Property notes torrens land PDF

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Torrens land notes...

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Property Notes 2018 - Torrens System Background about the Torrens System Two policies goals for the system of land ownership: security of land title and ease of transfer - Can only have either one of the two: a high security of transfer comes at the price of low facility of transfer, and vice versa. Problems with the Old System -

Full of technical rules that was supposed to provide property owners with security of title. But didn’t achieve either policy – land was hard to move, and there was little security of title o Even when you acquired title, it was uncertain whether or not somebody would state that the document was forged and that they were the real owner

Torrens System of Land Registration -

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Most significant reform of old system of title First launched by Sir Robert Torrens in SA in 1858 Designed to fulfil both policies by being: cheap, simple and speedy for ease of trasnfer, reliable in providing secure title and PUBLIC o Its strategy for achieving these goals was by bringing property dealings out of the private sphere and into the public sphere: it replaced the chain of title (private acts of individuals executing deeds) in Old System with a public register for the only evidence of title o Secure title: what is listed on the register would be guaranteed title – registration would cure defects in title  E.g. forgery – at general law, purchaser cannot keep their title due to the nemo dat rule, but at Torrens, if it is registered then the title is conclusive. Under the old system, the purchaser lost, but Torrens established a new priority rule for the bona fide purchaser. o High facility of transfer: potential purchasers could check the vendor’s title on register quickly and cheaply in contrast to the examination of chains of title in old system registration Kirby J described the impact of Torrens on society in Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2004) 220 CLR 472, 503 [94]: ‘There is no doubt that the RPA represents the implementation in New South Wales of one of the most important legal innovations adopted in Australia. ... Virtually from the start, the Torrens system succeeded in Australia because of its great advantages for all those concerned with interests in land….’

PRIORITY DISPUTES IN TORRENS Torrens indicates a shift in priority disputes from thinking about equitable/legal interests to unregistered/registered interests. It favours the interests of the registered proprietor over prior interest holders. Real Property Act 1900 (NSW) 1. Challenges to the Registered proprietor’s title (a registered interest) -

Registered proprietors enjoy indefeasible title, that cannot be defeated.

2. Competitions between unregistered interest holders -

S 43A RPA & ‘first in time’ rule

INDEFEASIBILITY A REGISTERED PROPRIETOR’S TITLE IS ‘INDEFEASIBLE’ UNLESS AN EXCEPTION APPLIES Frazer v Walker [1967] 1 AC 569, 580 defines ‘indefeasibility’ as: ‘a convenient description of the immunity from attack by adverse claim to the land or interest in respect of which he registered, which a registered proprietor enjoys’

Real Property Act 1900 (NSW) Section 42 – Indefeasibility Section 42 sets up the principle of indefeasibility, providing that the estate or interest of the RP is paramount, free from all encumbrances except: 

Fraud (by the registered proprietor) - If you are victim of fraud, your registered title is indefeasible, but if you commit fraud and then register the interest, then it is not.

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Encumbrances recorded on the register

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Interests that fall into the expressed exceptions

Real Property Act 1900 (NSW) Section 43 – Effect of Notice in Torrens No person taking an interest in land from a registered proprietor ‘shall be affected by notice’ (either direct or constructive) of any trust or unregistered interest regardless of whether they would be subject to that interest under common law or equity.  

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In old system of title, notice (actual, imputed or constructive) could threaten a purchaser’s title. S 43 reflects a fundamental principle of Torrens that it should not be necessary for a person to investigate the history of title, but that the register ought to be the sole source of information that a new purchaser needs. It confines the fraud exception – notice of an unregistered interest does not constitute fraud, so just knowing about a previous interest will not make your title defeasible.

Real Property Act 1900 (NSW) Section 45(2) – Ejectment Protects the title of a registered bonda fide purchaser with valuable consideration against any action for ejectment based on a claim that the vendor derived their title through fraud or error.  

Confines the fraud exception - Even if you knew about the fraud or error in the predecessor in title, you will be protected as a bonda fide purchaser. However it does not extend to actual fraud by the person obtaining the registered title.

