Real Property 5
Associate Professor Cameron
Stewart
(c) Cameron Stewart 2005
Exceptions to indefeasibility
- Rights in personam
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While registration of an interest may extinguish
other unregistered interests personal rights of action
can still survive – sometimes called “personal
equities”
Examples:
Right of specific performance in a sale of land
contract;
Right of beneficiary to call on performance of trust;
Right to rectify a mistake in a contract which has
bestowed title on the wrong party.
The personal equity must rest on a legal or equitable
cause of action
(c) Cameron Stewart 2005
Exceptions to indefeasibility
- Rights in personam
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Bahr v Nicolay (No 2) 1988) 62 ALJR 268.
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The registered proprietor (R) was bound by a
personal equity where R knew of an
unregistered interest and had purchased the
property on the basis that R would recognise and
be bound by that unregistered interest.
(c) Cameron Stewart 2005
Exceptions to indefeasibility
- Rights in personam
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Mercantile Mutual v Gosper (1991) 25
NSWLR 32: Mrs Gosper and the registered
proprietor of land subject to a mortgage to
Mercantile Mutual. Mr Gosper borrowed
money from Mercantile Mutual and it was
agreed that the loan would be secured by a
variation of the existing mortgage over
Mrs Gosper’s property. Mr Gosper forged
his wife’s signature to the variation and it
was registered.
(c) Cameron Stewart 2005
Exceptions to indefeasibility
- Rights in personam
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After her husband’s death Mrs Gosper
discovered what had happened. She
sought orders removing the variation of
the mortgage from her title. The issue
before the court was whether Mercantile
Mutual had an indefeasible title insofar as
the variation was concerned or whether it
was defeated on the basis of an in
personam claim by Mrs Gosper. By a
majority the Court of Appeal held in
favour of Mrs Gosper.
(c) Cameron Stewart 2005
Exceptions to indefeasibility
- Rights in personam
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In Story v Advance Bank the Court of Appeal had to
consider in personam exceptions in the context of a
mortgage granted by a corporation to a bank, where the
corporation was a ‘family’ company operated by Mr &
Mrs Story. The loan was to Mr Story only with the
mortgage being over land owned by the corporation. Mr
Story forged his wife’s signature on the mortgage
documents. Mrs Story claimed an in personam exception
against the bank on the basis that the bank failed to
make appropriate inquiries to determine that Mrs Story
had indeed executed the mortgage. The Court of Appeal
ruled against Mrs Story. Gleeson CJ (Cripps J agreeing)
held that even if the bank had not made adequate
inquiries of what going on in the corporation ‘that does
not produce the result that it is against conscience for
the bank to rely upon its statutory rights’ to an
indefeasible title as(c)toCameron
the Stewart
mortgage.
2005
Exceptions to indefeasibility
- Rights in personam
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Vassos v State Bank of South Australia, the bank obtained a
mortgage over land owned by three tenants-in-common.
One of the tenants-in-common subsequently obtained a
substitute mortgage for a greater sum by forging the
signatures of the other two tenants-in-common. In this
case the bank’s mortgage was not obtained as the result of
fraud, nor was there an exception under the in personam
exception. On the in personam exception, Hayne J said this
case was distinguishable from Mercantile Mutual v Gosper.
He reaffirmed that more than a mere forgery was required.
Even though the bank was negligent in the manner in
which it took the forged mortgage, there was, at 333, ‘no
misrepresentation by it, no misuse of power, no improper
attempt to rely on its legal rights, no knowledge of
wrongdoing by any other party. … Even if by making
reasonable enquiries the bank could have discovered the
fact of the forgery I do not consider that that fact alone
renders its conduct unconscionable’.
(c) Cameron Stewart 2005
Registrar’s power of correction
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RG can fix up administrative errors in the records
but no resolve disputes – s 12 not to prejudice the
rights of interest holders
State Bank of NSW v Berowra Waters Holdings Pty Ltd
(1984) 4 NSWLR 398
James v Attorney-General (1967) 69 SR (NSW) 361, it
was held that the corrections should be made prior
to a bona fide purchaser or mortgagee obtains an
interest on the faith of the uncorrected register.
