Laws1082: Property & Equity 2 Notes
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LAWS1082: PROPERTY & EQUITY 2 NOTES
1. THE TORRENS SYSTEM
Wk 1.1 28/07
BACKGROUND:
Problems with Old System title: o Possibility of fraud; o Forgery is a possibility (can’t necessarily check signatures); o It’s a cumbersome and long process – lots of stuff to check & takes a long time! The process needs to take place every time the property is sold/mortgaged/etc; o Documents can go missing:- can be both lost and “missing” -> Eg. So that a purchaser doesn’t know that there is an easement. o Therefore, it was uncertain and unreliable, as well as costly and burdensome. o These were caused by a land transfer system which was exclusively dependent on chains of title deeds.
The Deeds Registration System: A central place where all the deeds are stored => Solves problem of documents going missing. It is the registration of INSTRUMENTS (whereas the Torrens system is the registration of TITLE). The effect of registration is to give priority over all instruments that are either unregistered or not registered until later (s 184G Registration of Deeds Act). However, the deeds registration system did not cure all defects b/c registered deeds could still be forged, etc. The deeds registration system continues to apply to land that is not under the Torrens system.
The Torrens System: The central feature of the Torrens system is that it is not so much a system of registration of title, but a system of title by registration: Breskvar v Wall. You get a CT (Certificate of Title) when you register land. Tells you who owns the land; about any easements, mortgages, leases on the land – IE: Everything relevant about the land. Legal title is not transferred until the title is registered: Frazer v Walker. Mirror principle: The register should reflect reality. The curtain principle: The principle that you don’t need to look behind the register; you don’t need to work out how it came to be that way -> all you need to know is what is on the register. If you’re the name on the register = you are the registered proprietor. You need to submit a plan of the land.
1 Title rests upon the act of the Registrar-General (RG) in registering the instrument, rather than upon the act of a party executing the instrument. The Torrens system was designed to obviate the need for a chain of title and the necessity of tracing the vendor’s title through a series of documents.
Strata Title & Community Title: Exists by virtue of legislation. You own a lot (an apartment, townhouse, etc). Owners are members of the owners’ corporation, which owns common property. There are also by-laws: Rules made by the owners’ corporation. All strata title is Torrens title – because it is created through this process of registering plans. Re: By-laws: Interesting that if you have a freestanding house, you can do what you want, but with strata living neighbours can enforce by-laws over one another. POLICY: A prob is that members of the owners corporation are the people who own property in strata, but often the people living there are tenant – who are not on the owner’s corporation and thus don’t have a say, yet the rules are enforced against them.
INDEFEASIBILITY:
[A problem with Old System title was defeasibility -> IE: A weak link in a chain of title was sufficient to destroy the title of the last person in the chain.] With the Torrens System, once you register a title it becomes indefeasible, meaning that it cannot be set aside on the basis of a defect existing in the title before it was registered. Having indefeasible title means having protection, the rights given to the proprietor.
Key Indefeasibility Provisions: S 42(1) Real Property Act: o Upon registration, the registered proprietor will obtain indefeasibility. o Fraud will vitiate a registered title. o The estate/interest of the registered proprietor is subject only to those encumbrances noted on the CT (with 2 exceptions listed in the statute) (P.468). o There are certain unregistered interests which are enforceable against the registered proprietor.
The Notice Provision – s 43: The indefeasibility section is accompanied by a “notice provision”. S 43: o Except in the case of fraud, no person purchasing from a registered proprietor will be affected by notice (either actual or constructive). o Also, knowledge of the existence of an unregistered interest will not by itself be considered fraud by the person purchasing from the registered proprietor.
The Ejectment Provision:
2 S 45: A bona fide purchaser for value CANNOT be open to an action for recovery of damages, or to an action for ejectment, or to deprivation of his/her interest –> on the ground that the vendor has been registered, or derived their title, through fraud or error.
Immediate VS Deferred Indefeasibility: (We have immediate indefeasibility in Aust.) Big Qu for Torrens Title legistation: Does it set up a system of immediate OR deferred indefeasibility?
Immediate indefeasibility (What we have in Australia): A proprietor is protected as soon as s/he is registered, regardless of defects in his/her transferor’s title. EG: If B is registered through a forgery (someone else forged A, the owner’s, signature. B wasn’t involved in the forgery) => Under a system of immediate indefeasibility, A has no action. B is proprietor. B wins!
Under a system of deferred indefeasibility : If the instrument of the transferor is a nullity, then the transferee is unable to defeat a claim by the true owner. Indefeasibility is deferred to the NEXT person to be registered as owner of the land. EG: B/c B got there b/c of a forged document, therefore the transaction was not valid, even though B is on the register. Therefore A wins! Taking same scenario: B now sells to C who is a bona fide purchaser, and C is now the registered proprietor: Under both systems C wins! B/C: C got registered through a valid transaction (even though B’s title was defeasible). Therefore, for deferred indefeasibility, you not only have to be the name on the title, but also have to have gotten there through a valid transaction. You have to be wary of people stealing your CT and forging your signature.
…And the Winner Is?… IN AUSTRALIA WE HAVE: IMMEDIATE INDEFEASIBILITY: Breskvar v Wall (which applied Frazer v Walker) (This is Subject to exceptions, of course!) Until 1967, the doctrine of deferred indefeasibility prevailed (as established in Gibbs v Messer and Clements v Ellis). BUT: After Frazer v Walker and Breskvar v Wall, immediate indefeasibility became accepted. Frazer v Walker (a Privy Council case) was applied by the HC in Breskvar v Wall: “A registration which results from a void instrument is effective according to the terms of the registration”. However, a Gibbs v Messer principle remains good law: A person will not obtain indefeasibility if they obtain title from a fictitious person (as distinct from an impersonator of the registered proprietor).
Wk 1.2 31/07
Revision: Under Old System title (& deeds registration), title in land is historically derived. o Crown grant + series of dealings; OR o Adverse dealings + series of dealings. Torrens title introduced to solve the perceived defects in the old system, and to make conveyancing more efficient.
3 Notion of “Registered Proprietor” as owner of a particular interest in land (EG: Fee simple, mortgage, lease, etc). Being a registered proprietor gives you some sort of protection – referred to as “indefeasibility”. 2 possible types of indefeasibility: Deferred & Immediate. o C entitled to rely on the register under both types. o But only in immediate indefeasibility does B win. o A wins in deferred – because the title is deferred back to A. Immediate indefeasibility: A registered proprietor is the owner of the relevant interest in land (subject to statutory exceptions and the in personam exception).
Frazer v Walker (1967) PC: (P.474) In Old System: Remember that mortgagor (borrower) has an equitable interest called an equity of redemption. In Torrens: If X is registered proprietor in fee simple, and signs a mortgage form in favour of Y, Y takes the form & CT and gets registered = Then Y’s name goes on the CT in Schedule 2, but X’s name is still on the 1st Schedule. Y has specific rights = a charge on that land for the debt. If the debt is not repaid, etc, then Y is entitled to exercise the power of sale.
Facts: Mr and Mrs Frazer are registered proprietors in fee simple. Mrs F forged her husband’s signature on the mortgage. The mortgagee exercises the power of sale b/c there was a default on the payment of the mortgage. Mortgagee sold to Walkers. So now the Walkers name is in the 1st Schedule. Does the Qu of immediate VS deferred indefeasibility technically really come up in this case? = No! B/c the fraud exception is limited to instances when the new registered proprietor is involved in the fraud. Here, the mortgagee had not acted fraudulently, was a registered proprietor of a mortgage and validly exercised the power of sale to the Walkers. The Walkers did not commit fraud either, obviously. – Thus, they were protected no matter which view of indefeasibility the court adopted. Nevertheless, the court went into discussion immediate VS deferred. Court decides in favour of IMMEDIATE. Reasoning: Court reads what s 42 says, and other provisions in the Act – If you’re on the Register, unless you have committed fraud, (or a bunch of listed exceptions) = then you hold title. Therefore, since the Walkers did not commit fraud, they hold title. Court can order an amendment to the register ONLY in cases of fraud or one of the listed exceptions. The Court used statutory interpretation in deciding between immediate and deferred (rather than a policy analysis).
POLICY CONSIDERATIONS: Immediate VS Deferred Indefeasibility: See P.490 for policy stuff! Also maybe see P.467 for the Objects of the Torrens System. EITHER: So long as you own title, you are always at risk of challenged by a previous person saying you got it by a void transaction, OR you’re at risk of someone forging your signature and transferring it to someone else. So there are risks either way. 2 different securities depending on immediate VS deferred: Knowing that the transfer gives you something (=immediate), OR knowing that no one can take the title away from you (=deferred – ie. it is deferred back to you).
4 More Policy considerations to think about: Immediate: Normally, Mr Frazer could get money, and the Walkers would get the house. But the qu is who should get the house?!? The person who has lived there for years, or the purchaser? One argument: It is not arduous for the purchaser to check that it is a valid transaction (ie. not a forged signature, check ID). Therefore, surely purchasers can be vigilant, easy to check the vendor’s ID. Doubts about immediate indefeasibility continue to be aired – prompted by high rates of identity fraud, and the losses suffered by owners evicted from their homes and deprived of their land b/c someone has forged a transfer, or, more commonly, a mortgage.
S 43: Makes notice irrelevant: o If you have knowledge or notice of a prior unregistered interest – even actual notice – once you become the registered proprietor = that notice doesn’t matter!!!: RM Hosking; Loke v Yew o UNLESS: It comes under the exceptions, ie- . There is actual fraud (ie. mere notice is not fraud); OR the in personam exception.
Breskvar v Wall (1971) HCA: (P.481) => Title gained with fraud gives rise to a defeasible title. Facts: Bs sign a blank transfer of mortgage (IE: Leaving the name of the transferee blank. (Which is void under the Stamp Act)). They hand over the transfer and CT to Petrie. Petrie lends them $1200. Note that: They did a blank transfer & CT as security - instead of a real mortgage = in order to not have to pay stamp duty, etc. Instead of just holding it as security, Petrie fills in Wall’s name (his grandson), and registers the land to him. Wall therefore becomes the registered proprietor (but his title is tainted w/ fraud). Wall signs a transfer selling to Alban Pty Ltd (though Alban is not yet registered). [Note that: If Alban had registered, Alban would win whether it was immediate OR deferred indefeasibility (=> B/c got registered through a valid transaction.] Q: If you are on the register, but you are fraudulent, therefore someone could take your title away = what kind of title do you have, if any? IF being on the register when your title is tainted by fraud means you have NOTHING AT ALL, then it’s just a case of nemo dat – Wall had nothing to give. BUT Court says this is not the case, rather, Wall’s name is indeed on the 1st Schedule as registered proprietor, BUT he has DEFEASIBLE TITLE. A RULE: Title gained w/ fraud gives rise to a defeasible title.
Barwick CJ: (P.484) Torrens system of registered title= Is not just a system of registered title, BUT a system of title by registration. It is the title which registration itself has vested in the proprietor. Therefore, a registration which results from a void instrument is effective according to the terms of the registration. A RULE: Even if your instrument is void, you get registered.
In this case: Q: What kind of right do the Breskvars have? = An equitable right to get the land back. Alban has a right to get registered, b/c was a BFPFVWN => Which is an equitable interest.
5 The competition is b/w Breskvar’s equitable interest against Albon’s equitable interest. Alban wins. Reasoning: Earlier equitable VS later equitable interest. Rule: First in time prevails, unless there is a reason to postpone. AKA If the equities are equal, then the first in time prevails (Rice v Rice). Here: The Breskvars are first in time, BUT there was postponing conduct! => The Breskvars armed Petrie with the mains of placing himself or his nominee on the Register (by leaving the name of the transferee blank). Therefore, Bs lose their interest to Alban, due to their postponing conduct (Ie. despite prior interest in time).
MAIN POINT FROM THIS CASE: When a person becomes a registered proprietor through a void instrument, the previous registered proprietor automatically loses their title. However, if the new registered proprietor has acted fraudulently, then the previous registered proprietor can seek to re-register since they have an equity of rectification stemming from the current registered proprietor’s fraudulent behaviour. Horvath v Cth Bank: Indefeasibility attaches to a transfer that is void by reason of a statute. (In that case, it was when a mortgage was given by a minor). Co-operative Property v Cth Bank (Tas): The registration of an invalidly executed mortgage was held to give the mortgagee an indefeasible title.
