Australian Property Law

 Introduction Due to the uncertainty, unreliability and complexity that existed old system title and its dependency on chain of title deeds a new system of registration was created that eventually evolved into the Torrens title. In NSW the Torrens system was introduced by the Real Property Act 1862. Land now under the Torrens system would have been converted to it from the old system. Principle of Indefeasibility

The principle of indefeasibility is the basic principle of the Torrens system. Indefeasibility means that the registered proprietor has title, which is conclusive. In Frazer v Walker this was expressed to mean immunity from attack by adverse claim of pre-registration defects. Key Provisions (RP Act)

Section 42(1) – Indefeasibility Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except:

a) the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land, (a1) in the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act,

b) in the case of the omission or misdescription of any profit à prendre created in or existing upon any land, c) as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and d) a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected: Provided that:

(i) The term for which the tenancy was created does not exceed three years, and (ii) in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years.

This section must be read in conjunction with * s40 – the manual/computer folio to be considered evidence of title, and that the land has been duly brought under the Act * s41 – dealings not effectual until recorded in the register * s43 – purchaser from registered proprietor not affected by notice * the main purpose of which is to prevent equitable principles from applying to registered land and to narrow accordingly the definition of fraud – Templeton v Leviathan * s44 – suing for specific performance

* s45(1) – bona fide purchasers or mortgagees for value protected from deprivation of interest (sometimes know as the ejectment section) * this leaves the purchaser open to an action for recovery of damages or ejectment or deprivation of their estate/interest if the vendor was registered through fraud/error or derived the property title through fraud/error * s118 – prohibits recovery of land from the person registered as the proprietor except as set out in the section

Deferred v immediate indefeasibility Immediate indefeasibility – means that a proprietor is protected as soon as they are registered, regardless of defects in the transferor’s title. - eg. A is the RP, B steals A’s Certificate of Title and posing as A sells the land to C, giving C the COT and transfer. C, who is ignorant of the fraud, becomes registered as RP. On registration, C acquires a title that A cannot set aside. C’s title is ‘immediately indefeasible.’ A is left only with a personal action against B or if certain conditions are met, a right to compensation from the assurance fund

Deferred indefeasibility – if the instrument of the transferor is a nullity, the transferee is unable to defeat a claim by the true owner, here indefeasibility is deferred to the next person to be registered as owner of the land. - eg. A could set aside C’s title as A could not lose the right to have their name restored to the register as RP until both C had become registered and a third party (D) acting on the existing state of the Register (showing C as the RP) had purchased bona fida for value from C and became registered. C’s title though not itself indefeasible, would form the basis of an indefeasible title in D.

Until 1967, deferred indefeasibility was the preferred approach in Australia, for reasons outlined in Gibbs v Messer and Clements v Ellis.

The case of Frazer v Walker broke from this doctrine, affirming immediate indefeasibility as the orthodox approach. ------------------------------------------------- Frazer v Walker 1967 Facts: Mrs Frazer forged her husband’s signature to obtain a new mortgage on their jointly owned property and discharged the old one. A (Frazers) B (Radomski – reg’d mortgagee) C (Walker – reg’d mortgagee) Held: Upon registration of the mortgage the M’gee obtained an immediate indefeasibility of title.

Walker got an indefeasible title, as he was an innocent party not at all involved in fraudulent activity. The result would be the same if Walker had become aware of the fraudulent behaviour after registration. But if Walker knew of the existence of fraud before registration then it would fall under the fraud exception to indefeasibility under s42 Reasoning: Upon registration of the mortgage, the mortgagee obtained an immediately indefeasible title. * General principle is that registration confers upon a registered proprietor a title to the interest, which is immune from adverse claims, other than those specifically, exempted

* Indefeasible title can be acquired by the registration of a void instrument, (through overthrowing the earlier authority of Clements.) * Now established that in the absence of fraud (must be fraud by the registrered Proprietor) or some other statutory exception, an indefeasible title can be acquired by virtue of a void transfer. * This however in no way denies the right of P to bring against a registered proprietor a claim in personam founded in law or equity * Compensation under the assurance fund is available for loss interests under the Torrens System, which would not have been sustained under old system. But only one innocent party is entitled to compensation

Decision was applied in Australia in Breskvar v Wall


According to B, the intention was for the transfer to act as a security rather than a genuine transfer. Presumably is the loan was not repaid Petrie would have the property transferred to him. However P fraudulently enters the name of his grandson, Wall in the blank section of the transfer. Registration of this void instrument was secured. Wall then sold the land to Alban, a bona fide purchaser who had no knowledge of the Breskvar’s claim. Before this transfer had been registered, B’s tried to prevent any further dealings by lodging a caveat.

Principle: The conclusiveness of the COT is definitive of the title of the RP…Consequently a registration, which results from a void instrument, is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void. Held:

* B (RP) blank transfer P (fraudulent) Wall Alban (bona fide purchaser for value without notice) * The register is conclusive of the registered proprietors’ title except in the case of fraud. ‘In the case of fraud’ was interpreted as meaning when registration was obtained by the proprietor’s own fraud. [Assets Co Ltd v Mere Roihi [1905] In this case Alban had not acted fraudulently. * If the land had not been sold to Alban the Breskvar’s could have brought an action to defeat Wall’s title because of the fraud of his agent, but the transaction between Wall and Alban prevented this. The Breskvar’s would have been able to defeat Wall’s title, as it was not indefeasible under s42 of the RPA. Rather Wall had a defeasible title, which was god against the world except as against the Breskvar’s.