(c) Cameron Stewart 2005
Overriding statutes
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Other statutes can override the provisions of the RPA
EG – rates, taxes and charges on land bind the land
regardless of the indefeasibility provisions
Pratten v Warringah Shire Council, part of Pratten’s land was
resumed by the Council before he purchased the land.
Before purchasing the land Pratten made inquiries to the
Council to ascertain if it had any interest in the land. The
Council replied that it had no interest in the land. Pratten
also thoroughly searched the register. After Pratten
became registered proprietor of the land the Council
asserted its rights over the land that had been resumed.
The Court ruled in favour of the Council on the basis
that Pratten's registered interest was subject to overriding
legislation, in this case s. 398 of the Local Government Act
of that time.
(c) Cameron Stewart 2005
Overriding statutes
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Hillpalm Pty Ltd v Heaven\'s Door Pty Ltd
[2004] HCA 59 – right claimed to have
easement created pursuant to subdivision plan
–Majority found that it was not an exception
because there was no evidence that the
creation of the easement was a condition
(McHugh ACJ, Hayne and Heydon JJ)If there
was a right it was a right to create an easement
which was in personam, but given that the
EPPA Act did not seem to create such a right
and given the easement did not appear to be a
condition there was no in personam right
created.
(c) Cameron Stewart 2005
Overriding statutes
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The Court held that the resumption by the Council was one
that created a charge that took effect by force of the statute
creating it. It did not depend upon registration. Street J
observed that the indefeasibility provisions of the Real Property
Act were of no effect in the face of overriding legislation that
removed the land from the registration system of the Act as
had occurred in this case. The fact that the Council didn’t
apply to have its interest notified upon the register when it
became possible to do so after an amendment to the Real
Property Act did not amount to an estoppel against the Council.
Not did an estoppel arise when in response to Pratten’s
inquiry, the Council wrote a letter back saying that it had no
interest in the land. This was so because the Council had no
right to dispose of the land without the consent of the
Governor-in-Council.
(c) Cameron Stewart 2005
Volunteers
King v Smail [1958] VR 273 a husband and wife were
registered as the proprietors of land as joint tenants.
The husband executed a transfer of his interest in the
land to the wife by way of gift. Before the transfer
was registered the husband executed a deed of
arrangement under the bankruptcy legislation. The
trustee lodged a caveat claiming an equitable interest
in the land under the terms of the deed of
arrangement. In proceedings by the wife to remove
the caveat the question was whether the trustee had
an interest which had priority over the registered title
of the wife. Adam J held that s 42 of the Victorian
Act (which is equivalent to s 68) did not give the wife
priority because she was a volunteer and the doctrine
of indefeasibility only protected bona fide purchasers
(c) Cameron Stewart 2005
for value.
Volunteers
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Adam J said, at 276:
"Although s 42 of the Transfer of Land Act
1954 in itself affords no ground for
distinguishing between thevolunteer and the
purchaser for value and would appear to give
paramount effect to registered title in either
case, other sections in the Act draw a
distinction between the volunteer and the
purchaser for value and appear tojustify the
conclusion that upon the registration of
dealings subsequent to initial registration under
the Act, it is purchasers for value only who
were intended to have the benefit of s 42.”
(c) Cameron Stewart 2005
Volunteers
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Kitto J in IAC (Finance) Pty Ltd v Courtenay
(1963) 110 CLR 550 at 572:
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"A provision that a person is not to be affected by notice of
prior interests has no application to him so long as he remains
unregistered. For the same reason, it has no application even to
one who has become registered, if he acquired his estate or
interest as a volunteer. It is only a person having a legal estate or
legal interest acquired for value whose position is prejudiced by
his having received, before paying his money, direct or
constructive notice of an outstanding equitable interest. This is
so even under the Real Property Act (NSW) for a registered
interest is not (as was suggested in the course of the appellant's
argument) some special kind of statutory interest - it is a legal
interest, acquired by a statutory conveyancing procedure and
protected from competition to the extent provided for by the
Act, but having, subject to the Act, the nature and incidents
provided by the general law. So all the provision does which I
have quoted from s 43 is to protect against notice of any trust or
Cameron
Stewartacquired
2005
unregistered interest a (c)legal
estate
for value".
