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Summary of lecture notes for Property B...

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Introduction to Torrens System of Land     

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Register: contains folio, dealings and all records kept pursuant to Real Property Act; central repository for all dealings = crucial to whole system Folio (reference): the description of the land and the distinctive reference to a parcel of land; there must always be a legal description of the land – s 32(1); there is a unique folio number for each parcel of land Certificate of title: provides details of interests that are recorded; this is required when registering dealings – s 33 Dealings: any instrument that is capable of being registered under the provisions of the Act – s 3(1)(a); includes transfers, mortgages, easements, leases Features of Torrens system: o Conclusiveness of register = notion of indefeasibility o System of title by registration o Elements:  S 31B(1) requires the Registrar-General to maintain the register  Folio of the register is a distinctive reference of each dealing  Certificate of title records all dealings  Each dealing is recorded – any instrument other than a caveat – s 36 Priorities and registration: o Registration confers title and determines priority o Priority is governed by order of registration o Registration is the source of the title o The Registered Proprietor is the owner of the land – s 40(1)(a) What constitutes the Register? o Bursill Enterprises Pty Ltd v Berger Bros Trading Co (1971) 124 CLR 73 HCA  Title was subject to an interest notified on CT  “Right of way created and more fully set out in… Transfer no 7922 affecting parcels X and Y.”  But right of way actually restricted ability to build above the right of way (so restriction on height) – there was an inconsistency in the CTs by imposing control of airspace above 12 foot  This wasn’t checked  Windeyer J held “a prudent conveyancer acting for a purchaser … would have ascertained what it was that Transfer 7922 referred to on the vendor’s certificate of title in law effected … surely no prudent person, seeing the reference found to a right of way, would neglect to ascertain what exactly was the nature of the right of way, the land subject to it, the persons who could avail themselves of it, for what purposes in what matter and at what time.”  There was an obvious mistake in the Register but the HC ultimately found that the Register is infallible

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Even though the CT was found to be in error, the court decided to follow what was on the CT because of the notion of conclusiveness  Amendment to legislation after this case was made on s 42 – fraud is an exception to conclusiveness of CT; omission or misdescription  So if there is a notification on the CT – must assess the instrument itself Legal and equitable interests: o Lysaght v Edwards (1876) 2 Ch D 499  Vendor died prior to completion of a contract of sale  Held that contract was specifically enforceable and purchaser’s equitable interest was acquired at the same time as the contract, being a proprietary interest it could be enforced against the executors of the vendor’s estate o Walsh v Lonsdale (1882) 21 Ch D 9  Tenant took possession of premises pursuant to written and signed agreement to grant a lease of 7 years  No formal lease was drawn up. Tenant paid rent on periodic basis and it was held that an equitable lease for 7 years arose Conveyancing Act requires that a contract for the sale of land be in writing – s 54A Exceptions for this requirement: o Doctrine of part performance:  Law of mortgages: because of the doctrine of part performance an equitable mortgage will be created if the mortgagor (the borrower) hands over title deeds as security for the loan – known as deposit of title deeds  Taking possession of land and paying rent can also be part performance of a lease Resulting trusts: o Purchase Money Resulting Trust – Calverley v Green (1984) 155 CLR 242 o Purchased in the name of another Presumption of advancement: o In certain situations equity presumes that the person who purchased property in the name of another has made a gift o Legal owner doesn’t hold as trustee but as outright owner o Presumption in these situations:  Husband or fiancée purchases for wife or future wife (no such presumption if wife purchases property and puts it in name of husband)  Father or mother purchases property and puts it in name of child o Presumption is rebuttable if it is clear that the intention is that the transfer is not a gift