HOW DOES INDEFEASIBILITYWORK? Two competing theories about what the effect of indefeasibility actually was:

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Deferred indefeasibility Immediate indefeasibility

Difference through an example: X is RP of an estate in fee simple in a parcel of registered land. A rogue steals the certificate of title (CT) held by X and, masquerading as X, agrees to sell the land to Y. The rogue forges X’s signature on a transfer, and gives Y the transfer and stolen CT in return for the purchase price. Y has no knowledge of the fraud, and lodges the transfer with the CT. The R-G (register general) registers the transfer, and Y becomes RP of the fee simple estate in the land. Y has not been fraudulent in this case (the fraud exception will only apply if the RP commits the fraud) Immediate indefeasibility theory  

The moment that the transfer was registered, Y gained indefeasibility. Y’s title will be indefeasible notwithstanding that the transfer is void due to forgery, and X’s title cannot be restored to the register.

Deferred indefeasibility theory  

An instrument that is void before registration remains void between the two parties after registration, and does not confer indefeasible title on the immediate transferee. Therefore, as between X and Y, the title is still defeasible until Y transfers it to an unrelated third party.

Which theory prevails in Australia? 

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The Privy Council in Frazer v Walker decided in the favour of immediate indefeasibility, and this was confirmed by the High Court in Breskvar v Wall. o Justification: ease of transfer (prioritising the innocent purchaser than the defrauded party) Deferred indefeasibility was the prevailing theory in Australia beforehand (Clements v Ellis) The theories are not addressed by the RPA – s45(2) does not protect Y as it refers to fraud committed by the vendor (X), so the provision does not cover this situation.

COURT ENDORSES IMMEDIATE INDEFEASIBILITY AS OBITER Frazer v Walker [1967] AC 569 Facts:      

Mr and Mrs Frazer were the RPs of a farm. Mrs F negotiated a loan from the Radomskis by forging Mr F’s signature on the mortgage form. The clark had signed as a witness to both signatures at her solicitor’s office, and then the mortgage to R was registered. Mrs F defaulted on the loan, and R exercised their power of sale to Walker, who became the new RP. W commenced proceedings against Mr F for possession of the land, as he had no idea of Mrs F’s actions and was still living in the property. Mr F counterclaimed that because his signature was forged, the mortgage was annul.

Held: Mr F lost his claim. 

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The Privy Council endorsed immediate indefeasibility onto R through statutory interpretation of the legislation o No basis on the legislation for attacking R’s title to the mortgage. But this statement was obiter o The defective dealing was with R’s mortgage, but the transaction was then deferred to W, so even under deferred indefeasibility, W would have had indefeasible title. Neither R nor W knew of Mrs F’s fraud. (??? Is this important – check)

Breskvar v Wall Facts:           

The Breskvars were the RPs of land, and they entered into a loan agreement with Petrie. As security for the loan, B gave P an executed document of transfer of the fee simple as well as a duplicate certificate of title They did this because this was an arrangement in the nature of a mortgage by deposit of title deeds, using a transfer form, rather than a mortgage form. The intention was that P would only lodge the transfer for registration if B had defaulted in paying the loan. The transfer was void because it didn’t comply with the formality required by the Queensland Stamp Duty Act – the name was left blank on the executed document of transfer The B’s were not in default under their loan, but P fraudulently inserted his grandson’s name, W, into the blank space and then registered the transfer W become the RP of the property. W was party to the fraud, so he would not have indefeasible title even under immediate indefeasibility. W then sold the land to Alban Pty Ltd, who had no idea of the fraud. Before A could register the interest, B discovered the fraud and stopped the registration of the transfer by lodging a document called the caveat The caveat is an instrument that stops the registrar general from making any changes to the register.

Issue: Was B entitled to stop A from becoming the RP? Held: A won.     

The court approved the decision in Frazer v Walker, overruling Clements and Ellis. However it was still obiter – indefeasibility on registration was not the issue, as A had not been registered. Registration confers title – it creates title rather than merely documenting the title The title is not historical or derivative – therefore B now had an unregistered interest because the property had been transferred out, despite that the instrument is void. A was also an unregistered interest, but A won in the priority dispute because even though B was earlier in time, it was postponed to A.