* Frazer v Walker established that indefeasible title can be acquired by the registration of a void instrument; through overthrowing the earlier authority which had the opposite outcome (Clements) Now established that in the absence of fraud (must be fraud by the RP) or some other statutory exception, an indefeasible title can be acquired by virtue of a void transfer. In this case registration was not a nullity and title could be passed to Wall: Frazer v Walker but defeated by the Breskvar’s * Both Alban and the Breskvar’s were not registered and therefore had competing equitable interests. * In the case of competing equitable interests it becomes a priority issue Two available courses of action

(1) Apply the principle of Rice v Rice: First in time and surrounding circumstances. * Generally the earlier interest has a stronger claim than the later: qui prior est tempore potior est jure, ‘whoever is first in time is in the stronger position in law.’ Ultimately however Equity will determine priority by seeking the ‘BEST EQUITY.’ If equitable interests are equal (determined by the circumstances of the case eg conduct etc) the first in time principle will only apply if no other sufficient ground exists for preferring one interest over the other.

Qui prior is a principle of LAST RESORT. * So in the Breskvars case the priority of their right in time will only by lost by some postponing conduct on their part, which contributed to the assumption, false as the event proved, upon which the holder of the competing interest, Alban acted when that equity was created.’ * The postponing conduct on behalf of the Breskvars was that by executing a memorandum of transfer without their name they had armed Petrie with the power to deal with the land as owner and this enabled Petrie to pass title to Alban.

The situation was governed by the principle in Lapin v Abigail where ‘the agent exceeds the limit of his authority but acts within the apparent indicia.’ * Consequently the Breskvars lose their priority and their interest is postponed to equitable interest of Alban as a purchaser bona fide for value and without notice.

(2) Mere equity vs Later Equity: In a competition between a mere equity and a later equitable interest, the equitable interest prevails if (and only if) acquired for value and without notice of the mere equity: Latec Investments Ltd v Hotel Terrigal (1965) The ‘mere equity’ in this case would be ‘a mere equity of redemption’ to have the interest set aside for fraud (a right to ask the court to compel Wall as the holder of the registered title to deal with it in such a way that they would obtain no benefit from the fraud that had been practiced on the Breskvars).

Alban’s equitable interest prevails however as his interest arises out of the contract for the purchase of the land made with the registered proprietor of the land without notice of any defect in title and completed by the payment of purchase money and the obtaining of a transfer.

NB: The result would have been different in NSW RP takes free of any interest of unregistered interests under the notice provision of s43

The dominance of immediate indefeasibility has been bolstered further with the extension of the definition of fraud to include ‘a fictitious person’ (ie a forged/void document?) in s3(1) RP Act. What will attract indefeasibility?

Indefeasibility will not attach to every provision in the registered instrument. Indefeasibility of terms was considered in Mercantile Credits Ltd v Shell Co of Australia Ltd, where it was decided that some terms of a lease are indefeasible while others are not.

Leases: -------------------------------------------------

Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) NB Leases: question of the indefeasibility of terms relating to the renewal of a lease arose and the case demonstrated how some terms of a lease are indefeasible and others are not. – one’s that touch and concern the land (is it personal or does it run with the land?) Facts: Shell is the lessee of land at Adelaide (owned by Celtic Agencies) on which is erected a service station and garage.

Mercantile is the mortgagee of that land. Celtic owner registered mortgage to Mercantile on 3 August 1973 Registered lease to Shell on 30 August 1969 (first in time) Lease contained two covenants under which the lessee was entitled upon notice to renew the term for 3 successive periods each 5 years. The right of the renewal was exercised and the lease was extended so that it would expire in 1974 (was registered in 30 August 1969) the mortgage in favour of Mercantile was registered on 3 August 1973. Subsequently Shell gave notice to Celtic who executed an extension of the lease for another 5 years in registrable form. This extension has not been registered.

Celtic defaulted in its obligations under the mortgage and Mercantile gave notice of its intention to sell the land. key question is whether the title arising from the right to exercise the right of renewal is better then that of the rights under a mortgage. It is not in doubt that the lease is entitled to priority over the mortgage (since the lease was registered first). The appellant however contended that the exercise of renewal was not an integral part of the lease. Principle: a covenant which touches and concerns the land will attract indefeasibility but a personal right created by a covenant, even if that covenant were registered in an instrument, will not attract the benefits of indefeasibility (as it is considered collateral). Held:

GibbsJ * Whether the option to renew was indefeasible depended on whether it received indefeasibility by virtue of the registration of the head lease or whether the leases arising from the existence of the option needed to be registered independently in order to attract indefeasibility. (Was the option to renew a separate interest) * If the right of renewal created by the covenant can rightly be said to be part of the estate or interest specified in the lease (‘touch and concern the land’ not a personal right) OR if it is a right whose registration is authorised by the Act it will take priority over the mortgage which was subsequent.

* Consider the nature of the covenant for renewal such a covenants runs with both the land and the reversion. The right of renewal is an incident of the lease and directly affects the nature of the term itself. However, it is clear that when the right is exercised, a ‘new lease, a new demise’ comes into being * Q whether the right of renewal gained priority over the mortgage by reason of the prior registration of the lease is not an easy one.

(1) on the one hand it may be said that the right of renewal is an integral part of the estate vested in the lessee and upon registration obtains the same protection as the term itself. Pearson v Aotea District Maori Board [1945](NZ) (2) on the other hand, it might be said that what the lessee seeks in substance is to have priority according to the new lease which came into existence as a result of the exercise of the right of renewal, and that the new lease itself is not registered and gains no priority because it has its origin in a right conferred by a registered instrument.

* The ‘right of renewal is so intimately connected with the term granted to the lessee which it qualifies and defines, that it should be regarded as part of the estate or interest which the lessee obtained under the lease and on registration is entitled to the same priority as the term itself.’

