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Torrens sytem...

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Torrens system – Promotes both secure title/ease of transfer. Owners are ‘registered proprietors’: 

The public register guarantees the registered title of purchasers (fee simple owners) and titles can only be created/transferred via registration, meaning all previous/other interests not recorded are obliterated.

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Once satisfied that all interests in the land have been ascertained, the specific parcel of land and its interests are recorded in the register (called a ‘folio’). A copy of the folio is called a ‘certificate of title’ – must be produced in any dealing.

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Any person deprived of an interest may have a remedy against the applicant (e.g. if the applicant has acted fraudulently) or for compensation from the public insurance fund. Real Property Act 1900 (NSW).

Indefeasibility-A registered proprietor has ‘indefeasible’ title unless an exception applies. 

Fraser v Walker [1967]: ‘Indefeasibility’ of title is the ‘immunity of attack by adverse claim to the land or interest in respect of which they registered, which a registered proprietor enjoys’. -It is immediate upon registration even if procured via a forged title/there was a transaction defect, assuming the owner acted bona fide. Breskvar v Wall (1971).

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S 42 (Exceptions to ‘indefeasibility’): The estate or interest of the registered proprietor is free from all encumbrances except: In cases of fraud/encumbrances recorded on the register/Interests under the expressed exceptions.

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S 43 – Notice provision: A purchaser cannot be bound by earlier unregistered interests even if it has notice of them at registration, as registering obliterates these interests.

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S 45(2) – Ejectment provision: Protects the title of a registered purchaser (bona fide for valuable consideration) against any action for ejectment based on a claim that the vendor initially acquired the title via fraud/error. (Fraser v Walker [1967]).

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Exception– estates and interests recorded in a folio: If there are other interests registered in a folio, the property will be subject to those. Bursill Enterprises v Berger Brothers (1971) –A ‘prudent conveyancer’ would assess the transfer listed on the folio.

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Exception– registrar’s power to correct: S 12(1) (d)– Registrar may correct minor errors/omissions in the register.

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Exception – fraud:

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s 42. The fraud must occur by the person whose registered title is impeached/their agent (Assets Co v Mere Roihi [1905]). -s43/ Wicks v Bennett (1921): Knowledge that a certain trust/unregistered interest exists does not in itself constitute fraud.

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Fraud is ‘personal dishonesty or moral turpitude’, i.e. a conscious intention to defraud (Butler v Fairclough (1917)) and a wilful choice to disregard/violate the rights of another person- rather than merely knowing certain statements are false (Russo v Bendigo Bank Ltd (1993)). -Can include wilful blindness (where the registered proprietor should have realised that the transaction was fraudulent and decided not to act upon their suspicions by asking follow up questions), but not constructive notice on its own i.e. merely failing to make the relevant inquiries by not being vigilant enough and mentally disregarding the fact that the interest is unregistered: Assets Co v Mere Roihi [1905]. -Fraud must arise prior to/during registration (Bahr v Nicolay (No 2) (1988)).

4. Exception- unregistered leases: s 42(1)(d): Any tenancy not exceeding three years (including options to renew). 5. Exception - interests arising under other statutes/inconsistent statutes: Indefeasibility can be modified by interests arising under later inconsistent statutes.

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Legislation exists before 2009: S42(3): Unless there is an express override of the Real Property Act, then indefeasibility remains.

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Legislation exists after 2009: South-Eastern Drainage Board (SA) v Savings Bank of SA (1939): The later act prevails to the extent of the inconsistency.

6. Exception - actions in personam: 

Registered proprietors cannot exploit s 42 to hide from the consequences of their own actions (Frazer v Walker). This exception allows a legal/equitable action ‘in personam’ to be initiated against the plaintiff (Conlan v Register of Titles [2001]).

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Bahr v Nicolay (No 2) (1988): Indefeasibility is not there to protect a purchaser from their own contractual promises which created interests affecting their own title. Examples can include a contract for the transfer of land/holding a property on trust/the rescission of a contract containing a defect (Lukacs v Wood (1978)).