PROBLEM QUESTION: X is registered proprietor of a piece of land. X’s son steals the CT, and, pretending to be X, forges X’s signature on a mortgage of $100,000 to Y, and hands Y the mortgage and the CT. Y hands over the money ($100,000) w/out checking the mortgagor’s ID. Y procures registration. o Can X seek to have the mortgage expunged from the Register? o Does X have any other remedy?
Answer: The fraud exception only applies if the new registered proprietor is implicated in the fraud. In this case, Y was not fraudulent, thus the fraud exception does not apply. Therefore, Y has an indefeasible interest! Therefore, X cannot have the mortgage expunged from the Register, b/c of the doctrine immediate indefeasibility. Also has no other claims against Y, b/c of Y’s indefeasible interest!
Another Hypothetical: What about if the son first of all transfers the land to himself and gets that registered, & then tries to mortgage it in his own name to Y. But then mortgage to Y is not yet registered. In that case: It’s a competition b/w earlier equitable against later equitable (as in Breskvar v Wall), but in this case there is no evidence of postponing conduct, therefore X wins.
6 What happens if the mortgage is for more than the value of the land? Not only does the mortgagee have a charge over the land, but there is also a personal covenant – meaning that the mortgagee can exercise its power of sale, but if that comes up short, the mortgagee can still come after you to get the rest.
Wk 2.1 4/08
Recap: Various sections of the RPA = protect the title of a registered proprietor. o SS 42, 43, 45. These sections have been interpreted to provide for “Immediate Indefeasibility”. Prima facie, if you are a Registered Proprietor of an interest in land = It is yours. o Express Exceptions: Fraud, those from s 42. o Also- the “in personam” exception.
THE UMBRELLA OF INDEFEASIBILITY: => How far does indefeasibility extend to?
If you’re the registered proprietor = on the 1st Schedule of the CT = you are owner of the fee simple. If, on the other hand, you are the registered proprietor of a lease or mortgage = more complicated. Q: What terms of the mortgage/lease bind you?? (IE: Even though you didn’t sign the lease/mortgage) To what extent are terms enforceable against you even though they would normally be void for indefeasibility.
RE: An Option to Renew:
Mercantile Credits v Shell Co (1976) HCA: (P.494) => An option to renew in a lease is covered by the umbrella of indefeasibility! Facts: The Lease contains an option to renew (IE: The lessor/landlord is obliged to grant a new lease if the lessee/tenant gives notice of the exercise to option). First, an original lease is registered. Then the lease is renewed, & this new lease is registered. A Mortgage is registered. Lessee gives notice to renew again. A Lease in registrable form is executed (pursuant to the 2nd renewal). => IE: New lease had been signed BUT it is NOT yet registered. BUT THEN, the Lessor defaults on the mortgage.
[If was simple case of mortgage registered 1st, then lease after= mortgagee has priority ->they trump lessee’s rights & can sell. If lease was registered first, then the lessee has priority, mortgagee can only sell subject to the lease.] HERE: It’s a competition between an option to renew VS a mortgage. B/C: The current lease had not been registered at the time of the mortgage. Therefore, the lessee could only have priority if it could show that the option to renew (which came before the mortgage) = had indefeasibility. Q: Does indefeasibility cover an option to renew? (in which case all terms in option to renew would be indefeasible) Court held that: YES!
7 Reasoning: How do we work out which terms are covered by indefeasibility and which are not? Gibbs J: The right of renewal (ie. = the option to renew a lease) is so intimately connected w/ the term granted to the lease, which it qualifies & defines, that it should be regarded as part of the estate or interest which the lessee obtains under the lease, and on registration is entitled to the same priority as the term itself (P.497 TOP). => In other words, the option to renew is so intimately connected w/ the lease itself, => b/c it is essential to describing what you have, the rights you’ve got. Therefore, it should be granted the same protection and priority as the lease itself. RULE: In a previously registered lease, the Registered Proprietor is bound by all covenants that “Touches and concerns the land”. RULE: Where a head lease is validly registered, an option to renew the lease is indefeasible even if it has not been registered itself.
o Other cases use slightly different terms to define what is included under the umbrella of indefeasibility: (Eg. Karacominakis P.499): “An essential part of the transaction b/w the lessor & lessee”; “intimately related to the lessee’s interest”; “defines the lease”; “a condition upon which the leasehold interest is created”.
Karacominakis: (P.499) => Payment of the agreed rent is protected by indefeasibility, b/c it is an essential part of the transaction b/w lessor & lessee. Q: Is there an obligation to pay rent? => IE: If there is a registered lease, even though the document is void. Is there an obligation to pay rent even if the document is void (for forgery, etc)? Court held that: Yes! Rent is clearly an essential, intimate, etc. part of the lease! RULE: A personal covenant to pay rent is protected by indefeasibility. RULE: The essential things to do w/ the lease do come under the umbrella of indefeasibility, and side things do not.
Travinto Nominees v Vlattas (1973) HCA: =>If a term is void for illegality, it will not attract indefeasibility. RULE: Where legislation provides that an option to renew in a lease is to be void, then registration does not attract indefeasibility/validate this option. In other words, indefeasibility does not make enforceable a term that is inherently unenforceable. (Eg. b/c of illegality or incompatibility w/ a Statute). RULE: If a term is void for illegality, it is never enforceable. For terms to be enforceable/come under indefeasibility, you may have to do certain things. EG: An option to renew is not indefeasible under all circs => IE. you have to have exercised the option to renew within a certain time, etc. Therefore, indefeasibility is an answer to some problems and not others.
Caleo Bros v Lyons Bros: The option to renew expires when the time for its exercise has expired.
RE: An Option to Purchase: s 53(3) RPA = Yes it is protected
8 Mercantile Credits: An option to purchase is a covenant that does NOT directly affect the land, as it is focused on converting the landlord/tenant relationship into a vendor/purchaser relationship, as opposed to concerning the land itself. However: Statutory intervention with s 53(3) RPA means that a covenant to purchase is protected under the indefeasibility principle. RE: What is Indefeasible in a Void Mortgage:
Yazgi (2007) NSWCA: => A personal covenant does not come under indefeasibility. Facts: Husband forged wife’s signature on a mortgage over the property which was registered, specifying both the husband and the wife as the mortgagors. The wife knew nothing about it. Q: Were any moneys owing under the mortgage secured on the wife’s interest in the property? Court held that: Undisputed b/w the parties that the forgery the personal covenant contained in the mortgage was not enforceable. Also, clearly, the registration of the mortgage clearly gave the mortgagee an indefeasible title, notwithstanding that the wife’s signature was forged (Breskvar v Wall). However, the extent of the registered title holder’s (mortgagee’s) interest needs to be ascertained. IE: Indefeasibility for what? Rule: It is necessary to examine the terms of the particular mortgage to determine the scope of the mortgagee’s interest in the land in respect of which indefeasibility was claimed by the registration of that mortgage. In this case: The wife won. Court declared that in respect of her interest in the property, the amount secured by the mortgage was nil, and that she was entitled to a discharge of the mortgage insofar as it affected her interest. But the mortgage was held to be enforceable against the husband. Qld Premier Mines (HCA): The indefeasibility of a forged mortgage does not extend to collateral loan agreements or facilities purportedly secured by the mortgage.
Problem question based on Yazgi : (P.501) Mr & Mrs X are joint proprietors. Mr X forges Mrs X’s signature on a mortgage from Mr & Mrs X to Z, and hands Z the CT. Z procures registration. Z gives Mr X $1M in cash. What happens if: 1. The mortgage specifies the amount lent as $1M, but the property is only worth $700,000? 2. The mortgage refers to another document specifying the amount of the loan; that document was signed by Mr X (who forged his wife’s signature)? Assume the property is worth $1M. 3. The mortgage states that the amount owing is all moneys under the mortgage? Assume the property is worth $1M.
Answers: 1. If the land is not worth enough, there is both a charge on the land AND a personal obligation to pay (a personal covenant). Is the personal covenant to pay against Mrs X enforceable? => IE: The bank can enforce any covenant against Mr X, but can the bank enforce it against Mrs X? The bank has an indefeasible mortgage – but indefeasible for what??? Mercantile Credit: A term is protected by indefeasibility if it is an essential/intimately connected part of the mortgage. Here, a charge on the land is conceptually distinct from (ie. NOT intimately connected to) a charge to be paid/a personal obligation to repay. (The 2 are not
9 inseparable, therefore the personal obligation to pay does not come under the umbrella of indefeasibility): Yagzi. Therefore, the bank’s indefeasibility does not extend to enforcing a personal covenant on Mrs X.
2. What happens to Mrs X’s half of the property? Can the property be sold out from under her? Registration of title gives the bank indefeasible rights, but indefeasibility for WHAT? How much is secured? To find out how much is secured, it is not stated in the registered document; rather, the mortgage specifies another document, but that document is forged. Therefore it’s not a proper loan agreement (b/c it’s a forgery). As in Yazgi: Therefore, if we are working out the amount owing, we come up with ZERO! Since there is no where that the sum of amount owing is recorded (since the loan agreement is a forgery & therefore void).
3. All moneys clause= The amount owing under this mortgage is all moneys lent to Mr & Mrs X. If the mortgage uses words like this, then you can clearly get all money back from Mr X, but what about Mrs X? (This is different to Yazgi – it was not an “all moneys” case.) This is different to the void document case, as you don’t need to look to a void document to found out the amount. -> Rather, the mortgage document itself states that it is “all moneys”. What is secured = all moneys lent = $1M. Therefore it would seem that the money owing is $1M, and that Mrs X is liable for the amount. => NB: If the amount lent was to a fraudster, then no money would have been lent to Mrs X. But in this case, the mortgage says “all moneys to Mr and Mrs X”, and it was lent only to Mr X. Therefore, it’s just about interpreting the registered document to work out what the sum of the debt is.
VOLUNTEERS & INDEFEASIBILITY: (P.505) Q: Does the protection in the RPA extend to a person who is getting an interest in land without paying valuable consideration? (EG: A beneficiary under a will who registers their interest.) In Old system, you have to be a bfpfvwn to get priority. RPA (SEE HANDOUT!)- Which provisions protect everybody, and which provisions only protect purchasers/people who give value? S 40 – Doesn’t distinguish. S 42 – Doesn’t distinguish. – seems to include volunteers. S 43 – Mentions “purchaser” in the heading. S 45 – Only protects bona fide purchasers & mortgagees! = Therefore clearly does not protect volunteers. [“Bona fide purchasers & mortgagees protected in relation to fraudulent and other transactions”.] S 118(d)(ii) – Protects volunteers.
Therefore, the qu of whether or not volunteers are protected = depends on which ss give indefeasibility. It will depend on what the actual action/case is.
RULE: A registered volunteer will obtain indefeasibility and will prevail over a prior unregistered interest: Bogdanovic v Koteff.
10 Bogdanovic v Koteff: => Volunteers are protected by the indefeasibility provisions. Facts: Mrs B had an equitable interest in Mr K’s land under a trust. Mr K left the property to K Jnr in his will – therefore K Jnr became the registered proprietor. Competition: Earlier eq VS later legal (but not for value – since K Jnr was a beneficiary under a will). Torrens: Volunteers get the same protection of indefeasibility as everybody else – s 42 = the main indefeasibility provision. IE: Court did statutory interp to work out if K Jnr protected by indefeasibility, even though a volunteer. Therefore, K Jnr wins!
The law is different in different states: QLD, NT: Statute expressly states that volunteers are protected by indefeasibility. NSW: Volunteers are protected by virtue of interpretation of statute. Vic: Rasmussen – Volunteers are NOT protected.
POLICY: Should volunteers be protected? Old System – Volunteers always lose out in the competition of earlier equitable VS later legal interest. If volunteers are not protected, then there would be the question of what constitutes valuable consideration?!? (Eg. You could sell your property to your sister for $10.) Therefore, if you don’t protect volunteers, there can be uncertainty.
Wk 2.2 07/08
Revision: Volunteers protected by s 42. Notion of Umbrella of indefeasibility: Terms of leases/mortgages/etc that are intimately connected with the relevant interest or estate in the land (lease/mortgage/etc) = are given the same priority/indefeasibility as the estate inland. Including: o An option to renew, o Payment of rent, o NOT including a personal covenant to pay a debt. Priority date for renewed lease (pursuant to an option to renew) is the date of registration of a lease containing the option. NB: A void document (EG: b/c forged, signed by a minor) = Creates, upon registration, an indefeasible interest. However, a void/illegal provision in the docu does not become enforceable merely b/c the document is registered.