Volunteers
Bogdanovic v Koteff (1988) 12 NSWLR 472
Mrs B looked after Mr K on the basis of a
promise that she would be given an interest in
the house which would allow her to stay for
life. Son inherited house.
Breskvar v Wall applied - no distinction is made
between volunteers and purchasers hence
indefeasibility is given to the son
(c) Cameron Stewart 2005
Volunteers
Rasmussen v Rasmussen [1995] 1 VR 613
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Grandfather farmed a number of properties with his
four sons. After he died the property passed through
G's will to the grandson H. Hand his father E then
argued over who should own the property as E stated
that one property was held by the father on trust for
E. The purpose behind the trust was to avoid tax. H's
response was that he was the registered proprietor
and that he had indefeasibility.
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It was held that ss 42 and 43 bona fide purchaser for
value and volunteers other later sections do make a
distinction. On this basis the court held that the in
Victoria the legislation only provides indefeasibility to
purchasers for value.
(c) Cameron Stewart 2005
Volunteers
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Valoutin Pty Ltd v Furst (1998) 154 ALR 119- a
decision on the Victorian legislation. Finkelstein J,
having referred to King, Bogdanovic and IAC (Finance)
Pty Ltd, said, at 136 - 137:
"When it is accepted, as it must be, that s 43 does not
relieve a volunteer from equities which affected his
transferor it is difficult to see why s 42 should be held
to give that protection. Such a view would be
inconsistent with the structure and text of the
Transfer of Land Act. It should also be noted that
King v Smail was followed by Coldrey J in Rasmussen
v Rasmussen [1995] 1 VR 613 in preference to
Bogdanovic. In my view King v Smail correctly states
the law.
(c) Cameron Stewart 2005
Volunteers
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Conlan (As Liquidator Of Oakleigh
Acquisitions Pty Ltd) -v- Registrar Of
Titles & Ors [2001] WASC 201
Position of Bogdonavic is preferred
(c) Cameron Stewart 2005
Caveats
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Protection of unregistered interests
Section 74F - System of lodging a “caveat”
by a person who claims to have a legal or
equitable interest in the property – any
further dealing with the property cannot be
recorded unless with the caveator’s
approval – freezes any dealing with the
land that would impact on the subject of
the caveat
(c) Cameron Stewart 2005
Caveats
Different types of caveats:
1. caveat against dealings
2. caveat against improper dealing where CT
has been lost
3. caveat against improper exercise of power
of sale
4. caveat lodged by RG to protect interest of
a person under a legal disability or on
behalf of the Queen
(c) Cameron Stewart 2005
Caveats
What is a ”caveatable interest”? Must be an
interest in land!!! Not just a contractual
right or personal right – the interest must
exist at the time of lodgment – no future
interests
Eg
Interest of a purchaser under a contract for
sale
Interest of an equitable mortgagee
Option to purchase land
And many many more
(c) Cameron Stewart 2005
Caveats
How can they be removed?
Lapsing notice with dealing – serve a notice
of lodging a dealing and then 21 days for
the caveator to go to SC for extension of
time – otherwise the caveat lapses
Lapsing notice without dealing – 21 days to
obtain SC order extending caveat otherwise the caveat lapses
SC order – no notice
(c) Cameron Stewart 2005
Caveats
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After lapsing further caveat by same
person based on same interest will be of
no effect unless court leave has been
obtained
Wrongful lodgment – if a caveator is found
to have wrongfully lodged a caveat they are
liable to compensate the person sustaining
a pecuniary loss – “wrongfully” means in
infringement of the rights of the person
against whom the caveat is lodged
(c) Cameron Stewart 2005
Section 43A
On completion of the contract for sale of
land and before registration the purchaser
has less rights than they would have under
the old system as they only have an
equitable interest which is subject to any
earlier equitable interest (even though they
may have taken the interest for value and
without notice) – under old system they
would have had the legal estate provided
they took that estate without notice of
earlier interests and for value.
