 7 of 15 -- 7 mortgagee of an estate in the land, or confer any immediate right to possession or reception of the profits of the land. The mortgagee's interest is the interest- of a statutory charge, the incidence of which depends on statutory provisions and such provisions of the general law as is availed of by or under the statute; Partridge -v- Macintosh & Sons Limited ( 1933) 49 C.L.R. 453 at 466, English. Scottish & Australian Bank Ltd -v- Phillips (1937) 57 C.L.R. 302 at 323. Section 60 renders it lawful for a mortgagee to enter into possession of the mortgaged land by receiving the rents and profits but only upon default of payment by the mortgagor. In such circumstances the mortgagee may also bring an action of ejectment to obtain possession of the land. 0 The position with respect to a mortgage under the Real Property Acts. to be contrasted with a common law mortgage, under which the mortgagee's rights were effectively those of an owner in fee simple, is that the estate having been transferred from the mortgagor to the mortgagee is to be held by the latter until 0 claims under the mortgage have been satisfied; e.g. Sykes Law of Securities, 5th Edition, pp 39, 56, 81. Thus at common law where the mortgaged property was c) the subJect of a lease the mortgagee had the reversionary interest in the land and hence the primary right to receive the rent; de Nicholls -v- Saunders ( 1870) L.R.S.C.P. 598 in re lnd Coope & Co. Ltd 1911 2 Ch. 223. lt may be also necessary to bear in mind that the-re are variations among the various jurisdictions in the statutory provisions constituting the Torrens title system and effecting the respective positions of mortgagor and mortgagee. The mortgagor of land under the Real Property Acts is, from the fact of continuing to be the legal owner of the land after the execution of the mortgage, -- 8 of 15 -- 8 entitled to possess·ion. The mortgagee's right is, relevantly to present purposes, ' ' ;~.: .• ·~· upon the specified default, to enter into possession "by receiving the rents and profits". S.60 of the 1861 Act does not give a mortgagee in possession a right to sue the tenant for rent, Partnership Pacific (No. 1) (unrep. O.S. 240 of 1992, de Jersey J judgment delivered 12/3/92), Partnership Pacific (No. 2) (Unrep, O.S. 261 of 1992, Williams J, judgment delivered 15 May, 1992.) The section refers to the position as against the mortgagor not against others; cf. K.A. & B.A. Haase Pty Ltd -v- Barboo (No. 5) Pty Ltd (unrep 211 of 1992 Thomas J judgment 1 0.4.92). F.A.I. relies on S. 117. of the Property Law Act 1974. That provides:- " ( 1) Rent reserved by a lease and the benefit of every covenant, obligation or provision therein contained touching and concerning the land, and . on the lessee's part to be observed and performed ... shall be annexed and instant to and shall go with any reversionary estate in the land ... (2) Any such rent ... shall be capable_ of being recovered ... by the person from time to time entitled, subject to the term, to the income ... of the land leased." In the ~artnership Pacific cases de Jersey J and Williams J differed as to the effect of S. 117. I find myself constrained to agree with the reasoning of Williams J and his conclusion that. S. 117 does not confer rights on a mortgagee _in possession to sue for recovery of rent or for _arrears of rent. The circumstances of the pres~nt case have to be distinguished from those in Partnership Pacific No. 2. In the latter case PC;Irtnership Pacific was party to an . agreement in whic~ the lessee agreed that the covenants in the lease would be applicable between it and the mortgagee. In the present case, there has been no foreclosure or_ effective assignment of the rights under the lease to F .A. I. to permit 0 0 () -- 9 of 15 -- ·, u 0 0 c-) 9 it to sue in its own name. As to the latter point, the grant of powe'rs to the mortgagee is conditional and the notices asserting a right to receive rent (cf 8.60 of the Act of 1861) do not refer to an assignment. The position seems to me to be that the mortgagor remains "the owner" of "the Heritage Building" site. F.A.I. has not become the owner. The consequen·ces follow from the fundamentally different positions of a mortgagee of old system land and a mortgagee under the Real Property ACts. The Real Property Acts confer on the mortgagee limited rights as against the mortgagor to enter into possession by receiving the rents and profits, and title to the fee simple