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Often, this cause of action is required to be combined with unconscionability (Vassos v State Bank of SA (1993)). -LHK Nominees v Kenworthy [2002]– Knowing receipt (e.g. knowingly receiving trust property in breach of a trust) is not a basis for ‘in personam’ on its own.

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If successful, such an action will lead to orders requiring the registered proprietor to give up their interest (either whole/in part), in favour of the claimant (Hillpalm Pty Ltd v Heaven’s Door Pty Ltd (2004)).

7. Exception–Volunteers do not take indefeasible title if s 118 applies (Cassegrain v Gerard Cassegrain & Co (2015)): 

Real Property Act 1900 (NSW), s118:

(1)

Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except in relation to (d) Proceedings brought by a person deprived of land by fraud against: (i) A person who has been registered as proprietor of the land through fraud, or (ii) A person deriving (otherwise than as a transferee bona fide for valuable consideration) the land through fraud. Priority between unregistered/equitable interests (Arising via acts of the parties, e.g. via a contract capable of specific performance (Bunny Industries) or via a right to rescind a dealing because of fraud (Latec Investments Ltd v Hotel Terrigal)): Caveats (As a way of protecting unregistered interests): 

s 74F: Any person who, via any unregistered dealing [does not need to be capable of registration] or otherwise, claims to be entitled to a legal/equitable estate or interest in land under the provisions of this Act, may lodge with the Registrar-General a caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled.

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Effect of caveat – s 74H (a): ‘While a caveat lodged under s 74F remains in force, the Registrar-General must not, except with the written consent of the caveator, record in the register any dealing if it appears to the Registrar-General that the recording of the dealing is prohibited by the caveat’. -The caveat puts a temporary halt to the registration of the land and gives the person claiming the unregistered interest time to enforce that interest and obtain the land in registrable form from the existing registered proprietor so that they can register it themselves – e.g. commence legal proceedings to enforce their interest/negotiate a settlement.

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Lapse of caveats – Real Property Act s 74I:  Where a dealing for registration is lodged with the Registrar-General for a piece of land and then someone else records a caveat prohibiting this registration,  The Registrar-General shall, on an application being made in the approved form by the registered proprietor, prepare for service on the caveator a notice to the effect that unless a Supreme Court order [who will consider whether a caveatable interest exists] extending the operation of the caveat is obtained and lodged with the Registrar-General within 21 days of the date of service, the caveat will lapse and the dealing will be recorded or registered.

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Removal of caveats via court order- s 74MA: -E.g. if the person doesn’t have a caveatable interest and the caveator was not entitled to lodge the caveat, or if the caveat was drafted too broadly. -‘Any person who is/claims to be entitled to an estate or interest in the land described in a caveat lodged under section 74B or 74F may apply to the Supreme Court for an order that the caveat be withdrawn by the caveator.’ -‘The Supreme Court may order the caveator to withdraw the caveat within a specified time.’ -Lawrence & Hanson Group Pty Ltd v Young [2015]: The caveator must demonstrate (to prevent a court from ordering the withdrawal of the caveat): 1. That there is a serious question to be tried such as does the caveator in fact have an interest in the land? 2. The balance of convenience favours the continuation of the caveat: The harm that the caveator will suffer if the caveat is not continued will outweigh the harm that the other party will suffer if the caveat is continued.

Priority disputes between unregistered interests:

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Unregistered interest v registered interest: See exceptions to indefeasibility topic.

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Unregistered interest v unregistered interest: Where the equities are equal, the first in time prevails (Rice v Rice (1854)).

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Butler v Fairclough (1917): The first in time prevails- yet they will lose their place via an act or omission which causes the later interest to act to their detriment. Failure to caveat where there is a contract capable of specific performance is a reason in itself to postpone the prior interest if not done promptly, because it could lead the other party entering into an agreement to purchase a lease in reliance upon the clear title. - Also includes the failure to get custody of a certificate of title as it means the holder of the earlier interest has not taken adequate care of its interest: Heid v Reliance Finance (1983).