EXCEPTIONS TO INDEFEASIBILITY: (P.512)
11 Some exceptions to indefeasibility: 1. Express exceptions to indefeasiblity – in the statute. 2. Fraud- Loke Yew; RM Hoskings. 3. Interests created by or agreed to by the registered proprietor are enforceable in personam- Frazer; Bahr; Gosper. 4. Earlier registered interests: s 42 RPA. 5. Short-term tenancies. Indefeasibility may also be affected by: 1. Adverse possession. 2. Overriding statutes. 3. Easements. 4. Etc.
1. The Fraud Exception to Indefeasibility: Where the registered proprietor has been guilty of fraud, that person’s title cannot prevail against the interest of the person defrauded. The statute expressly states that fraud is an exception to indefeasibility: ss 42, 43. (= Different to equitable fraud. This is statutory fraud.)
Loke Yew: Facts: Sultan transfers 322 acres to Eusope, who registers the land. LY then becomes the owner of 58 of these acres, but does not register. Meanwhile, PSR and Eusope negotiated a deal whereby all 322 acres would be sold, but on agreement that LY’s interest would not be touched. After the sale, PSR registered all the acres, BUT did not recognise LY’s rights. LY claimed that: PSR’s conduct amounted to fraud. Court held: This did amount to fraud = Therefore, was an exception to PSR’s indefeasibility of title. PSR fraudulently made representations that they had no intention to use the 58 acres. B/c they knew that they would only be able to obtain execution of the transfer by this fraudulent representation. Court ordered: The transfer of the 58 acres to LY. (Note that: The order was not rectification of the register, but was rather directed towards the company itself.)
Fraud Distinguished from Carelessness – How Bad Must it Be? Fraud is not defined in the RPA. Fraud can be based on knowledge – knowing about a fraud. Can also be based on wilful blindness: Assets v Mere Roihi. o In other words: Fraud is NOT established if the registered proprietor could have been more vigilant or made inquiries; HOWEVER, it IS fraud if the registered proprietor’s suspicions were around AND s/he failed to make inquiries (= wilful blindness). Negligence and want of due care are NOT fraud: Pyramid Building Society v Scorpion Hotels. Fraud requires something in the nature of personal dishonestly or moral turpitude: Butler v Fairclough. Requires dishonestly in the sense of a wilful & conscious disregard & violation of the rights of others: Waimiha Sawmilling v Waione Timber (NZCA). Fraudulent conduct occurs prior to registration: Loke Yew.
12 Fraud against the holder of a prior unregistered interest: & NOTICE Registering an interest in land with mere notice (either actual or constructive) of a prior unregistered interest does NOT constitute fraud: s 43 RPA; RM Hosking; Waimiha Sawmilling v Waione Timber (PC). o IE: If you know there is a fraud going on, then it’s fraud. But if you know that there is an unreg’d interest, you don’t have to search for whether there is a fraud going on. However, notice accompanied by other conduct may amount to fraud. EG: Notice, together with assurances that induced the transaction that has been fraudulently made = amount to fraud: Loke Yew. However, it must be more than a mere disregard of a prior unregistered interest (Eg. Hearing about the possibility that someone might have an unregistered interest in the land is NOT enough to amount to fraud): Wicks v Bennet. It IS fraud for a purchaser to collude in transfer designed to cheat a person out of a known existing right, or to engage in a deliberate & dishonest trick to cause the person not to register their interest: Waimiha Sawmilling.
Fraud & Agency – Whose fraud? The fraud must be “brought home” to the person – or their agent – whose registered title is impeached (or to his/her agents): Assets v Mere Roihi.
1. Q: What is the position if the RP’s agent had participated in the fraud (ie. not the RP)? 2. Q: What is the position if the RP’s agent knew about the fraud, but did not participate in the fraud?
Answers: (P.518) 1. The agent must generally be acting within the scope of his actual or apparent authority for the principle to be responsible: Schultz v Corwill Properties. 2. Schultz v Corwill Properties: If the agent knew about but didn’t participate in the fraud, the agent’s knowledge of the fraud can be imputed to the Registered Proprietor –> IF there is an established duty to communicate any matter to the principal (= the RP). o IE: Because there arises an irrebutable presumption that the agent communicated the matter to the principal; Hence, evidence is NOT admissible to prove that the agent did not in fact communicate his/her knowledge to the principal.
Davis v Williams: (Mentioned in CB, but not extracted) Principle: The Mair Principle. = You can’t take or retain a benefit from a fraud committed on your behalf. Facts: Registration Clerk was given 2 docus – 1 was a transfer to an ex-husband, ex-wife as joint tenants; the other document severed that joint tenancy, and made it tenants in common. The Registration Clerk looked at this and thought they’re going to have to pay extra money in stamp duty, so ill amend the 1st document to make it tenants in common. The document was duly registered. Ex- husband then died, & wife wanted to get his share of the property. RE: Agency: To use the Mair principle, you have to find that the principal had a real choice to obtain the benefit or not -> In this case, he didn’t have a real choice, because he would have lost the whole transaction. Therefore, the Mair principle doesn’t apply in this case. Wife wins.
13 Russo v Bendigo Bank: (P.520) Facts: 19 year old Clerk is aware of need to have the document signed in front of her, but she was held to have thought it to be a mere technicality. Q: Is what she did fraud? Q: If so, is it attributable to the solicitor? TJ found that: She didn’t realise the connection between not witnessing the signature, and the registration. She thought it was just a formality (TJ had found). o Note that: Falsely attesting a signature has been found to constitute fraud, if it is intended to trick the RG (SEE: Diega – below). o Here, court found that there was no such intention or awareness. Also, she does NOT know about the fraud. Court held that: Her action was NOT fraud, b/c there was no dishonesty, she had nothing to gain from her false statement (except perhaps some time or trouble). RULE: The essence of fraud is to relieve people from the consequences of indefeasbility only where their behaviour, or the behaviour of those who are responsible, has that element of dishonesty, of conscious moral turpitude or wickedness such as would justify the intervention of a court to set aside a registered estate. Therefore, she wasn’t fraudulent. (If she had been fraudulent, she was in the scope of her authority, therefore it could be attributable to the solicitor.)
Diega: (sp?) => Opposite result! Facts: Employees of the mortgagee (= bank officers), saying witnessed signature, but didn’t. Court held that: This WAS fraud -> B/c trying to trick the Registrar General, for the purposes of s 42. The difference is probably that the bank officers both falsely attested the document AND took it to be registered -> Ie. they knew the whole chain; knew the connection between not witnessing the signature and the registration.
There are also other cases where cases similar to Russo v Bendigo Bank get different results. Lyria thinks Russo is an example of poor cross-examination of a witness.
False Attestations & Imposters: Grgic: => If there is an honest belief that a transfer of an interest is legitimate, then there is NO fraud. Facts: Witness saw someone sign in front of them, but the falsity was that the witness signed: “I witnessed the signature of such and such who is known to me” -> but the witnesser did not actually know them. Court held that: This was not fraudulent. Witness thought impostor was who he claimed to be, therefore not fraud. RULE: If there is an honest belief that a transfer of an interest is legitimate and bona fide, then there is no fraud. They will not be guilty of fraud UNLESS they acted w/ conscious knowledge of the falsity and with reckless indifference to the truth.
14 Therefore, the cases are limiting/narrowing down the fraud exception to people who actually are morally wicked, dishonest!
Davis v Williams: (P.524) => Already mentioned in these notes above. Facts: Registration Clerk, to save $50 off stamp duty, makes an unauthorised amendment to a document.She was just trying to save money for the people. Q: Was she fraudulent in amending the document after it had been signed. Hodgson J: NO Fraud. B/c you don’t only have to prove the lie, but also that you intended to induce the RG to act in a materially different way (as in Diega). Here, the clerk didn’t know the effect the lie would have, that it was going to affect titles.
Notice: Loke Yew: It’s not fraud merely to have notice that there exists an unregistered interest, which your registration is going to defeat. 1. (In Loke Yew, fraud was found to exist because the respondent had actually taken it upon himself to respect Loke Yew’s unregistered title – contract had a clause to that effect.)
Possible interpretation of s 43 : o Mere notice can’t be fraud. A possible extension of it would be to say that even beyond that, no action where any element of the action involves notice of something – can be brought against the registered proprietor.
Wk 3.1: (P.526)
2. The In Personam (Personal Equities) Exception to Indefeasibility:
Indefeasibility of title does not entitle a registered proprietor who enters into a contract to sell the land to refuse to complete that contract, or a trustee to evade the equitable obligations owed to a beneficiary. The in personam exception is not limited to obligations voluntarily undertaken by the registered proprietor, but extends also to obligations imposed by equity in its inherent jurisdiction to relieve from unconscionability. IE: The indefeasibility provisions are aimed to protect a transferee from defects in the title of the transferor, NOT to free him/her from interests with which s/he has burdened his/her own title.
Registration will not extinguish the personal (in personam) obligations created by the reg’d proprietor. In Frazer v Walker, the Privy Council championed the idea of indefeasibility through registration, but also so that this principle “in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam founded in law or equity, for such relief as a court acting in personam may grant.”
15 Rationale: Indefeasibility cannot be used as a tool to oppose those who have relied on the obligations of conscience which registered proprietors of interests such as fee simple estates, mortgages or leases, have entered. Such obligations of conscience arise out of the registered proprietor’s conduct & hence operate as personal claims: Mercantile v Gosper. Where the registered interest is found to be subject to an in personam interest, up until an order of the court is granted and the Register is altered pursuant to its terms, the Register remains intact.
Not so much an exception to indefeasibility, rather something sitting outside of it. WHEN DOES IT ARISE?: MUST BE A KNOWN CAUSE OF ACTION: Grgic. o It arises by virtue of an obligation of conscience created by a registered proprietor, or by his/her agents or employees -> someone for whom s/he was responsible: Mercantile Life Insurance v Gosper. o This obligation of conscience may arise in relation to the registered proprietor’s conduct concerning either legal OR equitable rights: Grgic. o As such, the non-fulfilment of legal obligations under a legal lease may give rise to a right in personam which may, in turn, be enforced against the registered proprietor.
Bahr v Nicolay (No 2) (1988) HCA: (P.526) If the registered proprietor has burdened his/her own title by creating obligations, s/he must be bound by those burdens. Title of a purchaser who not only has notice of an antecedent unregistered interest, but purchases on terms that s/he will be bound by the unregistered interest = is subject to that interest. Mere neglect or notice of an earlier interest will NOT suffice –> must be unconscionable conduct. Facts: The Bahrs did not have enough money to develop their land, so they transferred the property to Nicolay, on the basis that the Bs retained an option to buy it back. Nicolay transfers to Thompson, who took the land pursuant to the earlier agreement between the Bahrs and Nicolay. Thompson agrees to recognise the B’s interest- > Ie. they would convey the land back to the Bs if the Bs ever came up with the money. Later, the Bs wanted to repurchase, but Thompson would not sell the land to them, relying on his status as the new registered proprietor and the indefeasibility that flowed from this. Different to Loke Yew : B/C Thompson never deliberately intended to cheat the Bahrs, from the outset. In Loke Yew, they were being deceitful all along that they were going to cheat Loke Yew. Later, Thompson refused to transfer the land to the Bs. Q: Does this conduct constitute fraud? o This depended on the construction of clause 4 of the Bahr-Thompson agreement. o Did the clause merely acknowledge the pre-existing rights of the Bahrs, or did it mean that Thompson agreed to be bound by the earlier agreement?
Mason CJ and Dawson J held that: Neither ss 68 or 134, nor the principle of indefeasibility, preclude a claim to an estate or interest in land against a RP arising out of the acts of the RP himself: Breskvar v Wall. Therefore, an equity against a RP arising out of a transaction taking place after he became registered as proprietor may be enforced against him: Barry v Heider. Equally, an equity arising from the conduct of the RP before registration could be enforced against the RP: Logue v Shoalhaven Shire Council . Noticing isn’t sufficient, but if you acknowledge it then maybe that is enough. The timing of going back on your word shouldn’t make a difference.
16 Wilson and Toohey JJ: Rejected fraud argument. Held that there was no active dishonesty. Refer to Frazer v Walker : The indefeasibility provisions of the Act do not protect a RP from the consequences of his own actions, whereas those actions give rise to a personal equity in another. Doesn’t matter whether the undertaking to honour an interest is pre or post sale.