rem·ains vested in the mortgagor. The mortgagee doe's not acquire a right to receive rents enforceable against the tenant or to sue others again in respect of this; see in addition to the cases cited· earlier, Francis & Thomas on Mortgages and Securities 14 7 Sykes the Law of Securities (5th Ed.) at 258 and following. I now turn to (b); the issues as to whether the transferable site area is an interest in land forming part of the fee simple ·and is subject to F.A.I.'s mortgage. The relevant terms of Clause 22.11 of the Town Plan are set out earlier. In substance a transferable site area is :the right'to have the Brisbane City Council consider, according to law, including the context of the relevant town planning provisions, whether to exercise a power in the holder's favour. If the discretion is exercised in the holder's favour, the transferable she area may, apparently in whole or in part, be attached to another site. In those circumstances, for development purposes, the Town Plan provisions apply to ·the new· site as if its area were its actual area of the site plus the transferable site area (or part of it) the transfer of which the Council approved. The outcome is, it may be accepted, to. enhance the -- 10 of 15 -- \ 10 value of the site to which the transferable site area is transferred so compensating the owner of the Heritage Building site for any diminution of value because of restrictions in development brought about by the "Heritage" characteristic. This is particularly so if the right is a proprietary right capable of being dealt with by the owner of the Heritage site. The transferable site area arises as a consequence of there being a Heritage Building on the site and I have difficulty in persuading myself it 'is in any way personal to Ermond, the company which owned the site when the right arose. Concepts comparable to transferable site areas have been considered in other jurisdictions. In Depsun Pty Ltd & An or -v- Tahore Holdings Pty Ltd ( 1990) 5 BPR 11 ,314, McCielland J concluded that "a floating floor space right" under relevant Sydney town planning codes was not a proprietary right and was not a "legal or equitable state or interest" in land within the meaning of the relevant provisions of the Real Property Act (NSW) so as to found a right to· caveat. The N.S.W. Court of Appeal in Uniting Church of Australia Property Trust (N.S.W.) -v- lmmer (No. 145) Pty Ltd (1991) 24 NSW L.R. 510 doubted McCielland J's,conclusion that floating floor (or air) space rights did notconstitute proprietary rights but had no doubt that he was correct in concluding that the right was not a legal or equitable estate or interest in land within the meaning of the relevant provisions of the N.S.W. Property Act legislation. The court characterised the right as a proprietary right to air space which was transmissible and transferable. The right was a proprietary right in the same way as "good will, patents or shares in the capital of a company are 'proprietary' rights". 0 0 () -- 11 of 15 -- 6 0 0 (_) 1 1 The rights in those cases essentially conferred· on the owner of land an entitlement to build higher than would normally be permitted if he acquired from the owner of another building the rights which the latter would have had, had he utilised them to build as extensively as the relevant codes permitted. The rights were contractual as between the respective site owners but the contract attached to the products of the relevant two town planning scheme. In McEwin -v- The Valuer-General [(unrep.) Mulligan J, S.C. of S.A. Land & Valuation Division, judgment delivered 6 February, 1993, (SCGRG-92-1595, S.3833)] the court was concerned with the implications, from the perspective of valuation, of a building the subject of heritage listing (conservation site) and of the transferable floor associated with such a listing. The scheme applicable to the City of Adelaide permitted owners of a conservation site to transfer floor area from that site to another site with the consequence that the extent to which the floor of the latter site could be developed was increased. The court concluded that the transferable floor area was not to be included as part of the site value of the land under the relevant valuation legislations. It thought that features ·'such as:- (a) the fact that the transferable floor area could be transferred wholly or in part independently of the land on which the heritage building was built and could be attached to