LAWS3112: LAW OF PROPERTY B TORRENS SYSTEM …€¦ · OLD SYSTEM VERSUS TORRENS ... introduced in Queensland under the Real Property Act 1861 (after SA in 1858) and was made compulsory

Doug Johnson Page 1 of 67 Semester 2, 2015

TOPIC 1: TORRENS LAND .......................................... 2

1. INTRODUCTION TO TORRENS .................................. 2 2. FREEHOLD LAND REGISTER .................................... 4

TOPIC 2: INDEFEASIBILITY & EXCEPTIONS ................. 6

1. CONSEQUENCES OF REGISTRATION .......................... 6 2. INDEFEASIBILITY GENERALLY .................................. 6 3. DEFERRED VERSUS IMMEDIATE INDEFEASIBILITY ......... 6 4. EXCEPTIONS TO INDEFEASIBILITY ............................. 8

TOPIC 3: EXCEPTIONS TO INDEFEASIBILITY ............... 9

1. FRAUD ............................................................... 9 2. IN PERSONAM ................................................... 18 3. SHORT LEASES................................................... 22 4. OMITTED OR MISDESCRIBED EASEMENTS ............... 23 5. ADVERSE POSSESSOR.......................................... 24 6. ERRORS ON THE REGISTER ................................... 27 7. REGISTRAR’S POWER TO CORRECT REGISTER ........... 28 8. OVERRIDING STATUTES ....................................... 30 9. REMEDIES FOR EXCEPTIONS TO INDEFEASIBILITY ....... 32

TOPIC 4: PRIORITIES.................................................34

1. LEGAL INTEREST FOLLOWED BY LEGAL INTEREST ...... 34 2. LEGAL INTEREST FOLLOWED BY EQUITABLE INTEREST 34 3. EQUITABLE INTEREST FOLLOWED BY LEGAL INTEREST 34 4. EQUITABLE INTEREST FOLLOWED BY EQUITABLE

INTEREST .................................................................. 34 5. MERE EQUITY FOLLOWED BY EQUITABLE INTEREST... 37

TOPIC 5: CAVEATS & SETTLEMENT NOTICES ............38

1. LODGING A CAVEAT ........................................... 38 2. EFFECT OF LODGED CAVEAT ................................. 38

3. CESSATION OF CAVEAT ........................................ 39 4. COMPENSATION FOR IMPROPER CAVEAT ................ 39 5. SETTLEMENT NOTICES ......................................... 40

TOPIC 6: MORTGAGES .............................................41

1. MORTGAGES GENERALLY..................................... 41 2. OLD SYSTEM MORTGAGES ................................... 41 3. TORRENS MORTGAGES ....................................... 41 4. DUTIES OF MORTGAGOR (LAND BEING MORTGAGED) 42 5. RIGHTS OF THE MORTGAGOR ............................... 43 6. RIGHTS/DUTIES OF THE MORTGAGEE (PROVIDING

SECURITY INTEREST) .................................................... 45

TOPIC 7: EASEMENTS & PROFITS A PRENDRE ..........53

1. EASEMENTS AND PROFITS A PRENDRE .................... 53 2. ELEMENTS OF AN EASEMENT ................................ 53 3. CREATION OF AN EASEMENT ................................ 57 4. INTERPRETING EASEMENTS .................................. 59 5. REMEDIES ......................................................... 60 6. REMOVAL OF AN EASEMENT................................. 60 7. PROFITS A PRENDRE ........................................... 61 8. STATUTORY COVENANTS ..................................... 61

TOPIC 8: REMEDIES ..................................................62

1. SUPREME COURT ORDERS ................................... 62 2. COMPENSATION GENERALLY ................................ 62 3. DEPRIVATION, LOSS OR DAMAGE .......................... 62 4. CAUSATION....................................................... 64 5. EXCLUSIONS ...................................................... 65 6. TIME LIMITATION ............................................... 66 7. MEASURE OF COMPENSATION .............................. 66

LAWS3112: LAW OF PROPERTY B – TORRENS SYSTEM

SEMESTER 2 2015


TOPIC 1: TORRENS LAND 1. INTRODUCTION TO TORRENS

1.1. OLD SYSTEM VERSUS TORRENS

- Old system conveyancing: Under old system conveyancing, deeds were often incomplete, lost or fraudulent and were held privately. Establishing a complete chain of title back to the first Crown grant of land was expensive and required highly skilled lawyers (30 years in Qld PLA s 237(1)). There was no certainty of title.

- Torrens’ vision: Robert Torrens envisioned a new system of registration, the features of which were certainty of title; security of title and reduced conveyancing costs. Thus, Torrens title was introduced in Queensland under the Real Property Act 1861 (after SA in 1858) and was made compulsory under the Property Law Act 1974. There is no longer any old system title in Queensland, though there is in other states, particularly New South Wales. Modern legislation is the Land Title Act 1994 (Qld).

1.2. THREE PRINCIPLES OF TORRENS

1. Mirror Principle: register must accurately reflect all facts material to the owner’s title. 2. Curtain Principle: registered interests give indefeasible title (Fels v Knowles) and there is no reason

for prospective purchases to concern themselvies with interests behind the curtain. 3. Insurance Principle: a person deprived of an interest by Torrens statute gets compensation

1.3. DETAILED HISTORY OF CONVEYANCING

1. Feoffment with livery of seisin

- A “feoffment” was a gift of a freehold interest in land and “livery of sesin” meant the formal delivery of possession of the land. In order to effect a conveyance of a freehold interest in land, the person seised of the interest and the person to whome the interest was to be conveyed were required to attend open and public ceremony in presence of witnesses on land or in sight of land.

- No document required to perfect the feoffment

- After Statute of Uses 1535 passed, it begun the decline in public to private conveyancing

2. Lease and release at common law

- Lease and release provided an avenue to transfer land without a public ceremony in a more convenient secret manner

- Lease was not considered real property and could be granted without public ceremony of feoffment. A subsequent release could then be granted of the lessor’s reversion effected by a “deed of release”.

- Still necessary for lessee (purchaser) to enter onto land Æ not completely secret

- Statute of Uses 1535 removed last hurdle to make a completely private conveyance by structuring transaction that the vendor of the freehold interest became seised of that interest “for the use of” the purchaser, the legal estate would vest in the purchaser by virtue of the statute.


3. Bargain and sale

- Equity regarded the vendor as seised of the legal estate “to the use of” the purchaser with the Statute of Uses 1535 executing this use and, secretly without entry onto the land, vested the legal estate in the cestui que use – the purchaser.

- Benefit was short-lived with Statute of Enrolments 1535 requiring it be made by deed, sealed and “enrolled” in of the Kings Courts of Record.

4. Lease and release under the Statute of Uses 1535

- In early 17th century, complete secrecy was achieved in conveyancing transactions through a combination of lease and release at common law and bargain/sale under the Statute of Uses 1535

- Vendor “bargained and sold” the land to purchaser for a leasehold term. A leasehold was not an estate of “freehold or inheritance”, therefore the bargain and sale did not need to be enrolled pursuant to the Statute of Enrolments 1535. Equity regarded the vendor as seised of the land “to the use of” the purchaser for the leasehold term. No need for actual entry on land. Vendor then completely transaction by “releasing” her or his freehold reversion to purchaser.

5. Old system title

- Old system title involved a statutory system of registration, rather than the uncoordinated efforts of private individuals (the hallmark of private conveyancing)

- Old system title was a statutory system of registration. Although, registration had no effect on validity of instrument but could affect priority between competing interest in land (date of registration beats date of execution)

DEFECTS IN OLD SYSTEM

- Key problem was the validity of title – validity of title was dependent on validity of documents by which ownership of an interest in land is obtained.

- Documents affecting land had to be traced all the way back to the grant from the Crown – feasible in settled country like Australia but not England – rule was no less than 60 year chain; Queensland is 30 years

- Chain of title was only as strong as its weakest link – nemo dat quod non habet (no one can pass a better title than he/she possesses)

- Validity of title was still dependent on the validity of prior documents in the chain – registration had no effect on validity

6. Torrens Solution

- Torrens system of registration of title is a system of registration of land and land title not instrument.

- Indefeasible title shows the names of registered owners of fee simple estate and any other interests registered for that parcel of land

- Legal interest are created and transferred by registration. Equitable interests are not registrable but can be protected by caveat.


Old System Title Torrens Title Legal estate in the land passed on execution and delivery of deed of conveyance, not on registration of deed.

Registered estate in land does not pass until instrument is registered in freehold land register. Registered estate does not pass by act of parties but by act of official who records particulars in the register.

Title to land depended upon deeds themselves, not upon registration.

Registration of a void instrument is, in the absence of fraud on part of registered proprietor, generally effective to vest and divest title, and to protect the registered proprietor against adverse claims.

A mortgage took effect as a conveyance of the land from the mortgagor to the mortgagee.

A mortgage is only a statutory charge on the land. It is effective as security but does not operate as a transfer of the estate or interest charged.

The “title” consisted of all the documents constituting the chain of title.

The title is the current particulars in the freehold land register about the lot. In all cases a certified search will provide evidence of title.

2. FREEHOLD LAND REGISTER

2.1. OBLIGATIONS OF THE REGISTRAR

- The registrar must keep a register of freehold land in the general land registry: ss 8, 27 LTA

- Under s 28(1) LTA, the registrar must keep record of the following particulars:

(a) every lot under the LTA;

(b) every interest registered in the Register;

(c) the name of everyone who hold a registered interest;

(d) the date of birth of every minor who holds a registered interest;

(e) all instruments registered in the register including their lodgement and registration dates.

- Other responsibilities of the Registrar are contained in ss 27-30 LTA

2.2. REGISTRABLE INTERESTS

- An ‘interest’ is recorded on the register through registration of the appropriate ‘instrument’ (E.g. an instrument of transfer, an instrument of mortgage

- fee simple alienated by the State: s 47 LTA - transfer of a lot or interest in a lot: s 60(1) LTA - a lease: s 64 LTA - a mortgage: s 72 LTA - a building management statement: ss 54A-54J LTA - a life interest: s 55 LTA

- an easement: s 82 LTA - title of an adverse possessor: s 99 LTA - a profit a a prendre: s 97E LTA - a trustee’s interest: ss 109 and 110 LTA - a writ of execution: s 116 LTA - a plan of subdivision: s 49A LTA


2.3. NON-REGISTRABLE INTERESTS

- A beneficial interest under a trust: ss 109, 110 LTA

- A remainder interest, whether vested or contingent: ss 55 LTA, 30(2) PLA

- A restrictive covenant that isn’t specifically allowed by s 96A LTA: s 4 PLA

2.4. REGISTERING AN INSTRUMENT

- Registration occurs when the Registrar records in the register the particulars necessary to identify the instrument: ss 173-174 LTA

- This creates an indefeasible title: s 37 LTA

- Instruments affecting a lot must be registered in the order in which they are lodged: s 177 LTA

2.5. CONSEQUENCES OF REGISTRATION

- Registered instrument forms part of the freehold land register: s 31 LTA

- An instrument does not transfer or create in interest in a lot at law until it is registered: s 181 LTA

- On registration of an instrument, the interest is: (a) transferred or created in accordance with the instrument and (b) is registered (c) and vests in the person identified in the instrument as the person entitled to the interest: s 182 LTA

- A person to whom an interest is to be transferred or in whom it has been created has a right to have an instrument registered: s 183 LTA

- The registered instrument operates as a deed: s 176 LTA

Indefeasibility

- Indefeasibility is created on the recording of the particulars of the lot in the freehold land register: s 37 LTA

- The indefeasible title for a lot is defined in s 38 as “the current particulars in the freehold land register about the lot”: s 38 LTA

- Indefeasibility is conferred by circumstances outlined in ss 184 and 185 LTA. I.e. while RP has ‘indefeasible title’ as defined in s 38, he/she only obtains benefit of indefeasibility in circumstances outlined in ss 184 and 184.

Certificate of Title

- A certificate of title is conclusive evidence of indefeasible title for a lot: s 46 LTA

- A certificate of title is no longer automatically issued and must be requested in writing: s 42 LTA

- Mortgagee’s permission is required for a certificate of title to be issued: s 42(2) LTA

- When no certificate is issued, a title search is proof of indefeasible title: ss 35 and 36 LTA


TOPIC 2: INDEFEASIBILITY & EXCEPTIONS 1. CONSEQUENCES OF REGISTRATION

1. Legal title is transferred upon registration and not sooner: ss 181/182 LTA

2. Instruments are accorded priority according to the date of lodgement: s 178 LTA

3. Registered instruments operate as deeds and therefore bind the parties without the need for consideration: s 176 LTA; Cantrick v Thompson

4. Section 179 LTA implies that the particulars of registered instruments are conclusive evidence of:

a. the registration of the instrument; b. when it was lodged and registered; c. the contents of the instrument; d. all terms stated or implied by the LTA

5. Registration confers indefeasible title: ss 184 and 185 LTA; Frazer v Walker

Note:

Registered proprietor of a lot means a person recorded in the freehold land register as a proprietor of a lot: Sch 2 LTA

Proprietor of a lot means a person entitled to an interest in a lot, whether or not the person is in possession: Sch 2 LTA.

2. INDEFEASIBILITY GENERALLY

- Indefeasibility means that the registered proprietor of a lot holds their interest subject only to other registered interest but free from all other interests: s 184(1) LTA

- The registered owner is not affected by actual or constructive notice of an unregistered interest: s 184(2)(a) LTA

- The registered proprietor of a lot is only liable to proceedings brought by a registered proprietor of an interest affect the lot: s 184(2)(b) LTA

- The effect of registering an interest is to extinguish all unregistered estates or interests, which, but for registration, would have conflicted with the proprietor’s estate or interest unless one of the exceptions to indefeasibility applies: Leros Pty Ltd v Terara Pty Ltd

3. DEFERRED VERSUS IMMEDIATE INDEFEASIBILITY

- The determination of when indefeasibility vests in the registrant is fundamental to the concept of indefeasibility

Deferred Indefeasibility – means that, even in the absence of fraud, the title of a registered proprietor who acquired his/her interest by a void or voidable instrument remains open to attack (indefeasibility deferred) until the moment of time when a transfer to another bona fide purchaser for value is registered.

Immediate Indefeasibility – means that, a bona fide registered purchaser for value acquires indefeasible title immediately upon registration even if the instrument under which the registration occurred was void or voidable.


Example above where fraud by Z in transferring A-B:

Deferred Indefeasibility – protection conferred by indefeasibility provisions ‘deferred’ until such time as B, whose estate was acquired by registration of void instrument, transfers the lot to a bona fide third party, C. B will not obtain benefit of indefeasibility because instrument under which B became registered is void. B LOSES OUT.

Immediate Indefeasibility – B (bona fide for value purchaser) immediately acquires an indefeasible title notwithstanding that the instrument under which B became registered is void. C LOSES OUT.

3.1. AUSTRALIAN POSITION

- The High Court initially favoured deferred indefeasibility, with the rationale being that the burden of ascertaining whether a person represents himself to be the RP is really the RP should lie upon the person who dealt with him/her: Clements v Ellis.

- However, the High Court in Breskvar v Wall, favoured immediate indefeasibility unless an exception is present: Breskvar v Wall (affirming the PC decision in Frazer v Walker)

- Subsequent Queensland cases have generally applies immediate indefeasibility: Elroa Nominees v Registrar of Titles.

FICTITIOUS TRANSFEREE EXCEPTION TO IMMEDIATE INDEFEASIBILITY

- Possible exception to applicability of immediate indefeasibility arises in the case of a ‘fictitious transferee’ which is rooted in the PC decision of Gibbs v Messer and was endorsed in subsequent PC decision Frazer v Walker.

- Gibbs v Messer has been heavily criticised though never expressly overruled and arguably does not apply in Queensland: see e.g. Khan ATF Khan Family Trust v Hadid. This is because the decision was based upon the reasoning that indefeasibility arises only where a RP deals with a real RP and there is no statutory provision in the LTA which supports this view. Applying current


authority, if same facts occurred today, McIntyre’s mortgage would be indefeasible by registration.

CASES

Frazer v Walker – Mr and Mrs F were the RPs of farmland in NZ. Mrs F negotiated mortgage with Mr and Mrs R. Mrs F forged Mr F’s signature. No repayments made and Rs exercised power of sale to Mr Walker. Mr Walker became RP of land.

Held (PC Decision): Immediate indefeasibility applies. Per Lord Wilberforce: ‘registration is effective to vest and divest title and to protect RP against adverse claims’ at 584.

Breskvar v Wall – Mr and Mrs B were RPs of property in Acacia Ridge and borrowed money from rogue (Petrie), security involved transfer of land but was void by failing to write the name of the transferee per the Stamp Act 1894 and Petrie put in name of grandson. Wall registered transfer. Petrie sold land to Alban Pty Ltd bona fide for value. Mr and Mrs B lodged caveat before registration of transfer. Held: immediate indefeasibility applies in Australia. Per Barwick CJ at 385-386:

The Torrens system of registered title of which the [Real Property Act] is a form is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor. Consequently, a registration which results from a void instrument is effective according to the terms of the registration. It matters not what the cause or reason for which the instrument is void.

Gibbs v Messer - Mrs M was RP of land in Victoria and her husband had power of attorney. Mr M’s solicitor, Cresswell, forged a transfer by Mr M to a fictitious person, Mr Cameron. Cresswell registered the transfer on behalf of the fictitious Mr C and granted a mortgage to the McIntyres who advanced the mortgage funds to Creswell. The mortgage was registered.

Held (PC decision): Mrs M’s right to have the transfer to the fictitious Mr Cameron was never questioned. Even though the McIntyres were bona fide, their mortgage was a nullity and their title defeasible.

