Real Property Law Exam Notes PDF

Preview

Summary

Notes consisting of every chapter required to pass the course. ...

Description

Real Property Law Exam Notes PRIORITY (Chapter 6) Consider: - The land in question (registered land or unregistered?) - What type of interests (legal, equitable or equities) are an issue and when they were created? Prior Legal Interest Against Later Legal Interest  Nemo Dat Rule (Unregistered Land) Rule: Priority is given to the legal interest that was created first in time. The first in time prevails. If it is possible for interest to coexist, the second (later) interest is subject to the first. (Lease granted prior to the purchase.) If it is not possible, than the second is nullified. Most of the time it can be conferred without the consent of the owner of the land. This happens in the case of Fraud. Impact of Land Registration - no interest is legal until it is put onto the Register - when registered the concept of indefeasibility applies - same rule applies to lease. Where lease holder gets it registered first and purchaser will be subjected to that lease. However, if purchaser registers land free of the lease, then the purchaser gets land without lease. However some lease are legal without registration (Find Victoria law) Prior Legal Interest against Later Equitable Interest (Unregistered Land) Rule: a prior legal right will always prevail against a later equitable right Exceptions:  Northern Counties of England Fire Insurance Company v Whipp (1884): where the holder of the legal interest has been fraudulent and this lad led to the creation of the later equitable interest  Barry v Heider (1914): where the earlier interest holder allows another to appear to be the true owner of the property  Brocklesby v Temperance Permanent Building Society (1895): ‘clothing’ another person with authority to deal with the land. Where the owner of the legal interest in land gives an agent the title deeds with an authority to raise money on them. The owner is then bound, even if the agent raises more money that was authorised.  Walker v Linom (1907): where there has been gross negligence in failing to obtain the title deeds to the property. Gross negligence is some type of extreme lack of care for one’s own interest that it could suggest fraud by itself. HOWEVER, if there is a reasonable excuse for deed not being produced then priority of the legal interest is retained, provided proper investigation has been made into to verify the truth . If no attempt has

been made to verify the excuse, that would constitute the required gross negligence. Gross negligence in two ways: failure in obtaining title deeds (banks etc) or parting with them (individual giving to others blatantly) Thus underlying principle for the postponement would occur as the legal owner is estopped from taking the priority because their conduct they have allowed the person with the title deeds to represent ot the world that they are the legal owner of an unencumbered estate. Impact of Land Registration Rule: Legal owner of property has indefeasible title. Thus first Legal Registered Interest gets priority Exceptions:  later unregistered interest created because prior registered proprietor was fraudulent  Barry v Heider: later unregistered owner wins in personam claim against prior registered proprietor (esp. estoppel / clothing another with authority to deal with the land) Thus holding the owner of a legal interest subject to a later equitable interest where he or she has been fradulent in some way leading to the creation of that interest, or enabled a person to look as though he or she has the right to create interests in the land. Mr Barry still signed the paper even though knowing it was fradulent, and made it appear as though Schmidt has such an interest in the land to be entitled to have the Title. Prior Equitable Interest againt Later Legal Interest Rule: Pilcher v Rawlins (1872) A ‘ bona fide’ purchaser of the legal estate for value without notice of the prior equitable interest (Equity Darling) will take the land free of the prior equitable interest 

Holder of the legal interest can take land free of earlier equitable interest if they pass the five part test

1) Bona Fide - Purchaser must be in good faith during the transaction. - Midland Bank Trust Co Ltd v Green (1981): to determine whether an action was done in good faith requires an investigation into the motives and state of mind of the purchaser 2) Purchaser - A purchaser who took the land land other than an operation by law - Following people cannot be purchasers; trustee in bankcrupcy, adverse possessor of land, a person who receives the land by descent on intestacy