* Assisted to this conclusion by two further considerations: (1) it would be unjust and inconvenient if a right to renew contained in a registered lease could be defeated by the subsequent registration of a mortgage and (2) it is difficult to attribute to the legislature the intention that rights of renewal which are a common incident of leases should be liable to be defeated in this way * According to Gibbs J a covenant which touches and concerns the land will attract indefeasibility but a personal right created by a covenant, even if that covenant were registered in an instrument, would not attract the benefits of indefeasibility.

* Because the right of renewal created by the covenant was indefeasible as part of the estate/interest it took priority over the mortgage which was subsequently registered (but if the right of renewal had been a personal right, then it would not have) * Distinguished a right for renewal (option to renew) with the right to purchase, which does not attract the benefits of indefeasibility because it ‘does not directly affect or concern the land’ and it is ‘not a provision for the continuance of the term, like a covenant to renew.’

* But in NSW under s 53(3) of the RPA if a covenant to purchase has been specifically included in the registered lease, indefeasibility will attach. * Stephen J What will be registered and protected by that registration is aright conferred by covenant which touches and concerns the land and runs with the land; …forming a part of the lessee’s interest in the land * Barwick CJ Because of the specific enforceability of the right to renew...it ran with the land and therefore the covenant attracted indefeasibility.

In NSW s53(3) RP Act covers the positions of covenants to purchase. The section states that if the covenant to purchase has specifically been included in the registered lease and that option is exercised, the lessor is bound to execute a transfer of the land to the lessee. The effect of this section is to make such an option indefeasible.

Note that if there is a void (or illegal) instrument, this will be cured by registration (assuming its bona fide) however a separate question arises to whether or not the rights contained in the void, but registered, instrument are indefeasible. This question was answered in Lehrer’s Case where the court said that registration would not provide the benefits of indefeasibility to an interest if the interest were contained in a provision of a registered instrument, which is intrinsically uncertain. Or as said in Travinto Nominees v Vlattas if there is an option to renew in a lease that was rendered illegal by statute, registration does not result in the validity of that option.

Re Options to Renew - generally speaking if an option is part of registered lease it will be protected by indefeasibility and if chose to exercise option but don’t have it registered still will be protected by indefeasibility by the earlier lease. (Re Eastdoro Pty Ltd – Queensland case).

Section 36(11) RP Act – gives the effect that once registration has occurred “a dealing shall have the effect of a deed duly executed by the parties who signed it”. In the case of forgery, the party has not actually signed it and therefore has not duly executed it so it is not a deed that has effect. Therefore if a void instrument is registered the instrument has as a shell receives the benefits of registration while the covenants contained within it are unenforceable (this is because covenants operate under general law where void instruments have no effect). -------------------------------------------------

Karacominakis v Big Country Developments (2000) Facts: BC acquired land and planned a staged development. BC entered into a lease, which was then assigned. When the third assignee defaulted on rent BC claimed arrears in rent and damages for repudiation of the lease. The assignee sought to rely on a mortgage that was made as a prior encumbrance was an unauthorised alternation to the lease. The Lessee had no knowledge of the alteration when the lease was registered. The lessee argued that it was void according to Pigot’s Case (at common law if a deed is altered materially after execution it would be rendered void) Therefore if the instrument was void the rent covenant could not be enforced despite registration.

Re-raised the use of indefeasibility of specific provisions in a registered instrument. Dealt with the same question as in Travinto Nominees: Are the ordinary covenants in the lease enforceable by the parties notwithstanding that the instrument, apart from the effect given to it by registration, is expressed to be void and illegal?

Held: BC was entitled to enforce the rent covenant in the lease, According to Giles JA registration created entitlements beyond those recognised as being created by personal covenants. Registration gave validity to the rights under the lease made void by statute, at least in so far as they related to the payment of rent, an essential term of the lease.

‘Payment of the agreed rent is an essential part of the transaction between the lessor and the lessee. The covenant to pay rent is a condition upon which the leasehold interest is held and intimately related to the lessee’s title created upon registration. BY taking up concepts held in Travinto and Mercantile Credits it was found that its connection with the continuance of the lessee’s interest in the land, it defines and delimits that interest. Mortgages:

If a loan agreement is a forgery and no money has actually been advanced to the person shown as the M’gor then there is no debt secured by the mortgage – this is the personal obligation, which is separate from the indefeasible interest which is created via registration.

The threshold question is to identify on a proper construction of the instrument securing the loan what debt the mortgage secures - Chandra v Perpetual Trustees -------------------------------------------------

Yazgi v Permanent Custodians Ltd (2007) Facts: Wife was jointly registered with her former husband as proprietors of their home. 6/3/04 a mortgage was registered to PC specifying the husband and wife as M’gors. The husband had forged the wife’s signature on bother the mortgage and the loan agreement, which was a ‘secured agreement’ for the mortgage. Wife had no knowledge and received no moneys Question: whether any moneys owing under the mortgage or loan agreement were secured on the wife’s interest in the property. Held: it is necessary to exam the terms of the mortgage to determine the scope of the M’gees estate or interest in the land.

Here it was in clause 6 which entitled the wife to a discharge of her part of the mortgage as he was no loan agreement on her part. Principles: It is common ground that because of the forgery, the personal covenant contained in the mortgage was not enforceable – Grgic v ANZ * Registration of the mortgage gives PC an indefeasible title in respect of the mortgaged interests, notwithstanding the forgery - Breskvar * The effect of registration does not give the registered titleholder an indefeasible title in general terms;

it is necessary to ascertain the extent of the registered titleholder’s interest When registered what is attained it an estate or interest in land. Registration DOES NOT validate al the terms/conditions of the instrument that is registered. It validates ONLY those which DELIMT OR QUALIFY the estate/interest are that are NECESSARY to assure that estate/interest to the registered proprietor – PT Ltd v Maradona P/L Volunteers

The question here is whether or not a volunteer should receive the benefits of indefeasibility? This question has evolved from the equitable tenant that equity will not assist a volunteer. RP Act doesn't talk about volunteer - argument that it may imply it through sections on “purchasers for value”.

