Indefeasbility notes PDF

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Summary

Indefeasibility and judicial discretion  Box diagram, the box is a land registration title  Empty box, cleanest title with no impedimentsOwnership  Conveyancing: transferring the ownership of your real property  Originally owner handed over a sod of earth  Development of written records, includ...

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Indefeasibility and judicial discretion  Box diagram, the box is a land registration title  Empty box, cleanest title with no impediments Ownership    

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Conveyancing: transferring the ownership of your real property Originally owner handed over a sod of earth Development of written records, including interests of the land and transfers, known as the deeds system Problems with deeds system o Too many documents, documents for everything which took place o If one transaction not valid, future owners had no "guarantee of title" o Conveyancing was very complicated and expensive How was it solved? o Torrens system developed o Essentially "title by registration", legal estate in the land passes by an Act of state, not an act of the parties o “ … to contain within its four corners a complete system which any intelligent man could understand and which could be carried into effect in practice without the intervention of persons skilled in the law… The cardinal principle of the statute is that the register is everything, and that except in the cases of actual fraud on the part of the person dealing with the registered proprietor [described now as “owner” under the Land Transfer Act 2017], such person, upon registration of the title under which he takes from the registered proprietor, has an indefeasible title against all the world. Nothing can be registered the registration of which is not authorised by the statute. Everything which can be registered gives, in the absence of fraud, an indefeasible title to the estate or interest, or in cases in which registration of a right is authorised, as in the case of easements .. ..to the right registered.” ( Fels v Knowles (1906) 26 NZLR 604 (CA) o Note: red, important part of quotation

Torrens system  Three simple principles: o The “mirror” principle” - the register accurately and completely mirrors the state of title o The “curtain” principle – purchasers of land should not concern themselves with trusts or other interests lying behind the curtain of the register o The “insurance” principle – if the mirror gives an incorrect reflection and as a result a person incurs a loss, that loss should be met by a State insurance fund  What does the "mirror" mean? o Register accurately and completely mirrors the state of title o Whatever is on the title sticks o May be an easement, a mortgage, a fencing agreement or a caveat (freezes the title until the dispute is resolved)  Enforced under the LTA 2017 o Note: cases studied may be under former Act, in exam may need to show that cases may be decided directly as they are under a different Act, exam situations will be governed under LTA 2017

Terminology in LTA  Fee simple "record of title" replaces freehold "computer register" or "certificate of title" in fee simple  "Registered proprietor" is now a registered owner Registration is paramount  Torrens system is a system of registration  Title to land does not pass until the registration has happened o Section 24(1) LTA 2017: “An instrument has no effect to create, transfer or otherwise affect an estate or interest in land under the provisions of this Act until the instrument is registered. o Does not mean that there is no interest in land, but it is only equitable Indefeasibility and judicial discretion  Foundation to Torrens system is the indefeasibility of title -> full protection of title  Subject to actions of fraud, if someone takes the house by fraud they cannot hide behind this principle  Must consider the limitations of indefeasibility  S51: Title by registration a. On registration under this Act of a person as an owner of an estate or interest in land, the person obtains a title to the estate or interest that cannot be set aside a. The title of the registered owner is free from the estates and interests in the land that i. are not registered or noted on the register; or ii. are not capable of being registered or noted on the register b. Despite subsections (1) and (2), the title of the person registered as owner of the estate or interest is subject to i. The exceptions or limitations in ss 52-56 [ exceptions, title to public road, manifest injustice]; subparts 1 and 3 of Part 4 [adverse possession; title to access strips] and s 204 [limited record of title]. b. Subsections (1) and (2) apply whether or not the registered owner acquired the estate or interest i. the land for valuable consideration [i.e. paid for it] ; or ii. from a fictitious person b. Nothing in this section affects the in personam jurisdiction of the court. 

Corresponding provisions in the LTA 1952 o S62: Estate of registered proprietor paramount o S63(1): Registered proprietor protected against ejectment o o

Volunteers  

S64: Title guaranteed to register proprietor Note: first two also include exceptions but these are now in S52 LTA 2017

Volunteer is a person who does not purchase an estate or interest in land, receive it as a gift or by way of inheritance Did they gain the same indefeasible title?

