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Indefeasability of title

Table of Contents Title....................................................................................................................... 3 Title and relativity.............................................................................................. 3 Transfer of title: Historical forms of conveyancing...........................................3 The Torrens System........................................................................................... 4 Principles of the Torrens System....................................................................4 Parliamentary History of the Torrens System.................................................4 Indefeasibility........................................................................................................ 5 Concept.............................................................................................................. 5 Title by registration........................................................................................... 5 Registered Interests....................................................................................... 5 Unregistered Interests.................................................................................... 6 Gifts................................................................................................................ 6 Indefeasibility Provisions in the LTA 1952 & 2017............................................6 Prior to 2017................................................................................................... 6 LTA 2017......................................................................................................... 9 Immediate and Deferred Indefeasibility.......................................................... 11 Three cases prior to Frazer v Walker:..........................................................11 Frazer v Walker – The determination establishing immediate indefeasibility ...................................................................................................................... 12 How the Gibbs v Messer anomaly has been settled.....................................13 Debate about immediate indefeasibility.......................................................13 The ‘Manifest Injustice’ Exception...................................................................14 The drafting process..................................................................................... 14 The ‘Manifest Injustice’ Exception...............................................................15 Structure of the ‘manifest injustice’ exception.............................................16 The scope of indefeasibility in respect of other rights and covenants.............16 Mortgages..................................................................................................... 16 Indefeasibility and volunteers.......................................................................18 Indefeasibility and unregistered interests....................................................18 Indefeasibility and Maori Land..................................................................... 19 Exceptions to Indefeasibility...............................................................................20 Overview of Exceptions to Indefeasibility........................................................20 Fraud................................................................................................................ 20 Case Law prior to Land Transfer Act 2017...................................................20 Fraud in the Land Transfer Act 2017...........................................................21 Fraud against the previous registered proprietor........................................21 1

Fraud against the owner of an unregistered interest...................................24 Supervening fraud (fraud post-registration).................................................27 Fraud by an agent......................................................................................... 29 In personam claims.......................................................................................... 30 In personam jurisdiction not precluded by indefeasibility...........................30 Parameters of the in personam jurisdiction..................................................30 Recognised causes of action under the in personam exception...................31 Other LTA 2017 exceptions.............................................................................. 35 Provisional registration.................................................................................35 Estates or interests registered or noted on the record of title at the time of registration................................................................................................... 35 Prior computer record..................................................................................35 Omitted or misdescribed easements............................................................35 Wrong description of parcels/boundaries.....................................................36 Mortgagor or lessee in default.....................................................................36 Public roads.................................................................................................. 36 Adverse possession....................................................................................... 36 Access strips................................................................................................. 36 Limited computer registers..........................................................................37 Correcting the register.................................................................................37 Overriding Statutes..........................................................................................37 General rule.................................................................................................. 37 Three categories of rights.............................................................................37 Property Law Act 2007.................................................................................37 Other enactments......................................................................................... 41 Correcting the register....................................................................................42 Powers of the Registrar................................................................................ 42 Powers of the Court...................................................................................... 44 Compensation.................................................................................................. 44 Introductory principles................................................................................. 44 Loss or damage caused by mistake..............................................................45 Deprivation of land or an estate or interest in land......................................46 Quantum of compensation............................................................................47 Guaranteed searches....................................................................................48

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Indefeasibility of Title Title Title and relativity Title: entitlement to exercise ‘ownership rights’ over land, of use, management and disposition. These are established through owning an abstract concept termed an estate, which confers the right to seisin (possession). Relativity of title: some titles to land can be superior to others Asher v Whitlock (1865) LR 1 QB 1 

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Williamson took possession of land by squatting there, building a cottage and occupying it for 10 years. In his will, he left it to his widow so long as she remained unmarried, then to his daughter in fee simple. Whitlock later married the widow and moved in, meaning the widow’s entitlement lapsed. Later the plaintiff sought to remove Whitlock, and the question arose of whether the Williamson title or Whitlock title was superior? The Court held the Williamson title was superior as it began first, and the Whitlock title has dispossessed them

