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Warning: TT: more functions defined than expected Indefeasibility of TitleThe cardinal principle of the Torrens system is that the register should be everything so that anyone proposing to deal as a bona fide purchaser or mortgagee for valuable consideration with any estate or interest in land shoul...

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Indefeasibility of Title The cardinal principle of the Torrens system is that the register should be everything so that anyone proposing to deal as a bona fide purchaser or mortgagee for valuable consideration with any estate or interest in land should be concerned only with such interests as appear on the register and should be able to ignore all other interests without the risk of the title being affected by those unregistered interests. Title does not pass until registration: s 41 Land Transfer Act 1952 S41- it is the act of registration (and not the act of parties to the instrument) that creates or transfers a legal interest in registered land. Position of unregistered instruments No instrument is effectual until registration. A person who has given valuable consideration and who had a specifically enforceable contract has an equitable interest in land.  Duncan v McDonald- 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.  So to attract the paramountcy of s62 notification of an equitable interest by caveat or otherwise is essential. There is strong authority in Regal Castings Ltd v Lightbody that it is immaterial whether that interest is able to be registered. Legislative Scheme: Land Transfer Act 1952: s62 - paramountcy of RP's estateOne’s estate is paramount except: where you have been fraudulent. Also three minor exceptions: (referred to below) GENERALLY SEEK COMPENSATION UNDER S172(A) FOR THESE THREE. (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 RP by wrong description of parcels or of boundaries. s63 - protection from ejectment  This section protects the RP against any proceeding for possession or other proceedings for the recovery of the land.  A RP protected from being ejected. It has five exceptions: in s63(1) S63(1)(a)- The case of a mortgagee as against a mortgagor who is in default. S63(1)(b)- The case of a lessor as against a lessee who is in default. S63(1)(c)- The case of a person who has been deprived of any land by fraud, as against the person who has become registered as proprietor of that land through fraud, or against a person who derived title otherwise than as a transferee bona fide for value from or through a person registered through fraud. USE S85 TO CORRECT. COMPENSATION UNDER S172(B). S63(1)(d)- The case of a person who has been deprived of, or who claims, any land which has been included in any grant or certificate of title of other land by misdescription of that other land or of its boundaries, as against the RP of that other

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land; but only if the RP of that other land is not, or has not derived title from or through, a transferee bona fide for value. S63(1)(e)- The case of a RP proprietor claiming under the instrument of title prior in date of registration in any case in which two or more certificates of title have been registered in respect of the same land. a.This fifth exception is linked to the exception from indefeasibility contained in s 62(a). 11 S63(2) In any case other than as aforesaid, the production of the register or of a certified copy thereof shall be held in every Court of law or equity to be an absolute bar and estoppel to any such action against the RP or lessee of the land the subject of the action, any rule of law or equity to the contrary notwithstanding. s64 - prescription section  Section 64 protects the title of the RP against a competing claim based on another’s adverse possession. It also protects against the acquisition of prescriptive rights, privileges, or easements in derogation of a RP’s title.  There is a qualification from the 1963 Amendment Act where a squatter has put in a fence or shed e.t.c. As long as the LT Office can trace someone who owns the land, they will not allow the squatter. Sections 182 and 183 are concerned with the position of third parties who deal with a RP with the intention of acquiring a registered estate or interest from that proprietor. s182 - protection from notice  Concerns where title is transferred and there is an unregistered interest.  A bona fide purchase is not under any positive duty to inquire into anything beyond the title.  Not affected by notice; direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding, and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.  So s182 does not last indefinitely and cannot apply in cases of fraud e.t.c. A bona fide purchaser is required. s183 - protection from defects in vendor's/mortgagor's title BONA FIDE!  S183 provides protection to purchasers or mortgagees who bona fide and for valuable consideration acquire a registered estate or interest in land.  This protection is for where the vendor might have obtained registration through fraud or error, or under a void or voidable instrument, or may have derived title from or through a person registered as proprietor through fraud or error, or under any void or voidable instrument. Deferred & Immediate Indefeasibility Gibbs v Messer (1891) A.C. 248  M was RP wanted to go overseas. She executed a power of attorney in favour of her husband and they went overseas. He left certificate of title and power of attorney with solicitor. Solicitor forged a transfer of land by Mr M as his wife’s attorney to a fictitious person Hugh Cameron (X). Unknown to the solicitor, there was a real Hugh Cameron (X) in existence. Transfer was subsequently registered. Solicitor, purporting to act as X’s agent arranged a loan and secured it by way of registered mortgage over the land granted by X. So X became mortgagor to a bona fide mortgagee. Mrs Messer sought an order for the calling in and cancellation of the