Registered and unregistered interests; Caveats 

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Personal equity and breach of trust: o Obviously, a registered proprietor who obtains registration in breach of fiduciary duty cannot escape liability  Breaches of trust or fiduciary obligations involve the element of unconscionability or equitable fraud required to bring an action in personam o But what about a stranger who takes from a trustee in breach of trust?  Barnes v Addy – first limb is a stranger who knowingly receives trust property in breach of trust holds the property subject to the trust  The second limb arises where the stranger assists which knowledge in a fraudulent or dishonest design on part of trustee or fiduciary and therefore takes the property as a constructive trustee known as accessory liability Farah v Constructions Lty Ltd v Say-Dee Pty Ltd: o Second limb coincides with concept of fraud and is an exception to indefensibility o But what about first limb? Which imposes a constructive trust on a person who acquires trust property with actual or constructive knowledge of the existence of a trust is harder to reconcile with indefeasibility provisions, particularly the notice provision of the Torrens Statute o Facts:  Farah Constructions Pty Ltd entered into an agreement with Say-Dee Pty Ltd, to purchase and to redevelop a residential property in Burwood. Over the next few years, the development stalled because the council considered that the property was too narrow for the proposed construction and would need to be amalgamated with adjoining sites  In June 2001, MrFarah Elias along with his wife and two daughters entered into a contract to purchase one unit on a nearby property and in August 2002, LesmintPty Ltd, which MrElias controlled, contracted to buy an adjoining property. Thereafter, the relationship between SayDee and Farah deteriorated. Say-Dee filed a cross-claim, seeking declarations that Farah, Lesmint, MrElias and his wife and daughters held their interests in the various properties on constructive trust for the partnership between Say-Dee and Farah  The judge at trial, Palmer J, found that Say-Dee had declined invitations to participate in the purchase of Nos 13 and 15. Moreover, it was held that Farah’s fiduciary duties to Say-Dee did not extend to an obligation to disclose information concerning the opportunities to acquire the properties. There being no breach of duty found on the part

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of Farah, the liability of the other cross-defendants as participants in the alleged breach did not arise for examination  On appeal, Tobias JA, with whom Mason P and Giles JA agreed, reversed many of the findings of fact made by the trial judge  Notably, it was found that Say-Dee had not been invited to participate in the purchase of Nos 13 and 15. Farah was obliged and had failed to disclose this and other information to Say-Dee and so had breached its fiduciary duties  Moreover, it was held that MrsElias and her daughters were liable as recipients of the benefit of a breach of fiduciary duty. It was decided that, under the first limb of Barnes v Addy, they held their interests on constructive trust because the requisite knowledge could be imputed to them Special equity cases: receipt of trust property: o Where RP purchases knowing that property was subject to a trust? Can it be set aside under 1st Limb of Barnes v Addy (knowing receipt)  Second Limb is knowing assistance o High Court in Farah v Constructions Pty Ltd v Say-Dee Pty Ltd confirmed that absent of fraud, the RP is not subject to a personal equity in these circumstances o Otherwise beneficiaries of trust property would be in a better position than other unregistered interests  Under 2nd limb (accessory liability) where transferee participates in the breach of trust this will be fraud and a statutory exception to indefeasibility o Insufficient to know that property was acquired in breach of trust –must have somehow participated in the breach to constitute fraud – fraud has to be actual dishonesty Other exceptions in s 42 of RPA: o Other estates or interests in land s42(2) o Ideally no need to search register but where reference recorded may need to look at underlying document as will be subject to any interest it represents o Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd:  Facts: two adjoining blocks of land where the certificate of title to each referred to a right of way. (easement) On Bursill’s certificate of title the encumbrance was recorded as: ‘Right of way created and more fully set out in Transfer No 7922…’ . Both wanted to build over the easement. Question was whether there was simply an easement or if there was an easement with air space attached to it. Bursill claimed that Berger only held the interests that were notified on the register and that if Bursill’s certificate of title did not notify an interest in the airspace nor interests in the building spanning above the right of way, then Bursill’s title was not encumbered by those interests  Principle: Judging from the cases we do not take the Register at face value, rather we look at the dealings between the parties. Register says that the interest is an easement, but the dealings between the parties indicate that it is an entire transfer of the interest o Majority of the court found that additional rights burdened the land and they were ‘notified upon the folium.’ These additional rights were sufficiently