Transfer of title: Historical forms of conveyancing Feoffment with livery of seisin: feoffment implied the grants of the estate, livery of seisin was the transfer of vacant possession. This was often done ceremonially by the handing over of a symbol, like a key, twig from a tree etc Documentary title: seen as a replacement for feoffment with livery of seisin through private conveyancing. Private conveyancing was inherently unsatisfactory as relied on the uncoordinated efforts of individuals. This took significant effort as every time title changed, had to go through the history of title of that land. Often there was uncertainty about the scope of the land as no physical inspection was necessary and a high risk of fraud as documents were held by private individuals. Deeds registration: was introduced by the Deeds Registration Ordinance 1841, nowadays the Deeds Registration Act 1908 but is essentially obsolete as no one uses deeds. The two disadvantages of this (1) if any instrument of conveyance was not valid, the whole chain of title was broken and the transferee could not obtain a clear and secure title – it provided no real guarantee of title. (2) Conveyancing was complicated, burdensome and expensive. Title by registration – different concept to private conveyancing, aims to remove the need to inspect documents time after time by establishing and maintaining a register that holds the facts of each transfer. Title depends on the registration, not the documents themselves (although may create contractual or equitable rights) Fels v Knowles (1906) 26 NZLR 604, 609:

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Comments on the register “The cardinal principle … is that the register is everything, and that, except in cases of actual fraud on the part of the person dealing with the registered proprietor, 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 expressly authorised by the statute. Everything which can be registered gives, in the absence of fraud, an indefeasible title to the estate or interest …. “

The Torrens System Under the Torrens system, the legal estate in the land passes by an act of the State, not by an act of the parties, as was the case under the Deeds system. The act of registration is what confers the legal title to land. When a transfer occurs, the register is updated with the new title by the Registrar. This means that a potential purchaser should be provided with relevant details about the land, including whether the vendor has a legitimate title, as well as third party interests.

Principles of the Torrens System The Torrens system comprises three simple principles: (1) The “mirror” principle – the register accurately and completely mirrors the state of title. (2) The “curtain” principle – purchasers of land should not concern themselves with trusts and other interests lying behind the curtain of the register. (3) The “insurance” principle – if the mirror of title gives an incorrect reflection and as a result a person incurs a loss, that loss should be met by a State assurance fund.

Parliamentary History of the Torrens System The Torrens System was adopted by the Land Transfer Acts, beginning with the Land Transfer Act 1870. The 1870 Act was further consolidated in 1885. The current Act is the Land Transfer Act 1952. However, the Land Transfer Act 2017 has received the Royal Assent on 10 July 2017 and any provisions yet to be brought into force will on 10 January 2019. The 2017 Act increases clarity and ease of access through consolidating and modernising the 1952 Act, along with two stand-alone amendments (Land Transfer Amendment Act 1963 & Land Transfer (Computer Registers and Electronic Lodgement) Act 2002) A couple of publications provide the background to the LTA 2017, namely the New Zealand Law Commission Issues Paper 10 (2008) and New Zealand Law Commission Report 116 (2010). Whilst it endorses Torrens principles, it introduces some changes as to their application. The New Zealand Law Commission Report 116, para 1.11 stated: 

Title to land should be acquired by registration; 4

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Title should be, as far as possible, secure and indefeasible; A purchaser should not need to go behind the register to investigate the ‘root’ of title; The register should reflect as accurately as possible the true state of title to land so that persons who propose to deal with land can discover all the facts relative to the title; The system for the transfer of land should be efficient, effective and simple; There should be adequate compensation where an innocent owner has suffered loss due to the operation of the system.

Indefeasibility Concept Fels v Knowles (1906) 26 NZLR 604, 609: “The cardinal principle … is that the register is everything, and that, except in cases of actual fraud on the part of the person dealing with the registered proprietor, 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 expressly authorised by the statute. Everything which can be registered gives, in the absence of fraud, an indefeasible title to the estate or interest …. “ Frazer v Walker [1967] 1 AC 569, 580-1: Lord Wilberforce: [‘Indefeasibility of title’, an] expression not used in the [Land Transfer] Act itself, is a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys. This conception is central in the system of registration. It does not involve that the registered proprietor is protected against any claim whatsoever; as will be seen later, there are provisions by which the entry on which he relies may be cancelled or corrected, or he may be exposed to claims in personam. These are matters not to be overlooked when a total description of his rights is required. But as registered proprietor, and while he remains such, no adverse claim (except as specifically admitted) may be brought against him. Qualification of the right to indefeasibility of title. The Law Commission considered dropping the term as it is a misnomer by virtue of these qualification. However, it remains due to its status as long-established and widely used.