4. EXCEPTIONS TO INDEFEASIBILITY

- Sections 184 and 185 LTA make it clear that the RP holds the interest subject to registered interests affecting the lot: s 184(1), and does not obtain a benefit of s 184 indefeasibility where an exception arises: s 185(1).


TOPIC 3: EXCEPTIONS TO INDEFEASIBILITY - Three categories of exceptions: exceptions expressed in ss 184 & 185 LTA; power given to Registrar

of Titles in the LTA to correct Register in ss 15 & 186 LTA and overriding statutes.

1. FRAUD

- A registered proprietor of an interest of a lot holds the interest subject to registered interests affecting the lot but free from all other interests: s 184(1) LTA.

- Fraud by the registered proprietor will destroy the protection of indefeasibility: s 184(3)(b) LTA.

1.1. PARTIES TO FRAUD CASE

Plaintiff

- Previous registered proprietor;

- Registrar of Titles (see e.g. AGC v De Jager);

- Holder of an unregistered interest.

Defendant

- Fraud must be committed by the registered proprietor or their agent: s 184(3)(b) LTA; Assets Co v Mere Roihi

- Fraud on the part of a predecessor in title will not defeat current registered proprietor’s title: Bank of SA v Ferguson

1.2. WHAT CONSTITUTES FRAUD

- Fraud is not defined in legislation but needs to be more than a mere notice of an interest: s 184(2)(a) LTA

- Fraud means actual fraud, personal dishonesty or moral turpitude: Assets Co v Mere Roihi

- Dishonesty is an essential part of fraud: Bahr v Nicolay (No 2)

- ‘Designed cheating’ will suffice: Latec Investments v Hotel Terrigal

- There must be a causal link between the fraudulent act and the obtaining of the registered interest which has resulted in the loss or deprivation to the claimant: Bank of SA v Ferguson

Fraudulent act must be: Davis v Williams; Russo v Bendigo Bank

- Intended to disadvantage a person who is deprived of their interest; or

- A misrepresentation to the registrar in a material respect with the intent that the registrar would act in a different way to what they would have if the fraud had not been committed.

CASES

Davis v Williams – registration clerk was given two instruments to register: transfer to Mr and Mrs W as JT and subsequent transfer from Mr W to himself thus severing JT. Rather than lodge both, clerk replaced the word ‘JT’ with ‘TIC’ on first transfer.


Held: No fraud because clerk did not intend to mislead the registrar and did not intend to deprive anyone of their interest.

Russo v Bendigo Bank – young law clerk in early 20s with little conveyancing experience falsely witnessed a signature forged by Mrs Russo’s son in law. There was no evidence to suggest she knew of the fraud or she was a party to the statement on the mortgage instrument or of putting a false instrument on path to registration.

Held: Clerk was not guilty of fraud because even though she knew that she said was false, she had not been shown to be dishonest and claimant had not established the requisite conscious dishonesty or moral turpitude required to establish fraud under Torrens.

FOUR CATEGORIES OF FRAUD

- Four categories of fraud:

1) *Fraud against a previous registered proprietor (‘forged instrument’ cases)

2) Fraud against the registrar (‘false attestation’ cases) Æ overlap with first category Æ where document is not properly executed/false in some material respect

3) Fraud against a prior unregistered interest holder

4) Fraud supervening after registration

1.3. FRAUD AGAINST A PREVIOUS REGISTERED PROPRIETOR – FORGERY

CATEGORY 1: ACTUAL KNOWLEDGE IS FRAUD

- Lodging an instrument with actual knowledge it is a forgery constitutes fraud: Young v Hoger

- Lodging an instrument with actual knowledge it has not been properly executed in compliance with statutory formalities is fraud: AGC v De Jager

o In De Jager, the mortgagee was fraudulent even though it did not know the wife’s signature was a forgery because it did know it had not been duly attested.

AGC v De Jager [1984] – mortgage over home in favour of AGC. Mrs De Jager’s signature had been forged but not sure by whom. AGC did not know of forgery but did know it was not properly witnessed.

Held: Court held that the actions of the employees of the mortgagee constituted fraud within the meaning of the Torrens statute.

‘To lodge an instrument for registration in the knowledge that the attesting witness had not been present at execution must deprive the lodging party of an honest belief that it is a genuine document on which the Registrar can properly act’: p 498 per Tadgell J

CATEGORY 2: WILFUL BLINDNESS/RECKLESS DISREGARD IS FRAUD

- There is a very fine line between carelessness and incompetence on the one hand and wilful blindness on the other.

o However, the application of s 185(1A) careless mortgagee provisions would require many of these cases below to be decided differently today.


- Mere failure to make enquiries will not suffice to establish fraud, but wilful blindness for fear of learning the truth will amount to fraud: Pyramid Building Society v Scorpion Hotel

- Must establish actual dishonesty: Young v Hoger

Pyramid Building Society v Scorpion Hotel [1998] – Scorpion had mortgage over land with Pyramid. Scorpion defaulted. Mortgage had not been properly executed. A number of other actions to both a Scorpion director and Pyramid or its solicitors amounted to fraud on the part of Pyramid.

Held: The evidence established that if mortgagee had made inquiries it would have discovered that the mortgage was not properly executed. The claimant had failed to prove necessary element that the mortgagee had failed to inquire for fear of learning the truth or that there was some other conduct establishing dishonesty or moral turpitude.

“The expressions ‘reckless indifference’ and ‘wilful blindness’ are useful shorthand expressions to describe some kinds of cases of fraud. As the classical exposition by Lord Herschell in Derry v Peek (1889) 14 App Cas 337, 374, shows, fraud can be proved by showing that a false statement has been made without belief in its truth or, ‘recklessly careless whether it be true or false’. But as was said in the Assets Co Ltd case, the emre fact that a person might have found out fraud if further enquiries had been made does not of itself prove fraud. The enquiry is an enquiry for actual dishonesty not for want of due care” – per Hayne JA at 196.

Young v Hoger [2001] – Mr H was registered owner of a property. Without his knowledge, Mrs H and daughter forged Mr H’s signature on mortgage document to obtain mortgage and later to refinance loan. When Mrs H and daughter defaulted, the mortgagee sought possessed. Mr H argued the mortgagee was fraudulent due to actions of solicitor who acted for mortgagee in transaction.

Held: Solicitor was mortgagee’s agent and he acted within scope of authority thus actions could be imputed to mortgagee. Although the solicitor was the mortgagee’s agent, the acts/omissions incidated an honest, if careless, belief that the document was executed by Mr H but did not amount to a wilful abstention of inquiry for following reasons:

x The transaction was substantially a refinancing, not a new mortgage; x All mortgagor’s were family members; x The deed of loan and mortgage documents appeared to have been executed in the presence of

a Justice of the Peace; and x The solicitor received a photocopy of Mr Hoger’s passport, visa card, Medicare card and

electricity account (although he didn’t request certified

Hilton v Gray – High interest, short-term loan was fraudulently obtained by Mr G’s step-daughter who forged his signature. Following factors relevant:

x solicitor's certificate provided with the signed mortgage documents was unsigned; x a signed certificate was later provided, but it wasn’t signed by an admitted solicitor; x irregularities in the certificate provided were not queried or otherwise followed up; x the lender's lawyers had no direct contact with the borrower (only his step-daughter who was

purporting to act on his behalf); and x neither the lender nor their advisers asked the borrower for photo identification.

Despite above circumstances, no fraud because there was no actual dishonesty and no wilful blindness on bank’s part – just carelessness.


CATEGORY 3: MERE CARELESSNESS IS NOT FRAUD

- Grgic v ANZ – Mr Francesco impersonated Mr Grgic and forged Mr Grgic’s signature on a third party mortgage in order to help Mr Grgic’s son obtain a loan. The assistant manager of ANZ witnessed the signature and the branch manager signed the mortgage.

- Held: The bank’s mortgage was indefeasible. To constitute fraud, the dishonest conduct must be brought home to the registered owner or proprietor. However, ‘A less than meticulous practice as to the identification of persons purporting to deal with land registered under the provisions of the Act does not constitute a course of conduct so reckless as to be tantamount to fraud’ (p 222). Careless or unwitting participation does not constitute fraud.

1.4. FRAUD AGAINST THE REGISTRAR – FALSE ATTESTATION

- There has been some criticism of this third category and arguments that it be reconceptualised as another form of the first category of cases (fraud against previous registered proprietor): see Skead and Carruthers 2014; Munro (1924) per Harvey J endorsed by the High Court in Ferguson in 1998.

- These cases are where the registered proprietor has falsely attested to the document being correct/properly executed.

FALSE ATTESTATION OF FORGED SIGNATURE

- Fraud may be established against the RP if the RP at the time of lodging the instrument for registration knows that the instrument has not been properly executed in accordance with statutory formalities or knows that the instrument, in some other material respect, is a false document.

- AGC v De Jager [1984] – Mrs De Jager’s signature to a mortgage over her home in favour of AGC was forged. Mr and Mrs DJ were RP of the property. Court made no finding as to who committed the forgery but did find that AGC were not aware of the forgery but an employee of AGC was aware it had not been attested. With this knowledge, AGC’s employee lodged the mortgage for registration and it was registered.

- Held: Fraudulent conduct and AGC could not claim possession of De Jager’s property. Signing an attestation clause in a mortgage without having witnessed the mortgagor executing the mortgage is an inherently dishonest act.

- ‘To lodge an instrument for registration in the knowledge that the attesting witness had not been present at execution must deprive the lodging party of an honest belief that it is a genuine document on which the Registrar can properly act’: p. 498 per Tadgell J.

- Beatty – See detailed facts below. Officer of ANZ knowing ‘that the subject mortgage was not executed in her presence by the…[mortgagor]’ put the subject mortgage on the path to registration.

- Held: The false representation in this case, as in De Jager, was held to have been made ‘to the Registrar of Titles’. Mandie J found fraud on the part of ANZ bank.

- Russo v Bendigo Bank – A law clerk in her early 20s who worked for Bendigo Bank’s solicitor falsely attested Russo’s signature. Russo was not aware of, and did not consent to, the mortgage over her home which was security for a loan to her daughter and son-in-law’s company.

- Held: The court accepted that neither Gerada nor the solicitor knew the mortgage was forged and the solicitor was not aware of Gerada’s false attestation. The Court found that being only 19 or 20


years old with three years’ experience as a law clerk, there was no evidence that she understood the conveyancing process or that the mortgage was to be lodged for registration, or that an attestation clause constituted a representation to the Registrar that the mortgage had been properly executed by Russo in Gerada’s presence. Accordingly, Gerada cannot be said to have ‘wilfully or consciously disregarded’ the Registrar’s right to rely. ‘False’ but not shown to be ‘dishonest’.

- CRITIQUE: If Russo is correct, whether a forged mortgage is enforceable against a defrauded registered proprietor would seemingly depend on an assessment of the age, experience and level of understanding of the person attesting the mortgage on behalf of the registered mortgagee.

ALTERATION AFTER EXECUTION

- If the conduct did more than give effect to the parties’ shared intention, and the rights of the person asserting fraud were not disregarded, or affected in a way that he/she did not intend, fraud will not be established: J Wright Enterprises [2010]; Davis v Williams (2003).

- Beatty [1995] – Ms Beatty and Mr Hennessy were the registered JT of property. They subsequently married and Mr Hennessy sought finance from ANZ Bank for a business venture. Ms Beatty did not consent to the mortgage and expressly refused to put property up as security for loan. Mr H agreed to terms of loan offered by ANZ. Attestation of Ms B’s signature by bank officer was false.

- Held: Mandie J found that as against Ms B and the mortgage was defeasible on grounds of fraud perpetrated by ANZ: ‘The bank (whilst having no knowledge of the forgery itself) had falsely represented to the Registrar of Titles an honest belief that the plaintiff had executed the instrument in the presence of Mrs Mills…whereas the bank by its employees knew that this was not the case (or had no honest belief that this was the case)’: p. 315.

- NAB v Maher [1995] – Registration of bank’s mortgage procured through fraud where bank’s employee had included in the mortgage instrument particulars of additional land after the instrument had been executed by the mortgagor and then put the false instrument on the path to registration.

- J Wright Enterprises [2010] – an alteration to a mortgage adding the words ‘By Trevor O’Rourke – Director its duly constituted Attorney under Power of Attorney No…’ below his properly attested signature, effected after execution, did not amount to fraud.

- Held: ‘By adding the words that he did, he conveyed a false impression to the Registrar of Titles but by the time he added those words of capacity he had seen the original power of attorney and did not act in violation of any other person’s rights…the authorities do not support such exacting standards upon agents of mortgagees with respect to registration and it must be emphasises, there were no other rights, for example, of priority which were disregarded.’

- Davis v Williams (2003) – registration clerk was given two instruments to register: transfer to Mr and Mrs W as JT and subsequent transfer from Mr W to himself thus severing JT. Rather than lodge both, clerk replaced the word ‘JT’ with ‘TIC’ on first transfer.

- Held: No fraud because clerk did not intend to mislead the registrar and did not intend to deprive anyone of their interest.


FALSE ATTESTATION OF OTHERWISE VALID INSTRUMENT

- Hickey (1998) – Hickey signed two duplicate originals of a mortgage over her home in favour of Powershift Tractors. Although Birrell witnessed Hickey signing the mortgages, he did not sign as witness. As he was a director of Powershift, Birrell thought he was not a competent witness. Birrell handed the signed but unwitnessed documents to an accountant whom he asked to witness the documents. Hickey then sought to avoid the mortgage on the grounds that PT was involved in fraud by knowingly permitting a document to go forward for registration which it was aware had not been witnessed in accordance with a provision of the Real Property Act.

- Held: Bryson J found that PT was not entitled to enforce the mortgage as a registered and, therefore, indefeasible interest in Hickey’s property. However, also that there would be no justice if Hickey were permitted to take advantage of this irregularity and disavow the effect of the mortgage which she had in fact consented to and signed. Therefore, vitiating effect of fraud extended only to registration and not underlying mortgage agreement – therefore enforceable against Hickey in equity as an unregistered mortgage.

1.5. FRAUD SUPERVENING (OCCURRING) AFTER REGISTRATION

- In Bahr v Nicolay (No 2), High Court was divided equally as to whether fraud must occur before registration. Wilson and Toohey JJ said fraud must occur prior to registration, but Mason CJ and Dawson J said it can occur after.

- The reasoning of Mason CJ and Dawson J has been applied in Queensland (see Slorach v Mountain View Farm) indicating fraud supervening after registration is an exception to indefeasibility. However, other authors like Wallace et al. 2015 believe the better view is Wilson & Toohey JJ as it is logical to focus on intent prior to or at the time of registration, rather than on a change of intent subsequent to registration.

- It has been suggested academically that the court’s focus is on the intent in relation to unregistered interests, not knowledge of unregistered interests (See Wallace et al. 2015 p. 341). Since reneging on an agreement after registration will give rise to an in personam exception (as in Bahr v Nicolay (No 2)), the fraud exception need not be extended to encompass this type of conduct.

Bahr v Nicolay (No 2) –Mr and Mrs Bahr sold commercial premises to Nicolay, who leased it back to them for three years. The sale contract provided that after three years, the Bahrs would enter into a contract to repurchase the land. Nicolay subsequently sold the land to the Thompson’s and insisted they acknowledge the agreement with the Bahrs. The Thompsons relied on their indefeasible title and refused to convey the property.

Held: All five judges found that the in personam exception applied

Mason CJ and Dawson J held that fraudulent conduct could not be imputed to the Thompsons at the time of securing registration but fraud is not confined to “fraud in the obtaining of a transfer or in securing registration”

Wilson and Toohey JJ held that the Thompson’s conduct did not constitute fraud and argued that fraud must occur prior to registration.

Brennan J: Found in personam but did not comment on fraud.


1.6. FRAUD AGAINST THE HOLDER OF AN UNREGISTERED INTEREST

- The registered proprietor “is not affected by actual or constructive notice of an unregistered interest affecting the lot:” s 184(2)(a) LTA

- Knowledge of an unregistered interest, coupled with the knowledge that registration of an adverse interest will defeat that interest, is not fraud within the meaning of s 184 LTA: Bahr v Nicolay (No 2)

Friedman v Barrett – Barrett entered a lease for a term of three years with three options to renew. The lease was unregistered. Friedman purchased the land with knowledge of the lease. Barrett notified Friedman that he was exercising the first option and for a year, Friedman accepted rent. One year later, Friedman served a notice to quit on Barrett.

Held: Although Friedman had actual notice of Barrett’s unregistered lease, he was not fraudulent for the purposes of s 184 and took free of the lease and the options to renew therein. As such, Barrett was a tenant holding over after the expiration of a fixed term and could be served a notice to quit at any time. Barrett could have protected his interests by lodging a caveat.

Loke Yew v Port Swettenham Rubber – Eusope was the registered proprietor for Torrens land in Malaysia. Eusope sub-infeudated 58 acres of his holding for an annual rent to Loke Yew without registration. Eusope agreed to sell all his land to Port Swettenham Rubber with the exception of Loke Yew’s land. PSR agreed to this but later commenced an action for possession against Loke Yew.

Held: Port Swettenham’s actions went beyond mere notice of Loke Yew’s unregistered interest and the fact that would be defeated by registration of an adverse interest. The company’s actions constituted “deliberate fraud” within the meaning of the Torrens statute for three reasons:

- the written assurance given by the company’s agent, Glass, to Eusope was “false and fraudulently made” for the purpose of inducing Eusope to sell;

- the fraudulent statement did induce Eusope to execute the conveyance; and

- the value of Loke Yew’s land was not included in the purchase price.