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S51(4)(a): applies whether or not the registered owner acquired the estate or interest for valuable consideration

Exceptions to indefeasibility of title: Fraud Section 6 Meaning of fraud (1) For the purpose of this Act, other than subpart 3 of Part 2 [Compensation] , fraud means forgery or other dishonest conduct by the registered owner or the registered owner’s agent in acquiring a registered estate or interest in land. (2) For the purposes of subsection (1) the fraud must be against – (a) the registered owner of an estate or interest in land; or (b) the owner of an unregistered interest, if the registered owner or registered owner’s agent (i) in acquiring the estate or interest had actual knowledge of, or was wilfully blind to, the existence of the unregistered interest; and (ii) intended at the time of registration of the estate or interest that the registration would defeat the unregistered interest. (3) For the purpose of subpart 3 of Part 2 [Compensation] fraud means forgery or other dishonest conduct by any person. Indefeasibility and judicial discretion: S52 LTA 2017 exceptions S 52: Exceptions and limitations 1. The title of the registered owner to an estate or interest in land is subject to the following exceptions and limitations: a. In the case where the title of an estate or interest of the registered owner is acquired through fraud on the part of the registered owner or the registered owner’s agent; b. An estate or interest registered or noted on the record of title at the time of registration; c. The estate or interest of a person having a valid claim to the same estate or interest under a prior record of title; d. The estate or interest of another registered owner that has been included in the record of title as a result of an incorrect description of area or boundaries e. An easement omitted from, or incorrectly described in, the record of title regardless of whether the easement was created before or after the land was brought under this Act. 2. Nothing in this section limits section 54 [ Alteration of register in cases of manifest injustice] 

Corresponding LTA 1952 provisions o s 62: Estate of registered proprietor paramount o

s 63(1): Registered proprietor protected against

o

(As noted, both these sections list exceptions to the

ejectment paramountcy)

Indefeasibility and the principle of its immediacy  X original owner, Y becomes owner by fraud, sells to Z who is the newest owner 

X and Z both innocent owners

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Z is the newest owner, has an indefeasible title X can get state compensation

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What happens if the forger does not transfer the house but forges a mortgage on it? o A registered mortgagee attracts the same indefeasible protection as a registered owner o

If Q (who is fraudulent) forges X's signature on the mortgage what are the remedies?  X can claim compensation to pay off the mortgage 

There are some limitations to this

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Messer was going away, owns a property

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Gave her title document to her solicitor for safe keeping Solicitor forged her signature to transfer the property to a person he made up Filled out a normal mortgage document making the made up person a mortgagor (borrower)

Where did this principle come from?  Gibbs v Messer o

Facts

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Solicitor collected the money from the mortgagees and then disappeared

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Messer came home and found she no longer owned her home

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Can she get her property back and without the mortgage?

o

PC decision  Messer could get her property back  The mortgage could be removed and the fictitious owner could be removed from the title  Could have meant one of three things:  Does it mean that the registration of a void instrument not give indefeasibility?  Does it mean that the registration of a void instrument due to forgery not give indefeasibility?  Does it mean that the registration of a void instrument due to forgery by use of a fictitious name not give indefeasibility?

Boyd v Mayor of Wellington o Solved widest ratio o

Facts 

Boyd registered owner of Wellington property

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Council took his land for a tramway, used the wrong proclamation to take his land (one for bare land, he had a house on it)

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Boyd claimed the council took his land using a void instrument and therefore he should get his land back

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Decision 

Court held he could not get his land back

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Registration of a void instrument (careless not fraudulent) did not stop the newest owner from keeping the land Means that the first ratio from Gibbs v Messer, has failed

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If a bona fide purchaser obtains land through a fraud instrument they will still get indefeasibility

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Mr and Mrs Frazer were the registered owners as joint tenants of a farm Without Mr Frazer knowing, Mrs Frazer organised a loan of £3,000 from Mr and Mrs Radomski to be secured as a mortgage on the farm. Mr and Mrs Radomski had no idea that anything was amiss ( i.e they were bona fide mortgagees) Mrs Frazer signed her name on the mortgage document and forged Mr Frazer’s signature. Mr and Mrs Radomski became registered mortgagees on the title. No payments were made on the mortgage Mr and Mrs Radomski eventually exercised their power of sale and sold the farm to Mr Walker Note -> is Mr Walker (the newest owner) safe?