The decision in Bogdanovic v Koteff was the first NSW case to accept the interests of the volunteer. ------------------------------------------------- Bogdanovic v Koteff (1988) Facts: Mrs B (appellant) lived in Mr Koteff’s house and paid him rent for the part of the house they used. By his will, Mr Koteff made his son, Mr N Koteff the sole beneficiary. Mr N K becomes the registered proprietor and he sought possession of the whole land from Mrs B. She argued that she was the holder of an unregistered life estate created by the testator, Mr K and was allowed to stay in the house until she died. Principle: In NSW volunteers are not an exception to indefeasibility.

A volunteer, like a bona fide purchaser for value is afforded indefeasible title upon registration due to the doctrine of immediate indefeasibility Held: Found in favour of the beneficiary under the will, Mr N Koteff, who was a volunteer, as upon registration he obtained an indefeasible title which defeated Mrs B’s unregistered life estate holder’s interest. In the court’s view any argument that a volunteer’s registered title could be no better than his predecessor’s was unable to stand in the face of the concept of ‘immediate indefeasibility’ enunciated by the PC in Frazer and adopted by the HC in Breskvar Issues raised:

* Priestley JA made reference to the possibility that notice by Mr N Koteff might have had a bearing on whether the life estate was enforceable against him. But it was found in Frazer v Walker that s43 RP Act must be read as subject to s42, which means that notice must be irrelevant to the indefeasibility acquired on registration.

Notes:

* Mrs B’s case is similar to that of Ogilvie v Ryan [1976]. Mrs B has an Ogilvie v Ryan equitable interest under constructive trust. As between Mrs B and Koteff (snr) she has an enforceable right in personam as his actions created the constructive trust * Should Mr K (jnr) have taken the property free of Mrs B unregistered equitable interest? What if Mr K (snr) had borrowed money from a neighbour (creating and equitable mortgage) and then passed away. Should the son not pay out the equitable interest?

In other states like Victoria, volunteers are an exception to indefeasibility as in King v Smail. Adam J held that the scattered references to purchasers for value clearly suggested that the Act meant to treat volunteers differently. In Rasmussen v Rasmussen [1995] Coldrey J followed King v Smail and states that the indefeasibility provisions needed to be considered by reference to an ‘overriding principle of fairness.’ -------------------------------------------------

Rasmussen v Rasmussen [1995] Claim that a pre-existing constructive trust could not be enforced against H, because of the indefeasibility provisions. It was argued that notice of provisions should not apply to volunteers. (It was accepted there was no fraud within the fraud exception to indefeasibility). This case distinguished between volunteer and purchase for value in respect to indefeasibility.

The law in Victoria is different to the law in NSW. There is NO uniform answer between states; this is partly due to the different wording in the states respective statutes.

The view that volunteers obtain indefeasibility of title upon registration is now confirmed by the HCA in Farah Construction P/L v Say-Dee P/L. In the joint judgement it was said, “registered proprietors would prevail over others even if they were volunteers”.

NOTE: New section 42(3) RP Act -------------------------------------------------

Regarding the ‘estate of a registered proprietor paramount’: -------------------------------------------------

------------------------------------------------- (3) This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.

NOTE: New section 56(C) RP Act ------------------------------------------------- 56C Confirmation of identity of mortgagor ------------------------------------------------- (1) Mortgagee must confirm identity of mortgagor Before presenting a mortgage for lodgment under this Act, the mortgagee must take reasonable steps to ensure that the person who executed the mortgage, or on whose behalf the mortgage was executed, as mortgagor is the same person who is, or is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates. -------------------------------------------------

------------------------------------------------- (2) Without limiting the generality of subsection (1), the mortgagee is to be considered as having taken reasonable steps to ensure the identity of the mortgagor under subsection (1) if the mortgagee has taken the steps prescribed by the regulations. -------------------------------------------------

------------------------------------------------- (3) Record-keeping requirements A mortgagee must keep the following for a period of 7 years from the date of registration of the mortgage under this Act (or for such other period as may be prescribed by the regulations): -------------------------------------------------

(a) a written record of the steps taken by the mortgagee to comply with subsection (1), -------------------------------------------------

(b) a copy of any document obtained by the mortgagee to comply with subsection (1). -------------------------------------------------

------------------------------------------------- (4) Mortgagee to answer questions and produce documents The Registrar-General, in determining whether or not this section has been complied with, may at any time require the mortgagee: -------------------------------------------------

(a) to answer questions in relation to the steps taken by the mortgagee to comply with subsection (1), and ------------------------------------------------- (b) to produce for inspection any records kept under subsection (3). -------------------------------------------------

------------------------------------------------- (5) If a person fails to comply with a requirement made under subsection (4), the Registrar-General may: ------------------------------------------------- (a) in relation to a registered mortgage-make a recording in the Register, with respect to the relevant land, to that effect, and ------------------------------------------------- (b) in relation to a mortgage that has not been registered-refuse to register, or reject, the mortgage in accordance with section 39 (1A) or refuse to make any recording or entry in the Register or take any other action in respect of the mortgage. -------------------------------------------------

------------------------------------------------- (6) Cancellation of recordings in the Register The Registrar-General may cancel, in such manner as the Registrar-General considers appropriate, any recording in the Register with respect to a mortgage if the Registrar-General is of the opinion: -------------------------------------------------

(a) that the execution of the mortgage involved fraud against the registered proprietor of the mortgaged land, and ------------------------------------------------- (b) that the mortgagee: ------------------------------------------------- (i) has failed to comply with subsection (1), or ------------------------------------------------- (ii) had actual or constructive notice that the mortgagor was not the same person as the person who was, or was about to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates. -------------------------------------------------

