The Torrens System Notes PDF

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Complete Notes relating to the Torrens System ...

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Page |1 The Torrens System

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Historical Introduction Comparison with general law system of title. A system of title by registration, not of deeds. Not a mere conveyancing system, for the substantive law is altered. PEXA: Property Exchange www.pexa.com.au

Australia

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ARNECC: www.arnecc.gov.au The Intention of the System (a)

(b) (i)

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To provide certainty of title by conferring indefeasibility upon the registered proprietor: Sec 40 To facilitate conveyancing By abolishing the necessity for investigating title prior to that of the registered proprietor: Sec 39. By making enquires as to equities unnecessary for trusts cannot be entered upon the register: Sec 132, and, except in cases of fraud or in the case of an equitable lease or an equitable easement, a transferee cannot be affected by notice of trust or unregistered interest: Sec 41.

A Brief Summary of the System E. Cooke and P. O’Connor, ‘Purchaser Liability to Third Parties in the English Land Registration System: A Comparative Perspective’, [2004] 120 L.Q.R. 640 Three Main Features of Torrens System  Provides a register for which every person can discover everything that relates to that title – there is nothing historical about the title.

(a)

Intent of Torrens to ensure a person dealing with Torrens land was not adversely affected by any (errors or mistakes). With General Law had to go back 20 years, and if told about it were bound by it (Compare ss39-41 of Land Title Act) provides a guarantee by the State that picture presented by certificate of title was true and complete, if this not the case, the State has to pay compensation The Register

The certificate of title and folios: Sec 33 The Land Titles Registration Act is administered by the registrar (Recorder of Titles) who is required to establish and maintain a register of all Torrens land. Certificate of title: becomes a folio on the register and certifies that a named person (registered proprietor) is the owner of a defined legal estate in a particular parcel of land. If the registered proprietor wishes to deal with the land, he or she executes a statutory form, called an instrument: has the effect of a deed once it is registered. Difference between Torrens and General Law System:  General Law: the interest passes as soon as the deed creating it is signed sealed and delivered. (Registration of title).  Torrens: instrument has no effect at law prior to registration. (Only the act of registration creates title and gives indefeasibility; It is a system of title by registration and not registration of title. (You get title by registering your

Page |2 interest) (b) Examples of Registrable/Noted Interests: What can be registered/noted is crucial   

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Estates of freehold in possession: Sec 33 Leases for a term exceeding three years: Sec 64 Mortgages and encumbrances (but which constitute a charge only): Sec 72 and Sec 73 Easements and profit a prendre: ss 102/107 Restrictive Covenants: Sec 102

Easement and Covenants:  Both are land use planning measures  Easement: the right to do something over someone else’s land  e.g.: a drainage easement –  e.g.: right of ways – to get to the beach  Covenant: where people agree (covenant) that a certain thing will not happen  e.g.: restrictive covenant: local council subdivides, restriction on cutting down trees, building materials. (c) The Effect of Registration The estate or interest passes upon registration (Sec 49) and, except in the case of fraud, and subject to the exceptions in the section, the registered proprietor holds his estate subject only to the interests notified in the register: Sec 40. Mills v Stokman (1967) 166 CLR 61. (d) The Order in which Instruments are Registered (Sec 48) (2) Where two or more dealings

affecting the same land are lodged for registration at the same time by the same person and are awaiting registration, the Recorder shall register the dealings in the order in which he is requested in writing to do so by the person lodging the dealings. (3) Where two or more dealings, lodged by different persons, or lodged by the same person at different times, affect the same land, the Recorder shall, subject to subsection (4), register them in the order which will give effect to the intentions of the parties as expressed in, or apparent to him from, the dealings. (4) Where the intentions of the parties referred to in subsection (3) appear to the Recorder to conflict, the order of registration shall be determined in the order in which a record is made in a device for storing or processing information approved under section 33(3)(b) or 143A(3)(b). (5) When registered, dealings affecting the same estate or interest shall, notwithstanding any express, implied, or constructive notice, be entitled in priority the one over the other according to the order in which they are registered and not according to the date of each dealing itself. (e) The Caveat 