Brennan J held that: The title of a purchaser who not only has notice of an antecedent unregistered interest but who purchases on terms that he will be bound by the unregistered interest is subject to that interest. Equity will compel him to perform his obligation. Outcome: Thompson not fraudulent, but actions were unconscionable. Therefore, holds the property subject to the rights created in favour of Bahrs in their agreement w/ Nicolay. Bahrs have a personal equity enforceable against T. RULE: The title of a purchaser who not only has notice of an antecedent unregistered interest, but purchases on terms that s/he will be bound by the unregistered interest = is subject to that interest. Mere neglect or notice of an earlier interest will not suffice. => There must be unconscionable conduct.
What kinds of causes of action work as in personam claims?
An in personam right can only come about if the proprietor’s conscience is affected as the result of a known legal or equitable cause of action which is enforceable against him/her: Grgic. There is no cause of action simply because something is unfair: Conlan. You can’t hang your in personam clause in negligence = b/c the remedy is damages, which has nothing to do with land: Scorpion Hotels. The notion of unconsionability gets bandied about, but as per Harris it is perhaps no longer relevant in NSW. A right in personam may arise out of conduct which occurred either before or after registration: Logue v Shoalhaven Shire Council.
Mere events or incidents which do not give rise to a known cause of action cannot be said to play upon the conscience of the RP, so as to create a right in personam which is exercisable against him/her: Grosvenor Mortgage Management v Younan. Mere neglect cannot firm the basis of an in personam right. There must be something unconscionable or unconscientious in the conduct of the registered proprietor acquiring the title: Vassos v State Bank of SA. Mere knowledge of the existence of a prior contract of sale was NO knowledge which would indicate that there was some dishonest or fraudulent design: Hinds v Uellendahl (No 2).
Pyramid Building Society v Scorpion Hotels: Facts: Pyramid sought to enforce its rights as a registered mortgagee against the registered proprietor - Scorpion Hotels. Having failed to establish fraud by reason of wilful blindness or reckless indifference on the part of the mortgagee’s agents, Scorpion argued that it had a personal equity against the mortgagee arising from negligence based on a variety of acts & omissions.
17 Hayne JA: Scorpion established no legal or equitable cause of action against Pyramid. The highest the evidence went was to show that had Pyramid (or its solicitors) made further enquiries, the defects which it is now said existed in Scorpion’s execution of the mortgage would have been revealed.
Special Equity Cases: (P.538) A special equity exception is the equity which a wife has to set aside a surety given to a 3rd party to secure the debts of her husband. Yerkey v Jones: HCA accepted that it might in some circumstances be appropriate to give special protection to a wife who gives a surety. (Controversial!) Garcia v NAB [1998] HCA: => Confirmed the special equity in favour of married women. Reasoning: There is still a significant number of women in Aust in relationships which are, for many + varied reasons, marked by disparities of economic & other power b/w the parties. It may be that the principles applied in Yerkey v Jones will find application to other relationships more common now than was the case in 1939 — to long term & publicly declared relationships short of marriage between members of the same or of opposite sex — but that is not a qu that falls for decision in this case. It depends upon the surety being a volunteer & mistaken about the purport and effect of the transaction, & the creditor being taken to have appreciated that b/c of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction's purport and effect. It would unconscionable to enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a 3rd party has done so.
Personal Equity & Breach of TRUST: (P.539) In recent years, parties have sought to bring proceedings against registered owners under the rule in Barnes v Addy.
Barnes v Addy: => Re: A stranger who deals w/ assets as trustee or fiduciary in breach of trust. 1st Limb: (DOESN’T APPLY IN TORRENS!!!) o Knowingly receiving trust property in breach of trust – means that you hold the property subject to the trust. o If recipient has knowledge, then there is a personal action available for beneficiary to recipient. o This limb is known as “recipient liability”. o BUT- This does not apply in Torrens -> b/c in Torrens, titles aren’t derivative, you get title from registration. Therefore, there can be no receipt of trust property! (Farry?) o So in exam, if such facts came up, mention it but say this does not apply in Torrens (according to Farry?)
2nd Limb: = Knowledge of breach of trust. o Arises where a stranger, although not receiving trust property, assists with knowledge in a fraudulent or dishonest design on the part of a trustee or fiduciary, & therefore takes the property as a constructive trustee. o = Being involved in the fraud means that you never get indefeasible title. o This limb is known as “accessory liability”.
18 o Farah Constructions: The breach of trust or fiduciary duty under this limb must be dishonest & fraudulent.
Farah Constructions: => Re: What is knowledge under the 2nd limb? 5 Categories of Knowledge: 1. Actual knowledge. 2. Wilful blindness. 3. Wilfully & recklessly failing to make such inquiries as an honest & reas person would make. 4. Knowledge of circumstances which would indicate the facts to a reasonable person. 5. Knowledge of circumstances which would put an honest & reasonable person on inquiry. = The first 4 would suffice to establish knowledge under the 2nd limb in Barnes v Addy. Personal Equities & Mistake: Mistake is not an exception to indefeasibility. In some circumstances, however, a personal equity may arise against a registered owner who has acted unconscionably in taking advantage of the tranferor’s unilateral mistake or a mutual mistake: Majestic Homes v Wise (The court in that case characterised the lessee’s conduct as amounting to “sharp practice”). o Sharp practice is basically the same as unconscionable. o Mutual mistake, however, does not require unconsiconability. In a case where more land has been transferred than was bargained for = relief under the personal equities exception will be available where the transferee either knew, or had reason to know, that the transferor was (or might well be) mistaken: Minister for Education and Training v Canham.
Personal Equity & Unlawful Action by Public Authorities: The mere fact that a public authority got its title through an ultra vires transaction, does not give rise to an in personam claim against it: Logue v Shoalhaven Shire Council.
POLICY: Conclusions on the scope of the In Personam Exception to Indefeasibility: The scope of the in personam exception has been significantly narrowed in recent years. Although the HC in Bahr v Nicolay envisaged personal equities as broader in scope than the fraud exception, BUT persons deprived of their land through forgery of a transfer or mortgage now have little chance of successfully asserting a personal equity against a careless transferee or mortgagee in circs that do not engage the fraud exception: See Pyramid Building v Scorpion Hotels; Vassos v State Bank of SA. Most commentators favour confining the scope of the exception in order to advance security of transaction.
Wk 3.2:
19 Registrar’s Powers of Correction: (P.543) The RG has the power to correct entries in the register, and to supply omitted entries. BUT cannot erase an original entry. S 12(1) RPA: The correction has the same effect as of the error or entry has not occurred, but w/out prejudicing any right that arose from any entry prior to the correction. SS 136, 137: Empowers the RG to cancel an entry or document on the basis of fraud. RG cannot be ordered to correct the register unless you have a registerable interest in land.
OTHER EXCEPTIONS TO INDEFEASIBILITY: (P.545)
1. Prior Certificate and Wrong Description: There is an exception to indefeasibility in cases where an interest is asserted by a proprietor claiming under a prior CT, or where the land has been incl in reg by wrong description of parcels or boundaries. SS 42(1)(c), 124(e): A Bona fide purchaser of land is not subjected to the exception applicable where land is included in the register by wrong description. CTs in NSW are endorsed to the effect that they are issued subject to the reservations & conditions, if any, contained in the Crown grant.
2. Short-term tenancies: A reg’d proprietor’s interest is subject to the interest of a short-term tenant in possession of the land. This is only if the lease is for 3 years or less: s 42(1)(d). AND the reg’d prop must have had NOTICE of it.
3. Easements: S 42(1)(a1): A registered proprietor is bound by any omitted or misdescribed easements “subsisting immediately before the land was brought under the provisions of this Act, or validly created at or after that time under this or any other Act, or a Cth Act”. Omitted or misdescribed – eg. by administrative error: Australian Hi-Fi Publications v Gehl. Therefore, a bona fide purchaser of Torrens system land is exposed to the risk of being bound by interests – the existence of which cannot be ascertained from the register, or, in some cases, from anyu other source at the time of the purchase.
4. Adverse Possession: S 45C: Registered titles are NOT extinguished by expiry of the limitation period, but are ONLY expired by an alteration of the register made under the provisions of the RPA. (This protects the integrity of the register, yet does not leave a squatter powerless to regularise title.) A person cannot make claims to strips of land, only to entire parcels of land
5. Other Overriding Statutes: The RPA can be overridden, in whole or in part, by a later statute which indicates an express or implied intention to do so: South Eastern Drainage Board.
20 Implied partial repeal can arise where a later statute overrides a registered interest, or creates an interest in land or a charge which is enforceable against the registered proprietor. If a later statute is inconsistent w/ the indefeasibility provisions of the Torrens statute (the RPA), then it will prevail over it to the extent of the inconsistency. S 196A Conveyancing Act: The Crown or any other authority resuming land is required to notified the RG. S 31A(3) CA: On lodgement of a resumption application, the RG is to record the resumption in the register. S 31A(3) CA: The RG is also empowered to take the initiative & record resumptions of which s/he has notice in the register. (This legislation is presumably to ensure that all resumptions of Torrens system land are recorded.) Horvath v Commonwealth Bank (1999) Vic: (P.550) => RE: Overriding Statutes Facts: Appellant was a child when he bought a property together with his parents. SC ordered in favour of the Respondent Bank for possession of the land over which there was a mortgage in which he had joined with his parents when a minor. On this appeal, A is arguing that the mortgage was unenforceable against him, relying on the minor’s relief provision in an Act (which was enacted later than the Torrens legislation), which provides that loan contracts entered into by minor are void. The new legislation says that any loan agreement with a minor is void. Q: Does Bank have a power of sale (& therefore an indefeasible title) over the whole property? Court: Looked to see whether there was inconsistency b/w the 2 statutes – says no relevant inconsistency in this case. Therefore, the mortgage was valid and bound the A’s interest in the land. Reasoning: Other Act had to do with contracts, and the Vic Torrens Act had to do with regisistration. And here we are talking about a void contract, but in Torrens, a void document can still be registered. o Therefore, the are not inconsistent.
Hillpalm v Heaven’s Door: When determining whether NSW legislation is compatible with the RPA indefeasibility provisions, courts need to look at the following features: o Later enactment usually takes priority; o Public law enactments usually take priority; o Cth leg overrides State leg. o Aggressive wording of a particular statute is indicative that it should take priority. o However, Courts do not lightly jump to the conclusion that Parliament has intended to repeal an earlier Act.
Kogarah v Golden Paradise: Where possible, the court will try to read the 2 statutes as not being in direct conflict with each other. NB: Remember that the title will only be defeasible to the extent of the inconsistency. (IE: This might lead to the partial OR complete overriding of indefeasibility).
WK 4.1:
TORRENS COMPENSATION- THE ASSURANCE FUND: (P.555)
21 The Assurance Fund provides compensation to people who have lost an interest in land as a result of the RPA (ie. registration). Legislation is s 129: Describes the circumstances in which you can make a claim for compensation against the Torrens Assurance Fund. Need to show that you suffer loss or damage as a result of the operation of Act.
Compensation is available when loss or damage is suffered in respect of: S 129(1)(a): Any act or omission by the RG in relation to land. S 129(1)(b): The registration of some other person as proprietor of the land, or of any estate or interest in the land. S 129(1)(c): Any error, misdescription, or omission in the Register in relation to the land. S 129(1)(d): The land having been brought under the provisions of the Act. S 129(1)(e): The person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud. S 129(1)(f): An error or omission in an official search in relation to the land.
Challenger Managed Investments v Direct Money (P.559 middle) “Comp= NOT an extraordinary remedy; not reserved for faults, blunders or enormities”. “There is nothing in the text of either s 129 or related sections which indicates that the acts or omissions to which para (a) relates are limited to acts or omissions which involve some fault, or some failure to comply with a duty.” Don’t need negligence on the part of the Registrar General.
Diemasters v Meadowcorp (2001) NSW SC: (P.565) => You can only claim from the Assurance Fund IF you would have won under Old System land, but now with the RPA you lose. Facts: Mortgage to Diemasters. Discharge of the mortgage, but the discharge wasn’t registered, Instead, Meadowcorp gave a contract of sale & then a transfer to Jain. But a caveat is lodged. Q: Was the loss or damage suffered by Jain as a result of the operation of the Act? Court says that: To find out whether it was the Act that caused the loss = you take away the Act and see what would have happened if the Act wasn’t there. Under Old System land: Jain would have won -> B/C would have been bfpfvwn of the legal estate. Court found this fitted in s 129(e) – the person having been deprived of the land…as a consequence of fraud. The fraud in this case was that the discharge was fraudulently procured. The court isn’t limiting itself to situations of where someone has an interest in land and THEN loses it b/c of fraud. Rather, the court extends it to include this situation – where Jain never even got the interest to begin with. Court doesn’t consider it nb that Jain loses the title to an earlier interest, rather than a later interest. Here, it’s b/c of the fraud that Jain never gets the title – therefore loses b/c of the structure of the Torrens system, rather than b/c of immediate indefeasibility as such. Therefore, the court takes a broad interpretation of the section.