------------------------------------------------- (7) Before cancelling a recording of a mortgage in the Register under subsection (6), the Registrar-General must give notice of the proposed cancellation to the mortgagee and may also give notice to any other person that the Registrar-General considers should be notified of the cancellation. Section 12A (2) and (3) apply to and with respect to a notice given under this section. -------------------------------------------------

------------------------------------------------- (8) Application to transferee of a mortgage This section applies to the transferee of a mortgage in the same way that it applies to a mortgagee (that is, requiring the transferee of a mortgage to take reasonable steps to ensure that the person who executed the mortgage as mortgagor is the same person who is, or is about to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates). Accordingly, a reference in this section to: -------------------------------------------------

(a) the presentation of a mortgage includes a reference to the presentation of a transfer of mortgage, and ------------------------------------------------- (b) the mortgagee includes a reference to the transferee of the mortgage, and ------------------------------------------------- (c) the date of the registration of the mortgage includes a reference to the date of registration of the transfer of mortgage.

This section requires that before presenting a mortgage for lodgment, the mortgagee must take reasonable steps to ensure that the person who executed the mortgage is, or is to become, the registered proprietor of the land that is to be mortgaged. Exceptions to Indefeasibility

There are several exceptions to indefeasibility, express and otherwise. The following are listed in s42(1) of RP Act * * Fraud * Other estates/interests * Prior folio recorded interests * Omission or misdescription of easements * Omission or misdescription of profits a prendre * Wrong descriptions of parcels * Short term tenancies

Indefeasibility of title may also be not apply by operation of * * Rights in personam (as permitted in court) * Adverse possession * Overriding statutes * Volunteers * Grant reservations and conditions (which may be provided in other statutes) * General power of the Registrar General to correct registrar Fraud Exception:

S42 states that the ‘the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except’.

S43 adds that ‘the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.’ Notice is excluded from the definition of fraud. This implies a NARROW DEFINITION (but not defined in act) * Registered proprietor must have been guilty of fraud. * Must be something in the nature of “personal dishonesty and moral turpitude” Butler v Fairclough

NOTE: that registered interest defeats an earlier unregistered interest even when the registered proprietor has constructive notice. BUT this doesn't mean that if fraudulent conduct is accompanied with the notice there will be no consequences

Definition of ‘FRAUD’ by the High Court * According to the HC ‘fraud’ in the context of the Torrens System means ‘actual fraud’ Bahr v Nicolay (No2) or ‘actual fraud, moral turpitude’ [Butler v Fairclough] or something ‘more than mere disregard of rights of which the person sought to be affected had notice.’ - Wicks v Bennett * Assets Co v Roihi – must be actual fraud, cannot be constructive, that is dishonesty of some sort, but the mere fact that fraud could be found if a search was conducted more vigilantly that the purchaser did does NOT itself prove fraud, but if the suspicions were aroused but he abstained from making inquiries then fraud may properly be ascribed to him i.e WILLFULL BLINDNESS is equivalent to actual fraud. * Requires dishonesty in sense of a willful and conscious disregard and violation of the rights of others - Waimiha Sawmilling v Waione Timber (NZCA) * From Stuart v Kingston the court went as far to say, “Fraud will no longer be imputed to a proprietor registered under the RPA unless some consciously dishonest act can be brought home to him.’ * Being negligent or not taking care in making enquiries would not constitute fraud - Pyramid Building Society v Scorpion

REMEMBER: Notice of prior interest is equitable fraud, which is not enough to amount to fraud for the purposes of Torrens registration/indefeasibility.

RELEVANCE TO INDEFEASIBILITY: 1. Where the present registered proprietor has become registered as a result of an earlier registered proprietor being defrauded and consequently losing his or her interest. 2. Where the present registered proprietor fraudulently seeks to rely on his other registration to defeat an earlier unregistered interest 3. Where the fraud is perpetuated against the Reg-Gen themselves -------------------------------------------------

Loke Yew v Port Swettenham Rubber Co Ltd [1913] Plaintiffs who are the holders of unregistered interests who allege fraud on behalf of present registered proprietor Facts: Eusope was the registered proprietor of 322 acres of land. 58 acres of this land was held by Loke Yew under unregistered documents giving him title ‘forever.’ In 1910, the respondents negotiated for the purchase of Eusope’s land on the condition that Loke Yew’s land remained undisturbed. The respondent’s agent, Mr Glass, gave a verbal assurance to this effect and also signed a document confirming this. On the strength of that assurance, Eusope signed the transfer of the land. The respondents registered as proprietors of the whole 322 acres of the land. Respondents offer to buy Loke’s land for a sum substantially less than the value of his land. Upon his refusal they attempt to dispossess Loke of all his land. Loke counterclaimed for a declaration of his rights. PC held that there was clearly Fraud on Mr Glass’s behalf. Found that the statement of present intention by Mr Glass was falsely and fraudulently made for the purpose of inducing Eusope to execute a transfer of the 322 acres.

Held: * Port Swettenham Rubber had made statements for the purpose of inducing Eusope into executing the conveyance and these statements were “False and fraudulently made.” * Court ordered a transfer of the 58 acres to Loke Yew (not a direct rectification of the register but rather directed to the company itself – in personam order)

Principle: * Where assurances are given for the preservation of an acknowledged, unregistered interest and those assurances have served as an inducement but were dishonest from the outset = fraud * Position would be different if third parties were involved * Exemplifies that the fraud must be actual fraud not constructive fraud (unconscionability)-ie notice of interest would be insufficient

In the scenario where there is actual knowledge by the registered proprietor that the instrument that is being relied on to effectuate registration has been falsely attested or improperly executed then this is considered an attempt to defraud the Reg-Gen – Australian Guarantee Corporation v De Jager.