1.7. AGENCY RELATIONSHIP – BROUGHT HOME TO PRINCIPAL?

In Schultz v Corwill Properties, Street J identified two situations where the actions of an agent are attributable to the principal:

(1) Fraudulent conduct by the agent

Where the registered proprietor is registered through fraudulent conduct by their agent, the principal’s title will be defeasible if the fraud is ‘within the scope of the agent’s actual or apparent authority’: Schultz v Corwill Properties. In Dollars & Sense Finance Ltd v Nathan [2008], the NZSC Court took a broader approach with Blanchard J holding that the question was broader than what the agent was asked to perform but whether it fell within the scope of the task they were asked to perform.

Where the agent is an employee, the employer will be bound if the act was actually authorised or the fraud was so closely related to the employee’s duties that it can be seen within the scope of their employment: Davis v Williams

Whether conduct is for the principal’s benefit is relevant but not conclusive: Schultz v Corwill Properties

Schultz v Corwill Properties – Corwill was the registered owner and Galea, a solicitor acting for both Corwill and Mrs Schultz, forged and registered a mortgage for Mrs Schultz over Corwill’s property. Later, Galea fraudulently obtained a release of the mortgage.


Corwill claimed he had indefeasible title free of the mortgage. Mrs Schultz claimed she had indefeasible title as the mortgage was registered and the release should be set aside on the basis of fraud.

Held: It was not within Galea’s actual or apparent authority to forge the execution of the mortgage and Mrs Schultz’ title was indefeasible. However, it was not within Galea’s authority to approach Mrs Schultz for a release of the mortgage and as Corwill had no knowledge of this, he took free of the mortgage.

ACG v De Jager – Mortgagee was held responsible for its employee attempting to register an instrument of mortgage with the knowledge that the mortgagors had not executed the mortgage in the presence of a witness as required by the relevant statute.

National Bank v Maher – Mortgagee bank was responsible for its employee fraudulently including additional land in the mortgage for without the mortgagor’s knowledge or consent (although for its benefit).

(2) Agent has knowledge of fraudulent conduct An agent’s knowledge of fraud will only affect the registered proprietor’s indefeasible title if that knowledge can be imputed to the registered proprietor: Schultz v Corwill

The agent must have actual, not constructive knowledge of the fraud: Schultz v Corwill

The agent is presumed to impart all knowledge to the principal unless the agent is a party to the fraud: Schultz v Corwill

The registered proprietor must give evidence that he had no knowledge of the fraud: Schultz

If the principal received a benefit from the agent’s fraud, the principal cannot deny the agency and the statutory fraud exception to indefeasibility will apply: Mair v Rio Grande Rubber

1.8. CARELESS MORTGAGEE EXCEPTION

- Under s 185(1A) a registered mortgagee will not obtain the benefit of indefeasibility conferred by s 184 if he/she fails to take adequate steps to identify the mortgagor as required by ss 11A and 11B of the LTA and the instrument of mortgage or instrument of amendment of mortgage has been executed by someone other than the RP of the mortgaged lot.

- Section 185(1A) applies to mortgages executed or transferred after 6 February 2006.

SECTIONS 11A(2) AND 11B(2) LTA

- Sections 11A(2) and 11B(2) LTA require that the mortgagee or transferee take reasonable steps to ensure the person who executed the instrument as mortgagor is the same person who is or is about to become the registered proprietor of the lot.

- The onus of proof is on the mortgagee: s 185(5) LTA

- The obligation to take reasonable steps will be discharged if the mortgagee complies with the practices in the Land Title Practice Manual for verification of identification of mortgagors: ss 11A(3) and 11B(3) LTA

LAND TITLE PRACTICE MANUAL [2-2005]

100 point check

Generally, a mortgagee takes “reasonable steps” if they acquire 100 points of identification with one document preferably including both a signature and photograph.


Situations where further checks are required

For example, if the person who executes the mortgage has or appears to have a different name, gender, or age than the current registered owner (as indicated by information reasonably available to the mortgagee), further identification checks would be required.

Existing customer taking out a new mortgage or varying an existing mortgage

It is not necessary for a mortgagee to conduct another 100 point check on an existing customer, but the mortgagee must ensure the person taking out the mortgage is the same person as the existing customer the mortgagee previously dealt with, for example, by verification of the signature and contact details of the mortgagor or confirmation of income statements.

DUTY TO KEEP RECORDS

- The mortgagee has a duty to keep a written record of the steps taken under ss 11A(2) or 11B(2) and copies of documents provided by the original mortgagee: ss 11A(4) and 11B(4)

- Failure to keep records carries a maximum penalty of 20 penalty units: ss 11A(5) and 11B(4)

- The registrar may inspect the records or the documents mentioned in ss 11A(4) and 11B(4): ss 11A(5) and 11B(5)

- Failure to comply with a request for records carries a maximum penalty of 20 penalty units: ss 11A(6) and 11B(6)

EFFECT OF NON-COMPLIANCE

- The mortgagee has no claim against the land of the innocent mortgagor and the mortgagee will be left to pursue action against the fraudulent party who is likely to have absconded.

- The registered owner may request the Court to cancel the mortgage: s 187 LTA

- Commonwealth Bank of Australia v Perrin (2011) – Mr Perrin forged wife’s signature on a guarantee and two mortgages registered over the family home which was solely owned by Mrs Perrin used to secure a loan for more than $10M. The bank conceded that it had not taken reasonable steps to ensure that Mrs Perrin signed the mortgages and therefore had not complied with s 11A(2) but argued that s 185(1A) did not apply to deprive the mortgagee of indefeasibility because if the mortgages were not actually signed by Mrs Perrin, they had been signed by Mr Perrin with Mrs Perrin’s actual/implied authority or she became bound by ratification.

- Held: McMurdo J rejected these arguments holding that s 185(1A) applied to render the mortgages defeasible and under s 187 were ordered to be removed from the register.

1.9. REMEDIES

Defeasible Mortgage

- If the mortgage is defeasible under s 184(3) or s 185(1A), the X can make an application under s 187 to have it removed. The Court can ‘make the order it considers just’ including:

(2)(a) To cancel or correct the indefeasible title or other particulars in the freehold land register; or

(b) to cancel, correct, execute or register an instrument; or


(c) to create a new indefeasible title; or

(d) to issue a new instrument; or

(e) to do anything else.

Indefeasible Mortgage

- If the mortgage is indefeasible, X can apply for compensation under s 188B, which is payable pursuant to ss 188 or 188A.

2. IN PERSONAM

- Even though Torrens provides certainty of title, it will not interfere with other doctrines of law – to do so would be to cut across a lot of other well-established doctrines of law. As the Privy Council emphasised in Frazer v Walker, ‘ indefeasibility 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’: [1967] 1 AC 569, 585

- Fraud and in personam exceptions are often pled together, see e.g. Bahr v Nicolay (No 2).

- Registered proprietors do not obtain the benefit of indefeasibility “as against an equity arising from the act of the registered proprietor”: s 185(1)(a) LTA.

2.1. SCOPE OF THE IN PERSONAM EXCEPTION

Act of the Registered Proprietor?

- The conduct complained of must be the act of the RP or their agent and such conduct may occur before or after registration: Conroy v Knox; Re Davies; Friedman v Barrett.

‘Equity’

- The LTA does not define the word ‘equity’ as used in s 185(1)(a) but as it is intended to reflect the current law, the case law sheds light on the scope of the exception.

- ‘Equity’ and ‘equitable interest’ refer ‘simply to the fact that the person involved may invoke the assistance of the equity court or equity principles to achieve the relevant relief’: Mercantile Mutual Life Insurance v Gosper. Therefore, the conduct complained of must give rise to a recognised cause of action, either legal/equitable (dealt with below in 2.2).

2.2. A. RECOGNISED LEGAL/EQUITABLE CAUSE OF ACTION

- To fall within the scope of the exception, the conduct complained of must give rise to a ‘recognised cause of action, either legal or equitable’: Grgic v ANZ Bank.

- Mere notice of an interest will not suffice to establish the in personam exception: s 184(2)(a) LTA; Loke Yew.

UNDERTAKING TO BE BOUND

- The in personam exception will arise where the registered proprietor gives an undertaking to be bound by the interest of the claimant: Bahr v Nicolay (No 2).

Bahr v Nicolay (No 2) – Mr and Mrs B sold to Nicolay, who leased back premises for 3 years. Sale contract provided that after three years, the Bahrs would enter into a contract to repurchase.


Nicolay subsequently sold the land to the Thompsons and insisted they acknowledge the agreement with the Bahrs. The Thompsons relied on their indefeasible title, and refused to convey the property.

Held: Unanimous decision that in personam exception applied.

Mason CJ and Dawson J: The clause acknowledging the prior agreement was ‘more than a mere acknowledgement, and amounted to an undertaking to be bound by the rights of the Bahrs’.

Brennan J: The clause was “a contractual stipulations by the Thompsons that they would hold the property subject to the Bahrs’ interests.”

Wilson & Toohey JJ: Thompsons were subject to a constructive trust in the Bahr’s favour

Valbirn v Powprop [1991] – Unregistered lease of restaurant premises for 3 years with option to renew for further 3 years. The sale was conditional upon the purchaser accepting terms of lease which purchaser agreed.

Held: Notwithstanding registration, it was bound by the terms of Powprop’s unregistered lease.

per de Jersey J citing with approval the Brennan J in Bahr v Nicolay: ‘[T]he 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.’

**Completely different decision if Valbirn had not entered into the contractual undertaking to be bound by the lease terms.

Bourseguin v Stannard Bros Holdings [1994] – Stannard Bros granted an unregistered lease to Bourseguin before contracting to sell to NBC. NBC then contracted to sell to Tawilla. Both sales were settled simultaneously and a clause in the contract stated that the sale was subject to B’s lease. Tawilla were aware of the lease but attempted to register the sale without registering B’s lease. Mrs B lodged a caveat after transfer registered but prior to the transfer to Tawilla. Therefore needed to look at behaviour of NBC as registered proprietor.

Held: Quinn (for Tawilla) acted fraudulently but NBC were current RP so needed to establish personal equity against them. They were not dishonest and not undertaken to be bound by Bourseguin’s interest. But, held land on trust for Tawilla, who were subject to the Bourseguin’s interest. NBC has contractual obligation to transfer to Tanwilla, so held on trust to Tanwilla who are in turn owing personal equity (exception).

CONTRACT

- The exception commonly arises where a contract exists between the parties: Valbirn v Powprop (see facts above) Æ Valbirn could not deny Powprop’s unregistered interest because it had contractually undertaken to be bound by lease terms.

MORTGAGES – FRAUD/DURESS/UNCONSCIONABLE CONDUCT

- In some instances, cases falling short of fraud may still fall within the in personam exception where they can establish a cause of action in duress, undue influence or other conduct which gives the claimant a right against the mortgagee to set aside the mortgage: Parker v Mortgage Advance Securities.


- The mere fact a mortgage has been forged or the mortgagee was negligent or careless will not give rise to the in personam exception: Pyramid Building Society v Scorpion Hotels

- The mere fact that a mortgage has been obtained by duress, undue influence or unconscionable conduct will not give rise to the in personam exception: Parker v Mortgage Advance Securities.

- Must establish that the mortgagee (or its agent) was guilty of duress, undue influence or unconscionable conduct: Parker v Mortgage Advance Securities

Grgic v ANZ – Bank were a bit less than meticulous but not enough to constitute fraud. Grgic tried to argue in the alternative that it could be set aside under the in personam exception.

Held: In personam did not apply. The claim to set aside the mortgage under s 52 TPA failed because on the facts there was no misleading or deceptive conduct by the mortgagee. Although ANZ Bank owed a duty to take reasonable care in establishing that the apparent mortgagor was in fact RP, it did not breach this duty.

Mercantile Mutual Insurance Co v Gosper – Mr G forged wife’s signature of her mortgage which significantly increased the amount owing under it. This would not have been possible had the bank not produced the certificate of title to register the variation without Mrs G’s consent.

Held: Mrs G had a personal equity against the mortgagee entitling her to compel the mortgagee to discharge the mortgage on payment of the amount secured under the mortgage before the variation. The mortgagee was held to have used the certificate of title in breach of the obligations that it owed to Mrs G and use was a necessary step in securing registration.

TRUST PROPERTY

- To successfully assert an in personam claim against an indefeasible title, the cause of action relied upon must not be inconsistent with the provisions and policy of the LTA, particularly the direction under s 184(2)(a) that an RP is not affected by notice of an unregistered interest

Two limbs to third party liability (Barnes v Addy):

1. Knowing receipt of trust property.

- Before, Farah Constructions v Say-Dee, it was unclear whether ‘knowing receipt’ of trust property under the first limb of Barnes v Addy could fall within the in personam exception as being a recognised cause of action. In Macquarie Bank v Sixty-Fourth Throne [1998] the VCA held that it could not while in Tara Shire Council v Garner [2002] the QCA held that it could be established. The High Court in Farah clarified the position by endorsing Macquarie Bank and holding that the ‘knowing receipt’ of trust property under the first limb of Barnes v Addy cannot be set up as a recognised cause of action: Farah Constructions v Say-Dee Pty Ltd. Normally, this cause of action will result in equity imposing a constructive trust and requiring the third party to hold the property on trust for the beneficiaries.

2. Knowing assistance

- Accessory liability will give rise to a claim in personam as ‘knowledge of a dishonest and fraudulent conduct’ is an essential element: Bli Bli #1 v Kimlin Investments

- To establish the second limb, the give categories of knowledge in Baden v Societe Generale are relevant:


1) Actual knowledge;

2) Wilfully shutting one’s eyes to the obvious;

3) Wilfully and recklessly failing to make sure inquiries as an honest and reasonable person would make;

4) Knowledge of circumstances which would indicate the facts to an honest and reasonable person;

5) Knowledge of circumstances which would put an honest and reasonable person on inquiry.

- Categories 1-5 may be relied upon to establish requisite knowledge (Category 5 may not): Farah Constructions v Say-Dee.

Remedy

- If successful, the title of the RP will be defeasible under either fraud exception to indefeasibility or the in personam exception s 185(1)(a).

Tara Shire Council v Garner [2003] – Garner sold small parcel of land to TSC but needed subdivision could be registered Æ never registered. Garner held on trust for Council. Garner then sold whole parcel to Arcape and Garner told Arcape about Council’s interest. Arcape became RP.

Held: Majority held that if facts alleged cold be proven valid action may be established despite no dishonesty being pleaded. Arcape’s title was defeasible on basis that they knowingly received trust property.

Davies JA (dissent): in absence of dishonesty, knowing receipt of trust property with notice that there is an unregistered interest, will not give rise to the in personam exception.

Macquarie Bank v Sixty-Fourth Throne [1998] – Macquarie lent money to Mr Kandy and he provided a number of securities over properties. Mortgage provided by Sixty-Fourth Throne over a property it owned. Mr Kandy gorged mortgage documents. Property was a trust property which bank had no knowledge of.

Held: No exception applied.

Tadgell JA: Introducing doctrine of constructive notice would be at odds with Torrens system. If registration is achieved dishonestly fraud is relevant exception.

Farah Constructions v Say-Dee (2007) – P entered into an agreement with D to develop property. Initial application refused based on the land being too small. Subsequently, Farah Elias (in personal capacity) purchased blocks of land adjacent ot the property to build the apartments and did not notify D about their availability for purchase. P commenced proceedings seeking trustees to sell D’s property. D cross-claimed for the interests in the properties bought to be on constructive trust for partnership between P and D.

Held: Farah had duty to disclose information about Council’s requirement of amalgamation to D and that information that adjacent properties were available for purchase.

Receiving trust property knowing it is trust property will not enliven the doctrine – need something more (undertaking to be bound – in personam; dishonesty – fraud).


2.3. B. UNCONSCIONABILITY

- Some judges have indicated that unconscionability on the part of the RP is required to establish an in personam claim: White v Tomasel (per Davies J)

- The better view seems to be that there is no ‘superadded’ requirement to establish unconscionability: White v Tomasel (per Williams JA & McMurdo J); Ardrey v Bartlett.

White v Tomasel [2004] – White was previous RP wanted to sell at auction and once it got over $190K property would sell. Property got over $180K. Auctioneer believed Mr White said it was ‘on the market’ but Mr White said he had not given authority. Mr White left property believing it had not been sold. Auctioneer agreed to sell to Tomasels for $182K. White found out property had been contracted to sell and refused – argued no valid contract as no authority to sell. Question at QCA was whether Tomasel was subject to a personal equity and whether unconscionability was necessary to enliven the exception?

Held: in personam exception applied.

Williams JA: Unconscionability is not a necessary element and was not present here.

McMurdo P: Unconscionability is not necessary, even though most cases have involved unconscionability – it’s not a separate element.

Davies JA (in dissent): Unconscionability is necessary to establish in personam.

2.4. C. REMEDIES

Overlapping Fraud and in personam Claims

- If an undertaking is made prior to registration with no intention to honour it, this will likely constitute fraud as well as the in personam exception: Loke Yew

- If an undertaking is made after registration, the in personam exception will apply but fraud might not be able to be made out despite Bahr v Nicolay (No 2)

Remedies

If fraud is established, an order for rectification by removing the relevant registered interest may be available under s 187 LTA

If in personam is established, s 187 LTA does not apply. Must rely on the relevant in personam rights and remedies. Rectification is not available for a claim in personam under s 185(1)(a) LTA. Court must make orders against the defendant to transfer property to the plaintiff, along with a vesting order under the Trusts Act: See Williams v Turner. End result is likely to be the same but the form of the orders and procedure is different and more cumbersome.

3. SHORT LEASES

- A registered proprietor is subject to the interest of a lessee under a short lease: s 185(1)(b) LTA

- A short lease is a lease with a term of three years or less, or from year to year (or shorter period): Schedule 2 LTA

- An unregistered short lease is a valid legal interest: Deventer Pty Ltd v BP Australia

- The interest of a lessee under s 185(1)(b) does not include:


o Options to renew beyond 3 years from the beginning of the original term (so options to renew within 3 years are protected): s 185(2)(b) LTA

o Rights to acquire fee simple or reversionary interests after ending short lease: s 185(2)(a) LTA

- May be bound by longer lease in personam: Valbirn v Powprop

3.1. APPLICATION OF EXCEPTION

- Scenario A: Original term needn’t be registered. Options must.