EXCEPTIONS TO INDEFEASIBILITY (1) ESTATES AND INTERESTS IN LAND RECORDED IN A FOLIO - This exception is contained in s 42

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A RP will take free title, subject to other interests that are already registered on the folio

A REGISTRAR GENERAL’S SHORT-HANDED DESCRIPTION DOES NOT INDICATE THE FULL EXTENT OF THE REGISTERED INTERESTS. Mercantile Credits Ltd v Shell Co of Australia Ltd (1976)136 CLR 326 Facts: -

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There was a lease to Shell that was registered on the folio Although it was registered on the folio as a ‘lease’ only, the lease was actually for five years with two options to renew, so it could potentially last fifteen years in theory. The holder of the title defaulted on a registered mortgage to Mercantile Credits, and MC sought to exercise their power of sale. MC argued that they were subject to the lease only as it was noted on the folio, but not subject to the options to renew that were not noted on the folio. The lease document, where the options to renew was contained, was noted on the register. The interests noted on the Torrens form referred to the document itself, but not the options to renew. S argued that if MC had actually inspected the document referred to on the register, they would have discovered the options to renew.

Issue: Did the options to renew in the registered lease bind the subsequent lease holders, even though the folio made no reference to the options? Held: MC’s title was thus defeated by S who could enforce the options to renew in their lease. -

The interest in the options to renew was binding on the subsequent interest holders even though it was not spelt out in the folio itself. The options to renew was just as enforceable as the lease as they were an integral part of the lease – it directly affected and was intimately connected to the terms of the lease. A Registrar General’s short handed description on the folio does indicate the full extent of registered interests that MC might be subject to. If MC had been given notice of an registered interest, MC needed to look behind the register at the document itself to discover what the full nature of the interest was.

Bursill Enterprises v Berger Brothers Trading Co (1971) 124 CLR 73 Facts:    

There were two adjoining blocks of land, where the registrar’s description referred to a right of way. On inspecting the transfer, the HC found that the grant included a grant to airspace as well as the right of way The original transfer document, that included the grant to airspace, was actually notified on the register, so the purchaser is incumbent by the rights granted in that transfer. Even though the registrar’s description only referred to the right of way and not the air space, the notification included a reference to the original document and that was sufficient to register the entire interest.

(2) REGISTRARS POWER TO CORRECT THE REGISTER Real Property Act 1900 (NSW) s 12(1)

(d) The Registrar-General may, subject to this section and upon such evidence as appears to the Registrar-General sufficient, correct errors and omissions in the Register.   

This is a limited power, where no substantive changes may be made It cannot change the nature of an interest (e.g. from mortgagee to fee simple) – that sort of change has to be re-registered Covers clerical errors e.g. registration of interest on the wrong folio

(3) FRAUD Fraud is found as a statutory exception in s42 and s43 of the RPA: A RP will not get the benefit of indefeasible registered title where there is fraud FRAUD IS ‘PERSONAL DISHONESTY OR MORAL TURPITUDE’ (BUTLER v FAIRCLOUGH) FRAUD DOES NOT INCLUDE NOTICE (WICKS) Wicks v Bennett (1921) 30 CLR 80, 91, per Knox CJ and Rich J: Fraud means ‘something more than mere disregard of rights of which the person sought to be affected had notice. It imports something in the nature of personal dishonesty or moral turpitude’. -

S 43: Knowledge (actual, imputed or constructive) about the existence of a prior unregistered interest will not constitute fraud

THE CONDUCT OF FRAUD MUST HAVE AN ASPECT OF PERSONAL DISHONESTY OR MORAL TURPITUDE Loke Yew v Port Swettenham Rubber Co Ltd (1913) AC 491 Facts: -

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E was the RP of 322 acres of land He sold 58 acres to LY under customary land law, so it operated as an unregistered land interest. Port Swettenham Rubber Co made an offer to E to buy all 322 acres, but LY refused to sell it back to E, so E told Co that 58 acres belonged to LY. Co said that if E transferred all the land under their name in the Torrens register, they would negotiate with LY to buy the 58 acres. E agreed, and Co was registered as RP for the 322 acres. The price that Co paid was reduced to remove the value of LY’s land for the price, under written assurance that they would make their own arrangements with LY. Co approached LY to pay for the land at a substantially lesser value, but LY refused, so Co brought proceedings to evict LY based on its indefeasible title of the whole 322 acres, as opposed to LY’s unregistered interest. LY tried to argue that Co’s title was defeasible due to their own fraud.