3) Of the Legal Estate - A purchaser must be taking a legal estate in the land, not another equitable estate - Issues arises when during a gap in time of payment of money for estate and the fina completion of the conveyance, the purchaser is aware of existing equitable interest. Thus during this time, under the Wigg v Wigg (1739) when they are aware of the equitable right at this time and before, they take the legal title they are still bound by it 4) For Value - Rule protects those who has give ‘value’ for the land. Similarly to consideration for contract - Midland Bank v Green - Equity will not protect a person who received the land as a gift ( a volunteer) 5) Without Notice - Essential that the purchaser has no notice of the prior equitable interest - Property Law Act 1958 (Vic) s 199 includes; actual notice, imputed notice and constructive notice Actual Notice - where purchaser has actual knowledge of the existence of a prior interest - where this knowledge exist, the purchaser will be bound by the interest - Jared v Clements (1903) just accepting an assurance from the person who created it (usually the vendor of the property) that it has been extinguished is not enough - Lloyd v Banks (1867 – 68) Notice can come from third parties, newspapers or any other source (including caveats) - Re Montagu’s Settlement Trusts (1987) possible to know certain facts at one point in time, but to have forgotten them many years later Imputed Notice - Jared v Clemens (1903) Agent representation who receives actual or constructive notice of a prior equitable interest, that notice will be imputed to the purchaser, whether or not the agent actually told the purchaser of it - Schultz v Corwill Properties Pty Ltd (1969) if agent deliberately defrauds the purchaser, notice that comes to the agent will not be impulsed to the purchaser - R v Biggin (1955) if the agent gets notice of an interest while they are in the course of their own independent activities, then that notice is not imputed to their principal either

Constructive Notice

-

-

-

If the new owner of the property had notice of the equitable interest, that equitable interest would survive the transaction and attach itself to the new owner Purchasers were deemed to have notice of everything and thus would have discovered if they have made usual / proper enquiries about the property that a reasonably prudent person would have made Bailey v Baarnes (1894) purchasers are not to derive any advantage through ignorance, failure to enquire etc Equity & Law Home Loans Ltd v Prestidge (1992) not permitted for an equitable interest holder to deny or remain silent about their rights if they are aware that the property is being mortgaged or sold. If they do so, they cannoy later turn around and claim that the purchaser has constructive notice of their interest

Reasonable purchaser would have done the following in the course of buying the property of interests; -Inspect the land Hunt v Luck (1902) where it was held that the purchaser is under a constructive notice of the tenants proprietary rights although not any rights can be found in the lease document Platzer v Commonwealth Bank of Australia (1997) husband name was only on the Title and bank knew couple was living together at the property, and wife had equitable interest due to her contributions to household. Bank failure to enquire of her interest, thus made them bound to the interest of the wife - Inspect the Title documents Property Law Act 1958 (Vic) s 44 (1); the purchaser has to search back 30 years Carter v Carter (1857); purchaser is deemed to have constructive notice of the contents of and all interests countained in the deeds that they are entitled to call for, that is, from the good root of title to the present day Property Law Act 1958 (Vic) s 44 (6); however they are not to be deemed to have constructive notice of interests contained in any deeds prior that good root of title deed Jared v Clements (1902) if they are to search further back of their required searches, they would be subjected to those equitable interests at hand Pilcher v Rawlines (1872) if vendor were to deliberately conceal of a particular document in the chain of title that is required by the purchaser and the chain of title still looks complete, thus the court would not hold the purchaser to be liable to those equitable interest Reeve v Berridge (1888) purchaser is not deemed to have constructive notice of the contents of a document if that document is not a necessary part of the chain of title 

The Doctrine of Notice (actual, imputed and constrcutive) ensures that purchasers have notice of prior equitable interests whether or not they actually do the normal searches



A Bona Fide purchaser of a legal estate without notice of a prior equitable interest can take the land free of that interest

Impact of Land Registration Rule: Any registered (Torrents Title) land notice of any unregistered interest will not affect a purchaser of land even if they register their ownership in full knowledge of the existence of the interest  

Doctrine of Notice abolished under Torrents Statues Torrents Statutes designates some unregistered interests as being paramount interests. If an interest is a paramount interest it does not require registration to defeat a alter registered interest in a prior dispute. Eg. Short term leases in Victoria which do not require registration to gain protection under the Torrens System