Immediate indefeasibility of title  Frazer v Walker o Facts 

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 CA decision  Made no decision about the mortgagees, were not part of the case, had no need to be worried because they had sold the property and therefore taken the money owed on the mortgage  Mr Walker was safe, too remote from the forgery incident, there was an intervening transaction which sheltered him -> known as the concept of "deferred indefeasibility" however this principle no longer relevant under LTA 2017 o Frazer appealed to PC  PC decided to look at "what if" the mortgagees had not sold? Would they still be protected  Yes, as long as you are innocent, even if you deal with someone who is fraudulent your interests will still be protected  Middle ratio from Gibbs v Messer, failed  Registration of a forged instrument will still give you indefeasibility  Legislative provision, S51 LTA 2017 Third ratio in Gibbs v Messer o Registration of a void instrument, due to forgery by use of a fictitious name does not give indefeasibility o Was never debated by the Courts, was always a possibility someone would lose their interest o Solved by S51(4) of the LTA (4) Subsections (1) and (2) [Title cannot be set aside] apply whether or not the registered owner acquired the estate or interest – o

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(a) for valuable consideration; or (b) from a fictitious person Morrison v BNZ o Facts  Mr and Mrs M – joint owners of Coatesville property ( c $400,000)  Contract for a house in Browns Bay: $715,000  Mr M – great entrepreneur: horse racing; goat farming; kiwifruit; shares  Thus, he was a regular visitor to the BNZ  The settlement for the Browns Bay property was a long one ( 3 months) –  in the hope that, within that time, the Coatesville property would have  sold.  Time was running out, so he approached the BNZ for some funding – a  commercial bill facility ( type of overdraft) for $600,000 to settle the  Browns Bay property  He needed his wife to sign – she was horrified but signed after significant  pressure from him. She was “not to embarrass him”.  The BNZ eventually wanted to convert the facility into a registered  mortgage over Browns Bay property. This time, he simply forged his wife’s  signature. The mortgage to the BNZ was registered.  Mr and Mrs Morrison separated  During the dissolution proceedings, Mrs M discovers BNZ mortgage  What rights does Mrs M have?  Note -> BNZ protected as bona fide mortgagee under S51LTA 2017 (formerly SS62,63 LTA 1952)

The question of compensation  Compensating the bona fide owner who misses out is a fundamental part of the Torrens system  Earlier cases we have looked at are generally silent about compensation  No mention in Morrison v BNZ  Statutory provisions for compensation o SS58-71 LTA 2017 o Formerly SS172-181 LTA 1952  Study compensation later but need to remember it exists The manifest injustice principle  Debates in Law Commission  Decided there should be some loosening of the stringent immediate indefeasibility principle in some circumstances o These circumstances are considering that allowing the newest registered owner to keep their title and leaving the original owner to lose that title but claim compensation may be unfair  Idea met with concern, certainty is the fundamental element of immediate indefeasibility and this would be a departure from this