some other land; (b) that the ability to transfer the transferable floor area depended on the Council exercising its discretion favourable to the transaction. were inconsistent with the transferable floor area being part of "the unencumbered estate in fee simple" of the land to be valued. The interest was to be characterised -- 12 of 15 -- 12 as the Court of Appeal in N.S.W. had characterised the floating floor or air space right in the Uniting Church case (ante). · In Queensland the Land Appeal Court upheld a decision of the Land Court that a transferable site area was not an interest or estate in land but did amount to a proprietary right; The Queensland Club -v- The Valuer-General ( 1991) 12 QLCR 200. In Mathers & Gibson -v- The Valuer-General (unrep. Land Court, Brisbane, 18 December, 1992 V92-1 06). The Land Court concluded that transferable site areas under the Town Plan were valuable proprietary rights of some sort, although they may not form part of the fee simple. In so doing the 6 court applied the approach in Uniting Church (ante). In Halwood Corporation Ltd -v- Chief Commission of Stamp Duties (N.S.W.) ( 1992) 92 ATC 4155 Loved ay J concluded that a transferable floor space was a proprietary right and that a deed making it available to a company other than to which it was- registered in the register of transferable floor spaces was an agreement for the sale or conveyance of property pursuant to the Stamp Act (N.S.W.). The scheme provided for a register of transferable floor space. The particular transferable floor space came into existence on account of provision for a: ratio of the areas of floor space in a proposed building development within the city of Sydney· to the area of the site and provision for the awarding of "bonus floor space" on account of specific considerations. Loveday J stated: "The transferee under the present deed may demand that its transferable floor space be considered by the Council in accordance with the Council's published policy and in accordance with the Council's statement to the transfer or even though there is no legally binding obligation on the Council to approve a development application relying on the transferable floor space." \10 0 -- 13 of 15 -- ,. ' • n 13 but concluded as I have set out above. In addition, following the decision in the Uniting Church case (ante), Loveday J referred to National Provincial Bank Ltd -v- Ainsworth 1965 A. C. 1175 where at 1247/8 Lord Wilburforce referred to definability, identifiability by a third party capability of assumption by a third party and. some degree of permanence and stability as characteristic of a proprietary right. There is some merit in the submission for A.G.C. that a transferable site area CJ is not unlike the rights of a beneficiary under a will in the unadministered estate of the testator; Official Receiver in Bankruptcy -v- Schulz ( 1990) 17 CLR 306 at 313. In the end, however, the rights in question fall into one category rather than another on account of their own particular characteristics. In my view then the transferable site area in question does not form part of the fee simple of the land the subject of F.A.I.'s registered mortgage. I am unable to accept that the right to nominate 11 some site 11 in terms of Cl. 22( 11 )(a) is an 0 incident of the estate of the registered proprietor or unseverable from the land. This is largely for reasons already canvassed. The right is a con~equence of the ~/I \_;../) Town Plan constituting a building which happens to be on the site of a Heritage Building. The Town Plan contemplates the. transfer of the right from one site to another not necessarily in the same ownership. The right is, however, a proprietary right capable of assignment and transfer, see A.C.T.V. -v- Commonwealth (1972) 108 ALR 579 at 615 as to assignability in addition to the cases earlier cited. lt follows in my view that F.A.I. is not entitled to the relief it seeks. -- 14 of 15 -- Q I o • 14 The characteristic I have attributed to the transferable site area in my view founds the conclusion that it is capable of being acquired as A.G.C. contends it has · acquired it. A.G.C.'S charge is over "all that right, title and interest of (Ermond) in and to the transferable site area." I should have thought that was sufficient to attach the security to the right to nominate. In my view, therefore, A.G.C. is entitled to a declaration in ter~s of paragraph 1 of its summons and to its costs. () 0 -- 15 of 15 --