(c) Cameron Stewart 2005
Section 43A
To remedy this defect in the RPA s43A
bestows upon such a purchaser of Torrens
land the same rights as they would have
under old system – that is the section
declares that they take a legal interest after
sale but prior to registration.
Therefore s 43A allows a purchaser of an
interest in land, who takes for value and
without notice, to get a legal estate – thus
protecting him or her against earlier
equitable interests
(c) Cameron Stewart 2005
Section 43A
The interest purchased must had been
effected by a “dealing registrable” that
is you must be able to lodge the dealing
for immediate registration
(c) Cameron Stewart 2005
Section 43A
Successive effect – recall priority rule
earlier equitable v later legal – bona fide
purchaser for value without notice and the
extension on that principle – eg Wilkes v
Spooner - later purchasers who buy the
original purchaser’s interest with notice are
protected by the original purchaser’s title –
to allow the purchaser the full right to deal
with the property as he or she wishes
(c) Cameron Stewart 2005
Section 43A
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Eg A buys an estate of B, for value and
without notice of C’s earlier equitable
interest in the property – A takes priority –
if a then sells to D and D knows of C’s
interest he can still take priority over C
So too does s 43A have this “successive
effect”
(c) Cameron Stewart 2005
Section 43A
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Eg if A buys land from B for value and
without any knowledge of the prior
equitable interest of D, under s 43A A will
take the legal estate and D’s interest will be
defeated. If before registering his interest,
A then executes a mortgage to C, C’s
interest will still take priority over D’s, even
if C had notice of D’s interest..
(c) Cameron Stewart 2005
Section 43A
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IAC (Finance) Pty Ltd v Courtenay (1963) 110
CLR 550
Courtney bought land off Mrs Austin for 15000
pounds. 3000 was paid as deposit and the rest
was secured by a mortgage back to Mrs Austin.
The documents were not lodged for registration
until seven months after settlement. Mrs Austin's
solicitor had retained these documents to allow
the mortgage to be registered. Later Mrs Austin
and the Courtney's agree that Mrs Austin would
buy the land back. The original transfer and
mortgage had not been registered by this time.
(c) Cameron Stewart 2005
Section 43A
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Before the second sale was registered Mrs Austin
agree to sell the land to Denton Subdivisions Pty
Ltd. She did this without the Courtney's
knowledge. Mrs Austin's solicitor uplifted the
original sale and mortgage documents from the
RG. When the sale to Denton was being settled a
question was asked about why these documents
had been uplifted. Mrs Austin's solicitor lied and
said it was part of a deal to finalise the resale
back to Mrs Austin. A copy of the second
contract for sale was produced as evidence.
Denton's purchased was financed by IAC as
mortgagee. The documents were lodged by IAC
but before they were registered the Courtney's
commenced their action
(c) Cameron Stewart 2005
Section 43A
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Held: the Courtney's were entitled to
registration.
Unregistered interests are equitable. The
effect of s 43A is to confer a legal
interest on an equitable interest, to put it
into the position of protected received by
a bona fide purchaser for value without
notice.
Why did IAC fail?
(c) Cameron Stewart 2005
Section 43A
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Kitto - the fact that the solicitor withdrew the
registration without authority meant that s 43A
did not give priority to IAC
Taylor - The ordinary rules of priority apply.
IAC had notice of the equitable interest of the
Courtney's hence they could not satisfy the
rule.