What is its purpose: Sec 133

Caveat: designed to provide some protection for unregistered interests. A caveat prevents registration of a purchaser’s interest until the caveator has had the chance of enforcing his or her claim against the purchaser. Where – (a) a settlor transfers registered land

Page |3 to be held by the transferee as trustee; or (b) a person claims an estate or interest in registered land under an unregistered dealing, or by devolution in law or otherwise – that settlor or person may, by caveat in an approved form lodged with the Recorder, forbid the registration of any dealing affecting that land, estate, or interest. Black v Garnock (2007) 230 CLR 438 Does this herald a new importance of caveats? 

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Owner sold land, Purchaser paid $100,000 deposit on $1ml property. Purchaser did not caveat, but checked title on day of settlement. Between checking title at 9am and settlement at 2pm, third party lodged a claim over the property, with this noted on title. Purchaser settles (ie pays over balance of $1ml), but then can’t register interest. Who prevails – third party or purchaser? HC – close 3:2 decision, in favour of third party. If the purchaser had lodged a caveat in relation to its equitable interest under the contract of sale, the third party would be unable to register its own transfer.

(ii) However, because it is a hostile action, the caveat must claim an estate or interest in land and depending on the jurisdiction, may have to state the quantum. Section 133(2) sets out with some particularity what must be contained in a caveat but for what is meant by 'estate or interest' or 'quantum' see:

Re Jones (1935) SR (NSW) 560 Held: invalid caveat as the duration of lease not specified. Cwalinski v Cwalinski (1958) Tas SR 56 Kerabee Park Pty. Ltd. v Daley (1978) 2 NSWLR 222 

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Caveat claimed ‘an estate or interest as mortgagee under the memorandum of mortgage dated 1/4/1976’ Caveat did not specify the period of the lease. Look at legislation s133(2) to s134 A caveat lodged under this section shall state: (c ) the estate or interest claimed by the caveator Held: Invalid caveat. The caveat must state the quantum (the amount owed for the mortgage) as well as the nature of the estate (the latter is what the legislation deals with). The legislation under consideration in this case different from what appears in Tasmania.

Smith v Longden Unreported (1997) 7 Tas R 194  Elderly man needed someone to look after him therefore younger woman agreed to do this, he indicated she would be left with property when he died but this did not happen.  Therefore, dispute between heir v carer  A Caveat was lodged by carer: ‘an estate or interest in fee simple and in equity by virtue of contributions both direct and indirect and both financial and in work in labour done towards

Page |4 the acquisition of and the provisions of improvements to the property’ Held: the judge questioned whether he needed to question the quantum therefore it did not fail for this reason.  There was no express requirement that the quantum needs to be stated.  Failed because she should have claimed a resulting interest by claiming a constructive trust Four Oaks Enterprises Pty Ltd v Clark [2002] TASSC 39 L. Aitken, ‘Many Shabby Manoeuvres – the use and abuse of caveats in theory and practice’, (2005) 26 ABR Lexis 16 M. Hughson, M. Neave and P. O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict between Purchasers and Prior Interest Holders”, (1997) 21 Melbourne University Law Review 460. 1. Detailed Consideration of Section

Torrens system: not a historical or a derivative system of title. Curtain: the certificate of title blocks off what goes on behind the certificate. Register is a mirror [when you look at the certificate of title, it accurately reflects what’s on the certificate] (what you see is what you get)

40 (a) When do you get Indefeasibility and what does Indefeasibility give you?

Windeyer J: “a prudent conveyancer acting for a purchaser of land that is now Bursill’s would have ascertained what it was that Transfer 7922 effected. Surely no prudent person, seeing the reference to a right of way, would neglect to ascertain what exactly was the nature of the right of way.”

S

This was registered by the Bank subsequent to other mortgage. In obtaining this mortgage, the husband committed a forgery.  The dispute is between S(wife ) and Tas Bank – both innocent of fraud  1st mortgage protected by caveat;  Second mortgage protected by registration.  Therefore who should have priority? Held: Bank because they registered, lodging a caveat is not a registration procedure. Registration of a caveat does not create any indefeasible interest in the caveator and the Bank’s registered legal mortgage prevailed over the earlier equitable mortgage. Note: priority of interests. 