Fraud and Agency: In cases involving fraud by an agent, the fraud becomes the registered proprietor's fraud only if the agent’s knowledge can be imputed to the principle. -------------------------------------------------

Assets Co Ltd v Mere Roihi [1905] HELD: knowledge of the fraud (not the interest) or suspicion of fraud from the evidence but choosing wilful blindness will also constitute fraud

From the PC’s explanation in Assets Company case of the meaning of ‘fraud’ in the TS it is clear that the fraud must be “brought home to” the registered proprietor whose title is sought to be impeached or to his/her agent -------------------------------------------------

Schultz v Corwill Properties (1969) Two situations 1) RP has become registered through the agent’s fraudulent activity: In accordance with the general rule of agency law, the agent’s activity within the scope of the agent’s actual or apparent authority bind the registered proprietor so as to male the principal’s title defeasible of fraud: Peddie v Stein (1988)(NSW) even though the agent was acting fraudulently and in furtherance of his own interests 2) Where the agent has knowledge of the existence of fraud in the course of the transaction (or is taken to have knowledge of fraud because s/he has deliberately abstained from making inquiry for fear of finding out fraud; Young v Hoger [2000] The agent’s knowledge is imputed to the RP because the law presumes than an agent communicates to the principal all information coming to the agent’s knowledge in the course of the transaction; Schultz v Corwill Properties (1969)(NSW) There is an exception if the information sough to be imputed to the principal is knowledge of the agent’s own fraud or if the agent acquired the information while a party to fraud, then the principal is permitted to give evidence to rebut the presumption of communication and prove ignorance of the matter. If successful in rebutting the presumption of communication, the principal’s title cannot be upset on this ground of fraud. What is required in the context of fraud is knowledge of fraud; mere constructive notice by the agent or the principal that fraud exists is not sufficient to impeach a registered title; Schultz v Corwill Properties (1969)(NSW)

SUMMARY: (1) RP becomes registered through the agent’s fraudulent activity (“respondent superior”) - was conduct within actual or apparent authority? (2) Agent has knowledge: Must be able to impute. Can do that where (1) agent had duty to communicate any matter to principal and (2) agent not a party to fraud. but if fraud includes the agent’s own fraud on the principal then the principal permitted to give evidence to rebut the presumption that she/he/it had knowledge -------------------------------------------------

Russo v Bendigo Bank Ltd (1993) Facts: R’s son forged her signature on a mortgage on her home to secure a loan to a company he and his wife controlled. The law clerk (G) at the M’gees solicitors’ office falsely attested Mrs Russo’s signature on the mortgage. G didn't see R sign the mortgage; she was unaware of the forgery. M’gees solicitor lodges the mortgage without knowledge of the forgery/false attestation. The bank obtained an order for possession of the property and Mrs Russo appealed, arguing that the bank’s registered mortgage was defeasable for fraud.

Held: Bank Should not be held liable for any impropriety because there was no such fraud for the purposes of the act (s42(1)) for which the solicitor was himself responsible or responsible indirectly by reason of the activities of his employee.

Reasoning: Best definition of fraud from Salmond J in Waimiha Sawmilling: ‘The term ‘fraud is not used here in its most restricted sense as including merely deceit, nor in its widest sense as including the constructive or equitable fraud of the Court of Chancery. It means dishonesty – a wilful and conscious disregard and violation of the rights of other persons’.

Fraud can also be against a previous unregistered interest (not just a registered interest). To take the narrower view of fraud, as Australian courts do, is to be more protective of a registered interest. * Mere knowledge of an unregistered interest is not fraud HOWEVER, such knowledge in conjunction with other circumstances may be * Knowledge of an unregistered interest and registering anyway, knowing that this will defeat the prior interest, is not fraud – Wicks v Bennett

BUT * Knowing that the registered owner is acting in breach of trust or is wrongfully destroying a prior interest does amount to fraud. * Fraud will be established if the purchaser had actual/certain knowledge of the breach of trust or wrongful deprivation * It is fraud for a purchaser to collude in transfer designed o cheat a person out of a known existing right or to engage in a deliberate and dishonest trick to cause the person not to register the interest – Waimiha Sawmilling * Is it fraud for a purchaser, having agreed to honour the rights of a prior interest holder, to then change their mind after registration? – HCA divided on this Q of dishonest repudiation for the purposes of obtaining title.

*NB: the fraud that activated the indefeasibility exception is understood generally as being limited to the period LEADING UP TO REGISTRATION!

The In Personam Exception Personal rights- legal or equitable: Note the text calls them equitable rights but they can be legal as well.

* Frazer v Walker: a person cannot rely on being the registered proprietor of land to avoid the normal application of the law of contract. * Indefeasibility of title does not entitle a registered proprietor who enters into a contract to sell the land and refuse to complete that contract or a trustee to evade the equitable obligations owed to a beneficiary. * This exception to indefensibility is not limited to obligations voluntarily undertaken by the registered proprietor but also to obligations imposed by equity in its inherent jurisdiction to relieve from unconscionability. * The non-fulfillment of legal obligations under a legal lease may give rise to a right in personam, which may, in turn, be enforced against the register proprietor. * Indefensibility cannot be used as a tool of oppression those who have relied on the obligations of conscience into which registered proprietors of interests such as fee simple estate mortgage or lease have entered.

Examples taken form gray: * A is the registered proprietor of Torrens land * A enters into a contract with B for sale of the land * A indefensibility cannot be used to defeat B’s claim arising out of contract. Instead the vendors has created an interest by virtue of the contract of sale and the court would act to ensure that the vendor upheld the obligations which he or she created.