Dixon - an unauthorised withdrawal was not a
withdrawal and was ineffective. Hence the
conflict was between an early registrable
interest and a later registrable interest. Section
43A meant that two registrable dealings would
be determined by the first in time rule
(c) Cameron Stewart 2005
Section 43A
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Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN
(NSW) Pt 1) 568
M contracts to sell land to J. At the date of the contract
M was not the registered proprietor but was a purchaser
of the land in a contract from A. The land was subject to
a mortgage to B. To settle the sale to J M intended to
hand over the transfer of the land to J, executed by A at
the direction of M, in conjunction with a discharge of
mortgage executed by B. J was not happy with this
arrangement and said that it wanted to receive the title
from M. J wanted the mortgage discharged before the
settlement. J sought to rescind the contract. However it
had not lodged its objections within the time period for
the making of objections to title. The issues were whether
a purchaser could refuse a transfer by direction and
whether it could require
the title free from incumbrances.
(c) Cameron Stewart 2005
Section 43A
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The court found that the purchaser could not
object to the sale by direction as it was still a
sale from the registered proprietor. A
purchaser received the same protection as a
purchaser taking directly from a registered
proprietor.
As for the objection to the discharge of
mortgage, the court found that the purchaser
could not object as uon registration it would
receive indefeasible title. After completion or
prior to registration the purchaser was
protected by s 43A against any defects of
which it had no notice.
(c) Cameron Stewart 2005
Section 43A
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The fact that the holder of an unregistered
instrument has not, at the time of settlement
of the transaction, paid the relevant stamp
duty and had the instrument stamped by the
Office of State Revenue does not mean that
such a holder is not able to obtain the
protection offered by s. 43A: Diemasters Pty Ltd
v Meadowcorp Pty Ltd [2001] NSWSC 495 at
para 22.
(c) Cameron Stewart 2005
Section 43A
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Section. 43A cannot be relied upon, if the
instrument is actually registered, and the
registered proprietor is not a party to any
fraud, he or she does get an indefeasible title.
In both Jonray (Sydney) Pty Ltd v Partridge Bros Pty
Ltd (1969) 89 WN (NSW) Pt 1) 568 and Mayer
v Coe (1968) 88 WN (NSW) (Pt 1) 549 it was
suggested that if notice of a void instrument
was received after completion of the
transaction but before its registration, the true
proprietor could prevent registration of it by
obtaining an injunction to prevent registration.
(c) Cameron Stewart 2005
Competing unregistered interests
Breskvar v Wall (1971) 126 CLR 376 - Mr and Mrs
Breskvar executed a transfer to Petrie as security for
a loan. Petrie fraudulently used the transfer and sold
to his grandson Wall, who became registered owner.
Wall sold to Alban Pty Ltd but before they could
register their interest the Breskvars lodged a caveat
which injuncted the sale. The conflict was therefore
between the interest of Breskvars and the interests
of Alban Pty Ltd
Barwick : 'title by registration'. What sort of interest
did Wall have? What sort of interest does Alban have?
What interest do the Breskvars have?
(c) Cameron Stewart 2005
Competing unregistered interests
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Heid v Reliance Finance Corporation Pty Ltd (1983) 154
CLR 326, Heid agree to sell land to Connell
Investments. Connell was owned by Newman McKay
& Co. Heid accepted advice from Newman to use their
employee (Gibby) as a solicitor. The solicitor was
unqualified. Hied left for overseas and left Gibby to
complete the sale and put part of the proceeds into an
investment. The remainder of the proceeds were not to
be paid by Connell but to be secured by way of a
mortgage in favour of Heid. In fact Connell mortgaged
the property to Reliance before it registered the sale
from Heid to Connell. After registering the sale but
before Reliance's or Heid's mortgage could be
registered, Hied discovered the fraud. Whose mortgage
(c) Cameron Stewart 2005
took priority?
Competing unregistered interests
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Gibbs CJ focused first on priority based upon the time
of creation of the relevant equitable interests, with such
priority being displaced only if the equities favoured the
holder of the interest created second in point of time.