Exceptions: - if the registered owner is guilty of fraud - if the unregistered interest has some in personam claim against the registered owner, or - if some other statutory exception to indefeasibility or overriding statutes applies   

A Caveat can be put by the Unregistered interest holder, and prevent registration of the purchaser as owner, or any other dealing with the land until it is withdrawn. The holder of the prior equitable interest holder can force the new purchaser to deal with his or her equitable interest rather than just destroying it by registration If a caveat is lodged to protect a prior equitable interest, it will prevent the purchaser’s interest becoming a legal interest. Thus this will mean the prior equitable interest will battle for priority with a later equitable interest

Prior Equitable Interest against Later Equitable Interest Rule: Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) if their equities are in all other respects equal, priority of time gives the better equity Exceptions: Rice v Rice (1853) held in order to determines which was the better equity, three aspects of the situation must be assessed: - the nature and condition of the respective equitable interests; - the circumstances and manner of their acquisitions; and - the whole conduct of the parties 

In Rice v Rice (1853) School of thought that conduct rather than time, should take priority. The manner and acquisition of the interest had usually been subsumed within an analysis of the conduct of the parties, and the

difference between two types of equitable interest was not the fundamental factor in deciding the priority of one over the other. More modern decisions - Abigail v Lapin (1934) where emphasised that the application of the ‘first in time’ rule as the rule of priority, unless some act or neglect (postponing conduct) by the prior equitable interest holder could be found - Moffett v Dillon (1999) suggests that where a second equitable interest holder had notice of a prior equitable interest, the second interest will generally be postponed. - Moffett v Dillon (1999) another judge; suggested that one ought to take the interest first created and then enquire whether any event has occurred which would result in the interest being postponed to the later interest. Postponing Conduct and the basis of the Merits Tests 

To search for some type of act or omission on the part of the first interest holder that contributes in some way to the second interest holder acquiring his or her interest without realising there was an earlier interest over the land

-

Rice v Rice (1853) where the act of the vendor to allow the purchaser to have the deeds to the property and receipt for full purchase price and act as the true owner of the land without any encumbrance upon the land. It was held that the vendor conduct helped make this happen and the mortgagee relied upon the following documents and lent him money, thus the priority of the vendor was postponed.

-

-

Cash Resources Australia Pty Ltd v BT Securities Ltd (1990) failure by a first mortgagee to take the title deeds allows the landowner to use them again. This would most inevitably lead to postponement of the first equitable mortage Waldron v Sloper (1852) if a person had lent money to a landowner and taken the title deeds as a security, but then allowed the landowner to have the deeds back, this would also lead to the priority going down

For Registered Torrens Land, a Duplicate Certificate of Title is the equivalent to Title Deeds - Heid v Reliance Finance Corporation Pty Ltd (1983) where the handing over of the documents and signing the acknowledgement that he had received the money Heid enabled Connell to represent itself as the unencumbered owner. - Important to see normal procedures of conveyance - Pg 199 of textbook

(Registered Torrens Lands) Basis for Postponing the First Interest

Estoppel & Negligence; Heid v Reliance Finance Corporation Pty Ltd (1983) looks at; - Who has the better equity bearing in mind of the conduct of both parties - representation by one party to another raising estoppel - reliance upon that representation by the other party to their detriment - negligence on part of the prior claimant Butler v Fairclough (1917) “failure to caveat etc” - when dealing with a contest between 2 equitable claimants, all things being equal, first in time is entitled to priority - when looking at conduct of parties concerned, failure to lodge a caveat to protect unregistered interest may be a factor warranting postponement of an equitable interest to a subsequent interest acquired by a party (eg mortgagee) in the mistaken belief that the Registered proprietor had an unencumbered title Prior Equity against Later Equitable Interest - Equitable Interest is a proprietary interest - Equity interest is a personal claim Rule: Where a bona fide purchaser for value of the later equitable estate, without notice of the earlier equity, will prevail over the earlier equity Latec Investments Ltd v Hotel Terriggal Pty Ltd (1965) - the right to have property transaction set aside for fraud or undue influence is an equitable interest, however when the issue of priority conflict arising, it is a mere equity and loses priority to the full equitable interest - Look at pg 205 / 206 Similarly in Blacklocks v J B Developments Ltd (1981) Impact of Land Registration -

the equity can be defeated by the bona fide purchaser of a later equitable interest without notice of the prior equity

-

Issue for lodging caveat for equity owner; Swanston Mortgage Ltd v Trepan Investments Pty Ltd , where it was held that for a mortgagor to prevent the complement of a voidable sale was not a full equitable interest or even any type of proprietary interest in the land.