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certificate in the name of X and also for the issue to her of new certificates of title free from the encumbrance of the mortgagee’s interest. PC allowed M’s claim. Professor Hinde has suggested three different rationes decidendi. o Three possible results: 1. Registration of a void instrument does not confer indefeasibility on person acquiring title even if that person was bona fide. 2. Registration of a void instrument due to a forgery does not confer indefeasibility on person acquiring title even if that person was bona fide. 3. Registration of a void instrument executed by a forger using a fictitious name which the forger has previously procured to be entered on the register does not have indefeasibility.  In the opinion of their Lordships, the duty of ascertaining the identity of the principal for whom an agent professes to act with the person who stands on the register as proprietor, and of seeing that they get a genuine deed executed by that principal, rests with the mortgagee themselves; if they accept a forgery they must bear the consequences. The ratio regarding fictitious people has remained unchanged since this case. This will lead to deferred rather than immediate infeasibility. Look out for mention of fictitious people in the exam. So a bona fide purchaser for value from say the mortgagee would get indefeasibility.

Boyd v Mayor of Wellington [1924] NZLR 1174 B required to transfer property to Wellington CC, received compensation, but litigated against them on grounds that such a transfer required owner or statutory consent. B argued that because they did not have these consents, the transfer was void, thus City Council did not have protection of indefeasibility. Whether the acquisition of land pursuant to a void proclamation could confer an indefeasible title. Court held it did confer indefeasibility, carelessness was not sufficient to upset their indefeasibility of title. Changed ratio 1) of Messer. I.e registration of a void title still has indefeasibility.

Frazer v Walker [1967] 1 A.C. 569  Mrs F forged husband’s signature to register mortgage on title. Mortgagee exercised power of sale in favour of Mr W- a bona fide purchaser for value. Mr F sought declarations such a sale was void and from DC Registrar to cancel entries in register.  CA: Irrespective of whether “deferred” or “immediate” indefeasibility applied, Mr Walker as a bona fide purchaser for value would have acquired an indefeasible title as against the Frazers. It was on the basis of s 183 (protection from defects in vendor’s title for mortgagees and purchasers clause) that the CA found against Mr Frazer. So did not consider the position of mortgagee.  PC agreed bona fide purchaser for valuable consideration from mortgagee entitled to the protection of s183 to same extent as if purchaser had taken title directly from RP.  With regards to mortgagee- held that they had acquired an indefeasible title and had immediate indefeasibility.  Recognised the point of contention had been whether a RP who acquired his interest under a void instrument had indefeasibility of title, or whether it was only a

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bona fide purchaser from such a proprietor whose title is indefeasible. Held earlier NZ CA decision of Boyd v Mayor of Wellington in which the wider (first) view was adopted was correct. ‘Registration of an instrument which is forged or which is void for any other reason, is effective to vest and to divest title and to protect the RP against adverse claims.’ Changed second ratio of Messer, registration of a void title due to a forgery does confer indefeasibility of title. PC qualified the protection of indefeasibility with observation that a plaintiff still had the right to bring against an RP a claim in personam.

