Exceptions to Indefeasibility- Fraud PDF

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Torrens System (b) Exceptions to Indefeasibility (i)

Fraud

FRAUD – denies indefeasibility S 40 (3) (a) Land Titles Act: The title of a registered proprietor of land is not indefeasible … (a) in the case of fraud, in which case the person defrauded has, except as otherwise provided …. all rights and remedies that he would have had if the land were not registered land. Assets Co. v Mere Roihi Privy Council definition of fraud: • [B]y fraud in [the legislation] is meant actual fraud, that is dishonesty of some sort, not what is called constructive or equitable fraud … [T]he fraud which must be proved in order to invalidate the title of the registered proprietor for value … must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had 1

been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shown that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different and fraud may properly be ascribed to him. Key Points:  it must be actual fraud, not constructive or equitable fraud;  The fraud must be committed by the person taking the estate in land or his agents – and nobody else for the Torrens fraud exception to work;  Just knowing about somebody else’s interest in the land and still getting registered is not fraud – it might be in equity, but not in Torrens land;  You have to be able to attach the actions that constitute fraud to the person registering themselves as mortgagee, proprietor of the land, etc.  You can’t infer fraud because a person didn’t make more enquiries, or wasn’t particularly careful or vigilant;  However, if a person deliberately did not make inquiries because they were suspicious and didn’t want their suspicions confirmed that there was 2

fraud – then you can bring the fraud home to them.

Loke Yew (1913) • Company purchased large area of land and gave assurance to vendor that would not disturb possession of Loke Yew • When transfer went through the Rubber Co. (D) sought to eject Loke Yew • They had notice of another interest but this is okay. • Further evidence revealed a deliberate plan between Company and vendor to get Loke Yew off the land. • Held: because of this ‘deliberate dishonesty’ there was a deliberate plan to deceive Loke Yew • You need deliberate dishonesty, a deliberate plan to deprive someone of their interest for fraud.

Bahr v Nicolay (1988) • Bs are registered proprietors of land, agreed to sell to N • N leased the land back to Bs for 3 years • At end of 3 years Bs would be able to repurchase the land 3

• Now N = registered proprietor • N decided to sell the land to Thompsons • They verbally and in writing agree to honour agreement to Bs • After Ts become registered they also acknowledged Bs rights and provided written acknowledgement • Subsequently Ts said they had indefeasible title and were going to ignore Bs. • Issue: Could Ts claim indefeasibility? Were they guilty of fraud? Alternatively, would an in personam right succeed? • Re: fraud – HC split 2/2 • Mason and Dawson JJ. – accepted that fraud could exist after registration i.e.: Ts became RP that gave them indefeasible title, subsequent to this they acknowledged the B’s interest – they said post registration K = a fraudulent K I.e.: No difference to Loke Yew • Wilson and Toohey JJ. – adopted a more conservative aspect. Dishonest could only occur in the period leading up to registration • More conservative line usually adopted i.e.: can only challenge before registration • Case was ultimately decided on in personam exception to indefeasibility.

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Russo v Bendigo Bank Ltd [1999] 3 VR 376 • Bendigo Bank took a mortgage over the land of Russo. This was done to secure a loan made to the registered proprietor’s daughter and son-inlaw. The signature of Russo had been forged by the son-in-law, with a law clerk of the solicitor for the Bank attesting that Mrs Russo had signed in her presence. Obviously, this had not been the case. The law clerk gave evidence that she had been advised not to attest a signature unless that person was in her presence. • Mrs Russo submitted that the false attestation by the employee of the solicitor acting for the bank was sufficient to constitute fraud. • The Victorian Court of Appeal disagreed. There was no evidence that the law clerk was involved with the fraud of the son-in-law; furthermore it was not proven that that the employee knowingly put the mortgage documents on a path towards registration (contrast Australian Guarantee Corporation Ltd v de Jager [1984] VR 483, in which the employees knew the consequences of forwarding falsely attested documents to the Registrar). • Held there was no direct evidence of personal dishonesty or moral turpitude in the legal clerk so no fraud. • What if it had been an older, more experienced clerk – would it have been fraud then? Too 5

much uncertainty for the future – need a rule – either it is or it isn’t fraud.