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Abigail v Lapin [1934]: The earlier interest holder is estopped from asserting priority if they make a representation that their interest does not exist/will not be enforced. -Failure to caveat is just one relevant factor, as a failure to caveat may have no practical effect (e.g. if register is not checked). o IAC (Finance) Pty Ltd v Courtenay (1963): Postponing conduct will occur when it is reasonably foreseeable and a natural consequence that the earlier party’s conduct would arm a later party with the ability to procure creation of the subsequent interest thinking they will be the absolute legal and equitable owner.

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J & H Just (Holdings) Pty Ltd v Bank of NSW (1971): Failure to lodge a caveat is insufficient to postpone an earlier interest if some other action has been taken to protect the unregistered interest, such as the reasonable retention of and reliance on the certificate of title (knowing the Registrar would not register any interest without production of the certificate).

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Relevance of local conveyancing practice: Person-to-Person Financial Services Pty Ltd v Sharari [1984]. -Failure to lodge a caveat leads to postponement where it does not conform with existing conveyancing practices and therefore led to the later interest holder’s belief that no earlier interest existed. -Incompetence of solicitor: Irrelevant in priority disputes, which look to what is equitable between the two parties. It is a matter between the client and the lawyer only here, where the client could sue the solicitor separately for negligence.

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If the holder of the later unregistered interest has actual notice of the earlier unregistered interest, then the later interest is subject to the earlier interest (Moffett v Dillon [1999]).

Prior equitable interest v later equitable interest where the later interest has settled (purchase money paid to vendor) but is awaiting registration: 

s 43A: Deems the later interest holder to be holding a legal estate (IAC (Finance) v Courtenay)) from the time of settlement. (1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. -‘Dealing registrable’ requirements: 1. The interest holder must have a document in the form required by the RegistrarGeneral for the purposes of registration as well as any documentation needed to lodge with that document, like the duplicate certificate of title. If the transferee has not signed yet (meaning it’s not registered), it’s still a dealing registrable so long as the transferor (mortgagor/lessor for those examples) has signed to make it possible to become registered in the future. 2. The interest must have been taken directly from the registered proprietor and be capable of immediate registration instead of being depending on certain prior dealings which have not yet occurred/been registered. -For a subsequent legal estate to have priority over an earlier equitable interest, the bona fide purchaser rule related to notice (no actual/imputed/constructive notice of the other interest) must apply at settlement. The innocent party must have made ‘such inspections as ought reasonably to be made’ and have paid a fair and full amount. -The later interest holder is protected by any notice gained between settlement and registration (Pilcher v Rawlins (1872)). (2) ‘No person contracting or dealing in respect of an estate or interest in land under the provisions of this Act shall be affected by notice of any instrument, fact, or thing merely by omission to search in a register not kept under this Act.’ -Means that the only way to have constructive notice in terms of saying ‘a reasonable person would have conducted a search’

which would have revealed the existence of the interest, is through the Torrens register and not any other register. Mortgages and the Torrens system:

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s 57(1): ‘A mortgage under this Act has effect as a security [a registered security interest- gained by mortgagee] but does not operate as a transfer of the [fee simple] land.’ (Meaning the mortgagor gains and retains registered title of the estate in fee simple). -s 57(2): Affirms the mortgagee’s power of sale where a default has occurred. The mortgagor cannot set this power aside if the mortgagee acts properly, meaning the mortgagor would only be the registered proprietor until the transfer is registered.

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s 58(1): The mortgagee [despite not being the registered proprietor] is authorised ‘to make and execute all such instruments as shall be necessary for effecting the sale thereof, all which sales, contracts, matters, and things hereby authorised shall be as valid and effectual as if the mortgagor had made, done, or executed the same.’