- Scenario B: Original term needn’t be registered. Options must.

- Scenario C: Original term and first option need not be registered.

- Scenario D: Lease is not a short lease- must be registered.

4. OMITTED OR MISDESCRIBED EASEMENTS

- Where there is an easement there must be a dominant tenement (land that benefits from easement) and a servient tenement (land that is burdened by the easement). The easement must be recorded on both lands.

- Registered proprietors are subject to easements which were omitted or misdescribed in the register: s 185(1)(c) LTA. I.e. omitted easement under s 185(3) LTA will be enforceable against the RP under s 185(1)(c) LTA.

- Where an easement is omitted or misdescribed, the registrar has the power to correct the register: s 15(3)(a) LTA.

Omitted Easements (3 Circumstances)

- Pursuant to s 185(3) LTA, an easement will be taken to be omitted if:

(a) the easement was in existence before the land was first registered and were never registered; or

(b) they were previously registered but are now omitted, other than because they were extinguished or surrendered; or

(c) the instrument was lodged but due to the registrar’s error, were never registered.

4.1. NEVER REGISTERED EASEMENT: s 185(3)(a)


- Any easement over a lot in existence immediately before the lot was first registered under the Torrens system falls within the scope of the exception: Stuy v BC Ronalds

- Extends to easements created by deed (Beck v Auerbach), prescription (Connellan Nominees), implied grant, and necessity (Stuy v BC Ronalds Pty Ltd).

- Not necessary to establish that the easement was omitted because of some fault of the registrar, omitted in this context means “not there”: Dobbie v Davidson

4.2. RECORDED BUT SUBSEQUENTLY OMITTED EASEMENT: s 185(3)(b)

- If an easement is registered and then the particulars are incorrectly omitted from the freehold land register, the RP of the servient tenement will take subject to the omitted easement: James v Registrar-Geeneral

- This section does not apply to extinguished or surrendered easements: ss 185(3)(b) and 185(6) LTA

- There is no doubt that in light of s 185(4) LTA, omitted easements can be enforced against subsequent RPs

Mount Cathay Pty Ltd v Lend Lease Funds Management Ltd [2013] – appellant and respondent owned adjoining parcels of land. The easement allowed pedestrian access through part of the respondent’s building to access appellant’s building. Respondent blocked right of way by locking the fire doors so people could no longer get through. Easement was recorded on title but after subdivision was no longer recorded. Easement document had also specifically contemplated subdivision.

Held: Easement was ‘omitted’ and servient tenement was subject to it by virtue of s 185(1)(a) LTA. In the alternative, the QCA also held that if the easement was not a registered interest, then the easement was an omitted easement within the meaning of s 185(1)(c) and the registered owner of the lots could enforce the benefit of the easement against the owner of the dominant tenement.

James v Registrar-General (1967) – Easement was created over a lot in Mosman, NSW and registered. Through an error in the office of the Registrar, the notation of the easement was omitted when the dominant tenement was transferred. The servient tenement was transferred on two subsequent occasions and neither certificate of title noted the easement.

Held: Even though Mrs James was not aware of the existence of the easement when she purchased the lot due to the registrar’s error, she was bound by the easement.

4.3. REGISTRAR’S ERROR: s 185(3)(c)

- Where an easement in registrable form is lodged for registration but never registered because of the registrar’s error, the registered proprietor takes subject to the easement: Christopher v Kells

- Note: situation is different where the instrument is not registered because of the fault of the parties rather than error by the registrar Æ easement would not be an omitted easement within the exception to indefeasibility.

5. ADVERSE POSSESSOR

- A registered proprietor’s interest will be defeated by the interest of a person who would be entitled to be registered as owner because the person is an adverse possessor: s 185(1)(d) LTA


- ‘Adverse possessor’ is defined as a person: (a) against whom the time for bringing an action to recover the lot has expired under the Limitations of Actions Act 1974; and (b) who, apart from the LTA 1994, is entitled to remain in possession of the lot: Sch 2 LTA.

5.1. ELEMENTS OF ADVERSE POSSESSION

1. Adverse possession established at common law

2. Provisions of the Limitations of Actions Act must be satisfied; and

3. The statutory procedure to register interests of the adverse possessor must be followed.

ADVERSE POSSESSION AT COMMON LAW

- In order to establish title by adverse possession, need to show adverse possession which is such possession as would eventually confer a statutory title to land: s 19(1) LAA

- To establish adverse possession, a claimant must establish factual possession and an intention to possess: Buckinghamshire v Moran

- Per Bowen CJ in Mulcahy v Curramore Pty Ltd: ‘[p]ossession which will cause time to run under the [Limitation] Act is possession which is open, not secret; peaceful, not by force; and adverse, not by the consent of the true owner’: [1974] 2 NSWLR 464 at 474.

1. Factual Possession

- Factual possession is ‘an appropriate degree of physical control amounting to single and exclusive possession’: Powell v McFarlane (per Slade J)

- Must show that the possessor has dealt with the land like an occupying owner and that no one else has dealt with the land in that way: Powell v McFarlane

Examples of factual possession:

It is possible to isolate some relevant factors to establish possession (not exclusive/exhaustive as each case turns upon the particular facts):

- Formal entry on the land is not sufficient: s 21 Limitation of Actions Act

- Paying rates is indicative, but not conclusive: Bank of Victoria v Forbes

o Paying rates is not necessary: Monash CC v Melville

- Erecting and maintaining fences is indicative, but not conclusive: Buckinghamshire CC

- Cultivating the land is indicative, but not conclusive: JA Pye v Graham

- Camping was not sufficient: Re Johnson

- Building a tennis-court fence was insufficient as it was necessary for enjoyment of the property: Riley v Pentilla

2. Intention to Possess

- The claimant must show an intention to exclude the world at large, including registered owner: Powell v McFarlane


- No need to show an intention to own the property or to exclude the registered owner specifically: JA Pye (Oxford) v Graham

- A willingness to pay the registered owner for the occupation indicates an absence of an intention to possess: R v Secretary of State for the Environment;

- Possession with the registered owner’s consent is not adverse: Mulcahy v Curramore

- If the person in possession mistakenly believes they are the true owner, the mental element will be satisfied: Petkov v Lucerne Nominees

LIMITATIONS OF ACTIONS ACT PROVISIONS

- Generally, a person cannot bring an action to recover land after the expiration of 12 years from the date the right of action accrued: s 13 LAA

- The right of action to recover land accrues on the date the person as dispossessed or discontinued possession: s 14(1) LAA

- The right of action does not accrue unless there is some person in possession of the land (the occupier) in whose favour the limitation period can run: s 19(1) LAA

Disability

- ‘Disability’ means the person is an infant or of unsound mind: s 5(2) LAA

- Where the person is under a disability on the date that the right of action accrues (date possession was taken), the action may be commenced at any time before the expiration of 6 years after the person ceases to be under the disability or dies (whichever event occurs first): s 29 LAA

- In any event, the action must be brought within 30 years from the date the right of action accrues: s 29(2)(b) LAA

Time stops running where:

- Owner retakes possession: s 35 LAA

- Owner gives permission for occupier to continue occupying land: Mulcahy v Curramore

- Owned commences proceedings to recover possession: BP Properties v Buckler

Gaps in Possession:

- Adverse possession must continue unbroken for the entire statutory period: s 19(1) LAA

- Short intervals where the claimant is not in physical possession do not conclusively prove abandonment such as where the possessor goes on vacation: Nicholas v Andrew

- Following abandonment of adverse possession, time starts anew: Trustees v Short

Changes in Possession

- An adverse possessor’s interest is transmissible and provided there was no gap, the successor can rely on the prior period of possession to establish a possessory title: Mulcahy v Curramore

Effect of expiry of limitation period


- Where a limitation period within which a person may bring an action to recover land has expired, the title of that person to land is extinguished: s 24 LAA

STATUTORY PROCEDURE UNDER LTA

- An adverse possessor may apply to be registered as owner of the lot, where the requirements of the common law and LAA above have been met: s 99(1) LTA

- If no caveat is lodged over property, applicant may be registered: s 108(1)(a)

- Otherwise, see flowchart for process below.

6. ERRORS ON THE REGISTER

6.1. EARLIER EXISTING INDEFEASIBLE TITLE: s 184(1)(e)

- A registered proprietor will not obtain benefits of indefeasibility against another registered proprietor making a valid claim under an earlier existing indefeasible title for all or part of the same lot: s 185(1)(e) LTA

- General rule: earlier title prevails.

Registrar of Titles v Esperance Land Co – Alwood subdivided his land into two lots. He sold the first lot to Henson and kept the second for himself. He then sold the second lot to Simon but the certificate of title issued to Simon erroneously included both the first and second lot. Simon sold his land to Esperance who became the registered owner of both lots.


Held: The rights of Henson, the prior registered owner, prevailed and Esperance had to deliver its certificate to the registrar to have the reference to the first lot removed. This was the case even though Esperance was a bona fide purchaser.

Exception: Certificate cancelled and new one issued

- The exception does not apply where a certificate is cancelled and a new one is issued, but an interest is not carried forward to the new title

Medical Benefits Fund of Australia v Fisher – Lease registered, MBF notified intention to renew. After notification land sold a week later and the new owner was registered. Old title cancelled and new title registered without lease. Registrar did not carry over lease due to error.

Held: Lease would not have effect as it would violate fundamental principles of Torrens.

6.2. FAILURE TO CANCEL FOLLOWING TRANSFER: s 184(1)(f)

- An earlier registered proprietor will lose the benefit of indefeasibility if there are two titles in existence over the same interest due to a failure to cancel, wholly or partly, the earlier registered proprietor’s indefeasible title on registration of a transfer: s 185(1)(f) LTA

- Applies where an earlier title should have been cancelled Æ A sells to B, B becomes registered but failure to cancel A’s title – B will prevail.

6.3. WRONG INCLUSION OF LAND: s 184(1)(g)

- The benefits of indefeasibility are not conferred upon a registered proprietor in relation to land wrongly included in an indefeasible title: s 185(1)(g) LTA.

- Where land is wrongly included in an indefeasible title, the true owner (Rather than the registered owner) retains title to that land: Marsden v McAlister (1887)

- Extrinsic evidence is admissible to prove the true boundaries: Overland v Lenehan [1901]

- The exception does not apply to omissions from the indefeasible title of a registered interest or a reservation noted in particulars (such as reservation of minerals to Crown or previous owner). In such cases, there is no wrong description of land or boundaries – merely an omission: CPR and Imperial Oil v Turta.

Exception Applicable

- Where land is wrongly included in indefeasible title and exception applies, the registrar is expressly conferred with power to correct error: s 186(1) LTA.

7. REGISTRAR’S POWER TO CORRECT REGISTER

- The registrar may correct the register if the register is incorrect and correction will not prejudice the rights of the holder of an interest recorded in the register: s 15(1) LTA; Equitiloan Securities v Registrar of Titles

- The registrar may correct in the following specified circumstances:

o where an instrument has been incorrectly recorded: s 15(2)(a) LTA

o where a particular is incorrectly recorded: s 15(2)(a) LTA


o where the registrar holds an enquiry under Division 4 LTA and concludes the register is incorrect, for example because of fraud affecting the register: s 15(2)(b) LTA

o where an easement is omitted or misdescribed: s 15(3)(a) LTA

o the Supreme Court has ordered the correction under s 26 LTA after the registrar has referred a case or finding to the Supreme Court or applied for directions: s 15(3)(b) LTA

Effect of Corrected Register

- If the register is corrected, the registrar must record the state of the register prior to the correction, and the date time and circumstances of the correction: s 15(6) LTA

- A register that has been corrected has the same effect as if the relevant error had not been made: s 15(7) LTA

7.1. REGISTER INCORRECT

- The registrar must be satisfied that there is an error in the register: Equitiloan v Registrar; s 15(1)(a) LTA

7.2. CORRECTION DOES NOT PREJUDICE RIGHTS

- Generally, the registrar cannot exercise the power to correct the register if it would prejudice the rights of an interest recorded in the register: Equitiloan Securities v Registrar; s 15(1)(b) LTA

Exception to Rule:

- Section 15 sets out three circumstances where the registrar may correct an error even though the correction may prejudice the rights of a registered proprietor:

1. Correction restores an omitted easement within exception to indefeasibility in s 185(1)(c) LTA (s 15(4);

2. Supreme Court has ordered correction under s 26 LTA (s 15(3)(b))

3. Where holder has acquired interest or dealt with interest with actual/constructive notice of error: s 15(a) LTA

Equitiloan Securities v Registrar – The registered owner alleged a mortgage lodged for registration was fraudulent. The registrar lodged the mortgage without following normal procedures and subsequently cancelled the mortgage and lodged a caveat.

Held: The cancellation was void because it was unclear whether fraud could be brought home to the mortgagee. As such, it was unclear whether the mortgagee had indefeasible title and the registrar could not have been satisfied cancellation of the mortgage would not prejudice the mortgagee.

Cantrick v Thompson – A release of a mortgage over Thompson’s land was fraudulently registered. Another mortgage was registered and transferred to Cantrick, a bona fide purchaser for value with no notice of the prior fraud.

Held: Court could not reregister the mortgage pursuant to s 15(7) LTA “as if the error had not been made” because this would prejudice Cantrick. An order for rectification under s 187 was made ensuring that Cantrick’s mortgage was the first registered mortgage


8. OVERRIDING STATUTES

- Overriding statutes are said to ‘pose the greatest single threat to the operation of the Torrens system’: Quach v Marrickville Council.

- The recent trend in Qld following the introduction of the LTA has been to significantly expand the information in the freehold land register: see e.g. ss 29(2), 28(2). This has significantly reduced the threat posed by the proliferation of overriding statutes.

- The benefits of indefeasibility conferred by the LTA may be cut down or overridden by provisions in other statutes.

o Section 60 Land Tax Act 2010 (Qld) – unpaid taxes are a first charge on land;

o Section 391 Environmental Protection Act – obligation to remediate binds to land;

o Section 55 Vegetation Management Act – vegetation restoration notice binds to land.

Statutory Interpretation Approach

- Whether or not statute overrides indefeasibility will depend upon whether two statutes can operate concurrently or whether they directly conflict. If they cannot operate together, the court will consider the canons of statutory interpretation laid out by Kirby J in Hillpalm v Heaven’s Door:

1. Special Measures prevail over general measures;

2. Later statute overrides earlier statute;

3. Precedence is given to public over purely personal rights.

- Cases upon overriding statutes are inconsistent and difficult to reconcile, however, judicial consideration of this issue generally takes on of two approaches (see below): Christensen, Sharon A., O’Connor, Pamela, Duncan, William D., & Phillips, Angela (2012) Regulation of land access for resource development: A coal seam gas case study from Queensland. Australian Property Law Journal, 21(2), pp. 110-146.

Inconsistency between State and Commonwealth Law

- A Commonwealth law will prevail over an inconsistent state law under s 109 Constitution.

8.1. CONFLICT & IMPLIED REPEAL APPRAOCH

- Pursuant to this approach, it must be determined whether a conflict exists between the statutory provisions. There is a presumption that Parliament does not intend to contradict itself: Butler v Attorney-General (Vic) (1961).

- This presumption is not easily displaced: City of Canada Bay Council v Bonaccorso (2007). Actual contrariety between statutes must be readily apparent.

- If the later enactment contains clear language from which it is plain that its provisions were intended to apply in a manner inconsistent with the earlier statute, the appropriate conclusion is that the earlier statute is repealed pro tanto.

South-Eastern Drainage Board (SA) v Savings Bank of SA (1939) – Clash existed between Torrens legislation (1886) and SEDB Amendment Act (1900) which enabled drains to be constructed and cost


apportioned amongst landholders as charge on land. In 1908 first charge for drainage board on land, subsequent mortgage in 1912. Which statutory charge prevailed?

Held: Drainage charge applied, all taking a statutory interpretation approach:

Latham CJ – inconsistency and later in time prevails

Starke J – ignoring/partial repeal of Torrens

Dixon J – created charge independent of Torrens

Evatt J – cannot bind successor in title, therefore charge can apply

McTiernan J – Torrens is not a manner and form enactment.

Miller v Minister for Mines [1963] – In 1980 land grant with no mineral reservation. Minerals rights were transferred to third party which was not registrable. Land transferred to Miller with no reference to mineral rights. Miller argued not affected by unregistered mineral right.

Held: Mineral right prevailed Æ intention of legislature. It would not make sense if it overrode Torrens.

Pratten v Warringah Shire Council (1969)

Quach v Marrickville Council (1990)

8.2. SEQUENTIAL ASSESSMENT APPROACH – MORE RECENT APPROACH

- The alternative ‘sequential assessment’ approach has become more prevalent in recent years and hinges upon a finding by the Court that there is no conflict between the statutory provisions or, where a conflict is established, that the provisions can operate ‘sequentially’ and therefore no implied repeal has occurred.

- For example, in City of Canada Bay v Bonaccorso 2007) a later statutory provision prohibiting the transfer of ‘community land’ was held to invalidate the transaction up until the point of registration. Upon registration, the indefeasibility provisions operated to confer a new grant of fee simple in the land. This instance of the ‘sequential assessment’ approach led to a conclusion that the later statutory provision applied before registration and indefeasibility provisions applied after registration.

Hillpalm v Heaven’s Door [2002] – Alleged condition of development consent involving an easement over the appellant’s land was omitted from the title. Heaven’s Door accepted it had no easement over the property or other interest but contended that it was entitled to compel Hillpalm to perform conditions imposed by shire council when the land was subdivided by the previous owner.