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‘notified’ because a prudent purchaser encountering the reference on the folium to a transfer described as granting a right of way, would inspect the transfer to ascertain the nature of the rights it conferred. On inspecting the transfer, the purchaser would discover that airspace had been transferred o Even though described in an unsatisfactory way, it was still discoverable by a prudent solicitor conducting reasonable searches When do you have to search behind the register? o S 42 requires that the recording must identify the interest even if only broadly o In cases where the interest is no longer current there is no need to search the dealing. For example don’t need to search for the Mortgage if the Register records a discharge of mortgage. There is no need to investigate the discharge itself o So only have to investigate subsisting interests Omitted or misdescribed easements: o Registered easement like other interest is indefeasible. But some easements will be an exception to indefeasibility. Implied easements are given only a limited protection where they are not registered o S 42(1)(a1) creates two scenarios:  Where easement was subsisting immediately before land was brought under the Real Property Act  Where easement was validly created under the Real Property Act Where easement created before Torrens system: o Where easement is omitted before the land was brought under the act, it will be an exception. This will include express easements, implied easements and prescriptive easements Where easement already validly exists: o Where easement created after land brought under the Act, exception to indefeasibility applies only where validly created. This requires that it is created by an appropriate instrument (section 46 RPA) and lodged for registration and registered (section 47(1) RPA); it would follow that unless in appropriate form and registered it will not be enforceable against subsequent transferee if later omitted or misdescribed. The exception is therefore a narrow one because of the registration requirement imposed by words “validly created”. Implied easements and prescriptive easements can never clear this burden o A narrow definition – may not apply to implied easements because of the requirement for “validly created” includes registration In personam: o Although the in personam exception may protect an easement from the indefeasibility of a RP, in a case decided by the NSW Court of Appeal in Williams v State Transit Authority of New South Wales, it was held that a prescriptive easement (i.e. where you have used land for 20 years – like adverse possession) cannot arise in respect of Torrens title land What about Wheeldon v Burrows Easement? o In McGrath v Campbell, the court decided that Wheeldon v Burrows Easement (this is where an easement arises under common law because the vendor of both the dominant and servient tenements sells to two separate parties in a contemporaneous transaction) was not protected by the in personam exception

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in this case because the actual conduct of the RP was insufficient for the easement to be protected by the in personam exception o In that case they knew of facts giving rise to easement (access to driveway) but there was no actual intention to take subject to the easement. Implied or imputed intention was seen as not sufficient o So the position isn’t entirely clear. At the moment a prescriptive easement can’t be protected under RPA. But a Wheeldon and Burrows Easement may be under specific circumstances (not by s 42 exceptions), but by in personam exception Omitted or misdescribed profits a prendre: o Right to come on land and take something away that belongs to land –like fruit o Like easements (if omitted by created before RPA then protected by 42(1)). Under second exception needed to be at least lodged for registration and probably can’t arise by prescription because of Williams v State Transit Authority Tenancy not exceeding 3 years – short term tenancies exception: o RPA s 42(1)(d): a tenancy where under 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:  Must be for no more than 3 years  Tenant must be in possession or entitled to immediate possession  Option to renew must not be capable of extending total period to more than 3 years  Purchaser of reversion must have taken his or her interest with the relevant notice of the tenant’s interest o No requirement to register short term leases o If new RP took without notice, not bound by lease but actual or constructive notice will be sufficient to burden purchaser: Marsden v Campbell o Constructive notice is imputed where tenant is in possession of premises Unregistered interests and the Torrens system: o Unregistered interests continue to exist in Torrens System o Some may be legal while some are equitable o Legal:  23D lease (CA)  Easement implied under Wheeldon v Burrows  Implied tenancy now under s 127 CA o Equitable:  Equitable lease  Equitable mortgage by deposit of title deeds  Vendor’s lien Purpose of caveat: o The main purpose of a caveat is to freeze the register (no further dealings in that property) but once lodged a caveat serves as ‘notice to all the world that the RP’s title is subject to the equitable interest alleged in the caveat.’ – Re Hitchcock