The conclusive and inclusive register principles: Conclusive register: the idea that the register should include all interests and rights to the land, such as third party interests Inclusive register: the idea that as much as possible should be on the register 5

Title by registration Registered Interests The act of registration creates and transfers an interest in land: Land Transfer Act 1952 s41: no instrument is effectual in passing any estate or interest, but upon the registration of any instrument under this Act, the estate or interest shall pass or, as the case may be, the land becomes liable as security for the payment of money subject to relevant covenants, conditions and contingencies Land Transfer Act 2017 s24: (1) any instrument has no effect to create, transfer or otherwise affect an estate or interest in land until the instrument is registered. (2) On registration, the instrument has the effect to create or transfer or otherwise affect the estate or interest specified in the instrument LTA 2017 s24 is largely a re-enactment of s 41 of the 1952 Act. Section 41(2) of the LTA 1952, which relates to the order of registration of two or more instruments executed by the same registered proprietor that affect the same land and which are presented simultaneously, is not re-enacted in its current form. Priority of registration is dealt with under ss 35 and 36 of the LTA 2017. Exceptions to s24: (a) Statutory provisions under Te Ture Whenua Maori Act 1993.27 (b) Vesting orders under the Māori Trustee Act 1953.28 (c) Property passing to the Official Assignee under ss 101 and 102 of the Insolvency Act 2006. (d) Statutory vestings. (e) Short-term leases.29 (f) The doctrine of implied dedication of roads.

Unregistered Interests However, this does not mean an unregistered document has no effect: Chan v Cresdon Pty Ltd (1989) 168 CLR 242: a document backed by an enforceable contract creates an equitable interest in the land Duncan v McDonald [1997] 3 NZLR 669: affirmed Chan v Cresdon “Where an interest enforceable in equity already exists in a transferee the act of registration of a memorandum of transfer substitutes a legal interest for the equitable interest.”

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Gifts Corin v Patton (1990) 169 CLR 540 Section 41 of the LTA 1952 (s 24 of the LTA 2017) does not prevent a gift of a registered estate or interest from being complete until the empowering instrument is registered. Milroy v Lord (1862) 4 De GF & J 264, 45 ER 1185 (Ch) at 274, 1189 The gift will be complete if the donor has done everything “which according to the nature of the property comprised in the settlement [or gift is] necessary to be done in order to transfer the property and render the settlement [or gift] binding upon him”

Indefeasibility Provisions in the LTA 1952 & 2017 Prior to 2017 LTA 1952: s62 (estate of registered proprietor paramount);

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Estate of registered proprietor paramount

Notwithstanding the existence in any other person of any estate or interest, whether derived by grant from the Crown or otherwise, which but for this Act might be held to be paramount or to have priority but subject to the provisions of Part 1 of the Land Transfer Amendment Act 1963, the registered proprietor of land or of any estate or interest in land under the provisions of this Act shall, except in case of fraud, hold the same subject to such encumbrances, liens, estates, or interests as may be notified on the folium of the register constituted by the grant or certificate of title of the land, but absolutely free from all other encumbrances, liens, estates, or interests whatsoever,— (a) except the estate or interest of a proprietor claiming the same land under a prior certificate of title or under a prior grant registered under the provisions of this Act; and (b) except so far as regards the omission or misdescription of any right of way or other easement created in or existing upon any land; and (c) except so far as regards any portion of land that may be erroneously included in the grant, certificate of title, lease, or other instrument evidencing the title of the registered proprietor by wrong description of parcels or of boundaries. This has been described as the “key indefeasibility provision” (Regal Castings Ltd v Lightbody). But comes with some exceptions: 1. Fraud (‘except in the case of fraud’) 2. Other interests existing prior (subsection a) 3. Omissions or misdescriptions of right of ways and easements. Such that the true interest is honoured (subsection b)

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4. Any land erroneously included in the transfer by misdescription of boundaries or parcels

s63 (registered proprietor protected against ejectment);

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Registered proprietor protected against ejectment

(1) No action for possession, or other action for the recovery of any land, shall lie or be sustained against the registered proprietor under the provisions of this Act for the estate or interest in respect of which he is so registered, except in any of the following cases, that is to say: (a) the case of a mortgagee as against a mortgagor in default: (b) the case of a lessor as against a lessee in default: (c) the case of a person deprived of any land by fraud, as against the person registered as proprietor of that land through fraud, or as against a person deriving otherwise than as a transferee bona fide for value from or through a person so r...