Mercantile Credits Ltd v The Shell Co of Australia Ltd (1976) 136 CLR 326 Bursill Enterprises Pty Ltd v. Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73 

Neighbour transferred part of land to adjoining neighbour (actually a

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transfer of airspace) so that they could extend over, no less than 12 feet above ground. Described in certificate of title: a right of way created by and more fully set out in Transfer No. 7922. (easement: allowing one person access to another’s land) The issue: Transfer No. 7922 was not a right of way, it was a transfer of land in itself. A long time after transfer the successors in title had a dispute over this land.

Issue: whether the transfer of the airspace had been noted on the register and whether it was valid. Held: a prudent conveyancer should have ascertained what transfer 7922 did; as such the transfer was valid and the title was indefeasible.  

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The transfer of airspace was valid. N.B.: The High Court seemed to indicated what was important was the intention of the original parties and they both intended to transfer the airspace Could argue that what is more important is what is on the certificate of title I.e.: parties intention is irrelevant

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Issue: Was the purchaser bound by this? 

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The agreement contained certain terms including: 128440 Fencing condition What this did if one looked at document number 128440, it referred to a transfer document which then referred to a certificate of title Vol 375 Fol. 106.

S40 LTAct – indefeasibility means subject only to such estates and interests as are recorded on the folio of the Register or registered dealing evidencing title to the land. Therefore had the interest been recorded on the folio of the register?

Held: No reference, direct or indirect, to it. (Curtain theory: one should not have to go through so much effort to search for the title). 

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Sieminski v. Brook Nominees Unreported 56/1990 (Tas) Contract whereby applicant purchased strata unit.

The certificate of title had a number of stipulations - one of these stipulations revealed that there was not to be more than 1 messuage (residential dwelling) erected on the land

The substantial effect of the covenant had to be found on the certificate of title There were too many references and consequently indefeasibility won out. One had to actively search for the restriction; according to the ‘curtain’ theory of the certificate of title, one should not have to actively search for the restrictions not on the certificate itself.

R. v. Recorder of Titles: Ex parte Horlock Unreported 25/1991 (Tas)  

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Similar conditions as above case 128478 – referred to certificate of title this said that only one residential building could be built. The only difference here being that here there was 1 less step than the above

Page |6 Held: Cox, J: interest had been noted on the register  

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N.B. This is a difficult question to determine Problem is how far do you have to go remembering that with Torrens you should only have to go to certificate of title. These cases create a gray line, have to figure out if it fits within one or the other.

Registrar-General (NSW) v Cihan [2012] NSW ConvR 56-305; [2012] NSWCA 297 Terms in registered (indefeasibility for what?)

documents

Not everything that is registered gains indefeasibility. 1. Leases: If a registered lease contains an option to renew, and if the option is an integral part of the lease, then the registered proprietor of the lease obtains indefeasibility over the lease and the option to renew. Mercantile Interests v Shell Company of Australia: Shell was granted a 5 year lease, containing covenants allowing renewal. The lease was registered. The lessor later mortgaged the property but defaulted, and the mortgagee gave notice to exercise its power of sale and sell the land. Shell lodged a caveat (Caveat: designed to provide some protection for unregistered interests. A caveat prevents registration of a purchaser’s interest until the caveator has had the chance of enforcing his or her claim against the purchaser) prohibiting registration of any dealing unless that dealing was to be subject to the right of renewal in the lease. Shell was successful in this action.