Bank of South Australia v Ferguson (1988) 192 CLR 248  Ferguson was the registered proprietor of land and sought a loan from the Bank of South Australia.  The local bank manager provided Ferguson with cash flow documents and these, together with a statement of position, were forwarded to the regional office.  Ferguson had never seen the statement of position, and Ferguson’s signature was forged by the bank manager on that document.  Subsequently, Ferguson advised the bank that the value of his land for the purposes of security was $420–$450 per acre. The local bank manager suggested a far higher figure ($900 per acre), with which Ferguson disagreed.  ISSUE: Despite the disagreement of Ferguson, the relevant documents were resubmitted, indicating the higher value for the land. Was this fraud?  The High Court, reversing the decisions of the earlier courts, found that the mortgage of the bank prevailed. There was no fraud which 6

operated on the mind of Ferguson; accordingly, no exception to indefeasibility prevailed;  The fraud has to have operated on F’s mind and/or induced detrimental action by F – here, in the end, he got what he had wanted – a loan for $X – basically he can’t complain about that.

Cassegrain v Cassegrain (2015) 254 CLR 425  CC controlled Cassegrain Ltd and made it transfer property to himself and his wife, F as joint tenants  The transaction should never have occurred under company law  CC knows this and transfers his share of the property to F, so she now owns the property outright as sole owner  Can the company get the property back from her – she is the Registered Proprietor so it needs to find an exception to her indefeasibility  HC said there was no evidence that F herself had been fraudulent – cannot presume this just because they are husband and wife  NB – because of interaction of company law and property law, in the end she was only entitled to a half share in the property.

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Cases highlight how hard it is to establish fraud in Australian Torrens system. As a result people have turned to other exceptions to indefeasibility – especially the in personam exception. Principles so far: 1. You need personal dishonesty of some form – moral turpitude – a deliberate plan to oust someone from their interest. So the bar was set quite high at the start. Then the cases started to modify the rule. Assets Company – if your suspicions are aroused and you don’t ask questions for fear of learning the truth – that can be fraud. The legislation added to this – mere notice of someone’s interest is not fraud. 2. Bank of SA v Ferguson – fraud must be brought home to the person defrauded – it must have induced detrimental action by that person, and 3. Cassegrain v Cassegrain – the fraud of one spouse is not necessarily to be attached to the actions of the other spouse.

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R M Hosking Properties v Barnes  Owner leased land to Barnes for 2 years, with option to renew for another 2 years  Land sold to R M Hosking – accepted rental payments and acknowledged lease BUT refuses to allow Barnes to exercise his option to renew at the end  Lease not registered  Not fraudulent for R M Hosking to refuse to extend the lease and to evict the tenant – notice of an interest is not fraud. If you are registered you can ignore the interest even if you know about it and it will not be fraud.

Davis v Williams [2003] NSWCA 371 • Mr and Mrs Williams purchased a house and land together as joint tenants in 1956. • The house was paid off in 1987, however the parties had separated in 1969 – no divorce proceedings had ever been taken. • In 1993, Mr Williams saw a solicitor, who arranged for a signed transfer from the owner in favour of the Williams as joint tenants. Mrs Williams' whereabouts were unknown and attempts were not made to contact her. • The solicitor arranged with a registration clerk (described as an independent contractor) to 9

effect the transfer. In an alleged effort to save money, this registration clerk altered the documents indicating that the transfer would be to a tenancy in common rather than a joint tenancy. • Husband died – wife decided to claim the property as they should have been registered as joint tenants. • The issue was whether the registration of the transfer effected an indefeasible tenancy in common, or whether there had been fraud by the registration clerk which made the tenancy in common registration defeasible, and so would be able to have it changed to a joint tenancy. • It was held by a majority that there was no statutory fraud, and even if there had been, it had not been brought home to the registered proprietor. • The husband was not responsible for the fraud of the registration clerk, so the registration as tenants in common still stood.

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(ii) Conflicting Titles s 40 (3) (b) Where the Recorder of Titles has mistakenly issued a Certificate of Title for one lot twice, the first issued is the valid one.

(iii) Omissions or Misdescriptions s 40 (3) (c) Any misdescriptions or omissions are exceptions to indefeasibility.