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Under LTA 2017, court can decide this is too harsh and the old owner can get their title back o S54 LTA 2017  A person (A) who has been deprived of an estate or interest in land or who suffers any other loss or damage by the registration under a void or voidable instrument of another person (B) as the owner of the estate or interest can apply for an order under s 55.  A original owner  B new owner o Section 55(1)  The Court may make an order cancelling the registration of Person B only if it is satisfied that it would be manifestly unjust for Person B to remain registered owner of the estate or interest. o Section 56  The Court must not make an order under section 55 if Person B has transferred the estate or interest to a third person, that third person acting in good faith Note -> it has been emphasised that this judicial discretion only be exercised in extreme cases How does it play out? Scenario 1 o Q forges X's signature on mortgage o BNZ mortgage safe under immediate indefeasibility o Under S54,55 if it is "manifestly unjust" for BNZ to keep the mortgage, it is cancelled and X gets the property back unencumbered o BNZ can apply for state compensation What might comprise manifest injustice? o Section 55(4): Issues the Court may take into account  Circumstances of the acquisition by Person B of the estate or interest ? Curtain principle, do not need to look behind the title, this suggests you can  Failure of Person B to comply with any statutory power or authority in acquiring the estate or interest ? Boyd v Mayor of Wellington - void instrument  If the estate or interest is Maori freehold land, failure by a person to comply with the Te Ture Whenua Maori Act 1993 ? Housing Corporation of New Zealand v Maori Trustee, Maori has its own deeds system, parties failed to do this so there was a mortgage sitting on Torrens title which had not been registered on deeds system. Courts said it didn't matter, LTA would always be supreme  Identity of person in actual occupation of the land;  Nature of estate: fee simple or mortgage etc ? Frazer v Walker - protection just as solid for mortgagee as for owner  Length of time A or B have owned/occupied the land  Nature of improvements on land made by A or B  Use to which land has been put by A or B  Special characteristics and significance for A or B  Conduct of A or B in relation to acquisition of land ? What can this be : fraud (N0); equity (unconscionability – in

o o

personam) (NO). What does this leave? Carelessness? Boyd v Mayor of Wellington - void instrument. Lecturer's understanding of principles of indefeasibility is both parties must be innocent so why look at conduct? Possibly carelessness but Courts adamant in Boyd that it did not matter  Any other circumstances Court thinks relevant Lecturer has issues with above section, reasons above Section 55(3)  An order under this section may be made only if the Court is satisfied that in the circumstances the injustice could not properly be addressed by compensation or damages , whether under subpart 3 ( Compensation) or otherwise  Court will not give land back to person A if money can solve the problem

Quick fire questions  What is the main exception to indefeasibility of title? o Fraud  Can a mortgagee dispossess of your land? o Yes, Frazer v Walker  Does an unregistered interest attract full protection? o No, to attract full protection your interest must be registered on the title  Susan is a registered owner, someone takes her title by fraud and sells it to Pippa o Pippa gets the land, Susan gets compensation  What if the manifest injustice principle is applied? o The above would be reversed  What does immediate indefeasibility mean? o Even if the bona fide purchaser takes immediately from the fraudster they will still be protected by indefeasibility of title Revision question to consider (can only answer some) "Martin also owns a holiday bach in Akaroa. All the upheavals from earthquakes have taken their toll on Martin’s legal firm and the partners have become less pedantic in their day-to-day practice. Constant checks on the way the practice is being run have been forgotten. Amy, a legal executive, has used this to her advantage. Martin has discovered (too late) that she, Amy, used his e-dealing access code to access the Landonline records. After transferring the Akaroa property into her name, she used it as security to gain a substantial loan from Westpac Bank who also were unaware of her trickery. In due course, this mortgage became registered on the title. Martin is furious. He wants your advice. Can he get the land back with no mortgage on it? Advise Martin"  Two innocent parties, Martin and Westpac Bank, who should suffer?  Martin will suffer, because Westpac was the newest registered interest on title. W is protected by immediate indefeasibility  Amy's interest disappears because she was fraudulent  Martin will hold the title with a mortgage to Westpac, however he can apply to the State for compensation to get rid of the mortgage  No suggestion manifest injustice exists  How do you back up this advice? o Statutory provisions

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S51 LTA "Title by registration" -> Westpac's interest cannot be set aside S52 LTA "Exceptions and limitations" -> Amy loses her title

Case law   

Frazer v Walker Morrison v BNZ Both confirm immediate indefeasibility of title

Fraud – main exception  S51, fraud is listed as an example of an exception  Until LTA 2017 there was no definition of "fraud" o Meant it was left for the Courts to determine what fraud meant  Definition of fraud from S6 LTA 2017 confirms the decisions of cases Assests Co Ltd v Roihi and Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd o S6 found earlier in notes Assests Co Ltd v Roihi  Lord Linley: “…by fraud in these Acts is meant actual fraud, i.e. dishonesty of some sort, not what is called constructive fraud or...