The High Court held that: the right to renewal was indefeasible as it was effectively part of the estate or interest in the land. (Covenants in a lease that are not effectively part of the estate or interest in the land are defeasible. Example: an option to purchase contained within a lease will be defeasible as it is an independent nature, separate from the lease itself.) Mortgages Question: Does indefeasibility (attached to mortgagee’s charge over mortgaged land on registration) extend to a personal covenant to pay a mortgage, thereby permitting this debt to be enforceable against a defrauded RP personally?  Where a collateral loan agreement (other document) has been forged, then it is void at general law (basic contract principles of fraud). So, the question is, if this collateral document is void, does the mortgage which refers to it, in effect, ‘secure nothing’?  A mortgagee (bank) will seek to have the collateral loan documents incorporated into the mortgage (Solak) – so that the indefeasible interest incorporates the amount owed - and in that case it wouldn’t matter that the loan agreement might be void at general law. Key point: if the contractual documents are integrated into the transfer of mortgage document, then indefeasibility is extended over both.  Ultimately, whether the collateral loan agreement

Page |7 forms PART of the mortgage, is a matter of CONSTRUCTION.  Trend for authorities to hold it as separate, so if the mortgage is void because of forgery, then there is nothing to become indefeasible and the defrauded mortgagor takes free of the mortgage. All monies: literally all the money you owe the bank, including credit card bills (money aside from the loan). Collateral Loan Document: sets out the terms and specifics of the Mortgage. Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567; BC200707767 Authority for:  

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The total amount secured by the forged mortgage was nil. i.e. the terms of the mortgage determine the scope of the estate in land in respect of indefeasibility. A narrow view of ‘mortgage debt’; as a matter of construction, the debt incurred through the forged loan contract could not have been secured over Mrs Yazgi’s interest in the property.

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As mortgage was forged, the total amount secured by the forged mortgage was nil. Perpetual Trustees Victoria v English [2010] ANZ ConvR 10-01; [2010] NSWCA 32 ISSUE was whether the debt and repayment amounts included in the unregistered loan agreement had attained indefeasibility upon registration of the registered mortgage documents. FACTS:  

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Facts: Forger was a joint owner of the property, Mr Yazgi, who forged Mrs Yazgi’s signature on both the mortgage and housing loan contract. Construction of terms of the mortgage:  

Mortgage document did not contain amount specified. Clause in the mortgage said “‘Mortgage debt’ means all money which any one or more of you owe us now, in the future, or come to owe us.”

Mortgage was addressed to ‘you’ – encompassing more than one mortgagor.

Forger was Mr English who forged Ms English’s signature (innocent) The Mortgage referred to ‘you’ as in, both Mr and Mrs English; but in the obligations of the mortgage “I” agree to pay. Security clause in the Loan Offer referred to: “You and if there is more than one person, all of you”. It said ‘By accepting this offer, You agree that the following …’ referring to both Mr and Mrs English, and this is the document Mr English forged. Because Mrs English never signed, the Loan Offer was never accepted, therefore the mortgage which referred to it, secured nothing. (No indefeasibility).

Solak v Bank of Western Australia [2009] VSC 82  

Forger was an imposter, someone pretending to be Mr Solak. The mortgage referred to ‘you’ the mortgagor, and named Mr Solak as the mortgagor. The mortgage incorporated a

Page |8 collateral document (collateral document sets out the amount of money owing and defines the obligation binding on the other party), saying ‘you’ will pay the Amount Owing in accordance with the terms of a ‘Bank Document’. The loan document contract referred to Mr Solak and said ‘you’. Construction of terms of the mortgage:  

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‘You’ will pay the Amount Owing ‘Amount Owing’ defined as ‘all money you owe the bank for any reason’ Clause: Mortgage given for security for payment to the bank all moneys owing and performance of all of your other obligations under this mortgage.

The home loan contract document: ‘You’ as referred to in the home loan contract, was signed by the imposter. Mr Solak argued because he never signed the document, it wasn’t connected to the Real Mr Solak’s obligation under the mortgage. (Mr Solak argued that the mortgage ‘you’ referred to him, and the loan contract ‘you’ referred to the imposter – but this argument was rejected) AUTHORITY FOR: 

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The home loan contract (a ‘bank document’ which is separate from the mortgage) ‘intends to incorporate’ and is ‘undoubtedly incorporated’ into the mortgage, and therefore attracts indefeasibility. ‘You’ is a drafting device connecting the person named in the mortgage with the person named in the bank document, in order to identify the documents in which the obligation to

pay could be found. The use of ‘you’ as a drafting device would be the same as using the term ‘Mr Solak’ in both documents. On this construction of ...