* A is the trustee of real property. As trustee, A has rights and duties, which must be fulfilled. These include a duty to hold the trust property on behalf of the beneficiaries B,C and D. * A is not permitted to assert that as the register proprietor he or she can simply rely on the indefensibility of title arising from registration and ignore the obligations that he or she owes under the trust. -------------------------------------------------

Bahr v Nicolay (No 2) (1988) FACTS * The Bahrs could not afford to develop their land, so they: * sold it to Nicolay on terms that they could lease it for a number of years, with an option to purchase for an amount specified in Cl 6. * Nicolay subsequently sold to Thompson with a clause (Cl 4) recognising the Bahrs right to repurchase. * Thompson also told the Bahr’s that he would recognised the clause. * When the Bahrs attempted to repurchase, Thompson refused. * The Bahrs took it to the WA Supreme Court and lost (presumably because of the principle of indefeasibility combined with the fact that Thompson was the registered proporietor) * Bahr appealed to the HC.

ISSUE * Does the principal of indefeasibility defeat the Bahr’s right? * Does the clause construe as a binding agreement, or as mere notice of a prior interest (and remember that notice of a prior interest by itself does not constitute fraud under s43 RPA) * What type of fraud is needed to give rise to an in personam claim?

HELD * Appeal allowed. * In order to defeat Thompson’s claim to the property, the Bahrs would have to show a fraud that goes beyond a mere fraud constituted by notice of their interest. * “actual fraud, personal dishonesty or moral turpitude lie at the heart” of the two sections. (for our purposes, s42 and 43 RPA) * In this case it was argued that as Thompson was not committing fraud when he originally agreed to honour the Bahr’s right – he genuinely wanted to uphold it, but later repudiated – his actions do not come under the fraud exception seen in cases like Loke Yew. The court disagreed with that, saying that the indefeasibility sections should be construed narrowly, and the exceptions broadly.

* “the repudiation is fraudulent because it has as its object the destruction of the unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer”.

* The matrix of facts tends to indicate that Cl 4 of the Nicolay/Thompson agreement was intended to be more than mere notice, but created actual rights enforceable against Thompson. * This is reflective of a trust relationship.

* Thompson held the property in constructive trust for the Bahrs, the repudiation of which constitutes fraud, allowing their equitable interest to take priority over Thompson’s registered interest.

Note that an in personum right is not simply a means by which any obligation of conscience may be enforced- there has to be cause of action. In the case above the court found that the agreement was intended to be more than mere notice- BUT the created actual rights enforceable against Thompson. * Grgic v ANZ Banking Group- Powell JA:

“I am of the view that the expressions ‘personal equity’ and right “ in personam” encompass only known legal causes of action or equitable causes of action, albeit that the relevant conduct which may be relied upon to establish ‘a personal equity’ or right ‘in personam’ extend to include conduct not only of the registered proprietor but also of those for whose conduct he is responsible, which conduct might antedate or postdate the registration of the dealing which it is sought to have removed form the register.”

* There is a fine distinction between a purchaser who becomes registered while knowing that another interest exists, and one who becomes registered while agreeing to be bound by the other interest. * Mere knowledge of a prior contract of sale has been held to not be indicative of dishonesty or fraud. (Hinds v Uellendahl (No 2) (1992) 112 FLR 222) * The conduct relied upon must be conduct of the registered proprietor or there agent, there is no in personam exception extending beyond that. (Conlan v Registrar of Titles) * Any conduct for which a court can provide the relief of reassigning the title can form the basis of a successful in personam claim. (Barwick in Breskvar v Wall) * Negligence does not give rise to any in personam claim. (Pyramid Building Society v Scorpion Hotels), one must establish willfull blindness or reckless indifference. -------------------------------------------------

Mercantile Mutual Life Insurance Co Ltd v Gosper (1991)

this case provides a rare example if a registered owner successfully asserting a personal equity to deprive a mortgagee of its interests acquired by registration of a forged mortgage. Facts * Mrs Gosper was the sole propritor of land * Unknown to her, her husband fraudulently arranged for further money to be borrowed form Mercantile Mutal Life. * The company understand that security for Mr Gosper loan was to be provided by way of Mrs Gosper’s property. * A variation of the mortgage was prepared and lodged with the RG, together with CoT and was subsequently registered, without the knowledge or participation of mrs Gosper or her agent.

Issue * Whether the mortgage can be enforced against Mrs Gosper land. Held * The company argued that it had not been a party to the fraud and it was not bound by Mrs Gospers interest. * Mrs Gospers argued that she had a right in personam enforceable against the company. The result of the enforcement of this obligation would, allow her to be pt back in the position she was in before registration of her husbands fraudulently created mortgage.

Mahoney JA: * The company could only register the mortgage because the CoT was delivered to it form Mrs Gospers mortgagee company * She did not hand over the certificate herself nor did she give authority for it to be handed over. * The mortgagee breached its obligations to Mrs Gosper and the variation of the mortgage should be set aside.

Note that the facts of this case are very specific. * This principal was distinguished in Ginelle Finance v Diakakis [2002] NSWSC 1032 where the forged mortgage is made immediately after the genuine one and there is no pre-existing relationship between the parties and their solicitors that suggest a custodian relationship.

The decision in Gosper has also been heavily criticised because it involves no knowledge of fraud on the part of the mortgagee and undermines confidence in the Torrens register. -------------------------------------------------

Vassos v State Bank of South Australia (1993) FACTS * The Vassos’ were registered tenants in common. * Land was subject to a registered mortgage to Sandhurst Tust as security for $130 000. * A third co-owner was authorised to refinance. * The Vassos’ discovered that their signatures had been forged on a registered mortgage to the Bank of SA. * Bank of SA was not a party to the fraud, nor were they aware of it. * The Vassos’ tried to claim a right in persomam against the bank.