His Honour, at 333, said:
In the present case the interest of the appellant was
first in time. The question therefore is whether his
conduct … has the consequence that [the holder of the
second equitable interest] has the better equity, and the
appellant's interest should be postponed to that of [the
holder of the second equitable interest].
(c) Cameron Stewart 2005
Competing unregistered interests
At 341, Mason, Deane JJ observed:
It will always be necessary to characterize the
conduct of the holder of the earlier interest
in order to determine whether, in all the
circumstances, that conduct is such that, in
fairness and in justice, the earlier interest
should be postponed to the later interest.
(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
Abigail v Lapin [1934] AC 491
 Lapins executed a transfer to Mrs Heavener
(as security for a loan) on the understanding
that they could redeem it on repayment. Mrs
Heavener became registered and mortgaged it
to Abigail. The mortgage was unregistered
but Abigail had not notice of the earlier
interest. He searched the register and found
nothing. Lapins sought to rectify the register
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(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
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Lapins' interest should be postponed - they
armed Heavener with the means to deal with
the estates. The failure to caveat was one
factor to consider in the question of who had
the better equity. The question of whether a
caveat should be lodged is a question of
conveyancing practice or whether it was
reasonable. Abigails search of the register was
not relevant as it had not been caused by an
representation by the Lapins
(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
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In J & H Just (Holdings) Pty Ltd v Bank of New South
Wales (1971) 125 CLR 546, the bank loaned money to
Josephson. The bank obtained a mortgage in registrable
form as well as the certificate of title but did not
register the mortgage. J & H Just advanced further
money to Josephson on the security of the land. They
asked Josephson about the certificate of title and
accepted his statement that it was with the bank for
safekeeping. J & H Just lodged a caveat. The issue
before the High Court was whether the bank
maintained its priority according to time. The High
Court ruled in favour of the bank. By receiving the title
documents the bank had taken adequate precautions to
protect themselves.
(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
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In Osmanoski v Rose [1974] VR 523, A contracted
to sell land to B and then again to C. When C
contracted he searched the register and saw that
A was the registered proprietor. B had not
lodged a caveat in relation to his unregistered
interest at that time but did lodge one before C
lodged a transfer for registration. The court held
that B’s failure to lodge a caveat before C
contracted with A was postponing conduct as it
led to C contracting in the belief that there was
no other interest such as B’s in existence.
(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
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Person-to-Person Finances Pty Ltd v Sharari [1984] 1
NSWLR 745 Tredgolde had a registered
mortgage over Torrens title land. As a registered
mortgagee he also held the certificate of title.
Sharari took a subsequent mortgage over the
property, but his solicitor failed to have that
mortgage registered. Sharari did not lodge a
caveat to protect his unregistered mortgage.
Subsequently Person-to-Person took a mortgage
over the property after being told by the owner
of the land that Tredgolde had the only other
mortgage over the property.
(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
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Person-to-Person’s search of the register
revealed only Treadgolde’s mortgage. Person-toPerson lodged a caveat in respect of its
unregistered mortgage. The issue before the
Court was whether Sharari’s failure to lodge a
caveat amounted to postponing conduct.
McLelland J ruled that Sharari was guilty of
postponing conduct and that, therefore, Personto Person had priority over Sharari.
(c) Cameron Stewart 2005
Failure to lodge a caveat and postponing
conduct
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His Honour, at 738, said:
[I]t is the settled practice of competent solicitors ... acting
for second or subsequent mortgagees, to ensure either
the prompt registration of the mortgage or lodgment of
a caveat. The failure by [Sharari] through his solicitor to
conform to this practice would lead naturally to those
who searched, such as [Person-to-Person], to believe that
there was no such outstanding second mortgage, and it is
my opinion that the failure of [Sharari], in the absence of
registration of his mortgage, to lodge a caveat led
[Person-to-Person] to acquire its mortgage on the
supposition that no unregistered second mortgage already
existed, in circumstances which make it inequitable as
between the parties that [Sharari’s] mortgage should have
priority over that of [Person-to-Person].
(c) Cameron Stewart 2005