Breskvar v Wall HCA Barwick CJ:  ‘The Torrens system of registered title... is not a system of registration of title but a system of title by registration’. 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.’ HCNZ v Maori Trustee [1988] 2 NZLR 662  Two mortgages on the same title- and it is Maori freehold land- it sits as a deed in the Maori Ct records, the title in question was incorrect in the MLC records i.e only the first mortgage was on that title. The Te Ture Whenua Maori Act requires that all changes to title go through the MLC but this was not done and thus the records were inconsistent.  Held the torrens system was paramount and the MLC was merely administrative so it was a void instrument but under Frazer this still attracted indefeasibility.  McGechan J accepted immediate indefeasibility. Nathan v Dollars & Sense Finance Ltd [2007] 2 NZLR  CA- held that to declare the interest of a registered mortgagee defeasible merely because the mortgage documents were void, through no fault of the mortgagee, would, ‘destroy the benefit of immediate indefeasibility and would be inconsistent with the Torrens system’. Merbank Corporation Ltd v Cramp  A mortgage instrument was registered absent a ‘charging’ clause which was crucial for its registration. It had not been discovered until afterwards. One party sought rectification of the instrument to include the clause, whilst the other argued that registration should not enshrine on the title because the document as registered did not purport to charge the land.  Barker J For charging of the land as security, it is not the instrument which establishes the charge but the act of registration. The statutory charge is created upon registration of the mortgage  Rectification was therefore not needed to create a valid mortgage and a charge, but was nevertheless ordered (without loss of priority) to give effect to the intention of the parties because no third parties were prejudiced.  The Merbank case is an illustration of the principle that: “It is not the parties who effectively transfer [or create a charge over] the land, but it is the state that does so, and in certain cases more fully than the party could”. FRAUD – The Main Exception to Indefeasibility of Title Fraud destroys the quality of indefeasibility in a registered title. There is no accepted definition of fraud. The parameters of the nature of fraud

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Assets Co Ltd v Mere Roihi [1905] AC 176. PC held that ‘fraud’ in the LTA 1952 requires actual fraud. Fraud which must be proved in order to invalidate the title of a registered purchaser for value must be brought home to the person whose registered title is impeached or to his agents, otherwise it does not affect him. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. Especially if he acts honestly. But if his suspicions were aroused, and he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him.

Waimiha Sawmilling Co. Ltd v Waione Timber Co. Ltd [1923] NZLR 1137  Fraud involves"dishonesty - a wilful and conscious disregard and violation of the right of other persons", per Salmond J. Dishonesty must not be assumed solely by reason of knowledge of an unregistered interest.  PC-If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent, and so also fraud may be established by a deliberate and dishonest trick causing an interest not to be registered and thus fraudulently keeping the register clear.

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Bank of South Australia Ltd v Ferguson (Aus case) An officer of the bank had forged the mortgagor’s signature on an internal bank document to expedite the loan approval. Whilst the forging of the signature was clearly dishonest, it had no operative effect on the mortgagor’s decision to grant the mortgage and did not harm or cheat the mortgagor. Therefore the mortgage was not liable to be set aside because of fraud on the mortgagor by the bank. “For fraud to be operative, it must operate on the mind of the person said to have been defrauded and to have induced detrimental action by that person”.

The effect of fraud on registered titles If registration has been obtained through the fraud of the RP or the fraud of the RP’s agent, the title is voidable at the suit of the person defrauded. RP may recover possession of the land from a forger who has been fraudulent by virtue of s 63(1)(c) of the LTA 1952. (1) Fraud against a previous RP

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Heron v Broadbent Plaintiffs were RP’s, D forged transfers of their land to himself. Defendant handed the forged transfers, together with the certificates of title, to X, as security for money owed. X took the certificates of title and the forged transfers in good faith; there was nothing on the face of the transfers to suggest that there had been any irregularity. X (mortgagee) later took a mortgage from D, and the forged transfers and the mortgage were registered. Defendant’s title, having been acquired by his own dishonest act in forging the transfer was, impeachable for fraud. Not in dispute. But there was no fraud on the part of X: he had taken his mortgage in good faith for valuable consideration and was shielded by the protection of purchasers section. Therefore no claim could be made by the plaintiffs either against X or against the subsequent owners of the mortgage. The result was that the fraudulent registration of defendant as proprietor could be set aside in favour of the former RPs, but only subject to the mortgage (which was indefeasible).