ISSUE * Does the lack of consent to a mortgage create an in personam right against the mortgagee? * Can an in personam right be used to defeat the indefeasibility of the registered title in a case where the registered proprietor was not party to fraud?

HELD * Claim dismissed. * Lack of consent to a mortgage (in the case f forged signatures) does not give rise to an in personam right. * An in personam right cannot be used to defeat the title of the registered proprietor in the absence of any unconsionability on their part. * The fact that the bank could have –through reasonable inquiries – have discovered the fact of the forgery does not render its actions unconscionable.

This view of Hayne J: that a registered proprietor is not susceptible to an in personam action unless he or she is acting unconscionably or unconscientiously, has been endorsed by appellant courts in Gric v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202

There is a long-winded extracted form White v Tomasel [2004] 2 Qd R 438 as it is a Queensland case I’m not sure how applicable it will be so haven’t included it. It basically enforced a restitutionary equity in the absence of any unconsionability, arguing that the equitable obligation of restitution was enough to justify a court order to re-transfer the property. Special equity cases:

A little old fashion principle but the case of Yerkey v Jones (1940) the court accepted that it might in some circumstances be appropriate to give special protection to a wife who gives a surety for her husband. * Understandably there has been a great deal of controversy surrounding this principle and I’m not sure how useful in an exam it is going to be but, there is some argument that he position of the wives in this position are better protected by more general principle of equity * Kirby P commented in Warburton v Whiteley that the principle ‘perpetuated a stereotype which was out of harmony with today’s society, preserved the unequal position of women and conflicted with the development of statue law with which legal and equitable principles should keep in step’. However the principle could not be overturned at this level could only be over turned by the HC. * Subsequently the Court of Appeal took a more robust position that the principle had been subsumed by a more general doctrine of unconscionable conduct- Akins v National Bank of Australia (1994) NSW Con R * the special equity in favour of married women has been confirmed as part of Australian law as recently as 1998 when the HC decided Garcia v national Bank of Australia Limited [1998] that the principle was affirmed. * Equity favouring those suffering special vulnerability or disability was noted in the case of Commercial Bank of Australia v Amadio, illustrating the expanding scope of equitable remedies based on unconscionable conduct. * However the concern of equity to relive against unconscionable behaviour and harp practice may not sit well with the idea of indefeasibility of title. * If the person becoming registered is guilty of unconscionable conduct as the primary actor, the in personam exception to indefeasibility will answer the to repel reliance by such a person upon a registered title. * The position is more difficult when the person has a passive role. This is most likely to arise when the registered proprietor is accused of unconscionable behaviour arising from having received notice of the unconscionable conduct of a third party. * The issues raised by the conflict of two important cornerstones of the modern lw of property, a vigilant and expanding equity and the preservation of the notion of indefeasibility of title are difficult and complex. Personal equity and breach of trust:

* A register proprietor who obtains registration for a transfer in breach of fiduciary duty to the transferor cannot set up his or her register title to escape liability ( the book states a NZ authority (Tataurangi Tairuakena v Mua Carr [1927] NZLR 688) for this but the same principle was used in Barr v Nicholay No.2 for a constructive trust. * Barnes v Addy: in recent years parties have sought to ring proceedings against registered owners under this rule: * Concerns the liability of a stranger who deals with assets as trustee or fiduciary in breach of trust * First limb: where a person knowingly receives trust property, in breach of trust, holds that property subject to the trust * Second limb: arises where a stranger, although not receiving trust property, assist with knowledge in a fraudulent or dishonest design on the part of a trustee or fiduciary and therefore take the property as a constructive trust. (Also know as the accessory liability). * Farah Constructions v Say-Dee (2007) HCA consider the scope of the 2 limbs of Barnes v Addy. The court held that the breach of trust or fiduciary duty required under the second limb must be dishonest and fraudulent. * In relation to the requirement to prove the registered owner had knowledge of the breach, the court referred to the 5 categories of knowledge laid out by Peter Gibson J in Baden v Societe Generale: i. the perpetrator had actual knowledge, or

ii. was wilfully blind, or iii. wilfully or recklessly failed to make an inquires as an honest and reasonable person would make iv. with knowledge of circumstances which would indicate the facts to an honest and reasonable person. v. with knowledge of circumstances which would put an honest and reasonable person on inquiry. * The court said that categorys (i) to (iv) would suffice to establish knowledge under the second limb, but category (v) would not. * The first limb, which imposed a constructive trust on a person who acquires trust property with actual or constructed knowledge of the existence of the trust, is harder to reconcile with the indefeasibility provisions, particularly the notice provisions. * HOWEVER, the rule in Barnes v Addy is not a personal equity, and thus it is not available to be used in personam (Farah Constructions v Say-Dee (2007) HCA) * One consequence of the ruling in Farah Constructions v Say-Dee (2007) HCA is that a purchaser who has been “gazumped’- (do not ask me what this means!!) by the registration of a transfer to another purchaser cannot compel the latter to transfer the land to him or her, even if the second purchaser took with knowledge that the vendor had already sold the land.

Personal Equities and Mistake * The Australian Torrens Acts do not provide for rectification in the instance of mistake, that is a mistake is not an exception to indefeasibility. * However, personal equity may arise out of a party unconscionably utilising the unilateral or mutual mistake of a transferor to obtain registered title. (Majestic Homes v Wise) * Tutt v Doyle (1997) NSWLR, the vendor, to the knowledge of the purchaser, transferred more land than contracted for, and was granted an order of retransfer as it would be unconscionable for the purchaser to retain it. * In cases where more land has been transferred that was bargained for, relief under the personal equities exception will be available where the tranferee either knew of had reason to know, that the transferor was or might well be mistaken (Minster for Education and Training v Canham [2004] NSWSC. * State Bank of