Execution/Creation of Torrens Mortgages- s 56C: ‘(1) Before presenting a mortgage for lodgment under this Act, the mortgagee must take reasonable steps to ensure that the person who executed the mortgage/on whose behalf the mortgage was executed [the mortgagor] is the same person who is/is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates.’ -The mortgagee will have taken ‘reasonable steps’ if they get multiple forms of identification from the person who is executing the mortgage (bearing a ‘reasonable likeness’ to mortgagor), and ensure that mortgage documentation is signed in the presence of a witness. Failure to comply with 56C: ‘(6) The Registrar-General may cancel, in such manner as the Registrar-General considers appropriate, any recording in the Register with respect to a mortgage if the Registrar-General is of the opinion: (a) That the execution of the mortgage involved fraud against the registered proprietor of the mortgaged land [that the mortgagor was being fraudulent], and (b) That the mortgagee – (i) Has failed to comply with subsection (1), or (ii) Had actual or constructive notice that the mortgagor was not the same person as the person who was, or was about to become, the registered proprietor of the land …’ Priority disputes- mortgagor and purchaser (contract not yet settled) – First in time rule is generally relevant: 

Forsyth v Blundell (1973): For a defaulting mortgagor to show that the exercise of the power of sale was defective/breached a duty of good faith, they must prove that the mortgagee recklessly sacrificed the mortgagor’s interests by not taking reasonable precautions e.g. to obtain a proper price. -The mortgagor has rights which allow the exercise of the power of sale to be set aside and to get the fee simple back.

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This creates a priority dispute between the mortgagor and the purchaser of the mortgagee’s sale via a contract capable of specific performance which transfers an interest in land and creates an equitable interest as an unregistered purchaser.

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View preferred by judge: The mortgagor’s interest arose prior to any interest acquired by the purchaser and thus the mortgagor (the registered proprietor) retains a legal interest until the transfer is registered by the new purchaser, thereby winning the priority dispute until this time.

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Alternate view (Preferred by lecturer): Characterised the mortgagor’s interest (despite being the registered proprietor) as an equitable interest, existing only by reason of the defective exercise of the power of sale. Their conduct does not contribute to any false belief upon which the purchaser relied on in entering into the transaction and there was no way of the mortgagor protecting their interest as they do not possess the duplicate certificate of title. It is thus fair to prioritise the mortgagor’s interest.

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Whether the mortgagor (alleging a defective exercise of power of sale) should/could have lodged a caveat will be relevant. -Where a mortgagee has defectively exercised the power of sale, the lecturer recommends that a mortgagor should get a caveat as soon as they become aware of the defective exercise as it’s the only way they can protect their interest.

Priority disputes- the mortgagee’s sale has occurred (settled) but the transfer is not yet registered: 

Real Property Act s 59: -‘The Registrar-General shall, for the purpose of a sale [by the mortgagee] authorised by s 58, register a transfer executed by a mortgagee in the approved form and, upon that registration, the estate/interest of the mortgagor in the land comprised in the transfer shall pass to and be vested in the transferee, freed and discharged from all liability on account of the mortgage.’ -Presumes that the transfer executed by the mortgagee to the purchaser at settlement is a ‘dealing registrable’ as per s 43A, indicating a legal estate (bona fide rule on p3– concerns knowledge of mortgagor’s right to set the power of sale aside).

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If s43A does not apply, we just apply the general priority rule between equitable/unregistered interests (p3).

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[Latec Investments v Hotel Terrigal (1965): Characterised the interest of a mortgagor (where the mortgagee has defectively exercised the power of sale) as a ‘mere equity’, i.e. a right to go to court and have the transaction set aside, to get an interest in the land at this later date. Equitable interest (here, a subsequent charge over the land) – an interest in the land now. Thus, an equitable interest held by a purchaser may prevail if they are a bona fide purchaser. Same outcome as s43A.]

Transfer to the purchaser has been registered- creates indefeasibility under s 42: 

The mortgagor’s right to set the sale aside following registration falls within an exception to indefeasibility solely where there is fraud from the mortgagee which can be ‘brought home’ to the purchaser. I.e. there is a ...