RULE: THEREFORE: You can only claim from the Assurance Fund IF you would have won under Old System land, but now with the RPA you lose.
22 THE REGISTER:
Bursill v Berger (P.568) => We know that you’re only bound by registered interests, but what constitutes the register? Generally, you don’t have to look behind the register, but in what cases do you have to look behind the register? = If the CT refers to a document outside of the register & a prudent conveyancer would have looked behind the register. Facts: There is a CT on which the registered proprietor on the 1st Schedule = Bursill, and on the 2nd Schedule is an “extension of right of way” – IE: Bursill holds the land subject to this:- which says that it is referring to the right of way created & fully set out in transfer number 7922. Therefore, the CT sets out the interests in the land, and it refers to other documents – In this case, the document referred to was a transfer of rights to buildings. BUT: It wasn’t actually a “right of way”; was actually a greater set of rights – as described in the docu. Q: Does Bursill only hold the land subject to a right of way, OR do we say Bursill holds subject to whatever is described in the extra document, no matter how it is described in 2nd Schedule of the CT?
Windeyer J: A RP )a “prudent conveyancer”) would have searched the transfer # referred to in the CT. Therefore, Bursill holds the land subject to the description of the right in the external document. He also talks about CONSTRUCTIVE NOTICE – the reference to the transfer number was constructive notice of the interest provided. Points to think about: This idea of constructive notice is interesting– for Old System land, constructive notice means you take the land subject to it. BUT in Torrens land, the effect of constructive notice is not so clear – nowhere in the RPA is notice of that nature brought up. Thus, Windeyer J seems to be thinking in terms of pre-Torrens. Hard to understand the effect that this sort of terminology might have in terms of Torrens legislation.
Hypothetical Problem Case: (P.572) (5.142) In this hypothetical case, the CT’s 2nd Schedule contains a reference to a document called “Lease” – but there is no reference to an easement in the CT (The description of the easement was only in the actual lease document, which was outside of the register). AND the lease has clearly expired. In Bursill v Berger, it was reasonable to look at the document behind the register – BUT here would a reasonably prudent conveyancer read the full terms of an expired lease?!? Probably not! Therefore, Bursill v Berger can be distinguished b/c arguably a prudent conveyancer would check a right of way, but not an expired lease (as in this case).
Compensation Question: (P.573) (5.144) Would a purchaser in the position of Bursill in Bursill v Berger be entitled to a claim for compensation for the assurance fund for any loss sustained b/c of the inaccuracy or omission in the register? = s 129(1)(c) = you can get compensation for the fact that there is an error, omission or a misdescription in the register.
23 EQUITABLE INTERESTS & UNREGISTERED INSTRUMENTS: (P.573)
Although dealings are only effectual at law when they have been registered (s 41 RPA), nevertheless:- The Torrens legislation recognises that unregistered or equitable interests can continue to exist with respect to registered land: Barry v Heider. Any unregistered interest is an equitable interest: Barry v Heider. S 72 RPA: A person with an unregistered interest can lodge a caveat to stop others interfering with their interests.
Barry v Heider (P.573) => Equitable claims and interests are still recognised under the RPA. Rule: Equitable claims and interests are still recognised under the RPA. Facts: Barry signs a transfer to Schmidt, Schmidt then goes on to give equitable mortgages to H and G, & gives them authorisation for release in the CT. Court accepts that he hasn’t been paid yet & he is still entitled to the money. (Court doesn’t accept that it was procured by fraud.) Q: Does Schmidt get an interest? A: Yes, he gets an equitable interest. Q: Barry is still registered proprietor, but what interest does he have? A: An equitable right. H and G also have equitable rights! Therefore, who wins? Rule = 1st in time unless there is a reason to postpone (Rice v Rice). H claims rights through Schmidt. Barry was holding Schmidt out as having more than actually had. In this case, there is reason to postpone: Barry makes a contract & then signs a transfer for sale. The representation in signing the transfer is that he has been paid – H thinks therefore this is the case. It would be unconscionable to go back on a transfer that has already been signed. Barry loses to H. G is treated differently to H b/c G knew there was an issue – Barry had caveated & then has withdrawn the caveat – therefore G had notice that Barry might have had an interest, which they should have followed up on.
MAIN POINT OF CASE: Equitable interests can crop up with Torrens land, and when they do, the competition is the same and the competition in terms of Old System land.
(P.578) BUT: The sphere of enforceability of equitable interest for Torrens Land is a bit different. You’re better off being an owner of an equitable interest in Old system land, than being the owner of an equitable unregistered interest in Torrens land – b/c an unregistered interest in Torrens land is liable to be defeated by the registration of an inconsistent dealing by a good faith purchaser, even if that purchaser had notice or even knowledge of the unregistered interest.
CAVEATS: (P.579) The caveat provisions are contained in ss 74F-74R RPA. The caveat system stops registration from occurring, similar to a statutory injunction: Re Hitchcock.
24 If you have an unregistered interest in land that you want to protect, you can get a caveat that sets up what your interest is, and what type of things you want to stop. But you have to be careful that you’re not trying to stop something that you cannot stop! =>This was a problem that came up in Kerabee Park v Daley.
Kerabee Park v Daley: => You can only try to stop things that are inconsistent with your interest. Facts: They had a 2nd mortgage over the property, but they wanted to keep their caveat up even to the point of preventing the 1st mortgagee of exercising their power of sale! And they didn’t have a right to do this! RULE: You can only try to stop things that are inconsistent with your interest.
The Purpose of Caveats: The purpose of a caveat is to protect the caveator’s interest from being defeated by the registration of a dealing w/out having had an opportunity to invoke the assistance of the court to give effect to the caveator’s interest. It is an equitable remedy – it restrains the RG from lodging documents for registration. It protects equitable, unregistered interests. Caveats also have a secondary function of warning those searching the register of possible encumbrances on the land. Caveats aren’t just to tell the world what kind of interest you have in the land, rather, they are to protect the caveator’s interest from being defeated, by saying what your interest is & what you are trying to stop.
Butler v Fairclough: (P.589) => 1 View of the purpose of Caveats = AS NOTICE. “Under the Australian system, a clear title on the register is, for some purposes at any rate, equivalent to the possession of title deeds. “A person who has an equitable charge upon the land may protect it by lodging a caveat, which, in my opinion, operates as NOTICE to all the world that the registered proprietor’s title is subject to the equitable interest alleged in the caveat.” = This is a view of caveat as being about notice. BUT: This is different to the view in Kerabee Park – which said is not about notice but about preventing certain types of registration.
What Interests Can you Caveat / Are Caveatable? (See P.580) A caveat can only be lodged in respect of an interest in land. Agreement to share profits on resale of land not caveatable: Simons v David Benge Motors.
The removal of a caveat was ordered where there was no sufficient memorandum in writing, and no consideration for giving security over the relevant property: Parker v Glenninda.
A claim to set aside a transfer on the ground of fraud is a claim in personam which may result in a proprietary interest, but is not caveatable until such a claim is successfully established: Valencia v Global Minerals.
A caveat to protect an option to acquire a lot in an unregistered strata plan was upheld as valid: Forder v Cemcorp.
25 A caveatable interest need not be a registrable interest, nor one that gives the holder a right to compel the RP to deliver a registrable interest, so long as the interest is one in respect of which equity will give specific relief in respect of the land: Composite Buyers v Soong .
S 74F(2): Allows the registered proprietor of land to lodge a caveat against dealings where the registered proprietor fears an improper dealing because of the loss of a CT or for any other reason.
Requirements for Caveats: The caveat must specify the quantum of the estate claimed by the caveator AND the facts on which this claim is founded: obiter in Kerabee Park v Daley. S 75F(5): A caveatable interest must be specified AND verified by statutory declaration. S 74L: These formal requirements are not to be enforced when they are the only thing standing in the way of an otherwise operable caveat. You can caveat an unregistered mortgage, but not the fact that someone owes you money.
Application for Removal of a Caveat: S 74MA RPA: The reg’d proprietor can apply to the court for the removal of a caveat. Court may remove caveat b/c the prohibition on registration of dealings stated too widely (eg. Kerabee). Re Jorss’ Caveat: The nature of the proof required for the removal of a caveat: If someone challenges the caveat, the caveator has onus of proving that there is a serious QU to be tried, & that on the balance of convenience it is better to keep the caveat on (like for an interlocutory injunction).
Compensation for Caveats: S 74P: If a caveat is lodged w/out reasonable cause, then the caveator can be ordered to pay comp. TEST: Did the caveator have an honest belief based on reasonable grounds that they had the interest that they claimed? (IE: If someone is just being annoying, then you can for sure get compensation; or if the caveat is imposed for the purpose of blackmail, something that has nothing to do with the land in question.) The fact that a caveator fails to sustain the caveat at a full trial must not unconsciously be equated with an absence of reasonable grounds for lodging the caveat in the first place: Savill v Chase Holdings. A caveat lodged in “deliberate infringement of the rights of the reg’d proprietor or interested person” = may render the caveator liable: Dykstra v Dykstra. A caveat lodged to place pressure on the reg’d proprietor to give something to which the caveator was not entitled (ie. blackmail) = cannot be meaintained: Wildshut v Borg Warner Acceptance. Lee v Ross: The test of forseeability should NOT be applied in assessing the caveat’s role in consequent loss or damage, (b/c a caveator must accept the risk of liability to compensate the reg’d proprietor for loss realistically attributable to the wrongful lodgement (IE. whether or not that loss was foreseeable)).
Week 4.2 21/08
Registered Interest VS Registered Interest: S 36(9) RPA: Priority between registered interests is determined according to date of registration. S 36(5): Dealings are registered in accordance with date of lodgement.
26 o S 36(4): Where 2 or more dealings have been lodged but are awaiting registration, the RG can register those dealings in the order that will give effect to the intention of the parties.
COMPETING EQUITABLE INTERESTS (=earlier eq VS later eqinterest): General Rule: First in time prevails, unless there is postponing conduct: Rice v Rice.
Does Failure to Caveat Amount to Postponing Conduct? Butler v Fairclough: Failure to caveat can constitute postponing conduct. BUT in Just v Bank of NSW: It was held that there is NO positive duty to lodge a caveat. Just v Bank of NSW: However, in some circs, failure to lodge a caveat may combine with other conduct to cause postponement. Just v Bank of NSW: It is not enough that the prior equitable interest holder did not caveat; but s/he also must have contributed to the assumption that the registered proprietor had the ability to give unencumbered title. Heid v Reliance Finance: Arming the other party to represent themselves as the unencumbered owner of land (Eg. By handing over the CT w/ receipt of payment) & with it the capacity to engage in deceptive conduct = IS postponing conduct. Person to Person: Failure to lodge a caveat where industry practice is to lodge one constitutes postponing conduct. NB: MORTGAGEES (ie. who haven’t registered their mortgage) = have an industry practice of either keeping the CT or lodging a caveat. So, if the mortgagee does neither of these things, then that is postponing conduct.
Abigail v Lapin: => Arming conduct constitutes postponement. Facts: Lapins hand over transfer to H, who registers the transfer, and then creates a mortgage to Abigail, who lodges for registration. Note that: Lapins handed over the transfer as security, (eg. instead of a mortgage) -> BUT the intention was never that H would ever become owner; rather, the intention was that it would just be used as security, but that H would never exceed the limits of authority. H therefore has registered interests. Lapin and Abigail have equitable interests. Therefore, the competition in this case is equitable v equitable. The first in time is Lapin. In this case, the first in time was postponed B/C: The Lapins armed Heavener –> the main conduct that postponed them was therefore the conduct of ARMING.
Had the Lapins lodged a caveat, Abigail would have had notice of their equitable interest– but the court does not look at the failure to caveat as the reason for postponing Lapins interest. Rather, the arming is the reason for postponing –> IE- Lapins put H in position to look like the owner. THUS, the failure to caveat is mentioned in this case, but is basically a side issue, it is not listed as the reason for the postponing – which is the arming. So yes, the caveat would have changed the result, but was not the postponing conduct. Thus, here the court did not rely on the failure to caveat as the postponing conduct. Therefore, this case does not go against Butler v Fairclough per say; finds other postponing conduct, as opposed to failure to caveat, whereas that case did.