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The plaintiffs had, however, been deprived of an estate or interest in the land by the registration of the mortgage and were entitled to recover under the compensation provisions of the Act.

When a person who has been deprived of land through fraud succeeds in a proceeding for possession against the perpetrator of the fraud, s 85 of the LTA 1952 gives the Court power to direct the Registrar to rectify the register by cancelling any certificate of title or other instrument, or any entry or memorial in the register relating to the land, and substituting such certificate of title or entry as the circumstances of the case require. (2) Fraud against the holder of an unregistered interest. Object of Torrens was to remove shortcomings of doctrine of notice by providing that unregistered notices would not have effect. Difficulty has always been distinguishing between notice that is by the statutes made ineffective and notice that amounts to fraud. Courts need to strike balance- on the one hand the register should be everything, on the other, a wrongdoer should not be able to shelter themselves under the registration against a man who has suffered wrong so long as the rights of 3rd parties are not implicated. The machinery of LTA should not be able to be used to cheat another of a known existing right. Principles of Fraud; Three useful starting points Waimiha Sawmilling Co Ltd  S182 LTA 1982- ‘Knowledge that any...trust or unregistered interest is in existence shall not of itself be imputed as fraud.’ However, knowledge of the imputed interest and other factors may amount to fraud;  Salmond J in Waimiha:  ‘The true test of fraud is not whether the purchaser actually knew for a certainty of the existence of the adverse right, but whether he knew enough to make it his duty as an honest man to hold his hand, and either to make further inquiries before purchasing, or to abstain from the purchase, or to purchase subject to the claimant’s rights rather than in defiance of them.  If, knowing as much as this, he proceeds without further inquiry or delay to purchase an unencumbered title with intent to disregard the claimant’s rights, if they exist, he is guilty of that wilful blindness or voluntary ignorance which is equivalent to actual knowledge, and therefore amounts to fraud.  The problem with this statement is that it cannot be reconciled with clear words in s182.  Duty of honest man test still widely accepted as facet of fraud. ii. iii.

Now clearly established that fraud means “actual fraud, ie, dishonesty of some sort”, brought home to the RP whose title is impeached or to the RP’s agents per Assets Roihi. In Waimiha, it was said that ‘If the designed object of the transfer be to cheat a man of a known existing right, that is fraudulent.’

Remedies Available In terms of remedies available to an unregistered interest holder who has been defrauded, these are not spelled out in LTA 1952. In Efstratiou, CA held it had the jurisdiction to set aside the transfer. Often conversion of the unregistered interest into a registered interest is

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the appropriate remedy and the execution and registration of the necessary instruments may be ordered. Alternatively an injunction may be granted restraining the fraudulent RP from interfering with the rights of the holder of the unregistered interest. The principle would seem to be simply that the fraudulent RP will be required to do whatever is necessary to give effect to the rights of the holder of the unregistered interest. NZ cases where the RP’s conduct has been considered fraudulent Loke Yew v Port Swettenham Rubber Co Ltd [1913] AC 491 Holder of an unregistered interest succeeded against a RP.  E was RP of 322 acres of land, 58 were held by Y in unregistered lease from E. X agreed to purchase E’s land except for Y’s 58. The X prepared a transfer of the whole 322 acres, E signed on condition X agreed not to disturb Y in his possession of the 58. X signed document to the effect that he had purchased the 322 acres and added and added he would negotiate with Y. Transfer was...