Held: Later statutory provision prohibiting development being carried out otherwise than in accordance with the development consent applied to original developer only. Not enforceable against a subsequent RP who gained benefits of indefeasibility.

Golden Paradise Corporation v Kogarah Municipal Council [2003] – Development approval for GPC to change level 2 to accommodation with brothel operating on ground floor. If they complied with development approval conditions it would mean they could only access via lane not Highway and there was a problem concerning ownership of access lane (had been transferred to council then conveyed back to private land). Owners of adjoining lots built a brick wall to prevent access to building. Under the LGA ‘community land’ could not be disposed of.


Held: Council’s transfer was invalid. Council was ordered to obtain a reconveyance of the access lane.

Kogarah Municipal Council v Golden Paradise Corporation *APPEAL* [2005] – appeal of above.

Held:

Tobias J (McColl J agreeing): Upheld Blakehurst’s indefeasible title. ‘Once registered, it was that registration and not the antecedent transfer that vested title to Lot 2 in Blakehurst. It could be said that that is the very point of the decision in Breskvar’: [60]

Basten JA: Doubted that Blakehurst obtained a valid title – but could not consider on the evidence: [84]-[103]

F & D Bonnaccorso v City of Canada Bay City Council (2007) – Mr Bonnacarso owned land on Chapman St. Council owned land as parkland and put up signs, mowed land etc. and was known as ‘Chapman Reserve’ used as open public space. Council contracted to sell in 2000 to private ownership but was only registered in 2006. Bonnaccarso argued transfer was void as it was ‘community land’ contrary to LGA.

Held: Chapman Reserve was ‘community land’ and therefore its transfer was contrary to LGA. Up until registration there was an opportunity to set transaction aside and prevent registration, but after registration that opportunity was lost: at [86].

Principles of statutory interpretation per Biscoe J at [51]:

x A provision of a later statute impliedly repeals or amends pro tanto a provision of an earlier statute if, upon their true construction, the later provision explicitly or implicitly and clearly contradicts the earlier;

x There is a general presumption that there is no contradiction between two Acts of the same legislature;

x There must be very strong grounds to support the implication of a repeal or amendment; and x There is no contradiction if the later and earlier statutory provisions can stand or live together

(or can be reconciled).

Koompahtoo Local Aboriginal Land Council v KLALC Property Investment & Ors [2008] – transaction under Aboriginal Land Rights Act 1986 (NSW) which was void unless it complied with division: s 40 (2). Section 40D(1) required a meeting of no less than 80% of Council members, land not to be of ‘cultural significance’ and approval by NSW. Question was whether sale was void or whether Torrens indefeasibility arose.

Held: Section 40(2) was not inconsistent with the RP Act. Following Bonnaccorso, transaction was void and there was a period of time to challenge but once registered the opportunity was lost.

Giles JA: Where land had been transferred in contravention of s 40(2) and then registered, the registration could confer indefeasibility because focus of provision was upon invalidating transaction rather than title obtained by registration of that transaction. This rationale lay at heart of decision in Bonnaccarso.

9. REMEDIES FOR EXCEPTIONS TO INDEFEASIBILITY

1. Rectification under s 187

- Not available for a claim in personam under s 185(1)(A) LTA

- Not available for short lease exception Æ same rationale as in personam can get remedies elsewhere not just from Torrens

2. Compensation under ss 188-188A


3. Correction of Register

- The registrar may correct an error where an exception to indefeasibility applies: James v Registrar-General


TOPIC 4: PRIORITIES 1. LEGAL INTEREST FOLLOWED BY LEGAL INTEREST

- Registered instruments have priority according to when each of them was lodged and not according to when they were executed (i.e. new legal interest trumps earlier legal interest unless they can co-exist – e.g. interest of fee simple owner and mortgagee): s 178(1) LTA

- Priority disputes between legal interests are resolved by applying ss 184 and 185 LTA. In other words, the current RP obtains indefeasible title provided none of the exceptions apply.

2. LEGAL INTEREST FOLLOWED BY EQUITABLE INTEREST

- A registered proprietor holds their interest free from all unregistered interests, unless there is an exception to indefeasibility (e.g. in personam exception): s 184 LTA.

3. EQUITABLE INTEREST FOLLOWED BY LEGAL INTEREST

- A registered proprietor is not affected by actual or constructive notice of an unregistered interest affecting the lot (i.e. legal interest will prevail): s 184(2) LTA

- A subsequent registered proprietor will take free of any unregistered interests unless an exception to indefeasibility applies: ss 184 and 185 LTA.

4. EQUITABLE INTEREST FOLLOWED BY EQUITABLE INTEREST

- Competing equitable claims are resolved by general law principles: Breskvar v Wall

4.1. IS THERE NOTICE?

- The claimant of a later equitable interest takes subject to any prior equitable interests of which they had notice: Lapin v Abigail (1930)

- Rule applies where the competition is between a mere equity and later equitable interest: Moffett v Dillon [1999]

Notice

- Requires actual, constructive or imputed knowledge: Moffett v Dillon

- Section 346 PLA modified the requirement of notice so that the claimant only takes subject to interests where they had actual knowledge (a) or should have had actual knowledge if they had conducted reasonable searches or enquiries (b).

- Notice may be imputed to a person if it comes to the knowledge of their agent or solicitor: s 347(1)(b) PLA

- Lodging a caveat gives constructive notice of existence of interest: Lapin v Abigail

- Lodging a settlement notice gives constructive notice: JNJ Investments v Sunnyville

Exceptions

- Where the holder of the earlier equity has induced a belief on the part of the holder of the later equity that the earlier equity no longer exists: Moffett v Dillon


- Where the parties have agreed to vary the priority that would otherwise exist under the general rule: Platzer v Commonwealth Bank

4.2. IF NOT, WHO HAS BETTER EQUITY?

- Where there is no notice, if equities are equal, the first in time prevails: Rice v Rice (1853) Æ n.b. this is last resort after considering all facts and circumstances.

o Must consider: “the nature and condition of their respective equitable interest, the circumstances and manner of their acquisition, and the whole conduct of each party with respect thereto…[and] broad principles of right and justice”.

NATURE AND CONDITION OF THEIR INTERESTS

Was one of the interests registrable?

The mere fact one interest is in registrable form (or easier to enforce generally) is irrelevant to which is a better equity: Moffett v Dillon; s 181 LTA

In Moffett v Dillon, the charge held by Moffett was superior to the mortgage held by Westpac Bank in registrable form (acquired after the charge).

Has contract been settled or money paid?

Settlement of a contract for sale or payment of the balance of purchase moneys is evidence of a better equity, but not conclusive: Clark v Raymor (No 2)

Extraordinarily arduous terms

In Circuit Finance v Wills, the fact that the interest rate payable on a loan given by Circuit Finance was extraordinarily high (26% pa and 40% pa after default) was consistent with the notion that Circuit knew it was lending with very little or no security. In contract, the loan made by the Wills was on average terms (10% pa and 15% pa after default) which is commensurate with adequate and appropriate security.

CIRCUMSTANCE AND MANNER OF THEIR ACQUISITION

The mere fact one interest is in registrable form is irrelevant to which is a better equity: Moffett v Dillon; s 181 LTA

**CONDUCT OF PARTIES – DISENTITLING/POSTPONING?

- The conduct of the parties may create circumstances that have the effect of disentitling one party’s interest: Clark v Raymor

Arming another with the ability to defraud?

In Breskvar v Wall, the Breskvars provided Petrie a signed instrument of transfer into which he could insert a transferee’s name. Petrie fraudulently inserted his grandson Wall’s name and Wall transferred the property to Alban, a bona fide purchaser for value without notice. Although the Breskvar’s interest was earlier in time than Alban’s, the Breskvars had committed disentitling conduct by arming Petrie with the means to commit fraud and not lodging a caveat to protect their own interests.

In Abigail v Lapin, Lapin gave Heavener title documents as security. Heavener became RP and granted a mortgage to Abigail (unregistered). The Lapins sought to retransfer property and Abigail


sought to enforce the mortgage, i.e. equitable interest (right to re-transfer) versus equitable interest (unregistered mortgage).

Held: Disentitling conduct,

Lapins presented Heavener with documents that allowed her to represent herself as owner. Abigail therefore had priority.

In Heid v Reliance Finance, Heid agreed to NM&Co’s lawyer also acting for him and gave him title documents, signed transfer and acknowledged that $165K had been paid when it hadn’t. Three unregistered mortgages obtained.

Held: Mr Heid’s interest was postponed because it was imprudent to accept Mr Gibby was a solicitor and give him documents (Gibbs CJ). The postponing conduct was ‘arming of a third person with the indicia of title’ and it was reckless to accept Mr Gibby was a solicitor in the circumstances (Mason and Deane JJ).

Reliance on a solicitor?

Reliance on a solicitor is not disentitling conduct because negligence or fraud by a solicitor is not reasonably foreseeable: Heid v Reliance Finance

Conduct after interests are acquired?

Regard may be had to all circumstances including those that arise after the equitable interests are acquired: Clark v Raymor

In Clark v Raymor, it was relevant that Raymor (who had an equitable charge over the property) didn’t lodge a caveat or notify the mortgagee of its interest thus leaving the owner and mortgagee free to sell the property without regard to Raymor’s interest.

EFFECT OF THE TORRENS SYSTEM

Failure to lodge a caveat

Failure to lodge a caveat is relevant but does not automatically result in a loss of priority: Heid v Reliance Finance

- Failure to caveat will not found an estoppel argument unless there is an established conveyancing practice that a caveat would be lodged in the circumstances: Jacobs v Platt Nominees

- May be necessary to show that failure to caveat resulted in a detriment to the holder of the later interest: IGA Distribution v King & Taylor Pty Ltd

Failure to lodge a caveat will not result in a loss of priority where:

- other actions have been taken to protect an interest acquiring possession of certificate title: J & H Just Holdings v Bank of NSW

- the instrument of transfer of the earlier claimant was lodged prior to the creation of the later interest: IAC Finance v Courtenay

- where a close familial relationship with the registered proprietor (or even by analogy a fiduciary relationship) makes it reasonable to rely on the expectation that the registered proprietor would not deal inconsistently with the claimant’s interest: Jacobs v Platt Nominees


- the claimant of the later equity has not actually searched the register: Abigail v Lapin

- the claimant of the later equity would be indifferent to the interest claimed, even if it was caveated: Lynch v O’Keefe (in that case, Lynch gave evidence he would have purchased land even if he’d known about the equitable mortgage over it)

Failure to lodge a settlement notice

Despite the operation of ss 141, 149 and 150 LTA, courts will likely apply similar rules to caveats and find that failure to lodge a settlement notice is relevant, but does not automatically amount to disentitling conduct: Heid v Reliance Finance

Arguably, due to their low cost and ease of lodgement, courts are likely to accord greater weight to a failure to lodge a settlement notice than failure to lodge a caveat.

Effect of ss 183 and 178 LTA

Sections 177 and 178 LTA which dictate the order of registration do not affect priority if neither instrument becomes registered: IAC (Finance) v Courtenay

5. MERE EQUITY FOLLOWED BY EQUITABLE INTEREST

A mere equity is less than an equitable interest and therefore needs the assistance of the court. A ‘mere equity’ has been described as ‘at the bottom of a hierarchy of proprietary interests consisting of legal interests, equitable interests and equities’: Neave and Weinberg ‘The Nature and Function of Equities’.

In Latec Investments v Hotel Terrigal, the Court held that a mere equity is defeated by an equitable interest acquired by a bona fide purchaser for value without notice.

A mere equity is a right to equitable relief which is assignable and therefore takes on a proprietary character such as the right to have a document rectified or a transaction set aside for fraud or mistake.

Examples include:

- right to have a document rectified: Smith v Jones

However, in Breksvar v Wall, the High Court applied the rule in Rice v Rice and suggested that the interest of the Breskvars to have a fraudulent registration set aside (although a mere equity) was not inferior to the interest possessed by Alban (a bona fide purchaser for value without notice).

Arguably, Latec might still apply where the party seeking to set aside the fraudulent transaction has not been guilty of disentitling conduct (as opposed to the case in Breskvar v Wall): see Ruthol v Mills, a decision of the NSW Court of Appeal after Breskvar v Wall which applied the Latec test

In Ruthol Pty Ltd v Mills, Ruthol granted Mr and Mrs Mills an option to purchase premises that were leased to a third party which would terminate if the lessees renewed their lease on the same terms and conditions. Ruthol falsely told the Mills that tenants had renewed lease and did not exercise option within stipulated time. Subsequently, Ruthol granted an option to Tricon who exercised it to purchase. Tricon was a bona fide purchaser for value without notice.

Held: Could not succeed.

Mills had not exercised their option in time – they needed assistance of the court. Therefore a mere equity, and could not succeed against the innocent holder of an equitable interest: [100]


TOPIC 5: CAVEATS & SETTLEMENT NOTICES 1. LODGING A CAVEAT

- Under s 122 LTA a caveat may be lodged by:

1. A person claiming an interest in the lot;

2. The Registrar: s 17 LTA;

3. The registered owner of the lot;

4. A person who has an interest under a court order: s 122(1)(d)-(e)

- Formal requirements of lodging a caveat are set out in s 121 LTA.

‘Person claiming an interest in a lot’

- Must be an interest in the land.

- Legal or equitable estate, or a right, power or privilege over property: AIA Sch 1.

- There are a broad range of circumstances this could include:

1. Purchaser under unconditional contract;

2. Person claiming a security interest;

3. Purchaser under option to purchase land.

In Re Henderson’s Caveat, the Court noted that:

“an equitable interest in land can exist when a claimant is entitled to something less than a full decree of specific performance ordering conveyance, that is it can exist provided that a claimant is entitled to equitable relief by way of injunction or other remedy to maintain and protect his interest: pp 637-8

Person having benefit of Court Order

Re Worrell’s Caveat [2001] – wide interpretation of ‘court order’ (in circumstances where the ‘order’ was essentially a record of an agreement)

2. EFFECT OF LODGED CAVEAT

- The registrar must give written notice to each person whose interest is affected: s 123

- Prevent registration of an instrument affecting the lot - from the date and time endorsed by the registrar: s 124(1)

- Exceptions under s 124(2)

1. Instruments caveat does not apply to, or caveator consents to;

2. Some mortgage instruments;

3. An interest that will not affect the caveator’s interest.


3. CESSATION OF CAVEAT

- A caveat has effect until it lapses, or is cancelled, rejected, removed or withdrawn: s 124(1A)

Lapsing – s 126 must bring proceedings:

- Within 3 months;

- Or, if a caveatee serve a notice – within 14 days.

Withdrawal

- A caveator may withdraw a caveat by lodging a request to withdraw it: s 125

Cancelled by Register: s 128

Removed by Court: s 127

- Similar to interlocutory application

4. COMPENSATION FOR IMPROPER CAVEAT

- A person who lodges or continues a caveat without reasonable cause must compensate anyone else who suffers loss or damage as a result: s 130(1)

Onus of proof

There is a rebuttable presumption that caveats are lodged or continued without reasonable cause and the onus of proof is on the caveator to show it was lodged and continued with reasonable cause: s 130(3) LTA

Claimant must establish that damage was suffered: Farvet v Frost

Brooks v Brooks [2015] 1 Qd R 105:

‘question pursuant to s 130(3) is not whether the caveator had a caveatable interest but whether it has been proved the caveator had reasonable cause for lodging or continuing the caveat’: p 109

Meaning of ‘Without Reasonable Cause’

- Caveator must show the caveat was lodged with an honest belief based on reasonable grounds that he or she had a caveatable interest: Farvet v Frost

o subjective component: “an honest belief”

o objective component: “based on reasonable grounds”

- the purpose of lodging the caveat is relevant in deciding whether it was lodged without reasonable cause: Brogue Tableau v Binningup Nominees

- if the caveator relies on legal advice which turns out the be false, this will be relevant to deciding whether the belief is based on reasonable grounds: Brogue Tableau v Binningup

Disentitling Conduct by Failing to Caveat (see discussion above)?

Heid v Reliance Finance - the mere failure of the holder of a prior equitable interest in land to lodge a caveat does not in itself involve the loss of priority which the time of the creation of the equitable interest


would otherwise give…it is just one of the circumstances to be considered in determining whether it is inequitable that the prior equitable owner should retain his priority: p 342

But it can be in some circumstances: Clark v Raymor

5. SETTLEMENT NOTICES

The settlement notice is designed to be an inexpensive alternative to the lodgement of a caveat.

Lodging a Settlement Notice

- ‘Transferee’ (s 138) may lodge a settlement notice: s 140

- Formal requirements: s 139

Effect of Settlement Notice

- Prevents registration of an interest in the lot until the notice lapses – except for the instrument specified in the notice: s 141

- Instruments lodged, but prevented from being registered by a settlement notice, are taken to have been lodged (in the order in which they were lodged) immediately after lodgement of the directly related instruments specified in the notice: s 150

o So – settlement notice gives the transferee priority

Cessation of Settlement Notice

- Lapses - when the instruments related to it are lodged, or after two months: s 143

- Withdrawal by the transferee: s 142

- Cancelled by the Registrar or by Supreme Court order : ss 144-145

- Compensation for an improper settlement notice: s 147


TOPIC 6: MORTGAGES 1. MORTGAGES GENERALLY

- Landowner is the mortgagor; bank/creditor is the mortgagee

- A mortgage gives the mortgagee a secured interest in land of the mortgagor. I.e. loan without mortgage gives a mere contractual right, while a loan with a mortgage gives a secured interest.

- The operation of mortgages is different in ‘old system’ land and Torrens land

2. OLD SYSTEM MORTGAGES

- Old system mortgages involved a transfer to the mortgagee containing a covenant by the mortgagee to reconvey the land once the debt was repaid (legal right of redemption)

o Mortgagee becomes legal owner; and

o Mortgagor obtains an equitable interest in the land known as the equity of redemption.