(iv) Certain leases are exceptions to indefeasibility: s 40 (3) (d) - periodic tenancies - leases for less than 3 years - equitable leases - residential tenancies

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(v) Implied easements and equitable easements s 40 (3) (e) Clarence City Council v Howlin 2016 TASS 61 Gravel road with houses along it was discovered to be a private road belonging to the first two houses. Those two owners were threatening to block off the street on the basis the easement for the others was not noted on their Certificate of Title and so they had indefeasibility and could ignore the easement. The other owners of houses along the street DID have the easement noted on their titles. Did any of the exceptions to Indefeasibility apply? No, because there is no historical title or derivative title – the two owners did have indefeasibility and could ignore the other owners. Note: an easement “in the public interest” WAS created by the judge under s 84J of the Conveyancing and Law of Property Act.

(vi) Wrong description of parcels or boundaries s 40 (3) (f)

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Torrens title does not guarantee boundaries – if they are wrong you cannot rely on your title to be indefeasible and defeat them.

(vii) Charges on land s 40 (3) (g) Any money charged on the land (eg unpaid rates from local council, land tax etc) is still payable – no indefeasibility.

(viii)

Adverse Possession

s 40 (3) (h): “rights acquired or in the course of being acquired, under a statute of limitations”. Limitation Act 1974, Land Titles Act 1908 ss 138T-Y If you have had possession of a piece of land for more than 12 years you can become the owner of the land and kick the real owner off the land. And no registered title can be indefeasible in the face of this 12 years of possession. Mind you, it means the real owner hasn’t bothered to evict you from the land.

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Woodward v Wesley Hazell Pty Ltd Hazell grazed cattle on part of Woodward’s land. Offered to buy it, Woodward refused. After 12 years Hazell claims adverse possession of the land – and they won – the judge had to accept the possessory title, even though the Woodwards had paid their rates, their insurance, they had the Certificate of Title etc.

LAND TITLES ACT 1980 - SECT 138V 138V. Requirements for title by possession In determining an application for title based on possession, the Recorder must consider all the circumstances of the claim, the conduct of the parties and in particular – (a) whether, during the relevant period, the applicant enjoyed possession of the land as of right; and (b) whether there is any reason to suppose that during the relevant period that enjoyment was by force or secretly or that that enjoyment was by virtue of a written or oral agreement made before or during that period unless the applicant can show that any such agreement terminated before that period; and (c) the nature and period of the possession; and (d) the improvements on the land and in particular – 14

(i) when they were made; and (ii) by whom they were made; and (e) whether or not the land has been enclosed by the applicant; and (f) whether during the relevant period the applicant acknowledged ownership, paid rent or made any other payment in respect of the land – and the applicant must produce evidence from at least one disinterested person in support of the application.

This legislation was not in force at the time of the Woodward case – in fact some of it was introduced as a direct result of the case, particularly: LAND TITLES ACT 1980 - SECT 138U 138U. Restriction on title by possession (1) For the purposes of an application to acquire title to any land by possession, any period during which council rates have been or are paid by or on behalf of the owner is to be disregarded. (2) This section does not apply to an application if the relevant council has certified in writing that it is unclear who has paid, or is paying, the relevant council rates.

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We’re still not quite sure what this means, but it looks as though any period of time that the owner is paying their rates cannot be included in the 12 years of adverse possession. No cases on this provision yet. But if someone has lived on your land as if they were the owner, and done all the things an owner would do, for 12 years, and you haven’t paid your rates, then they are entitled to the land and your title is not indefeasible.

J A Pye v Graham (UK) Graham used Pye’s land for grazing for 12 years and claimed it by adverse possession. This land was worth GBP 20 million. House of Lords had to allow the adverse possession but hated doing it. Then Pye took the case to the European Court of Human Rights, saying it was a breach of their human rights to have their land taken away without compensation. The Initial Chamber held it was a breach of human rights, but the Grand Chamber held (10 to 7) that it was not a breach of human rights: the law of adverse possession was not a law about the acquisition of property or the transfer of property without compensation. It’s a law where the government is saying “we prefer a particular title, in this case a

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possessory title held for 12 years, over a registered title which just sits on the books.”

(ix) Land Acquisition Act Any land vested in a government authority, but not yet registered to the authority as registered proprietor is still theirs. Any person who has bought it and registered themselves as proprietor has no indefeasibility if the authority suddenly turns up and demands the land back.

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