LAND REGISTRATION TORRENS TITLE (Chapter 7)

Transfer of Land Act Vic 1958    

S 40: No title passes until Registration occurs. S 41: Registration is conclusive evidence of title. S 42: RP’s interest is paramount (subject to exceptions). S 43: Doctrine of Notice abolished under the Torrens System

Indefeasibility - a registered proprietor of a land will only be subjected to interests that are notified on the register, and with a number of important exceptions, will take free from any other interests (s 42) - registered proprietor will gain status of indefesiability unless they were fraudulent in becoming registered Notice - Doctrine of Notice has been effectively abolished under the Torrens System (s 43) - This complements the doctrine of indefesiability provisions by preventing a purchaser from being affected from any unregistered interest even he or she should know of it Ejectment and Protection - s 44 (2) makes it clear that a purchaser cannot be affected by any fraud of error in the title of his or her predecessor, provided that the purchase is bona fide and for valuable consideration. Unregistered Interests - Barry v Heider (1914) interests arising through unregistered interests can exist under the system - Corin v Patton (1990) while the unregistered instrument itself is ineffective to create an interest, the agreement behind the instrument, if effective in equity will be sufficient to establish the equity - The protection is through the ‘caveat system,’ where a person with an equitable interest may lodge a caveat to prevent registration of a legal interest etc Indefeasibility of Title - S 42: RP’s interest is paramount (subject to exceptions). - Breskvar v Wall (1971) where to make the registered proprietor, once registered, subject only to those interests which are notified in the register - Frazer v Walker (1967) once registered, any invalidity in the process of obtaining registration (in the absence of fraud) is ignored – the title is indefeasible. There is imminuty from attack from adverse claim to the land - Frazer v Walker (1967) registration gives status of indefeasibility. Provided that there is no fraud on the part of the person who registers, registration under a void instrument confers immediate indefeasbility (Pg 219) Indefeasibility to terms in Registered Documents

Leases: - Mercantile Credits Ltd v Shell Company of Australia Ltd (1976) registered proprietor of the lease obtains indefesiability, provided that the option is an ‘integral’ part of the lease Mortgages: - The same applies to Mortgages where there will be a particular covenant to pay a particular sum, which is an integral part of the mortgage and thus indefeasible when the mortgage is registered - Provident Capital Ltd v Printi (2008) However in the matter of construction, where mortgage is void because of forgery on both documents, then there is nothing to become indefeasible and the defrauded mortgagor takes free of the mortgage. Considering the person who registers it did it under fraud or did not register for the person who did not do fraud Volunteers: - a volunteer is a person who does not give valuable consideration for acquiring an interest, yet becomes a registered proprietor - Bogdanovic v Koteff (1988) where the registered volunteer was not protected, and status of indefeasibility only applied to a purchaser for value Exceptions to Indefeasibility: Fraud 

Stuart v Kingston (1923) where fraud in the ordinary popular acceptance of the term ‘ie. Dishonesty of some sort ,‘ ‘fraud carrying with it grave moral blame’

Fraud can be against: - a prior registered proprietor - the holder of a prior unregistered interest; or - the registrar -

However, it is limited to fraud by the current registered proprietor. Any fraud, which occurs prior to the current transaction in question, for example by a precedessor, - cannot affect the current (innocent) registered proprietor

-

An innocent registered proprietor who registers a void document is, not fraudulent (Frazer v Walker 1967)

Personal Dishonesty - Butler v Fairclough (1917) where there must be so...