2.1. LEGAL RIGHT OF REDEMPTION

- A mortgagor who did not repay on the date specified lost the legal right to redeem and the mortgagee’s interest in the land became absolute, even when the value of the land far outweighed the debt.

2.2. EQUITABLE RIGHT OF REDEMPTION

- The equitable right to redeem allows the mortgagor to retake possession after repaying the debt.

2.3. FORECLOSURE – REMEDY FOR DEFAULT

- Foreclosure allows a mortgagee to end a mortgagor’s equitable right to redeem if debt is not paid within a specified time (usually 6 months). After that period, the mortgagee’s equitable interest would be extinguished and the mortgagor would become the absolute owner of the land.

- If the value of the property exceeded the value of the debt, the court would order a sale instead.

3. TORRENS MORTGAGES

3.1. NATURE OF TORRENS MORTGAGES

- A mortgage is a charge on a lot or interest in a lot for securing money or money’s worth: Sch 2 LTA

- A charge is a new interest granted over the mortgagor’s property as security for a debt – it does not involve a conveyance: s 74 LTA

- More than one mortgage can be lodged on a property. The priority between mortgages will be determined by the date of lodgement: LTA ss 177, 178

3.2. REGISTRATION

- Legal mortgages of Torrens land are created by registration: ss 72, 181, 182 LTA

- Under s 73(1) LTA, an instrument of mortgage must:


(a) be validly executed; and

(b) include a description sufficient to identify the mortgaged lot; and

(c) include a description of the debt or liability secured by the mortgage; and

(d) include a description sufficient to identify the interest to be mortgaged

Effect of Registration

- On registration the mortgagee obtains the benefits of indefeasibility: s 184 LTA

o In Tessman v Costello, a mortgage was obtained by undue influence but then transferred to the Costellos who were innocent third parties. The Tessmans could not set aside the mortgage on the grounds of undue influence as the transfer was registered and the Costellos had the benefit of indefeasibility. The mortgage itself gets the indefeasibility.

- Indefeasibility is of the mortgage interest. The content of the document may still be considered: Small v Tomasetti [2001]

- Note also: the careless mortgagee exception in s 185(1A) where a mortgagee does not obtain indefeasibility (or the benefit of compensation: s 189(1)(ab)) where it failed to take reasonable steps (as defined in s 11A) to verify the mortgagor’s identity.

4. DUTIES OF MORTGAGOR (LAND BEING MORTGAGED)

- Covenants are promises made by the mortgagor to the mortgagee and can be express or implied.

- Three key covenants:

1. To pay;

2. To protect/repair property;

3. Regarding default.

4.1. PERSONAL COVENANT TO REPAY: s 78(1)(a) PLA

- Mortgages will usually contain an express clause to repay the loan.

- Section 78(1)(a) PLA implies an obligation into a written mortgage to repay the principal money and interest according to the rate and at the times mentioned in the mortgage.

- The implied covenant to repay is subject to contrary intention in the mortgage: s 78(3) PLA

Right to early repayment

There is no right at common law or in equity to redeem the mortgage before the contractual date for repayment: Hyde Management v FAI Insurances

For home mortgages entered after 1 April 2010, the National Credit Code grants a statutory right to pay out a mortgage at any time, but payment must be in full (including principal, interest, and all other fees including reasonable termination charges if provided for in the contract): s 82 NCC

The NCC also grants a right to make repayments in instalment before the due date, unless the contract prohibits early repayment: s 26(1) NCC


(For mortgages before 1 April 2010, ss 75 and 24(1) Consumer Credit Code provide the same)

4.2. TO PROTECT/REPAIR PROPERTY: s 78(1)(b) PLA

Mortgages usually contain covenants requiring the mortgagor to maintain the property in good repair and pay all rates and taxes levied on the property.

Mortgagor’s duty to repair

Section 78(1)(b) PLA implies into a written mortgage an obligation that the mortgagor keep all buildings and improvements erected and made upon the mortgaged land in good and substantial repair as they were at the date of the mortgage.

This is subject to a contrary intention in the mortgage instrument: s 78(3) PLA

4.3. RELATING TO DEFAULT

- Most mortgages contain express clauses setting out the acts and omissions constituting default and the remedies which follow (such as power of sale, foreclosure, appointment of a receiver and entering possession).

- These are discussed below at Rights of Torrens Mortgagors & Mortgagee’s Power of Sale

5. RIGHTS OF THE MORTGAGOR

- Three key rights:

1. Right of redemption;

2. National Credit Code rights;

3. Right to deal with the land.

5.1. RIGHT OF REDEMPTION

The right to redeem the mortgage after discharging the debt secured by the mortgage is protected by equity (equity of redemption): Noakes and Co Ltd v Rice

Any provision which has the effect of clogging or fettering the equity of redemption is void in equity and unenforceable: Noakes and Co Ltd v Rice

Extinguishment of the right to redeem

Any provision which prevents the mortgagor redeeming the property after discharging the obligations secured by the mortgage is void: Samuel v Jarrah Timber

- For example, an option allowing the mortgagee to purchase the land is void because it effectively gives the mortgagee the right to extinguish the equity of redemption.

- In Samuel v Jarrah Timber, Samuel lent money to Jarrah Timber taking a mortgage over debenture stock. The Court held an option granted to Samuel to purchase a whole or part of the debenture stock at a fixed price at any time within 12 months was void.


Does not apply where the option is granted to the mortgagee in a separate and independent transaction from the mortgage: Samuel v Jarrah Timber

- equity will look to substance, not form, to determine whether the transaction is “genuinely independent” (Jones v Morgan)

- the fact the option is contained in a separate document from the mortgage is not determinative, but is a material factor

- if the transaction is actually a sale in substance, rather than a mortgage, the rules relating to clogging the equity of redemption have no effect: Gurfinkel v Bentley Pty Ltd

Note that Young J of the NSW Supreme Court suggested the rule should be confined to where the option was obtained in unfair or unconscionable circumstances, but this approach has not been followed in Queensland or approved by the High Court: Westfield Holdings v ACT

Postponing the right to redeem

A provision in a mortgage which merely postpones the right to redeem will not be void as a clog on the equity of redemption unless it renders the right to redeem illusory or nugatory, or is oppressive or unconscionable: Knightsbridge Estates v Byrne; Samuel v Jarrah Timber & Wood Paving Corp

- There is no requirement for a reasonable period: in Knightsbridge Estates v Byrne, a mortgage provided for 80 half-yearly payments and could not be redeemed for 40 years. The unreasonable length did not constitute a clog on redemption.

- In Fairclough v Swan Brewery, a leasehold interest was mortgaged with 17 years of the lease left to run. The mortgagor agreed to pay by monthly instalments, the last of which was due 6 months before the end of the lease. Consequently, the mortgagor would only be entitled to reconveyance when the lease was all but due to expire. This amounted to a clog on the equity of redemption because they made the mortgagor’s right to redeem illusory.

5.2. NATIONAL CREDIT CODE RIGHTS

National Credit Code applies to home mortgages after 1 April 2010

Consumer Credit Code applies to home mortgages before 1 April 2010

Rights of the debtor

- Terminate at any time before credit is given: s 21 NCC; s 19 CCC

- Make early repayments unless the contract expressly says otherwise: s 26 NCC; s 24 CCC

- Completely repay the debt: s 82 NCC; s 75 CCC

- Regulation of interest and fees: ss 27- 30A NCC; ss 25 -28 CCC

- Higher interest may only be charged following default, in respect of the amount in default, and only while the default continues: s 30(2) NCC; s 28(2) CCC

- Debtor must receive periodic statements of account: ss 33- 37 NCC; ss 31- 35 CCC


5.3. RIGHT TO DEAL WITH THE LAND

Clauses restricting dealings without consent

Some mortgages contain clauses restricting the mortgagor from dealing with the mortgaged property except with the mortgagee’s consent:

In the case of a Torrens mortgage, such clauses confer a personal right only, breach of which sounds only in damages: Nia v Phuong

Right to assign or dispose of the mortgage property

Under the Consumer Credit Code (for home mortgages prior to 1 April 2010) and the National Credit Code (for home mortgages after 1 April 2010), a mortgagor is prohibited from assigning or disposing of mortgage property without the consent of the credit provider, such consent not to be unreasonably withheld: s 51 National Credit Code; s 47 Consumer Credit Code

Right to grant a subsequent mortgage

The mortgagor is entitled to grant subsequent mortgages and the mortgagee must provide the certificate of title, whether or not the mortgagee consents: s 80(2) PLA

If the mortgagee fails to comply with a written request made by the mortgagor under s 80(2) PLA, the mortgagor is entitled to submit an application to the Supreme Court requiring the mortgagee to show cause: s 80(2A) PLA

Under s 80(4) PLA, grant by the mortgagor of a second or subsequent mortgage cannot:

(a) be a breach of the mortgage;

(b) be grounds for a penalty; or

(c) trigger an acceleration clause.

Right to refinance or transfer mortgage

The mortgagor may require the mortgagee to transfer the mortgagee to any third person the mortgagor direct (on the terms on which the mortgagee would be bound to discharge): s 94(1) PLA

- this does not enable a mortgagor to insist upon a transfer to himself, or anyone else on his behalf: Ley v Scarff

- the consent of any other mortgagee is not required: s 94(2) LTA; Corozo v Westpac Bank (No 2)

- does not apply where the mortgagee has been in possession: s 94(3)(a) PLA

- does not apply where the mortgage contains a valid restraint of trade of the mortgagor; or any other collateral benefit in favour of the mortgagee: s 94(4) PLA

6. RIGHTS/DUTIES OF THE MORTGAGEE (PROVIDING SECURITY INTEREST)

- Four key rights/duties of the mortgagee:

1. Exercise power of sale;

2. Sue on personal covenant;


3. Entry into possession

4. Foreclosure

6.1. POWER OF SALE

- The mortgagee has the power to sell property: s 83 PLA

- There are three preconditions to this power (s 84(1) PLA):

1. Default on payment or another covenant under the mortgage;

2. Notice has been served

3. Default continued for 30 days

- The parties cannot contract out of s 84(1) PLA: s 84(3) PLA

o the 30 day period cannot be shortened: Hall v Hall

- If the default is remedied within 30 days, the mortgagee cannot sell the property relying on that particular act of default: Hunter v Hunter

Notice Requirements

- Usually served to the address in the mortgage (mortgagee or their agent or solicitor) but otherwise comply with s 347 PLA.

- Use of the approved form is not mandatory: s 84(2) PLA

1. Notice should be in writing, signed by the mortgagee, specify the default and require it to be rectified

2. If the default is failure to pay an instalment of principal or interest, the notice should specify the amount to be paid: Stephenson Developments v Finance Corp of Australia

- The notice ought to enable the recipient to understand with reasonable certainty what is required to be done: Fox v Jolly

1. notices which contain substantial errors will be invalid and the mortgagee may be liable for breach of statutory duty: Hoole v Smith

2. notices with minor errors aren’t invalid if the debtor wouldn’t likely be misled: Clyde v Tasker

Examples of Errors:

- In Clyde Properties v Tasker, a notice was valid that wrongly claimed £5,500 instead of £5,000

- In Campbell v CBCS, a notice was valid despite a possible discrepancy of £29 out of £20,000

- In Clarke v Japan Machines, a notice was invalid due to an “enormous discrepancy” where it was unclear whether the mortgagee was claiming $430,000 or $20,000

EFFECT OF EXERCISING POWER OF SALE

Purchaser takes free of all mortgages: s 79 LTA


Mortgagee must serve a notice on the mortgagor under s 85 PLA within 28 days of completion.

Under s 88 PLA, the money recovered from the power of sale is applied in the following order:

1) pay costs associated with the power of sale; 2) satisfy the debt to the first mortgagee; 3) satisfy any debt to subsequent mortgagees; and finally 4) any surplus is returned to the mortgagor.

**MORTGAGEE’S DUTY IN EXERCISING POWER OF SALE

Mortgagee must take reasonable care to ensure the property is sold at market value: s 85(1) PLA

There is a common law duty of good faith: Forsyth v Blundell

What constitutes breach?

Failure to sell for market value does not amount to a breach if the mortgagee acted reasonably: Southern Goldfields v General Credits

What is market value?

Market value means “what a willing but not anxious buyer would pay on the day from a willing but not anxious seller”: Spencer v Commonwealth

There is no requirement to wait for the most opportune time to sell the property: Pendlebury

Must sell for the current market value but the creditor must decide in his own interest if and when he should sell: The China and South Sea Bank Ltd v Tan Soon Gin [1990]

Subject to the defendant’s duty to act in good faith, there is no obligation on D to sell…at any time other than the times selected by it: Tyler v Custom Credit

**Independent bargain

The sale must be an independent bargain, not a sale by the mortgagee to itself or its trustee: Farrar v Farrars Ltd

Where there is a sale to a close associate of the mortgagee, the onus is on the mortgagee to prove that it was an independent bargain: ANZ v Bangadilly Pastrol

- In ANZ v Bangadilly Pastoral, the mortgagee breached its duty by selling to a company controlled by the same people. It was relevant that the purchaser knew the reserve price and payed only nominally above it, they were the only serious purchaser, and the auction was inadequately advertised and scheduled on an inconvenient date.

The duties of a mortgagee in taking ‘reasonable care’ were summed up into a list of principles in Reynolds v Aluma-Lite Products [2009] QSC 379 at [34]:

(a)-(b) duty cannot be delegated to agents, auctioneers: CAGA Ltd v Nixon (1983) 152 CLR 49

(c) duty extends to the steps to be taken to attract potential buyers for the property, the negotiations for sale, and the settling of the terms of sale: CAGA Ltd v Nixon

(d)-(e) auction – advertisement seems obligatory, must contain clear property details: Pendlebury v CML Assurance Society Ltd (1912) 13 CLR 676


(f)-(g) outlet and timing of advertisement: Pendlebury; McKeon v Maloney (1988) 1Qd.R. 628

(h)-(i) advertising error not determinative, unless it depressed price: Tyler v Custom Credit [2001] QSC 495; Stone v Farrow Mortgage Services

(j) written valuation: Stockl v Rigura Pty Ltd [2004] NSWCA 73

(k) consider genuine offers to buy: Stockl

(l) if properly advertised and conduced, offers/bids = evidence of market value: Stockl

(m) even if process was deficient, sale at market value = no remedy: Apple Fields Ltd v Damesh Holdings Ltd (2004) 1 NZLR 721

Advertisement

The property must be properly advertised: ANZ v Bangadilly Pastrol

The mortgagee must advertise to all relevant areas for the type of property: McKean v Maloney

The advertising must be for a proper period: ANZ v Bangadilly

The advertising must accurately describe the land and convey all desirable features:

- In Cuckmere Brick Co v Mutual Finance Co Ltd, the mortgagee breached its duty by failing to advertise that planning permission had been obtained to erect 100 flats on the property even though the mortgagee instructed the auctioneer to mention it.

Date of auction

The mortgagee must set an appropriate date for the auction: ANZ v Bangadilly (two days prior to Christmas was not an appropriate date)

When is a private contract appropriate?

The mortgagee may sell by private contract: s 83(1)(a) PLA

However, an auction is a good indication of market value and is the favoured method of selling.

Reserve price

Failure to set a reserve price is not determinative, but is material: Tyler v Custom Credit

There must be a reasonable reserve price having regard to the value of the property (it should not merely be the amount required to discharge the mortgage): Cameron v Brisbane Fleet Sales

Duty to extend loan period

A mortgagee is under no duty to extend the loan, even if it previously has: Apostolou v VA Corp

Duty to subdivide or improve the land before sale

The power to subdivide in s 83 PLA does not impose a duty to do so if it would enhance the price: Upton v Tasmanian Perpetual Trustees Ltd

Appointing an agent

The duty to act reasonably isn’t discharged merely by hiring a reputable agent: McKean v Maloney


If the agent breaches their duty, for instance, by inadequately advertising, the mortgagee will be liable: Commercial and General Acceptance v Nixon

Prescribed mortgages

Under s 4(1) Property Law Regulation 2003, a prescribed mortgage is “a mortgage over residential land on which the mortgagor’s home sits”

Under s 85(1A), a mortgagee of a prescribed mortgage which exercises power of sale must do the following in order to discharge the duty imposed by s 85(1) PLA:

(a) adequately advertise the sale; and

(b) obtain reliable evidence of the property’s value; and

(c) maintain the property, including by undertaking reasonable repairs; and

(d) sell the property by auction (unless it is appropriate to sell it otherwise); and

(e) do anything else prescribed under a regulation.

Failure to comply with (a) to (d) is 200 penalty units: s 85(1A)

REMEDIES FOR BREACH

The mortgagor may seek damages for the difference between the market value and the price obtained: s 85(3) PLA; Cameron v Brisbane Fleet Sales [2002]

Injunction to Restrain Sale

- Note, if there was no defect in the process, will need to pay money into court: Inglis v Commonwealth Trading Bank of Australia

(1) Prior to any contract

- Injunction restraining power of sale will only be granted if there’s a bona fide dispute as to the amount owing or whether the power of sale has arisen: Allfox Building v Bank of Melbourne

- In a dispute as to the amount owing under the mortgage, the court will require payment into court of the amount claimed by the mortgagee: Inglis v CTBA

- In Clarke v Japan Machines, it was held that payment into court will not be required where:

o a requirement to exercise power of sale has not been met;

o the mortgage itself is invalid; or

o there is a serious question as to whether the mortgagee’s power has become exercisable at all.

(2) Between contract and settlement

- After the contract, but prior to settlement, the contract may be set aside where the mortgagee acted fraudulently or in reckless disregard for the mortgagor’s interest: Forsyth v Blundell

o In Forsyth v Blundell, power of sale exercised over a petrol station which was sold for $120,000 even though another oil company had offered $150,000. The purchaser had no knowledge of the other offer.