27 Heid v Reliance Finance: =>More on arming conduct that postpones. Facts: Heid hands over a CT & transfers to a solicitor – who is actually an unqualified employee of Newman Mckay – which controlled Connell Investments. Connell Investments becomes registered as proprietor. Nothing else is on the register. Connell Investments enters into a mortgage w/ Respondent. Competition is between Heid and the Respondent. Heid is first in time, but this is postponed to the R, because of ARMING again! Court says that: It is not reasonable to assume that an employee of a person you are giving the interest to will act in your best interests!! = The Arming conduct!
This case also discusses failure to lodge a caveat:- Held that: Failure to lodge a caveat is just one of the circs to be considered in seeing whether it is inequitable that the prior owner should retain his/her priority. (But again, like Abigail v Lapin, this case was decided on the basis of Heid arming the transferee, rather than failure to lodge a caveat.)
Just v Bank of NSW: => Failure to caveat is not postponing conduct if you keep the CT. Facts: Josephon gives CT to 1st m’ee = the Bank. The Bank does NOT register the mortgage. Josephon says to 2nd m’ee = I can’t give you the CT b/c the bank has it for safekeeping – IE: Suggesting that he nevertheless has full interest (ie. that there is no first mortgage). Competition is between 2 equitable interests = between the Bank (1st m’ee) and Just (2nd m’ee). Just argues that: They should get priority over the bank – even though they were 2nd in time – b/c the bank’s failure to caveat should be seen as postponing conduct.
Court held that: The bank didn’t caveat – but it kept the CT – and if you are trying to protect your interest from being beaten by other people, keeping the CT is a good way to go to protect yourself! -> IE: It’s not the best thing to do, but it’s up there! So in this sense, bank’s failure to caveat didn’t matter b/c did something almost equivalent (in keeping the CT). Court says that: The purpose of a caveat is not to give notice to the world (ie. to stop people getting registered), but to protect. => Therefore, if there is some other way to protect – Eg: Keeping the CT as in this case – that is ok too.
Hypothetical Circumstance: What if it hadn’t been a mortgage – but instead Josephson had entered into a contract of sale w/ Just Holdings (who was the 2nd mortgagee in the real case). = In this case bank would still win – b/c there was no postponing conduct (because the court said that failure to lodge a caveat was not postponing conduct, in light of the fact that the bank had protected itself by keeping the CT –> AND that a caveat’s purpose is to protect – as opposed to give notice)!
Black v Garnock: If you’ve got a system like the Torrens system where the register is meant to be transparent = it should be a 1st come 1st served system. -> If you don’t caveat, that’s a reason to postpone. Therefore, caveats do have a notice function, as well as a protective function. And you should caveat your interest straight away, and if you don’t you can lose your interest to someone else.
Australian Guarantee Corporation v CFC (NZ Case)
28 A first m’ee who failed to caveat AND failed to get the CT was postponed.
Mimi v Millenium Developments => Failure to caveat in suspicious circumstances led to postponement. Facts: There was a failure to lodge a caveat, but then you see construction going on on the building you are meant to buy – and you still don’t caveat! IE: Your suspicions should have been aroused. Therefore, failure to caveat in suspicious circumstances = led to postponement.
Victorian Cases in the Reading: Go back and forth – RE: What constitutes postponing conduct.
An additional Test: Did the later equitable interest holder have notice of the prior equitable interest at the time s/he acquired his/her interest? Moffett v Dillon: Facts: The 1st interest created a charge; the 2nd interest created a mortgage. The Bank had notice of the charge at the time they took the mortgage. THE COMPETITION is b/w Equitable v Equitable – BUT the 2nd equitable interest holder had NOTICE of the 1st when it took its interest. Therefore, the earlier wins. Difference in this case is the way the court formulated the test. Majority stated an additional test: RULE/TEST: If a later equitable interest older has notice (eg. b/c of a caveat) of an earlier eq interest (eg. because the first one lodged a caveat), then it takes subject to that interest. RE: Whether the role of caveats is notice or not: It is clear that a caveat is NOTICE to you if you take an interest and there is a caveat on it. That is, you are taken to have constructive notice of the earlier interest even if you didn’t check the register. A qualification to this is Donemore : You’re not taken to have notice if you have an existing interest & you’re just enlarging it.
Questions: 1. How do you judge priority b/w unregistered interests where the first in time did NOT caveat? o Barry v Heider: Unregistered interests are like Equitable interests. o Rice v Rice: First in time prevails if the equities are equal. o Postponing conduct includes arming (Abigail v Lapin). o Postponing conduct also incls failure to lodge a caveat in suspicious circumstances (Mimi). o RE: Failure to lodge a caveat ALONE:- Some cases say this is postponing conduct (Butler v Fairclough; NZ Case; Callinan J’s comments); but note that the dominating view at the moment is:- Other cases say that it depends on the circumstances (Abigail v Lapin; Heid; Just v Bank of NSW; Gleeson in Garnock). o Failure to lodge a caveat where industry practice is to lodge one (Person to Person). => It is industry practice to either lodge a caveat OR keep the CT in the case of unregistered mortgagees. o It is OK to fail to lodge a caveat if you have kept the CT (Just v Bank of NSW).
29 2. How do you judge priority b/w unregistered interests where the first in time DOES caveat? o The caveator has priority because the 2nd interest holder has notice (Moffett v Dillon).
2. CONCURRENT OWNERSHIP
Week 5.1 25/08
Concurrent ownership is when more than 1 person has an interest in the same object at the same time. ALL INTERESTS (EG. fee simple, life estate, leasehold, mortgage, etc.) can be concurrently owned. 2 types of concurrent ownership – Joint tenancy (JT) & tenancy in common (TC). JT is the most common – husband and wife scenario.
JOINT TENANCY: JT is where 2 or more people hold an equal interest in the same parcel of land or item of personalty. A joint tenant folds nothing on his/her own part, but rather the whole interest jointly. = 2 or more people holding the same ball. If one of them dies, the other is left holding the ball. No transfer when 1 dies – because there is only 1 estate.
JT has 2 distinguished features: 1. The Right of Survivorship; 2. The 4 Unities.
The Right of Survivorship: – Jus Accrescendi => The most nb feature of a JT! When 1 JT dies, the whole estate remains with the surviving tenant(s). The deceased’s interest is absorbed by the other joint tenant(s).
30 This means that the interest of a JT cannot be disposed of by will. However, during his/her lifetime, a JT can dispose of an interest inter vivos by SEVERANCE – so that the Joint tenancy becomes a tenancy in common, where the right of survivorship does not apply. RE: The Order of Deaths of JTs: o The right of survivorship makes it necessary to determine the order in which JTs died. o S 35 Conveyancing Act: When 2 or more people die in circumstances which makes the order of their deaths uncertain, the deaths are presumed to have occurred in order of seniority, if there is no evidence to the contrary.
The 4 Unities Needed for a JT to Exist: => Possession, Interest, Title and Time. 1. Unity of POSSESSION: All JTs possess the same property, and the whole of the property. 2. Unity of INTEREST: The interest of each JT must be the same in nature, extent, & duration. (=There is only 1 ball!) 3. Unity of TITLE: All JTs must have derived their interest from the same document or the same Act. 4. Unity of TIME: The interests of all JTs must vest at the same time (= must have gotten their interest at the same time).–> IE: B/C only dealing with ONE interest. If the time of vesting is different, a TC will arise. EXCEPTION TO THIS UNITY: The rule for trustees! o M’Gregor v M’Gregor: Any conveyance executed to a trustee for beneficiaries, or any disposition in a will may give rise to a joint tenancy in the grantees, even where unity of time does not exist. . IE: JTs, holding the property on trust for beneficiaries. . If Tenant2 wants to leave, doesn’t want to be trustee anymore. A Tenant3 is appointed & takes the tenancy from T2. . = YOU have a problem in terms of JT! = B/C there’s no unity of time & title b/w T1 and T3. . BUT – it’s okay – because there’s an exception to the 4 unities rule for trustees.
If one of the 4 unities is missing, it has to be a TC (unless it comes under the trustees exception = where unity of time is not needed).
S 25(1) CA: Corporations can hold joint tenancies in same way as natural persons. S 51(2) CA: Dissolution of corporation is equivalent to death of individual.
TENANCY IN COMMON: A TC only required unity of possession. Tenants in common hold “undivided shares” of the property. => IE: Each tenant in common holds an identifiable share of the interest in the property, which has not been formally divided up between them. = 2 tenants holding a divided share of the property. (EG: A ball cut in 2, each tenant holding one piece.) Each holds a separate piece of the pie. (Doesn’t have to be in equal proportions.) There is NO right of survivorship: Therefore, if 1 dies – the other tenant isn’t left holding their piece as with joint tenancy!!! On the death of a tenant in common, his/her share passes to beneficiaries by will or intestacy.
31 The method of transferring the interest of one tenant to another is by conveyance. A tenant in common may deal with his/her undivided share as s/he wishes. o May alienate his/her undivided share inter vivos – and the undivided share may itself become the subject matter of co-ownership! Haddelsey v Adams: The benefit of survivorship, may, however, be expressly attached to the estate at the time of creation of the tenancy in common.
RIGHTS OF ENJOYMENT INTER SE OF CO-OWNERS OF LAND:
Rights of Occupation: All co-owners – whether in a JT or a TC = have a right to occupy the whole property, any part of the property. They can agree between themselves otherwise (EG: This is my room, that is yours).
Stedman v Smith: 1 co-owner cannot bring an action for trespass against another co-owner – except in the case where the latter’s occupation has excluded the co-owner from possession, or, possibly, where the latter does something preventing common enjoyment of the land. Thrift v Thrift: Each can also invite other people to live on the premises. Therefore, absent standard husband/wife or de facto scenario, people generally enter into a side agreement, that states the mutual intention of the parties. = CAN BE ORAL. Occupation Rent: In general, if 1 co-owner decides not to possess the land, s/he cannot claim compensation from the co- owner(s) who are occupying the land: Luke v Luke . When is occupation rent payable? o Ouster: However, an occupation rent can be charged if 1 co-owner was OUSTED by a co- owner = prevented from exercising his/her right to possess the entire property. => The ousted one can claim compensation rent from the date of ouster: Biviano v Natoli. o Agreement: Also, an occupation fee can be charged is the parties AGREED on the payment of an occupation rent. o Claiming for Improvements: To have equity you must do equity – so if A seeks money from B, A must also compensate B for occupation rent.
The fact that 1 person simply is there and the other isn’t = is NOT enough for occupation rent. Occupation rent can only be claimed when the property is being sold: Forgeard v Shanahan. o => IE: With a claim for improvements. o W/ ouster = It is payable from the date of ouster (Biviano v Natoli).
What Does NOT Constitute an Ouster: Merely telling a co-owner to “get out” does NOT constitute an ouster, even if the addressee leaves: Cardinaels-Hopper v Tierney. A temporary disturbance to an access way to the property would not constitute an ouster. => EG: The inconvenience caused by 1 co-owners renovations to a driveway does NOT amount to an ouster: Ferguson v Miller. Obtaining an AVO will not result in an ouster: Biviano v Natoli. (Though other acts in that case were held to amount to an ouster.)
32 What DOES Constitute an Ouster: Def: The true nature of an ouster is that it constitutes an interference by 1 co-tenant of another co- tenant’s rights in respect of the property: Biviano v Natoli. Dennis v McDonald: An ouster may occur where 1 co-owner leaves the property because of domestic violence from the other co-owner.
Biviano v Natoli (1998) NSWCA (P.644) Facts: B wife got an AVO against N husband. So he couldn’t come near their house. Q: Is getting an AVO against someone an ouster? A: NO! Q: What was the ouster in this case? A: She denied his interest in the property altogether. There was an express denial of his title and right to possession. Said he had no right to it at all. Was occupation rent payable? = YES! From the date of the ouster. (Ie: Not from the date of the AVO.)
POLICY: Denning L’s comments in Davis v Johnson (referred to in Biviano v Natoli): That “Social justice requires that personal rights should, in proper cases, be given priority over rights of property”. This suggests a dichotomy b/w personal rights & property rights. And that personal rights compete. Lyria disagrees – thinks that personal and property rights do not compete. Sees it not as a conflict b/w personal & property rights as such, but rather that property rights are always limited by other laws – including laws about personal rights. IE: Owning property doesn’t mean you can do illegal things with it. All property rights are subject to the general law! (Eg. You can’t kill someone with the knife you own, just like you can’t live in your property if doing so is illegal b/c of an AVO).
Dragging someone out the door = Constitutes an ouster. Is physical abuse causing someone to leave an ouster? = Maybe it is interfering with the victim’s possession. Would depend on evidence in the specific case.