Issue: Knowledge of the existing unregistered interest does not constitute fraud, so what actions of Co did? Judgement: -

There was personal dishonesty and moral turpitude of Co because they presented a position that they never intended to satisfy

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When Co gave written assurance to E that they would make their own arrangements to deal with LY’s interest, Co never intended to buy LY’s rights If E had known that when E was negotiating, it would never have sold that land and executed the transfer.

Fraud is not negligence – Assets Co FRAUD MUST ARISE PRIOR TO, OR IN THE ACT OF, REGISTRATION (IT CANNOT BE SUBSEQUENT) Bahr v Nicolay (No 2) (1988) 164 CLR 604 Facts: -

B was the RP of vacant land, but they sold it to N in 1980 to finance the development of the land. They leased the land from N, with the right to exercise an option to buy back the fee simple of the land in three years at a specified price (cl 6 of the sale document) In 1981, N sold the land to the Thompsons, where they specified in cl 4 of their sale contract the existing interest of B’s right to repurchase. When B approached T to repurchase the property, T refused to sell back to them.

Held: T is now the RP, and they have indefeasible title which is not bound by B’s unregistered right. Judgement:  

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Although T bought the land with the knowledge of B’s interest, the mere knowledge of the interest is not sufficient to constitute fraud. No dishonesty when they obtained the title as they didn’t put out a position they never intended to honour. o The evidence in the case showed they took a calculated risk and actually believed that B would not be able to repurchase the property. Minority judgement (Mason CJ, Dawson J); There is no justification for restricting the notion of fraud to conduct and state of mind at the time of registration o Repudiation of an honest undertaking where RP had acknowledged a prior interest and induces execution of transfer is no different to a false undertaking, especially if it is repudiated for the purposes of defeating the prior interest. o In both cases, the preservation of the unregistered interest was the foundation underlying the execution of transfer Majority judgement (Toohey, Wilson, Brennan J): took the conventional view that fraud refers to fraudulent acts committed at the time of acquisition of title o The legislation makes it clear that fraud looks at moral turpitude and dishonesty in the act of acquiring registration, not subsequent repudiation.

FRAUD MUST BE THE FRAUD OF RP AND HIS AGENTS (‘BROUGHT HOME’)  

Assets Co Ltd v Mere Roihi [1905] AC 176 NB impact of s 118 discussed in ‘Exceptions to indefeasibility (Part 3).

FRAUD CAN INCLUDE THE RP HAVING ACTUAL KNOWLEDGE OR WILLFUL BLINDNESS ABOUT THE FRAUD OF OTHERS Assets Co v Mere Roihi [1905] AC 176, 210, per Lindley LJ:

‘Fraud by persons from whom [the registered proprietor] claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further enquires which he had omitted to make, does not of itself prove fraud on his part. But if it be shewn that his suspicions had been aroused, and that he abstained from making further enquires for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him.’   

Knowledge of previous unregistered interests will not challenge indefeasibility( s 43), but knowledge of the fraud of another person will, even if RP had not set out in deliberate fraud. Wilful blindness will also constitute fraud because there is an element of dishonesty in knowing that the circumstances are suspicious yet abstaining from making further inquiries Different from carelessness – if you would have found out about the fraud if not for negligence, that is not fraud as you have just been careless but your conscience has not been triggered (there is no aspect of personal dishonesty or moral turpitude)

EQUITABLE FRAUD (CONSTRUCTIVE NOTICE) VS WILFUL BLINDNESS  Equitable fraud is constructive fraud – when the RP should have realised that the transaction was fraudulent.  In Grgic v ANZ Banking Group Ltd (1994) 33 NSWLR 202, at 221, Powell JA said: [T]hose species of ‘equitable fraud’ which are regarded as falling within the concept of ‘fraud’ for the purposes of s. 42 of the Act are those … in which there has been an element of dishonesty or moral turpitude on the part of the registered proprietor of the subject interest or...