- If it is merely a breach of s 85, it is unlikely that the sale will be restrained unless the purchaser has knowledge of the breach of duty: McKean v Maloney

- Purchaser has no obligation to inquire as to whether the duty was exercised properly: s 87 PLA

(3) Between settlement and registration

- Breach of statutory duty is not sufficient if the purchaser has no notice: McKean v Maloney

- Where the mortgagee has acted in bad faith, the court will only restrain the sale where the purchaser has notice of the bad faith (and they will not be protected by s 87 PLA): Forsyth v Blundell

(4) After registration

- After registration, the mortgagor will require an exception to indefeasibility: Latec Investments v Hotel Terrigal; ss 184, 185 LTA

Latec Investments – There was a collusive and fraudulent sale from Latec to Southern Hotels and Southern Hotels’ title was defeasible for fraud. However, an earlier equitable mortgage to MLC Nominees prevailed in the priorities contest.

o same board of directors;

o unfavourable day for auction and high reserve price;

o no bargaining; and

o insufficient time for advertising.

6.2. SUE ON PERSONAL COVENANT

- Sue for breach of obligation to repay (express, or implied by PLA s 78(1))

- Personal action – not against property

- Can use in conjunction with power of sale (where sale does not net enough money to discharge obligation). Particularly useful when power of sale is exercised but the sale doesn’t realise enough money to discharge the mortgagor’s debt completely.

- The right to sue arises as soon as default occurs except where the NCC or CCC apply in which case a default notice must first be given to the debtor providing at least 30 days to remedy the breach: s 88 NCC; s 80 CCC

- Can’t be used after foreclosure as that involves transfer of the land in full satisfaction of the debt.

6.3. ENTRY INTO POSSESSION

- A mortgagee may enter into possession of the land if the mortgagor defaults: s 78(2)(a)

- The mortgage may enter into possession under an express provision of the mortgage or in the case of a registered mortgage, the right implied by s 78(2) LTA (subject to the terms of the mortgage).

- Under s 78(2), a registered mortgagee may enter possession:

(a) physically (in a way that does not contravene s 70 Criminal Code); or


(b) by receiving rents and profits; or

(c) by obtaining a court order/

- In the absence of an express clause, an equitable mortgagee should obtain a court order prior to taking possession: Mills v Lewis

Three main advantages of entry into possession:

- allows a mortgagee selling the property to give vacant possession;

- allows the mortgagee to protect the property where waste is threatened; and

- allows the mortgagee to make repairs to the property before sale.

Disadvantages of entry into possession:

- forces mortgagee to account to mortgagor for rents and profits: NBA v United Hand-in-Hand

- mortgagee in possession is liable for damage to the property caused by negligence: Tannock v North Queensland Securities

- mortgagee in possession is liable for rates and taxes levied against property owners: see for example s 24 Land Tax Act

Because of these disadvantages, a mortgagee will usually appoint a receiver who acts as the agent of the mortgagor instead.

6.4. FORECLOSURE – TITLE INSTEAD OF SALE

- A foreclosure allows a mortgagee to take full legal and beneficial ownership of mortgaged property in full satisfaction of the debt: Fink v Robertson. Alternative to power of sale – title in satisfaction of debt

- Mortgagee may choose: PLA s 89(2)

- Application to court: LTA s 78(2)

o Court has a discretion to order a sale of the property instead of foreclosure: PLA s 99

o Court gives mortgagor opportunity to pay – if not, final order to transfer title

Two Step Process to obtain Foreclosure:

1) Decree Nisi

- Mortgagee launches an originating application in the Supreme Court: s 78(2)(c) LTA

- The order usually provides for the following, from Stevens v Hoberg:

o an account to be taken of the amount owing under the mortgage;

o the mortgagor to be given a reasonable period to pay the amount owing;

o that if the mortgagor pays the amount owing, the mortgage is released; and

o that if the mortgagor fails to repay, they are prevented from exercising their right of redemption and must transfer the property to the mortgagee.


- Court will not grant an order nisi where the value of the property is greater than the amount owing- they will order a sale instead: s 99(2) PLA

2) Decree Absolute

After a specified time has lapsed (customarily 6 months but less if the mortgagor consents), the mortgagee obtains an order for absolute foreclosure. It debars the mortgagor from redemption and makes the mortgagee a trustee for the purposes of effecting the transfer of the property from mortgagor to mortgagee: s 89 Trusts Act; s 110A LTA


TOPIC 7: EASEMENTS & PROFITS A PRENDRE 1. EASEMENTS AND PROFITS A PRENDRE

- Easements and profits a prendre are the only examples of incorporeal hereditaments (intangible real property) which can be created in Queensland today.

- An easement has been defined as a ‘right of definite and limited character attached to the enjoyment of a corporeal or incorporeal hereditament (dominant tenement) by reason whereof the occupier of another corporal hereditament (servient tenement) is bound to permit the person in whom the right is vested to do something in, on or over the servient tenement other than taking corporeal substance, or whereby the owner or occupier of the servient tenement is bound to abstain from exercising one or more of the ordinary rights of ownership or occupation, or in rare cases, to do something for the benefit of the occupier of the dominant tenement’.

- Terminology of easements:

1. Dominant tenement/land/owner – receives the benefit

2. Servient tenement/land/owner – takes the burden

2. ELEMENTS OF AN EASEMENT

- In Re Ellenborough Park, four characteristics of an easement were identified by the court:

1. There must be a dominant and servient tenement;

2. An easement must accommodate the dominant tenement;

3. The dominant and servient owners must be different persons;

4. The easement must be capable of forming the subject matter of a grant.

- Re Ellenborough Park – Purchasers of land adjacent to the park and other blocks within 100 metres of the park were given rights to use the park as a ‘pleasure ground’ provided that they contributed to its upkeep. During WW2 the military occupied park and then paid owner of park compensation for use. Question of whether the owners of houses were entitled to some compensation as they had been denied rights under their easements?

- Held: Elements 1 and 3 were easily satisfied. The park ‘accommodated’ the houses with the analogy of a private backyard/garden. It was capable of forming the subject matter of a grant because it was specific and did not deprive the owners of proprietorship and possessed utility (benefits for exercise, domestic purposes etc.).

2.1. DOMINANT AND SERVIENT TENEMENT

- The dominant tenement is the property which is benefited by the easement. The servient tenement is land which is burdened by the easement.

- It is not sufficient that there be a person who takes the benefit of the easement, there must be a dominant tenement which is benefited by the easement (easement cannot exist in gross). Note exception of s 89 in favour of a public utility provider even though it does not have any land which is benefited by the power lines etc..


2.2. EASEMENT MUST ACCOMMODATE DOMINANT TENEMENT

- The determination of whether an easement accommodated the dominant tenement is primarily a question of fact: Re Ellenborough Park [1956]

Must benefit land not just owner

- This means that it must be connected with the normal enjoyment of that tenement and is not satisfied simply by a contractual benefit to a person: City Development v Registrar General of the NT (2000)

- Clos Farming Estates v Easton [2002] – Appellant developed land based on French clos farming system (shared farming). All lots were servient tenements and one lot kept for purpose of being a dominant tenement. Grapes were to be sold and profits shared but no profit was occurring.

- Held: Not an easement. It was a business to benefit the owner and not incidental to the owner of the land: [31]. No feature of lot 86 made it the natural place to carry out harvesting, therefore did not ‘accommodate’ lot 86. It was mere convenience to declare lot as dominant tenement.

Do tenements need to adjoin

- Tenements do not need to adjoin but there must be a sufficient connection: Re Ellenborough Park

- Diagram below illustrates this – while not adjoining there is a sufficient connection

- An easement for right of way cannot normally be used to provide access to a parcel of land other than the dominant tenement. This issue may arise where an easement for right of way is granted over lot A (servient tenement) for the benefit of lot B (dominant tenement). The owner of Lot B is not entitled to use this easement for the purpose of accessing Lot C that lies on the other side of Lot B: Westfield Management v Perpetual Trustee Company (2007). This movement is outside what is contemplated by the easement as it gives a right of access to land that is not the dominant tenement.

2.3. DOMINANT AND SERVIENT OWNERS ARE DIFFERENT PERSONS

- At common law a person cannot grant land or interest in land to himself/herself or contract with himself/herself. Rights in the nature of an easement cannot be exercised if both the dominant and servient land are in that person’s ownership.

Statutory Modification

- A person may convey or lease land to or vest land in the person: s 14(3) PLA. Pursuant to s 14(3), therefore, a person may create an easement over land in favour of other land owned by that person.

- An instrument of easement may be registered even if (a) the lot benefited and the lot burdened by the easement have, or are to have, the same registered owner; or (b) the owner of the lot benefited by the easement holds an interest in the lot burdened by the easement: s 86 LTA

- Where one person purchases both parcels (dominant and servient) not extinguished unless they ask registrar: s 87 LTA


- Where owner benefitted by easement acquires interest, or greater interest, in lot burdened by easement will not result in extinguishment: s 88 LTA

2.4. CAPABLE OF FORMING THE SUBJECT MATTER OF A GRANT

- Every easement must originate in a grant – express, implied or presumed. This means that the interest created must be such that it is capable of being created by way of deed and must be capable of being granted by a grantor to a grantee.

- Three requirements:

1. Must not be too wide or vague; 2. Must not amount to rights of joint occupation/exclusive possession; 3. Must not be mere rights of recreation possessing no utility/benefit

NOT TOO WIDE OR VAGUE

- The right must be well defined and understood: Re Ellenborough Park. It cannot be an indefinite and unregulated privilege.

- The use of a servient tenement for a pleasure ground or garden is capable of being the subject matter of a grant: Re Ellenborough Park; Riley v Penttila.

- In Riley v Penttila, a residential subdivision enclosed a 2 acre park of which each owner was granted an interest. D fenced off small portion and used land exclusively. Sought to excavate and build private pool on land and argued it was theirs in fee simple.

- Held: ‘In my opinion, enjoyment of a defined area for recreation not given to the public but given to a limited number of lot holders is…certain’.

NOT AMOUNT TO RIGHTS OF JOINT OCCUPATION/EXCLUSIVE POSSESSION

- The right must be limited and must not purport to give the grantee of the easement a right of joint occupation or right of possession or exclusive use over the servient tenement: Re Ellenborough Park.

- The case law (see e.g. Copeland v Greenhalf c.f. A-G of Southern Nigeria v John Holt & Co (Liverpool)) in relation to this aspect of easements is unclear. There seems to be a distinction between permanent rights (Copeland) and transitory rights (Owners of East Fremantle Shopping Centre).

o In Copeland v Greenhalf, a claim for a right to park an unlimited number of vehicles on another person’s land was held to amount to a claim to joint possession of land and therefore was not capable of constituting an easement.

o While in A-G Southern Nigeria, the Privy Council said that there was no reason in principle why an easement could not be claimed over certain land on which the claimants had built warehouses and sheds in which they had stored their goods.

o In Wright v Macadam, an easement to store coal in a shed was deemed to be appropriate subject matter for an easement, while in Grigsby v Melville, an easement to store goods in a cellar was considered not appropriate subject matter for an easement.

o In Owners of East Freemantle Shopping Centre West Strata Plan 8618 v Action Supermarkets [2008], a right granted to ‘pass and repass on foot or in motor vehicles…and


for the further purpose of the parking of motor vehicles…provided that the right to park vehicles shall be transitory in nature’ was held to constitute an easement. A right of carriageway is clearly an easement.

- Recent authority is suggestive of a movement away from the stricter test preferred in Copeland v Greenhalf.

- In Weigall v Toman [2008] a right to exclusive use of a garage on a servient tenement with the servient tenement retaining rights to the adjoining garage was called into question to determine if it was outside the scope of what is permissible in an easement. Wilson J concluded that the circumstances of the easement being granted including the small size in relation to the overall land and steep scrubby pathway did not rob grantor of reasonable use of servient tenement. Wilson J suggested four factors were relevant to determining this issue:

1. Proportionality between servient tenement as a whole and that part of it over which the exclusive right is given

2. The extent of exclusivity claimed 3. Whether easement arose by prescription or express grant 4. Practicalities

1) Proportionality

It is a matter of degree to determine whether exclusive use of all or a large part of the servient tenement suggested the easement may breach this criteria: London and Blenheim Estates v Ladbroke Retail Parks Ltd.

If the easement only covers a small part of a larger lot, this appears to be a significant issue in many cases: White v Betalli.

2) Extent of exclusivity

Whether the servient tenement holder is excluded from the area covered by the easement to an extent which would take the right outside of that contemplated by the easement?

Authorities that prefer narrow view suggest that if an easement grants exclusive use of land then this criteria is not satisfied as dominant tenement is left with little of rights associated with ownership: Harada v Registrar of Titles.

3) Easement arising by prescription or express grant

A tendency to hold an easement as involving inappropriate exclusivity was by prescription and in effect an attempt to claim title to land by prescriptive rights.

4) Practicalities

This relates to the need for access to a property, safety issues, maintenance requirements and other amenities of life.

NOT BE MERE RIGHTS OF RECREATION

- The easement must possess some utility. I.e. a right of way, right to run powerlines through property, right to park etc.

- New easement rights will be recognised with changes in society: Commonwealth v Registrar of Titles for Victoria.


3. CREATION OF AN EASEMENT

Six ways that an easement can be created:

1. *By express grant; 2. By express reservation; 3. By Implied grant; 4. By easement of necessity; 5. By long user; 6. *By statutory rights of user

3.1. EXPRESS GRANT

- An easement over a lot or part of a lot may only be created by registering an instrument of easement: LTA s 82(1)

o must state – the nature of the easement and its terms, the land to be benefited, and the land to be burdened: s 82(3) LTA

o must include a plan of survey designating the easement, and be signed by the owners of both lots: s 83(1) LTA

- Once registered, the following particulars must be recorded – any lot benefitted, any lot burdened: s 85A LTA

3.2. EXPRESS RESERVATION

- Created at time of subdivision: s 9 PLA

3.3. IMPLIED GRANT

- Traditional right – only applies if bound in personam: Wheeldon v Burrows

3.4. EASEMENT OF NECESSITY

- Implied as above by implied grant where land becomes landlocked.

- There is doubt about whether this can now occur under Torrens.

3.5. LONG USER

- Similar to adverse possession but of easement rights

- Limited by legislation: ss 178, 198 PLA

- Unlikely to bind successors in title, unless bound in personam.

3.6. *STATUTORY RIGHTS OF USER

- A statutory right of user may arise where it is ‘reasonably necessary in the interests of effective use in any reasonable manner of any land…the court may, on the application of the owner of the dominant land but subject to this section, impose upon the servient land…an obligation of user’

- The servient owner must have refused to agree to accept imposition of obligation and owner’s refusal is unreasonable.


- Must be consistent with the public interest and compensation will be payable where rights are lost.

- Applications under this section do not succeed easily.

REASONABLY NECESSARY

- Reasonably necessary is a question of fact that is determined objectively: Lang Parade v Peluso

- The question of reasonably necessity requires that there be taken into account the effect that the easement would have on the enjoyment of the servient tenement including the property rights of the owner thereof. That would seem to include economic effects, including diminution in value of the property: Moorebank Recyclers v Tanlane [2012]

- Young J in Hanny v Lewis noted that this provision should not have the effect of encouraging people to build without adequate access and then expect others to provide access: Hanny v Lewis [1998]

o In Hanny v Lewis, Hanny spent a lot of money to build house but had problems with access. Wanted to build inclinator to access house. Had been granted easement so wanted to see what they could do with that. Involved test or proportionality – is it in public interest to have landlocked land accessible. The Wongs argued very strongly against construction as it would go past their window.

o Held: Not granted. Unwilling to grant wider rights than the easement and was ‘not reasonably necessary’.

- An order can be made even though the property can be effectively developed and use without the easement: Khatter v Wise

- The greater the burden of the grant, the higher is the need to show reasonable necessity: Lang Parade v Peluso

Principles from Lang Parade v Peluso [2005]

(a) One should not interfere readily with the proprietary rights of an owner of land

(b) The requirement of "reasonably necessary" does not mean absolute necessity

(c) What is "reasonably necessary" is determined objectively

(d) Necessary means something more than mere desirability or preferability over the alternative means; it is a question of degree

(e) The greater the burden of the imposition that is sought the stronger the case needed to justify a finding of reasonable necessity

(f) For a right of user to be reasonably necessary for a development, the development with the right of user must be (at least) substantially preferable to development without the right of user

(g) Regard must be had to the implications or consequences on the other land of imposing a right of user


CONSISTENT WITH PUBLIC INTEREST

- Consistent with the public interest does not meant that it needs to be ‘in the public interest’: Ex Parte Edward St Properties

- The burden is on the application to show that a proposed use of the dominant tenement is not inconsistent with or contrary to the public interest and show that the public interest will be advanced by the use: Ex Parte Edward St Properties.

COMPENSATION

- Compensation is for the loss or disadvantage caused by the easement where a causal relationship is established between the easement and loss or disadvantage: Owners Strata Plan 13635 v Ryan.

- Requirement that the owner of the servient land must be able to be adequately recompensed may prove a stumbling block for the applicant. Onus of proof for this factor is upon the applicant: Katakouzinos v Roufir

o For example, in Ex Parte Edward St Properties [1977], the application failed because the court held that the respondents could not be adequately compensated. There was evidence that the respondent had plans to extend the house and good reasons for doing so. To impose the easement would result in hardships. A second respondent had purchased land because backyard was suitable for vegetable garden and wanted to relocate and enlarge garage. To impose right of way would defeat purpose for which respondent had purchased property.