The Quantum of Occupation Rent (IE: How to Calculate it!) Occupation Rent: Is calculated by reference to the proportionate increase in enjoyment of the property by the resident co-owner. IE: If there are 2 EQUAL co-owners, the occupation rent is half the market rent. BUT- If there are 3 equal co-owners, the occupation rent is 2/3 of the market rent for the period of exclusions: Re Gorman. o PTO To See Ryan v Dries RE: If the ownership is NOT equal. Occupation rent is limited – it cannot be more than the amount received for improvement costs: Brickwood v Young.
According to (ie. this cases may be modified, overruled later): Forgeard v Shanahan (1994) NSWCA: (P.646)
33 Q: When will equity force a co-owner in occupation to pay an occupation fee? A: When there is an ouster. Q: Can a co-owner claim from the other co-owner an allowance for improvements? A: Yes, but in order to receive equity s/he must do equity -> thus, the co-owner seeking improvement fees must be accountable to pay an occupation fee. The improvements fee one can claim is the lesser of: (1) The cost of the improvements; and (2) The extent to which it increases the value. Q: When can you claim? A: When there is a sale or partition. -> B/C when it’s being sold, why should a person who didn’t build it get a share of the increased value. In equity, an occupation fee is charged in a partition suit or if the owner in occupation claims an allowance in respect of improvements effected by him, in respect of the amount by which the value of the property has been increased, not exceeding the amount expended, the “value” to be ascertained at the commencement of the action.
In this case: The co-owner residing in the property was held to be entitled to ½ the cost of the mortgage repayment and rates => It was debt (=> IE: As opposed to improvements-> as Ryan v Dries says it can also be) – a co-owner’s obligation to contribute to the debt. (IE: The court did not treat it as improvements). RULE RE: Pest control: You can’t get money from the other co-owner for this = Doesn’t constitute improvements. A RULE: Mere maintenance cannot be reclaimed (which is what pest control is). o BUT note that: Ryan v Dries says that there is no difference between improvements and repairs – as long as it increases the value of the property.
Recap: In some situations, occupation rent is payable because there’s been an ouster. In other situations, there’s been no ouster, so Occupation Rent is only payable because there have been improvements. If the occupation rent is less than the claim for improvements, the person gets the difference. (IE: In a situation where a person lived there and the other didn’t, and the former made improvements) If it would be greater, then no compensation is payable.
Mortgage payments = Can either be considered an improvement, OR it can be considered as a contribution. BUT- if you claim it as an improvement, you need to pay occupation rent; but not if you claim it as co- debtors (= as a contribution). Forgeard v Shanahan: Taken as a contribution, therefore no occupation rent. Ryan v Dries: Was taken as an improvement, therefore had to pay an occupation rent.
Ryan v Dries (2002) NSWCA (P.649) => Goes against some of the points in FORGEARD v SHANAHAN! RE: The way a court will assess damages where mortgage payments & occupation rent are claimed. RULE: Court held that Strelly v Winson preserves the equitable rule that allows a co-owner to claim a share of rents collected by another. RULE: If the co-owners are NOT equal, apportion the occupation rent in accordance with the extent of co-ownership. Prima facie, the proceeds are divided in proportion to what the legal title shows, not the equitable title.
34 RULE: Takes away the distinction between repairs and improvements – except says that you can only get paid for repairs that affect the value of the land. RULE: Treats the mortgage payments differently to Forgeard v Shanahan:- If you’ve paid off more of mortgage than other person = either you can get them to pay as co-debtors, OR you can claim it as an improvement, can treat it as an improvement to land – in sense that this land is worth more to us now because our equity has greatened because of my repayments of mortgage. o If you do it this latter way, you need to pay an occupation rent – because remember that you need to do equity to get equity.
Suggestion Only: Also, it might not just be in a partition of sale context that you can sort all this out, but also in other contexts.
1 st - Need to know the proportions of ownership: Q: In what proportions did they own the property at law? At law, the A has 6/7, the R has 1/7. In equity, there is a resulting trust because of contributions to purchase price. They are both mortgagors – therefore $60,000 each. A paid $10,000. Also, $40,000 from the A. $30,000 from the R. Also, about $9000 in stamp duty, etc. from the A. = R has 43%, A has 57%. They hold in these proportions in equity, but in 6/7 to 1/7 at law. This means that we look at the CT to see what they own at law for Torrens Title. BUT trust relationships continue to exist even in Torrens – specifically, resulting trusts here. Therefore, it is quite possible that co-owners can own in the proportions stated on the CT at law (legally), BUT they hold as trustees for themselves in the proportions 43% to 57%.
Court says you can get a claim for improvements, but you need to do equity if you are seeking it – therefore you need to pay occupation rent. Q: How much is the improvements that have to be paid? A: He’s paid off the whole loan, therefore R has to pay him half of it back. But, on the other hand, he got more use out of the property –both before the breakup (because she was only there on the weekend) = 2/7 to 7/7, and also after the breakup, he got full use of it. Market rent: He did better than her by $130,000. Therefore, he has to pay her 43% of $130,000 = the OCCUPATION RENT.
More explanation: What extra use did he get = full time residency as opposed to just weekend which is what she got. And after the breakup he got full residence, and she got nothing. You use market rent. – which in this case the J calculated to be $130,000. But, he only has to pay her 43% of that market rent = 43% is her proportion of it.
PROBLEM QUESTION: 1 co-owner is in occupation, having ousted the other. The total market rent [To work out the occupation rent, you halve it!] for the property would have been $100,000. The co-owner in occupation spends
35 $300,000 to improve the property (thereby increasing its value by $200,000), and the property sells for $1M. How is the $1M divided? (Assuming that everyone wants to maximise their share)?
ANSWER: Before the adjustments: They own it 50/50 and they get a $1M. = Prima facie, they each get $500,000 each! 1 st Calculation: The value of the improvements is $200,000 (IE. b/c you calculate it based on the lesser of 1) the improvements cost and 2) the increase in value. And in this case, the value increase is the lesser of the two). Therefore, the ousted person needs to give the occupier $100,000. (Only needs to pay half the value of the improvements, b/c only needs to pay for their share of the improvements, which is half of the improvements!) Therefore, now that the ousted person had to pay the occupier $100,000, the division of the $1M becomes $600,000 to $400,000. 2 nd Calculation: Occupier has to pay an occupation rent to the other person – which is $50,000 (IE: Half of the market rent). Therefore, now it becomes $550,000 (occupier) to $450,000 (ousted person).
o REMEMBER THAT YOU ONLY NEED TO PAY HALF EACH TIME (be it the occupation rent or the improvements value). o Remember also that occupation rent is only paid in certain cases – including ouster, claiming for improvement, by agreement. (Not just if 1 person decides that they don’t want to reside there.)
IMPORTANT: If there is an ouster, you can get occupation rent no matter what. If there isn’t an ouster (& also no agreement for compensation rent) = you can only get occupation rent in the context for a claim for improvements. NB: => IE: Because someone is claiming costs for improvement from you, they therefore have to pay you occupation rent!!
Re: Mortgage payments: If you claim it as an improvement you have to pay the other person occupation rent. But if you claim it as co-debtors, then you don’t. (Though strange that anyone would then claim it as the first option!)
Accounting for Rents and Profits: The Statute of Anne allowed a co-owner to bring an action of account against the others for receiving more than their share of rents. NSW has repealed the Statute of Anne, BUT despite this –> Ryan v Dries: Court held that Strelly v Winson preserves the equitable rule that allows a co-owner to claim a share of rents collected by another. The non-occupying owner can therefore claim rents & profits despite the repeal of the Statute of Anne.
Squire v Rogers (1979) FCA (P.656) Facts: Occupier spent $100,000 on improvements. BUT the value increase was very small = $15,000, because of Cyclone Tracy in Darwin.
36 The basic rule in Boulter v Boulter still applies, that he can’t claim more than the lessor of his expenditure and the increase in value, which in this case amounts to $15,000 in improvements. But court said that: The co-owner not living on the land cannot claim for the higher rents and profits which were higher before the Cyclone, without also making allowance for the improvements.
Compensation for Repairs & Improvements to Land by 1 Co-Owner: At law: A co-owner who had improved the property w/out the assent of co-owners could not force them to contribute. IN EQUITY: Compensation can only be sought in proceedings seeking adjustment of co-owner’s rights when co-ownership comes to an end (eg. partition or sale): Brickwood v Young. o This is a “defensive” or “passive” equity: Brickwood v Young. When a claim is made, you can recover the lessor value of (1) The amount expended, and (2) Present value of improvements. o Cannot claim for time and effort, or for expenses incurred in relation to loans to finance the improvements: Houghton v Immer. When making the claim for compensation for improvements, the co-owner must do equity and therefore may be liable to have a claim for occupation rent/or account of profits offset against the compensation: Forgeard v Shanahan. If occupation rent/account of profits is greater than the compensation for improvements that is sought, then the net result is ZERO: Brickwood v Young. The compensation for improvements will be assessed by the relevant proportion of co-ownership, of whatever is the lesser out of the value of (1) the amount expended; and (2) the increase in property value: Forgeard v Shanahan. Note that: The defensive equity in relation to compensation for improvements is not enforceable against a bfpvwn. Leigh v Dickeson: Compensation for repairs as well as improvements may be recoverable if the repairs are more than mere maintenance. Ryan v Dries: ANY repairs, including maintenance, which increased the value of the property are compensable.
Liability for Waste: Ferguson v Miller: A co-owner can bring an action against another co-owner for voluntary waste.
Dispositions of Interest by Co-Owners: Frieze v Ungar: o A co-owner may sell/giver his/her interest in land to another person, provided that this does not interfere with the right of the other co-owner: o A co-owner can grant a lease which would bind his/her own undivided share. However, the lease cannot exclude other co-owners from entering into occupation with the lessee. o If JT dies after leasing his/her interest, then the lessee’s rights are not extinguished. Instead, the JT is suspended during the period of the lease and the surviving JTs are entitled to the reversion upon it. o The rent b/w the date of date and the expiry of the lease falls into the estate of the deceased lessor.
37 Hedley v Roberts: A co-owner can encumber his/her interest in the land with an encumbrance (EG. an easement) that compels the other co-owner’s submission -> ONLY IF the encumbrance does NOT interfere with that other co-owner’s rights over the land. o IE: A co-owner can grant an easement that does not interfere with the other’s right of possession.
Fulton v 523 Nominees: A mortgage granted by 1 co-owner, w/out the consent of the other, binds only the undivided share of the mortgagor. o A tenant in common can ONLY mortgage THEIR share. o A joint tenant: Can mortgage but it’s a charge on the whole of the land, but a personal debt (= a personal obligation to pay) only on that one person.
A co-owner may – in some circumstances – unilaterally determine (= terminate) a bare licence granted by another co-owner. A periodic tenancy to multiple tenants can be determined (=terminated) by a notice from any one of them.
Week 5.2 28/08
Recap – What we’ve done on co-ownership so far: JT, TC. Adjustments between co-owners -> Including occupation rent, which is payable when there’s been: o An agreement; o An ouster (which is more than merely saying “go away”); o Where 1 co-owner is seeking equity in a claim for improvement = that co-owner has to do equity in paying occupation rent to the other. Improvements compensation. Mortgage payments – can classify as improvements payments OR make a claim under the doctrine of contribution as a joint debtor.
SEVERANCE OF A JOINT TENANCY:
Severance changes a JT into a tenancy in common. (Whereas termination brings a co-ownership relationship to an end.) With JT, 2 people are holding onto the same ball. Severance makes it turn into a tenancy in common = 2 people holding onto divided shares of a ball. We will consider what acts cause severance? Also, What happens if you have lots of joint tenants (ie. More than 2) and one of them severs (eg. 1 of them transfers their interest to a 3rd party)? = o = If there were 3 JTs = That person takes off their share (their third) as a tenant in common, and the other 2 tenants jointly hold the other 2/3.
38 Ways to Sever: (= Turns a JT into a TC) 1. Unilateral action 2. By agreement 3. Embarking on a course of action that evince an intention to treat a JTenancy as at an end 4. By court order 5. One joint tenant kills the other 6. Bankruptcy.
For all of these there can be severance at law, and severance in equity.
