Australian Property Law

 IntroductionDue 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) – IndefeasibilityNotwithstanding 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 indefeasibilityImmediate 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 1967Facts: 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 purchaserfor 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’stitle 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 th