- To adequately recompense does not mean the developer can be held to ransom: Lang Parade v Peluso

- Compensation is not calculated based on cost savings to dominant owner, but loss or damaged suffered by servient owner: Lang Parade v Peluso

UNREASONABLE REFUSAL

- This subsection imposes an obligation on the applicant to negotiate with the respondent with a view to making a reasonable offer to the respondent. The applicant must have a specific proposal and be prepared to compensate the owner of the servient land in a reasonable way: Re Seaforth Land Sales Land (No 2)

- It is not unreasonable for a property developer to refuse to agree to the statutory user either because the user may commercially disadvantage that developer or because the refusal might give the developer some commercial advantage over a competitor: Re Worthston Pty Ltd [1987]

4. INTERPRETING EASEMENTS

- An easement is a proprietary interest in land that is likely to persist for many years. During this time the nature of the dominant and servient tenement and the neighbourhood may change as well as the technology available for use of the easement. This creates specific difficulties for the interpretation of easements.


- The decision of the High Court in Westfield Management v Perpetual Trustee Company (2007) changed the legal landscape in relation to interpretation of easements registered under Torrens by limiting the nature of extrinsic evidence that can be applied to interpreting easements.

- The High Court stated that ‘rules of evidence assisting the construction of contracts of the nature explained by authorities such as Codelfa v State Rail Authority of NSW did not apply to the construction of the easement’. The statement that Codelfa not apply is significant – in Codelfa, the HCA confirmed that in the context of a contractual provision evidence of surrounding circumstances is admissible to assist in interpreting the contract if language is ambiguous and susceptible to more than one meaning.

- Westfield Management v Perpetual Trustee – Four adjoining buildings in Sydney CBD fronted the pedestrian-only Pitt St Mall. Only one building had access to King Street from which vehicular access was available owned by Perpetual Trustees. Perpetual provided a registered carriageway giving access to the adjoining Skygarden property. When easement was created in 1988 all four lots were in separate ownership but in subsequent years Westfield acquired 3 of the 4 lots. Westfield sought declaration that access for driveways, parking spaces and loading docks was lawful under the terms of the registered easement.

- Held: Significant that easement granted right to ‘go, pass and repass at all times and for all purposes with vehicles to and from the said lots benefited or any such part thereof across the lots burdened’. Cited Harris v Flower - The general rule is that a right of way may only be used for gaining access to the land identified as the dominant tenement in the grant.” The access is to go, pass and repass to and from Skygarden and across Glasshouse. The terms do not speak of going, passing and repassing to and from and across Skygarden, and across Glasshouse. The term “for all purposes” encompasses all ends

5. REMEDIES

- There are two key remedies for where an easement is being infringed upon:

1. Abatement – owner of those rights may exercise remedy of abatement. E.g. owner of dominant tenement may go on to servient land and remove any obstruction from easement. Not encouraged by courts.

2. Court action (injunction) – dominant owner may apply to the court for an injunction. P must establish that D’s conduct will cause or has caused substantial interference with P’s reasonable use and enjoyment of the easement right.

6. REMOVAL OF AN EASEMENT

- Two ways an easement may be removed from the Register:

1. Release/surrender

2. Court Order

6.1. RELEASE OR SURRENDER

- Owner of dominant tenement may release the tenement.

- A registered easement may be wholly or partly surrendered by registering an instrument of surrender of the easement: LTA s 90


- May be signed by both owners, or just the owner of the dominant lot: LTA s 90(2)

6.2. COURT ORDER

- A Court order under s 181 PLA may be made on the application of any person interested in the land where the Court may wholly or partially extinguish the easement or restriction.

- Four circumstances in which this can be done:

1. Change in the user of dominant land/character of the neighbourhood – easement or restriction ought to be deemed obsolete (obsolescence): s 181(1)(a) PLA

2. Continued existence of the easement or restriction would impede some reasonable user of the land: s 181(1)(b) PLA

o In Oldfield v Gold Coast CC [2009] the Court noted: ‘At least as a general proposition, the reasonable use of land…will not be impeded…by acts and things which could be expected to exist or arise as a normal incident of land use in the subject locality, taking into account the land’s situation’: [31].

3. Dominant owners have agreed either explicitly or implicitly: s 181(c) PLA

4. Proposed modification or extinguishment will not substantially injure the persons entitled to easement or to benefit the restriction: s 181(d) PLA

7. PROFITS A PRENDRE

- A profit a prendre is a right to take from land. The ting taken must be part of the soil of the servient tenement land, its natural produce or the wild fauna on it and must be capable of ownership.

- A lot may be made the subject of a profit a prendre by the registration of an instrument of profit a prendre under this division over the lot: LTA s 97E

8. STATUTORY COVENANTS

- Restricted covenants are not applicable under Torrens

- Restricted statutory covenants may arise under s 97 A:

o Must be made by state or local government

o The content must relate to the use of the lot or be aimed at preserving a native animal or plant, or for tying two lots together


TOPIC 8: REMEDIES - Two options:

1. Supreme Court Orders

2. Compensation

1. SUPREME COURT ORDERS

- Can apply for a Supreme Court order under s 187 to make any order it considers just.

- In Commonwealth Bank of Australia v Perrin [2011], the bank argued that the mortgage should only be discharged if Mrs Perrin paid half of the amount owing. The Court held this would exceed their powers.

- Held: The power to make “the order it considers just” does not empower the Court to override existing entitlements and obligations and, in particular, to affect the interests of a registered proprietor (in this case the defendant) by encumbering her title in a way for which there is no legal basis. Rather it is a power which is to be exercised only in accordance with the respective legal positions of the parties which will be affected by the order. In the present case, the bank has no indefeasible title: [159]

2. COMPENSATION GENERALLY

- Section 188 – state compensation if a claimant is deprived of an interest in a lot because of:

1. Fraud;

2. Incorrect creation of an indefeasible title in the name of another person; or

3. Incorrect registration; or

4. An error in an indefeasible title or in the freehold land register; or

5. Tampering with the freehold land register; or

6. Loss, destruction or improper use of a document deposited or lodged at the land registry or held by the land registry for safe custody; or

7. An omission, mistake, breach of duty, negligence or misfeasance of or by the registrar or a member of the staff in the land registry; or

8. The exercise by the registrar of a power in relation to an application or dealing with which the person had no connection.

- To obtain compensation under the Land Title Act, there are three requirements:

1. Claimant must be deprived of his land or an interest in the land, or suffer loss or damage 2. The deprivation must be caused by one of the matters listed in s 188(1) or the loss by one of the

factors listed in s 188A(1) LTA 3. The circumstances must not be excluded by ss 188A(3) or 189(1) LTA

3. DEPRIVATION, LOSS OR DAMAGE


3.1. DEPRIVATION

A claimant who is deprived of a lot or interest in a lot because of the reasons listed in s 188(1) LTA is entitled to compensation: s 188(2) LTA

- Deprivation means a person can no longer bring an action to recover possession, such as where the property has been transferred to a third party who has indefeasible title.

- Temporary deprivation is probably sufficient and the claimant will be entitled to loss flowing from the temporary deprivation such as loss of rent or profits from the land: Parker v Registrar-General (but note Cox v Bourne which suggests that temporary deprivation does not suffice)

o In Glensaugh v Registrar-General, a reservation for a Crown road was accidentally left on the claimant’s title and only removed some years later. In the meantime, due to the reservation, the claimant lost the opportunity to sell the land to develop a golf course.

- Partial deprivation, such as where the claimant takes subject to an encumbrance, will suffice:

o In Cox v Bourne, Cox deposited the certificate of title with Levy to secure a loan. Levy forged Cox’s signature and fraudulently registered himself as the fee simple owner. Levy transferred the land to Dare who mortgaged the property to Walton, a bona fide mortgagee for value. Levy was entitled to set aside Dare’s title for fraud (since he colluded with Levy) but could not set aside Walton’s mortgage. Thus Cox was entitled to compensation for partial deprivation.

- Loss by an innocent mortgagor through enforcing a personal covenant probably does not constitute deprivation of an interest in a lot under s 188.

- Loss of an equitable interest will suffice: Williams v Papworth

o Also extends to the case where an existing registered interest outranks an equitable interest such as Diemasters v Meadowcorp where the mortgagor obtained a fraudulent release of mortgage and sold the land to an innocent third party. The mortgagee discovers the fraud and caveats before the release or transfer is registered and maintains indefeasible title. The innocent third party is entitled to compensation for deprivation of its equitable interest.

- Loss of a remainder interest (prior to determination of a life estate) will not suffice because deprivation of an interest in land refers to the loss of a right to the present enjoyment of the land: Finucane v Registrar of Titles

- Loss of priority constitutes a deprivation: Breskvar v White

o In Breskvar v White, the Breskvars were deprived of their interest when Alban signed the sale contract because Alban obtained an equity which prevailed over the Breskvars’ interest.

- Deprivation extends to voluntarily disposition induced by fraudulent misrepresentation: Parker v Registrar-General

3.2. LOSS OR DAMAGE

- A claimant who suffers loss or damage because of the reasons listed in s 188A(1) LTA is entitled to compensation: s 188A(2) LTA

- Arguably, loss includes damage arising from a deprivation.

- In some situations, a person will suffer loss without being deprived of an interest:


o Legal expenses: In Chandra v Perpetual Trustees Victoria, a forged mortgage secured nothing so the innocent mortgagor was not deprived of an interest in land. However, considerable legal expenses were incurred by the innocent mortgagor and these were recoverable.

o Liability of a guarantor: In Wells and Johns v RG, R owned land subject to two mortgages. Through an error in the titles office, the second registered mortgage was left off the title. In the meantime, a third registered mortgage was registered as second in priority. The mortgagor defaulted and the land was sold. The proceeds were sufficient to pay off the first and second mortgage but not the deregistered mortgage. The guarantor under the deregistered mortgage was not deprived of an interest in land but did suffer loss as a result of its deregistration.

4. CAUSATION

The test for causation is the “commonsense test” from March v Stramare

4.1. FRAUD OF ANOTHER PERSON: s 188(1)(A) LTA

- Compensation for fraud is limited to deprivation of an interest of a lot.

- Includes all frauds, whether legal or equitable, within the ordinary meaning of the term: Parker v Registrar-General

- Extends to the situation where the claimant is induced by fraudulent misrepresentation to transfer his land: Registrar-General v Behn

4.2. INCORRECT CREATION OF INDEFEASIBLE TITLE IN ANOTHER’S NAME: ss 188(1)(B) AND 188A(1)(A) LTA

- Arguably, the use of the word incorrect does not import a requirement of fault or misfeasance by the registrar.

- Rather, this situation arises where by some error on the part of the registry office staff, an indefeasible title is created in the name of someone who is not entitled to the lot thus depriving the rightful owner of their interest.

4.3. INCORRECT REGISTRATION: ss 188(1)(C) AND 188A(1)(B) LTA

- Unlike the situation in ss 188(1)(b) and 188A(1)(a), this rule covers registration of documents which do not necessarily involve creating a new indefeasible title such as registration of a power of attorney or a writ of execution.

- Again, the use of the word incorrect probably does not import a requirement of fault.

4.4. ERROR IN INDEFEASIBLE TITLE OR IN THE FREEHOLD LAND REGISTER: ss 188(1)(D) AND 188A(1)(C) LTA

- Arguably, a broader view of this situation is preferred where it is necessary to show that the information contained in the indefeasible title is factually incorrect and loss or damage resulted from reliance on the incorrect state of the register: Voudoiris v Registrar-General

4.5. TAMPERING WITH THE FREEHOLD LAND REGISTER: S 188(1)(E) LTA

- This ground is only available in relation to deprivation of an interest in land. It covers situations where a third party, such as a computer hacker, tampers with the freehold land register.


4.6. RELIANCE ON THE INCORRECT STATE OF THE FREEHOLD LAND REGISTER: S 188A(1)(D) LTA

- This ground is only available in relation to loss or damage.

- It is necessary to show that the information contained in the freehold land register is factually incorrect and loss or damage resulted from reliance on the incorrect state of the register.

4.7. LOSS, DESTRUCTION, OR IMPROPER USE OF DOCUMENT HELD AT REGISTRY: ss 188(1)(F) AND 188A(1)(E) LTA

- This ground covers loss caused if a document, such as an executed instrument, is lost or destroyed after it is deposited at the land titles office.

- This ground arguably extends to loss or destruction which is not the fault of the registrar such as if the registry was destroyed by fire.

4.8. OMISSION, MISTAKE, BREACH OF DUTY, NEGLIGENCE OR MISFEASANCE BY THE REGISTRAR OR A MEMBER OF THE STAFF OF THE LAND REGISTRY: ss 188(1)(G) AND 188A(1)(F) LTA

- This ground requires the claimant to establish some breach of duty or fault on the part of the registrar.

- Omission means a failure to do something which the registrar is required to do, rather than simply something which is not done: Trieste Investments v Watson

5. EXCLUSIONS

- A claimant is not entitled to compensation in the following situations:

5.1. WHERE THE ERROR MAY BE CORRECTED BY THE REGISTRAR: S 188A(3) LTA

- Where the registrar may correct the register under s 15 LTA, a claimant may no claim compensation for loss or damage caused by the incorrectness of the register: s 188A(3) LTA

- Relates only to loss or damage, not deprivation of an interest: s 188A(3) LTA

- The Registrar may correct the register if the register is incorrect and the correction will not prejudice the rights of the holder of an interest recorded in the register: s 15(1) LTA

- (See indefeasibility notes under Registrar’s Power to Correct for more detail)

5.2. BREACH OF TRUST OR FIDUCIARY: s 189(1)(A) LTA

- A claimant is not entitled to compensation from the state for deprivation, loss or damage caused by breach of trust or breach of fiduciary duty including a breach in the administration of the estate of a deceased person: s 189(1)(a) LTA

- Breach of trust must be a direct cause, not an intermediate result, or the loss: Parker v Registrar

5.3. CARELESS MORTGAGEE: s 189(1)(AB) LTA

- No compensation is available where the careless mortgagee exception is made out under ss 11A or 11B LTA.


5.4. LOSS CAUSED BY THE CLAIMANT, CLAIMANT’S AGENT OR AN INDEMNIFIED LAWYER: s 189(1)(B) LTA

- This exception covers contributory negligence on the claimant’s part: Registrar v Fairless

- Note that failure to obtain a certificate of title is irrelevant in deciding whether a person, their agent or their lawyer, contributed to deprivation of an interest in a lot: s 189(1A) LTA

5.5. CORRECTION OF AN INDEFEASIBLE TITLE THAT MISTAKENLY INCLUDES THE PERSON’S LAND: s 189(1)(E) LTA

- A person is not entitled to compensation for deprivation, loss or damage where the registrar corrected an indefeasible title which mistakenly included that person’s land, unless the person suffered loss or damage by relying on the incorrect state of the register and is seeking compensation under s 188A(1) LTA.

5.6. ERROR IN THE LOCATION OF A LOT’S BOUNDARIES OR IN A LOT’S AREA: s 189(1)(F) LTA

- A person is not entitled to compensation for deprivation, loss or damage arising from an error in the location of a lot’s boundaries or in a lot’s area: s 189(1)(f) LTA

5.7. AN ERROR OR SHORTAGE IN AREA OF A LOT: s 189(1)(G) LTA

- A person is not entitled to compensation for deprivation, loss or damage arising from an error in or shortage in the area of a lot according to a plan lodged in the registry: s 189(1)(g) LTA

5.8. REGISTRAR’S CAVEAT UNDER S 17 LTA: s 189(1)(I) LTA

- A person is not entitled to compensation for deprivation, loss or damage caused by a caveat lodged by the Registrar under s 17 LTA.

5.9. OMITTED OR MISDESCRIBED EASEMENT: ss 189(1)(J) OR 189(1)(K) LTA

- A person is not entitled to compensation for deprivation, loss or damage caused by an omitted or misdescribed easement.

6. TIME LIMITATION

- The application for compensation must be made within 12 years of when the applicant becomes aware, or ought reasonably to have become aware, of the entitlement: s 188C(a) LTA

- The court may extend the period where just: s 188C(b) LTA

7. MEASURE OF COMPENSATION

7.1. GENERALLY

- The compensation comes from the ‘state’ in the form of a Torrens assurance fund that reflects Torrens principles. A portion of the registration fees are diverted into the fund to ensure loss spreading.

- The purpose of compensation is to put the claimant back in the position they would have been had they not suffered the deprivation, loss or damage: Registrar v Spencer


- Where there has been a permanent deprivation, the appropriate measure is generally the value of the property at the date of judgment: Registrar-General v Behn

- Where improvements have been made after deprivation, the appropriate measure is the value of the property at the date of deprivation: Registrar v Spencer (No 2)

7.2. LIMITS ON AMOUNTS RECOVERABLE BY MORTGAGEES

- Where the deprivation arises through the wrongful registration of a mortgage, the appropriate compensation is the lesser of the amount to discharge the mortgage or the value of the property: Keddell v Regarose

o In Keddell v Regarose, the claimant’s claimed the amount required to discharge the fraudulent mortgage (which was double the value of the property) on the basis that they didn’t want to leave their family home. On appeal, the Court awarded them the value of the property (to enable them to purchase the land from the mortgagee) plus legal fees for reconveying the property into their own name.

- Where the property is jointly owned and one co-owner forges the signature of another, the fraudster will be bound by the mortgage and the innocent co-owner will be entitled to compensation under s 188(1)(a) LTA.

o The value of this compensation is the difference between the value of the share owned by the innocent co-owner and the sum that will be recovered after payment of the mortgagee out of the proceeds of sale of the property: Perpetual Trustees v Van den Heuval (No 2)

- Where a fraudulent mortgage is registered and the mortgagee has indefeasibility and exercises the power of sale, the rate of interest charged on the debt must not exceed the Reserve Bank’s official cash rate plus 2%: s 189A(3) LTA