1.) Severance by Unilateral Action: a) By Alienation to a 3rd party: A transfer severs. If you transfer your title to a 3rd party at law = there is severance at LAW, as the legal title actually changes: Wright v Gibbons. Wright v Gibbons: When a JT alienates his/her interest to a 3rd party, the joint tenancy is severed, and the alienee (= the person who has passed her interest onto the 3rd party) becomes a tenant in common as to an undivided share of the land. McNab v Earle: An unregistered memorandum of transfer has no effect either at law or in equity.
Corin v Patton (1990) HCA (P.659) => RE: Severance by Unilateral Act. => Equity will not perfect an imperfect gift. Facts: Mrs P is a JT, she signs a memo of transfer to Mr C, but the CT stays in the bank, and Mrs P does nothing to get the CT from the bank, or help Mr C get it. Is there severance at law? = No because no change in the registration. Is there severance in equity? = No, because equity will not perfect an imperfect gift => IE: It will not complete the gift unless the donor has done everything the donor can do. Here, the donor did not get the CT – which she could have done. Therefore no severance at law or at equity => therefore no severance. Therefore, Mr P got the whole, because it had not been severed.
Imagine that: Mr C had been given the memo of transfer AND the CT. (but hasn’t yet registered) = He would have a legal right to register, nothing in the way of that right, therefore has an equitable interest. Therefore the gift is completed, so equity will allow it, therefore there is a severance in equity.
b) By Alienation to Self: Severance at law: RPA s 97 = Statutory way to sever by a JT registering a transfer to him/herself. (1): A JT can transfer to him/herself, thereby severing the JT. (2): The Registrar General may require the severing JT to provide the RG with (a) the names and addresses of the other JTs; and (b) a statement that the person is not aware of any limitation or restriction oh his capacity, entitlement to sever the JT. S 97(5): The RG must then notify all the other JTs of the lodgement of the transfer.
39 If the above is done, then there is severance at law, -> but no severance in equity (because you can’t declare a trust for yourself in equity – equity doesn’t recognise that!). Why need to fill out a statement that not aware of any limitation or restriction on your capacity to sever? o = B/c there could be an agreement between the joint tenants not to sever. Why does JT need to provide names of other JTs – in order to notify them of the severance? o = B/c the other JTs need to know that survivorship no longer in force, need to put share int heir will.
c) By Declaration of trust = The JT is severed IN EQUITY: If you transfer in equity (eg. by declaration of trust – “I now hold this land no trust for B”) = that act only severs the equitable ownership, therefore severs in EQUITY. S 23C(1)(b) CA: A declaration will be effective if it is made in writing and signed by the person entitled to the property.
Does grant of a mortgage or a lease sever? Mortgage of Torrens land (registered or equitable mortgage) DOES NOT amount to severance of a joint tenancy, as legal title does not change hands: Lyons v Lyons . If a joint tenancy mortgagor dies before the mortgage is discharge, the right of survivorship will take priority over the mortgagee’s right (=> IE: The property will cease to be encumbered by mortgage, and the mortgagee can only sue the deceased mortgagor’s estate). However, if the other JT dies, the mortgagee has the benefit of extending their mortgage to whole of the land. The creation of a lease does not sever JT, but merely suspends it during period of the lease: Frieze v Unger.
2.) Severance by an Agreement: A Joint tenancy will be severed if the co-owners mutually agree to sever: Williams v Hesman. If there is an agreement to sever, the parties probably don’t need to comply with statutory formalities (can even be an oral agreement, as long as it can be proved): Abela v Public Trustee. The parties do not need to have decided what share each co-owner gets – as long as there has been an agreement to sever: Abela . o Note that: Merely applying to Family Law Court to sever isn’t enough: Marriage of Pertsoulis v Goddard. (IE: Application for property division under the Family Law Act does not sever.) o The parties need to AGREE that there is a severance, even if they haven’t worked out the details.
Saleeba v Wilke In that case, there was some talk about severing, with offers and counter offers of the severance terms, nothing decided. Q: Was there severance by agreement? There was no agreement – both parties were favourably disposed towards the notion of severance, but they never both agreed that it would happen. Different to Abela- B/C there they differed on the amounts, but there WAS a clear agreement to sever.
40 3.) Severance by a Course of Dealings = short of an agreement – that evinces an intention that they treated the JT as at an end: Williams v Hensman: A JT can be severed by an act of a JT operating on his/her own share. Severance will only occur when the conduct between the parties indicates that they treated themselves as tenants in common. o EG: Payment of joint money into separate bank accounts/treating the money as separate: Abela v Public Trustee. If an agreement to sever is not concluded – b/c certain preconditions have not been met = it will NOT constitute a sufficient course of dealing to sever: Abela v Public Trustee. Magill v Magill: Negotiations to sever will not be sufficient if there is no consensus about sale (despite reference in solicitors’ letters between them to their respective half shares). Greenfield v Greenfield: Severance of a joint tenancy is NOT effected where each JT occupies a separate floor of a building and pays individually for the maintenance and improvement of the premises s/he occupies, as long as the parties evinced an intention that the right of survivorship would continue. Barton v Morris: The fact that JTs have treated property as part of partnership assets for taxation purposes does not of itself bring about a severance.
Saleeba v Wilke RULE: If a course of dealing is to be relied upon as establishing a consensus, it must be a course of dealing in which all co-owners participated, and the intention to sever must be an intention held in common by all the co-owners. The unilateral acts of one co-owner will not suffice, nor will an intention of that co-owner to bring about the severance, however forcibly expressed to the others. The course of dealing must be mutual and give rise to a common intention. Negotiations, which come to nothing…do not amount to a course of dealing so as to satisfy the third rule.
4.) Severance by Homicide: Killing your JT severs the joint tenancy (turns it into a tenancy in common): Rasminas v Jurewitsch. AT LAW The principle of survivorship will continue to operate, so that the wrongdoer will be entitled to the whole interest. BUT IN EQUITY: A constructive trust will be imposed, under which the legal owner will hold a half interest on trust for the deceased JT. This is the “forfeiture rule”: Rasmanis v Jurewitsch. (Therefore, homicide only results in a severance in equity.) Courts have restricted the operation of the forfeiture rule in cases of reduced moral culpability. o EG: The rule has been held not to apply where JTs have died after a suicide pact: Permanent Trustee v Freedom from Hunger. o The rule does not apply in cases of self-defence or extreme provocation (eg. a wife’s response to domestic violence): Public Trustee v Evans. o The rule does not apply to negligent driving: Gardner v Moore. o The rule still applies where offender is mentally ill, but NOT to the extent that s/he cannot be held guilty of manslaughter: Public Trustee v Fraser .
S 5(2) Forfeiture Act: Confers discretion on a court to vary the forfeiture rule is “it is satisfied that justice requires the effect of the rule to be modified”. o NB: This does NOT apply to murder.
41 5.) Severance by Court Order: A judicial decree or order than 1 JT transfers his/her share to co-tenants operates to sever the joint tenancy: Guthrie v ANZ Banking. Often occurs under the Family Law Act 1975 (Cth) – under which the court has the power to make orders in relation to property – including severance of a joint tenancy. When the order is made, it severs in equity, but only severed at law when the registration on the Torrens land is actually altered.
6.) Severance by Bankruptcy: Order of court declaring a joint tenant bankrupt will sever the joint tenancy. A court order severs the JT in EQUITY. But the severance at law occurs only when the statutory requirements of Bankruptcy Act been met. In other words, the JT’s equitable interest is vested in the Official Trustee in Bankruptcy upon date of declaration of bankruptcy, and legal interest vests after registration: s 58(2) Bankruptcy Act; Re Francis.
The relevance of the difference between severance at law and in equity: If A and B are JTs and there is a severance (they agree to hold on trust for themselves as tenants in common) (though remember that I JT can’t declare a trust for themselves), so that in equity, A and B are tenants in common. But they don’t actually change the title, the register. Therefore, they are JTs at law, but tenants in common in equity. This doesn’t matter until one of them dies. If B does, A is the survivor, therefore A is the sole owner at law. BUT the trust still exists, so A now holds on trust for him/herself 50% and for B’s estate 50%.
TERMINATION OF CO-OWNERSHIP: How do you bring the whole co-ownership relationship to an end? Co-ownership can be terminated in 2 ways: 1. By action of the PARTIES. 2. By an order of sale or partition of the COURT.
1. By Action of the Parties: Where all but 1 of a number of JTs have died, the jus accrescendi (= The right of survivorship) operates, thereby enabling the survivor to become the sole owner of the property. A JT or TC can be determined (=terminated) if 1 co-owner purchases, or otherwise acquires the interest, of all the other co-owners. If all co-owners join in a transfer or assignment of their interests to another person, then that person will acquire the sole ownership of the property. Co-owners may agree amongst themselves to divide the property in accordance w/ their respective shares. o EG: 2 JTs could agree that each one of them will become the sole proprietor of a designated half of the land.
42 2. By an Order of Partition of Sale of the Court: a) Partition – The old way of doing it. In partition, there is a block of land, and the court draws a line down the land – depending on what their respective shares are. If 1 person would be ripped off because of the circs of the land itself (eg. a river running through it; or both people want to keep farming) – you have to pay “equality money” to that person. b) Sale – The default order in NSW. The default order in NSW is sale. = The land is sold and the proceeds are divided between the co-owners, in whatever proportion they own it. Statutory provisions are on WebCT (just look at them). – CA ss Div 6- 66F, G, H, I. S 66F: Defines co-owner as including ownership whether at law or in equity in possession by two or more persons as joint tenants or tenants in common, AND includes an incumbrancer of an interest of joint tenant or tenant in common. The application for such an order must be made by at least one co-owner at date of making the application: Darrington v Caldbeck. An equitable charge is within definition of “incumbrancer”: Cth Bank v MacDonald. A bank which had a mortgage granted jointly by JT did not fall within the s 66F definition and hence was unable to apply for appointment of trustees for sale: ANZ v Scott. o If, however, the mortgage had been granted by only 1 co-owner, the mortgagee (bank) would have been able to apply. There is an onus in favour of sale (rather than partition): Woodson v Woodson. If on application for sale, a co-owner satisfied court that partition would be more beneficial for the co- owner’s interest in the extent upwards of a moiety (half), the court may appoint trustees for partition, instead of trustees for sale: s 66G(4). however court may refuse to appoint grant order for partition if it would involve hardship to minority: Hayward v Skinner. trustees holding property on statutory trust for sale or partition are to consult beneficiaries and give effect to their wishes so far as is practicable: s 66H. Court has discretion to decline an application for appointment, however court cannot refuse a sale on broad grounds of hardship or unfairness: Re McNamara.
THINGS TO KNOW FOR THE MIDSESSION EXAM: Immediate indefeasibility as prevailing principle. o Volunteers can gain indefeasible title. o Umbrella of indefeasibility. Express exceptions: o Fraud and s 42 list. o In personam exception.
43 In personam exception requirements: o Need a known legal or equitable cause of action; o The claim must arise out of same act of either the registered proprietor or a person for whose conduct the registered proprietor is responsible; o The conduct may pre-date or post-date the registration; o The action must be consistent w/ the legislation (including s 43).
Adverse possession and provisions. Compensation provisions. Caveat provisions. Bursill v Burger – RE: what happens if there is an inconsistency within the register => If the registered memorandum differs from the dealing, there may be constructive notice of the contents of dealing. Co-ownership.
Week 6.2:
Mid-Session Exam Feedback:
Q3. Yazgi is the case relevant to this question. Amount of sum lent is not on the registered mortgage itself, it’s on the loan agreement. But the loan agreement is void because it’s forged. No sums were lent to X, because the money was handed to Y. Therefore, the mortgage secures nothing. B interest over X’s land = a charge over X’s land for NOTHING. Therefore, X is entitled to have that charge removed, because it secures nothing.
Q.4. B has no right to go to the assurance fund – because they got nothing in neither Old System OR Torrens. (See Diemasters v Meadowcorp rule – take away the RPA and see if they would still have had a loss.) X can claim under the assurance fund – because would have won under Old System but lost under Torrens.
Q.6. X is registered, therefore 1st in order of priority. Y does nothing to protect interest. Person to Person v Shiraree : In NSW, mortgagees have a general process of caveating to protect. = the usual course of dealing!!!! Therefore, the order is X, Z, Y.
44 Q.10. No ouster. There is a claim for improvements, and therefore they can claim occupation rent. Starts at: $800,000 to $200,000 Improvements = $100,000 Y only owns 20% of the building, therefore only has to pay 20% of the improvements!!! = $20,000. So, now the proportions are $820,000 to $180,000. And X has to pay occupation rent to Y, which is 20% of the market rent of $50,000, which is $10,000. (I got this bit right.) Therefore, end is $810,000 to $190,000.
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