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o A caveat does give notice, but there is no obligation on a person holding an unregistered interest to register his/her interest o A caveat’s purpose is not to give notice. However, it’s logical outcome is to give notice Caveat to protect unregistered interest: o The primary purpose of a caveat is to protect the caveator’s interest from being defeated by a registered dealing without the caveator first having a chance to approach the Supreme Court for an order protecting the interest: Kerabee Park Pty Ltd v Daley o Caveat freezes the register, preserving the status quo: Miller v Minister for Mines o Purpose of a caveat is set out in J & H Just (Holdings) Pty Ltd v Bank of New South Wales, where Barwick CJ stated that the ‘caveat is protective; it is not to give notice.’ o But in a way a caveat also serves to give notice to other parties of your interest o A caveat does not give you a greater interest than you have, rather a caveat just notifies the world of your interest and prevents further registration Caveats: o Caveats preventing dealings in land:  These caveats are covered by s74F RPA and are used to protect unregistered interests  An example is where a mortgagor fears that the mortgagee will improperly exercise a power of sale  When the caveator lodges a s74F caveat, the Registrar will note the caveat on the Register. Registrar-General is then obliged to notify the RP that a caveat has been lodged: s74(6)  Once lodged the caveat will stay in place until the RP attempts to deal with the land in a manner which is inconsistent with the interest protected by the caveat o Requirements:  Needs to be proprietary interest  Cannot lodge a caveat to protect a contractual or personal interest  Proprietory interest must exist at the time of lodging the caveat  Example: mortgagee or someone with call option to purchase land can also lodge a caveat  Cannot lodge a claim if you merely have a cause of action; e.g, claim under Family Law Act 1975(Cth); Ryan v Kalocasy  But you can if there is a constructive trust and you have contributed to the purchase price or made improvements to the property  Cannot lodge to protect a mere equity. Mere equity is a legal claim/action and not in itself an equitable interest  Contract is not a caveatable interest o Formal requirements:  S 74F – Lodgement of caveats against dealings, possessory applications, plans and applications for cancellation of easements or extinguishment of restrictive covenants  Approved form  Specify interest claimed by caveator so that RP can know what claim he or she will need to meet

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 Strict compliance with formal requirements no longer necessary in NSW s74L (Court can overlook deficiency in drafting)  But clear description of interest claimed is required because this goes to the heart of the Act Effect of caveat:  Caveat does not enlarge or add to existing rights  Primary purpose to protect interest by freezing the Register  Operates as a statutory injunction requiring RG to withhold registration until caveator given opportunity to pursue remedies  Also serves to give notice  A caveat only prohibits the recording of a dealing only to the extent that the recording would affect the interest claimed Removing caveats:  Can be removed in three ways:  Lapsing notice s74I (1) – where dealing lodged anyone with interest can request Registrar General to serve lapsing notice which gives caveator 21 days to extend caveat by applying to Supreme Court (otherwise caveat lapses). This is a partial lapsing (so caveat lapses only in relation to this dealing)  S 74J(4) – Where still serve lapsing notice without any dealings being lodged –the Registered Proprietor can do that. In this case, it is an entire lapsing and caveat cannot be relodged  Court order s74MA – Application to Court for withdrawal of caveat Extending caveat:  S74K(2) RPA  Court treats caveator’s position as analogous to position of an application for an interlocutory injunction  Must show serious question to be tried and balance of convenience In practice:  In NSW caveats are also relevant where a party might have a registered interest but have lost their CoT  S74F(2) permits a RP to lodge a caveat against his/her own registered interest: Barry v Heider  To prevent the CoT being used unscrupulously by its finder, the RP is able to lodge a caveat to prevent any dealings with the land  The most common use of caveats is where the mortgagor believes that the mortgagee is improperly exercising his/her power of sa...